The UK's Electricity Generation Problem...

The Economist had a provocative article entitled "Hinkley Pointless" ( http://econ.st/2b6nG0J 6th August 2016) where they questioned the economics of the UK's proposed nuclear power plant and recommended scrapping the project, plus investing in alternative renewables.

A large number of people will reference The Economist article in support of renewables without either knowing about the omissions (errors?) in the article, which were highlighted later by the company (EDF) planning to build the nuclear power station, see below:

"Why Hinkley matters

You (The Economist) urged the British Government to cancel the Hinkley Point nuclear-power project and instead spend the money on renewable energy (“Hinkley Pointless”, August 6th). There are a few things to bear in mind that were not mentioned in your leader. We take the construction risk. The consumer pays nothing before Hinkley starts producing electricity. The fact that prices decades from now are unknown is precisely why investors and consumers benefit from a set price today. It protects consumers from volatility. It makes investment possible. You also claimed that combined-cycle gas turbines are cheaper to run (“When the facts change…”, August 6th). That is only true based on today’s low gas and carbon prices and with the running costs of existing plants. The correct comparison is with future options. Under the government’s central forecast for gas and rising carbon prices, the cost of a gas-plant commissioning in 2025 is close to the Hinkley strike price.

Moreover, the government’s pledge to pay £92.50 ($120) per megawatt hour for Hinkley’s output is lower than the average £123 per MWh in renewables’ support schemes. You compared specific technologies without considering the whole-system cost. In fact, a low-carbon mix with nuclear is significantly more affordable than one without. Other technologies play a role but cannot replace the need for large-scale low-carbon generation.

Hinkley will create thousands of jobs as part of a real industrial strategy. Suggesting that Britain could “muddle along” is an unwise response to the issues of energy security and climate change. Hinkley Point is a wise response.

PAUL SPENCE
Director of strategy and corporate affairs
EDF Energy
London"

Conclusion: The Economist's article is incomplete and their conclusions, likewise.

Moral: Don't trust anything you read and if you're an economist it probably helps to get the same data as the actual players, rather than make potentially erroneous assumptions.