4 CCS Projects Through to Next Stage

DECC today announced that 4 CCS projects have been shortlisted for the next stage of their competition. Having had a small (very small!) part to play in one of those bids I am really quite excited. I must admit that I had thought that the shortlist might be one project shorter - for this technology £1bn doesn't actually go all that far - but I also thought that we'd see the 2Co project up there - and it isn't! Just shows how wrong one can be.

Hitachi Got It

Interesting. So Hitachi will be purchasing Horizon. As per a previous post it was down to one of two (or none at all) but it is a significant point that this will introduce yet another reactor type into the UK - a BWR. It is, a least, a tried and tested system. Gone are the days of 3 different AGR designs being constructed simultaneously (thank goodness).

Also interesting to note the name of Rolls-Royce cropping up here when they also have an MOU with Rosatom.

So, now it's down to Hitachi to complete the deal and get on with having their design fully tested and certified. It all means that we are unlikely to see one of these beasties in action before the early 2020s. So the risk of several years of tight capacity margins in the middle of this decade remains. Start saving your pennies now - electricity is going to become more and more expensive.

EdF Throws Down Gauntlet

There was a very firm statement from Vincent de Rivaz of EdF at the Commons Energy and Climate Change Committee yesterday. "The responsibility is on the Government and us to deliver the CfD and transitional arrangements" he said. It was very obvious that the sub-text was a need for sufficient certainty on EdF's behalf to allow them to proceed to investment. However, interestingly he said that EdF did not expect consumers to take on construction risk - i.e. it should not explicitly feature in the CfD. It's difficult to buy this. Construction risk should be part of business as usual for EdF but it must feature to some extent in the CfD stike price because it is only through these revenues that EdF will make any margin on it prospective investment. Rupert Steele of Iberdrola/Scottish Power was somewhat more open on this question. Probably the most telling comment was de Rivaz's "If there is not clarity we will not invest". This was all about the need to have long-term certainty behind the CfD. Over to you Government - and in particular DECC!

What was he thinking?

So David Cameron wants to force energy companies to put customers on the lowest tariff. Or does he? What the Prime Minister said was, of course, utter tosh. But is that what he meant to say? My betting is not. I suspect that the policy being considered is something along the lines of giving customers the option to move onto the cheapest tariff - or perhaps the other way around, the option to stay as they are rather than be moved onto something that the company considers to be cheaper, having done some analysis on usage patterns etc. Thereby hangs an interesting sting - until we get smart metering that analysis is just a little tricky.

There's also the problematic push-me-pull-you of wanting people to reduce energy consumption against playing to the cheap energy gallery.

And politicians don't seem to think through the fundamentals of energy issues. Take natural gas, for instance. It's a commodity. All the energy companies buy from the same sources in the same market place. All that is going to distinguish them as far as costs are concerned is the ability of their traders to time their deals cleverly, and their on-going non-product cost base. Frankly there ain't going to be much of a differential between the companies. So, surprise, surprise, competition is at the margin. Ditto for electricity.

What the country needs is to create a situation within which companies have the confidence to invest - especially electricity generators. Who would build a nuclear power station with huge up-front capital costs if there was a strong likelihood that some ill-informed politician would be forever fiddling with the market?

Did Anyone Notice?

October 13th was Disaster Risk Reduction Day. Did anyone notice?

Into Mervyn's Shoes?

Last Thursday Adair Turner used his Mansion House speech to pitch for the role of Governor of the Bank of England. Is he the man for the job? Very early on in the speech there's a "not me, guv" piece where he argues that he was not party to the failure of the FSA in the run-up to the financial crisis (he took the helm very shortly after Lehmans collapsed). Fair enough, although one might note that it was the Americans, not the FSA under Turner's watch, that spotted the Libor debacle. However, there is one big issue that he cannot avoid. That's his long term campaigning to get the UK to adopt the euro. He now admits he was wrong but that's one awful bad call (bad judgement). Should someone who got that so wrong be the next incumbent of Threadneedle Street? I'd say not.

Euro Chat

Angela Merkel's recent visit to Greece is a reminder that the Euro crisis rumbles on. I've mused before on the likelihood, or otherwise, of the Euro surviving - with my "man-in-the-street-no-I'm-not-an-economist" hat on. My untutored view has been that the Euro zone was an economic backdoor to an, at the time (and still now), unachievable political aim - i.e. political integration of Europe quite probably as some sort of federation.

Recently a kind colleague has suggested that I educate myself in this area and look up the "Theory of Optimum Currency Areas" so I have, indeed, turned to that fount of all knowledge Wikipedia. I'm struck by the four conditions for a successful currency union:

• labour mobility
• openness with capital mobility with wage and price flexibility
• a centralised risk-sharing fiscal policy
• broadly symmetrical business cycles within each participating region or country.

So how does the Euro zone stack up?

Well, labour mobility is enshrined in law but there are language and cultural barriers which means that Europe looks nothing like the much more mobile US.

How about wage and price flexibility? Well, if that really existed Greek, Spanish and Irish wages would be pushed down to restore competitiveness. If that's happening then it's a slow process (and, inevitably, a painful one).

Centralised risk sharing? No. There's no central policy. The Stability and Growth Pact was widely ignored. Germany (or individual Germans, at least) are very wary of cross-subsidising southern Europe.

Symmetric business cycles? Very clearly not. Europe's core and periphery have very different economies. Right now Germany is still growing through its export-led policies; many of the southern countries are close to being basket cases.

My conclusion? I go back to my opening paragraph. The Euro was a political project which tried to ignore the clear economic problems it engendered. There either has to be closer fiscal integration or an admission of rather expensive defeat.

No Longer Eco-Bling

A few weeks ago ING Direct released the results of a small (apparently 1000 people) survey into what they consider to be property "deal-sealers" and solar pv came top at 38%. This is something of a change since the days when having such panels on your roof was regarded, rather sniffily, as eco-bling. This makes me wonder if their value is being properly priced into the overall consideration. I've just sent off for my second quarterly payment for my system and so far it looks as though I could achieve simple payback in under 10 years, just as I had calculated before signing on the dotted line. And that was allowing for a reasonably severe degradation rate. Even if one factors in the likely requirement for a replacement inverter after, say, 12 years that still makes these panels a pretty valuable asset.

Nuclear Moves - Or Not

I've had the occasional rumble in this blog about my belief that there is an urgent need for the UK to build its next generation of nuclear power stations as soon as possible. Things continue to grind slowly. Last month the Planning Inspectorate was able to announce that the inspection into EdF's Hinkley Point application had concluded - after having taken the full six months allowed. A decision on the application is due by 21 March 2013. So, progress of a sort.

There are also mutterings that EdF has sent a draft of its Statement of Community Consultation to the relevant local authorities with respect to its plans for Sizewell although I couldn't find anything on EdF's website. So, possibly progress here, too.

Meanwhile NuGen (Iberdrola and GDF Suez) is not due to make any meaningful decision over its Sellafield (quaintly named "Moorside") site until 2015.

And the real fly in the ointment is Horizon, which owns sites at Oldbury and Wylfa. EoN and RWE put Horizon up for sale a while ago and it appears that only two consortia have actually tabled bids: one led by Westinghouse and the other by Hitachi. Both Areva and Rosatom had been thought to be in the frame but declined to bid in the end.

It's a case of "Don't hold your breath", then. I guess with a following wind Hinkley could get on the bars before 2020, and just conceivably Sizewell, but I don't see any likelihood of any of the others meeting that sort of timescale.

Windy Peak

September 14 - a new record for wind generation - at 09:56 the feed was 4.131GW. Now that's a significant capacity - funny how these things creep up on one. The forecast for the next day was 2.86GW (not sure about the actual) - just shows that the intermittency issue is going to grow ,too.

The Time Constant for CO2 Reporting

Still catching up I picked up edie's short note on CO2 reporting from local authorities (as reported by DECC). The note explains that 97% of local authorities in the UK reported increased emissions between 2009 and 2010, reversing the results from 2008 to 2009. The two main reasons given are increased natural gas usage for space heating because 2010 was a particularly cold year; and the electricity generation fuel mix moving from nuclear to fossil.

There are some important lessons for trend watchers here. Increased space heating could not be put down as a trend on this two-point basis - a longer time series would be required to ascertain any trend (unless someone has a very good, tried and trusted, temperature normalisation tecinique). However, given what we know about retirement of nuclear power stations and the slow progress towards replacements, or any meaningful, reliable renewables, then the second reason given above could be seen as the start of a trend; and a dangerous one.

Vodafone Eurotraveller - No Thanks!

Those nice people at Vodafone have just offered me their Eurotraveller product at £3 per day for every day I use my mobile in Europe (I would then be charged at my normal charge rates). Now I go to Europe for a holiday - i.e. to get away from things. And that means minimal 'phone usage - probably less than 5 minutes on any day that I actually use the 'phone. So £3 for the marginal second seems like rather a lot. No thanks, Vodafone!

Another Statement of the Obvious?

In August (yes, I am still catching up on my reading!) Chatham House released a report entitled The 'Shale Gas Revolution': Developments and Changes. Inter alia it notes

• the European shale gas situation is different to the US one - politics, planning laws, geology all making European development more tricky
• shale gas development in the US has ut downward pressure on gas prices (indeed, some production is only profitable because of the associated C3, C4, C5 liquids)
• shale gas may substitute for renewables rather than for coal
• shale gas can only be a transition fuel, not a greenhouse gas solution.

So what's new?

In an interview the author also makes the general statement that "the only way forward is to implement carbon pricing" but to achieve something meaningful require the involvement of the US, China and the EU. The likelihood of achieving this is thin!

OK, as I said, so what's new?

Greek Construction

I recently came across this announcement of the first Greek commercial premises to be BREEAM certified. This is a little piece of good news coming out of a dire situation but it got me to thinking about how one constructs buildings for the extremes of conditions experienced in many countries. In a way, in the UK we should have it easy - we have a relatively narrow range of ambient temperatures to deal with. What changes does one have to make to cope with both lower and higher temperatures? (I don't know - I'm no civil engineer). And what can one do to retrofit successfully? The little town house that we have stayed in during recent trips to Greece is a case in point. It has good thick walls which keeps the downstairs room nicely cool in the summer, but the upstairs room with a wood-lined ceiling immediately under the tiled roof can get very hot under the afternoon sun. Then again, on the few occasions that we have experienced a drop in temperature the house can be uncomfortably cold and the only heating is by portable electric fire or an traditional open hearth grate. There will be a lot of properties like this in the country. What would one have to do to make them more efficient? And what would be the cost?