Sunday, 10 May 2020

Fund Managers with £9.0 billion to invest, should you: Invest now in Offshore Wind OR invest in Advanced Nuclear Power Plants in 5 years time????

£9.0 billion of capital investment is going into Dogger Bank Offshore Windfarm right now. The first electricity generated will be in 2023 and full capacity reached in 2026.

One of the first Advanced Nuclear Power Plants (NPPs), the BWRX-300 Small Modular Reactor (SMR) will commence operation in 2027 and should become available in the UK by 2030.


This is Dogger Bank A; B; C - Offshore Windfarm:


And this is the BWRX-300 Advanced NPP


The most significant factor investors should consider about advanced SMRs is their build programmes are now down to 2 years - no different to an offshore wind farm. So the cost-of-capital burden that has drained investment from conventional npps is utterly negated. Comparing investments, it need not be considered a part of 'Significant Costs'.
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For the Dogger Bank investment, assuming the full 426 million MWh are generated between 2025 and 2050, the first significant cost is capital investment: £21.13/MWh.

The second significant cost is O&M. Research data is sparse, but a 2016 publication references a similar site: 800 MW Wind Farm D. The O&M cost is €75.2 million/yr. Pro rata that to 3,600 MW and factor in the 2016 € to £ exchange rate and UK inflation to 2020 and this significant cost is £17.50/MWh.
Page 6; Table 1; Wind Farm D. (2016)

The third significant cost is fuel and since it is stated frequently that this is 'free energy' the cost is £0.00/MWh.

The fourth and final significant cost is decommissioning. A research paper from DVL, a world authority on maritime affairs, settles at €400,000/MW. Factor in the 2015 € to £ exchange rate and UK inflation to 2020 and this significant cost is £2.70/MWh.
Page 9; Fig 9 (2015)

The significant cost total is £41.33/MWh. When applied to 426 million MWh is £17.61 billion.
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For the Advanced NPP, the BWRX-300, the first significant cost of capital investment is £4.13/MWh.

It is then possible to ascertain all of the remaining costs: Fuel fabrication; O&M; waste fund; decommissioning fund - from an analysis of Hinkley Point C npp. All of these costs add up to 23.00/MWh in 2018. Factor in the 2018 € to £ exchange rate and UK inflation to 2020 and this significant cost is £25.10/MWh

The significant cost total is £29.23/MWh. When applied to 2,177 million MWh is £63.63 billion.
Pie Chart: Hinkley Point C nuclear power plant

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So what does that mean for the pension pots that have gone into the £9.0 billion offshore wind farm, commencing generation in 2025 and earning for every MWh sold at the going Wholesale Price.

Thinking in terms of a Wholesale Electricity Price of £50.00/MWh, by 2050, after its 25 years lifespan of economical operation, Dogger Bank will have generated an income of £21.30 billion, with significant costs of £17.61 billion. That's a potential for dividend payments from earnings of £3.69 billion. 

Working out at £0.41 for every £1.00 of capital invested.

Meanwhile, it is reasonable to assume the Pension Fund Manager holding onto his £9.0 billion until 2030 would probably have partaken of 'opportunity earnings'. Then by 2030, the £9.0 billion invested in advanced npps starts earning on the Wholesale Market.

Again,thinking in terms of a Wholesale Electricity Price of £50.00/MWh, by 2050, after 20 years of operation (1/3rd of its lifespan), BWRX-300 npps will have generated an income of £36.26 billion, with significant costs of £21.20 billion. That's a potential for dividend payments from earnings of £15.07 billion.

But they will carry on for another 40 years of economical operation to reach £45.21 billion

Working out at £5.02 for every £1.00 of capital invested (12X more).
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WHAT TO DO???

DO NOT INVEST IN OFFSHORE WIND NOW - KEEP YOUR PENSION FUNDS SAFE FOR ANOTHER 5 YEARS AND INVEST IN 
ADVANCED NUCLEAR POWER PLANTS! 



1 comment:

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