The new UK government started its term in office by putting approval for the Hinkley Point nuclear plant on hold. Yesterday, it gave the green light to the world’s largest offshore windfarm off the east coast of the UK, near Hornsea.
Yesterday also saw the delivery of a personal letter from the new UK Prime Minister, Theresa May, to the Chinese President, Xi Jinping, reassuring him of Britain’s keen interest in maintaining close ties with China.
Given her less than warm embrace of foreign acquisitions of British assets while Home Secretary, many had speculated that she might be concerned about the planned investment by a Chinese state company in an energy asset as strategic as Hinkley Point.
However, yesterday’s developments suggest that nationalistic considerations are not to blame for the reverse gear on the nuclear project. Apart from anything else, Denmark’s Dong Energy is the principal investor in the Hornsea windfarm, just as it is in the London Array, another east coast project.
It seems more likely that Mrs May and her advisers are looking for the best value for money in their clean energy policy.
The nuclear deal has been a long time in the making. At a time when it seemed a fair price, during the nine-year negotiating period, the government guaranteed to pay £92.50 for every megawatt hour of energy produced.
Oil prices have since dropped and renewable sources of power have become more competitive also, with offshore wind – of which the UK now has a good supply – likely to drop to €80 (£70 at today’s exchange rate) by the time Hinkley Point would become operational. The nuclear option as the cheapest deal is now in doubt.
Renewables already contribute 25% of the British energy mix, and offshore wind is expected to make up 10% on its own within ten years, compared with the 7% anticipated input from the Hinkley Point plant.
This, along with yesterday’s Hornsea approval, looks like good news for the renewable energy sector.