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18 | 15TH - 21ST SEPTEMBER 2017 | UTILITY WEEK Finance & Investment Analysis I n recent decades, changes in electricity generation have tended to be gradual. Coal ruled the roost for over a century, until nuclear power emerged on the scene in the late 1950s. In the post-war period, oil-fired plants proved popular until the quadrupling of oil prices in the early 1970s eventually rendered them uncompetitive – and useful for little else apart from meeting peak demand. And, in the 1990s, the "dash for gas" kicked off in earnest: for new baseload plant, gas remains the best option. However, the rise in renewables is chang- ing the UK's generation landscape, although its profile is well below that of the Ener- giewende in Germany – the main difference being that the UK is building Hinkley Point C while Germany is scrapping all its nuclear plants by 2022. Coal and gas-fired plant Arguably, the most sensational change came in 21 April, 2017, when the UK generation system was coal-free. During that historic day, not a single megawatt-hour was gener- ated from coal-fired plant. Greenpeace UK's head of energy, Han- nah Martin, summed up the unique nature of this event: "The first day without coal in Britain since the industrial revolution marks a watershed in energy transition. A decade ago, a day without coal would have been unimaginable." All UK coal plants are due to close by 2025. However, this does not mean the end of carbon-fuelled power stations, although orders for new Combined Cycle Gas-Turbine (CCGT) plants are thin on the ground. Indeed, Centrica is selling two of its gas- fired stations – South Humber Bank and Langage – since recent financial returns have been lacklustre. Ireland-based ESB's 880MW plant at Car- rington, to the southwest of Manchester, has recently been commissioned but virtu- ally no other similar plants are on the hori- zon, which is a major concern as National Grid's wafer-thin plant margins are squeezed further. Hinkley Point C survives Despite all the political shenanigans of recent months – both the general election and ever-worsening relations with the Euro- pean Union over a workable Brexit – the Hinkley Point C new-build nuclear project survives. Furthermore, the infamous £92.50 per megawatt-hour 35-year contract for differ- ence, which at present prices indicates the government is well out of the money, has also been cited by some as a compelling rea- son to dump the c£24 billion Hinkley Point C project. Work has been underway for some time at the site, and short of either a massive U-turn or a most unexpected event, such as a sec- ond Chernobyl-type disaster, this controver- sial and desperately expensive project seems set to proceed. It is unlikely to be commis- sioned before the mid-2020s at the earliest. But whether Hinkley Point C is the first of a new generation of nuclear plants remains to be seen. An age ago, Sizewell B was des- tined the first – and less happily the last – of the pressurised water reactors that at one time were supposed to be the future for UK generation. Most interesting, perhaps, is not what has been happening onshore at Hinkley Point C but offshore in the North Sea. Offshore wind The 2017 summer season saw discernible progress for some key offshore wind projects. According to Renewable UK, there is now almost 5.4GW of offshore windfarm capac- ity in operation, with a further 3GW under construction and the technology received a boost in this week's contracts for difference auction. The leading offshore wind construction developments in 2017 were concentrated off East Anglia, with three major projects – Dudgeon, Race Bank and Galloper – making real headway. Off the south coast, the Ram- pion wind-farm is progressing. And further north, Dong Energy's Walney extension is also being built, along with the Beatrice pro- ject in the Moray Firth off Caithness in north- ern Scotland. Importantly for future UK energy capac- ity, all six of these offshore projects have capacities of between 330MW and 590MW. To that extent, when construction is complete, they will make a material difference to UK energy output. While these headlines look impressive – and they are – the offshore wind sector still faces challenges, especially on the financial front. Previously, costs per MWh had come in at well over £120 but they are coming down steeply. Recent auctions have confirmed this trend and there will come a time when no subsidies are required – but not yet. Given the government's aggressive efforts to curb public expenditure, there is always the risk that renewable energy subsidies will be substantially cut or even abolished. None- theless, offshore wind seems destined to play a key role in UK energy provision over com- ing decades – especially if the underlying per megawatt-hour can fall to well under £100/ MWh. The overall message is that, compared with most other generation sources, the off- shore wind industry is in rude health. Nigel Hawkins, director, Nigel Hawkins Associates Today's generation Over the past few decades the face of generation in the UK has changed completely as coal plant has been closed down and renewables have come of age. Nigel Hawkins writes. Key points At one point coal was king. The 1950s saw the advent of nuclear power, which was supposed to usher in a new dawn. Experimentation with oil-fired plant was curtailed by the soaring price of crude oil in the 1970s. Hinkley Point C looks set to proceed but the future of nuclear power is otherwise uncertain. Offshore wind holds real potential but the cost is high and there is little appetite for continuing subsidy