On January 23rd, EDF announced a further delay to its Hinkley Point C nuclear power station. This pushes back the start point for the first 1.6 GW reactor to between 2029 and 2031. Previously, the plant was due to come online in two stages: the first reactor in 2027 and the second in 2028.
But what will this delay mean for the system, power prices, and battery revenues?
Note: In this analysis, we have modeled a best-case scenario of unit one becoming operational in 2029, followed by unit two in 2030.
Britain currently has five operational nuclear power stations with a combined capacity of 6 GW. Aside from Sizewell B, all of these are due to retire before 2030. Without further extensions to these generators, total nuclear capacity will decrease to a 64-year low of 1.2 GW in 2028 - a 73% reduction from today - as Sizewell B becomes the only active nuclear plant. Further delays to Hinkley Point C would see this continue into 2029 and possibly beyond.
Shortfall in nuclear generation will be met primarily by gas CCGTs
In the worst-hit year, 2028, Hinkley Point C was expected to generate up to 21.7 TWh of zero-carbon electricity. The loss of this generation is not expected to to cause any major security of supply issues, with other generation available to take over.
Gas CCGT generation is projected to meet 60% of the shortfall in nuclear generation in 2028. Changes in interconnector flows meet almost all the remainder - a combination of reduced exports to and increased imports from Europe.
Carbon emissions will increase as a result
The switch from nuclear to CCGT generation will lead to increased emissions. The additional 26 TWh of CCGT generation projected across 2027 to 2029 would cause an additional 10 MtCO2 of emissions. This is equivalent to 19% of total power sector emissions in 2022, or the annual emissions of 6.2 million cars.
Delay could increase power prices by 10% in 2028, but price spreads fall
The delay to Hinkley Point C takes up to 3.2 GW of baseload, inflexible capacity out of the supply stack. Prices increase by 7% on average across 2027 to 2029 as a result of this, with a maximum increase of £4.7/MWh on average in 2028.
Despite the increase in overall prices, wholesale spreads are projected to decrease slightly, by up to 1.5% in 2028. This decrease occurs primarily because of a fall in the number of zero or negatively priced periods, up to 32% in 2028. This increases the daily minimum price by 28% on average.
Meanwhile, there is enough interconnector and CCGT capacity to meet the generation shortfall without a significant increase in peak prices. Maximum prices increase by just 3% on average.
Ultimately, the loss of Hinkley Point C from 2027 to 2029 is not expected to cause issues with security of supply. In our modeled scenario, there is enough spare capacity to meet the shortfall in generation, meaning we do not see an increasing number of price spikes.
Batteries revenues are unlikely to change significantly
Although prices are higher following the delay of Hinkley Point C, battery revenues are driven primarily by daily spreads in the wholesale market, which reduce by 1-1.5%.
As a result, total battery revenues remain similar - decreasing by a maximum of 3% in 2028 due to lower value from wholesale trading. This decrease is similar across batteries pursuing merchant-only and merchant and ancillary strategies due to the correlation of prices in frequency response services with those in the wholesale market.
While we don’t currently forecast any additional occurrences of price spikes (such as those seen in December 2022), the delay to Hinkley Point C does increase the probability that these occur. If so, batteries could see an increase in revenues.
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