Sunday 18 September 2016 6:10 pm

Hinkley Point C is not a magic bullet - the UK also needs a dash for gas to plug the looming energy gap

The go-ahead for Hinkley Point C last week may signal a new era for nuclear power in the UK, but the UK is still facing an energy gap. 

“Approval of Hinkley C is necessary but not sufficient to avoid a future supply crunch,” said Jeremy Nicholson, director at the Energy Intensive Users Group (EIUG). “We do need new, secure baseload to replace retiring coal fired power stations, and intermittent renewables simply can't provide this, regardless of cost. We need action to ensure new gas fired power stations get built quickly during the ten years or more that it will take before Hinkley Point is built.”

Around 15GW of the UK’s remaining operational coal and some older gas fired power stations are set to retire by around 2025. The UK's existing nuclear reactors start coming offline from 2023. Hinkley Point C, which will provide 7 per cent of the UK's power needs for 60 years, is due for completion by this date but experts fear delays.

With a couple of isolated exceptions, the only new generation currently being built is highly-subsidised intermittent renewables such wind and solar according to EIUG. Because they are intermittent, they need to be backed up.

The answer to the looming supply gap may be a new 'dash for gas', but will the existing market support the build of more gas-fired power stations?

The government, which works out national energy requirements under advice from National Grid, hopes the recently introduced capacity market will provide an incentive for power generators to invest in new gas power stations to replace the ageing ones. Companies bid for capacity contracts by auction which in theory should help ensure capacity is secured at least cost to consumers.

The system is designed to reward firm capacity, that is power stations that can generate reliably, whenever power is needed. This will help provide sufficient backup wind and solar that cannot be relied on at times of peak demand, such as on cold winter evenings.

However, there are concerns that the energy generated will be expensive for consumers, including the UK's energy intensive industries which are already paying up to 80 per cent more for their power than European competitors.

The next auction is due to take place in December, for capacity in 2020/21. Nicholson says: “We will have a clearer idea then what the cost impact will be on consumers bills.”

There are already doubts as to how successful this auction will be.

“I don't think what's been proposed in terms of subsidies will get companies to say yes we'll start building new gas-fired capacity," says Angelos Anastasiou, utilities analyst at Whitman Howard. “You'd need colossal subsidies for that to come through. But what it will do is stop the closure of existing plants.”

The Institute of Directors is also sceptical that the market is working. “I don't see a race to build gas plants right now. I would like to see much more of one. We had a very successful dash for gas in the late 90s and I would like to see that happen again. It makes sense but it think there are so many distortions [in the market] that it would be very difficult to bring about,” said Dan Lewis, senior adviser for infrastructure policy at the IoD.

He warns about relying on too many subsidies to close the energy gap, saying: “If you build a market where you can only build power stations on the back of a subsidy you effectively build subsidy upon subsidy then it comes almost completely unmarket aligned altogether.”

With question marks over the high cost of the next generation of nuclear reactors, the UK needs to do as much as possible to secure its future energy supplies. But as things stand, bridging the medium term energy gap with a new dash for gas is likely to prove both convoluted and costly.