Go nuclear, but keep your hand on your wallet

12 March 2008

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The government claims that the private sector will meet the costs of new nuclear plants, says Irwin Stelzer. But there is every risk that the public will end up footing the bill

Assuming that the permitting process can be expedited, there is then the small matter of whether these massive, capital-intensive stations will be economic, without government subsidies. Reasons for optimism include the rising cost of fossil fuels, with which nuclear must compete; the inability of renewable resources to do more than make a marginal contribution to future electricity supplies and the reduction of carbon emissions; the proven ability of US firms such as Exelon to operate nuclear plants at 94.5 per cent of capacity, a doubling of efficiency in the past decade; and the likely increase in the cost of carbon permits, which must be included in the cost of electricity produced from coal.

But if we know anything about nuclear power plants, it is that their cost always exceeds estimates. Perhaps the situation is no longer as bad as it was a few decades ago, when the predicted cost of one plant in the New York area was put at $700 million, and the final cost at completion came to over $5 billion. But we can’t be certain, since current estimates of the cost of these energy behemoths vary widely. Some American companies say they can bring a plant on line for $5 billion; others put the figure at twice that. The optimists might be right, but investors being asked to part with billions of capital must factor the risk that the low estimates are wrong into the price they will want for their money. As they watch the price of uranium rise, the cost of building materials escalate, and observe the rising wages of the scarce personnel who know how to build these plants, they will worry even more. Which is why John Hutton is hedging his bets by approving the construction of new coal plants.

And why the government has left open the possibility of subsidising nuclear power. On the surface its disclaimers are absolute — rather like its pledge to hold a referendum on the EU treaty/constitution. But it has left itself several escape hatches. First, there is the government’s indication that it will establish ‘a level fiscal playing field between nuclear power and other forms of electricity generation’. Just what that means is hard to say, but it certainly leaves the government room to take such steps as it deems appropriate to bring the costs of nuclear and non-nuclear power in line with one another, should nuclear prove too expensive to compete in the deregulated energy market.

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Ian

March 14th, 2008 12:05pm Report this comment

Typical sleight-of-hand, "we love the private sector" rubbish from Labour. The big point is that, given that every citizen uses electricity, taxpayers will foot the bill as consumers for the new plants anyway. So the only question is, should such plants be built and run for private sector profit or as facilities for the community? "New" Labour, as usual, looks for the clever-stupid answer, which is simply based on arbitrary national accounting rules....

Dwight Vandryver

March 15th, 2008 12:51am Report this comment

There are about 150 working nuclear reactors producing power in Europe (23 in the UK, 59 in France). The notion that by not building new plant, the UK would somehow be isolated from a Chernobyl style accident is untenable. As these stations have operated without incident and use different designs, it is fair to assume that the risk of an accident is negligibly small, but there can be no absolute proof of zero risk. Unfortunately, the THORP reprocessing plant at Sellafield has incurred huge time and cost overruns due to a radioactive leak. Although no danger to the public, it calls into question Britain's ability to conduct nuclear operations safely. It is these fears that the green lobby will amplify to hinder or arrest any new developments; so much so, that a revival of nuclear power in the UK probably will not occur. As a back-up plan for this eventuality, the government has recently announced approvals for a coal fired power station at Kingsnorth and a gas fired station near Plymouth. In terms of meeting EU legislation on CO2 reduction and easing Britain's dependence on fossil fuel imports, the plan is a disaster, but understandable. Alternatively, there is wind power and, as the Times reported, to achieve EU targets would mean building 20,000 wind turbines, which would cause uproar amongst ecologists. There is just one option: import more electricity from France. France is the world's largest net exporter of electricity due to its very low cost of generation. The UK already imports 3% of its requirement from France via an underwater cable. It would place the UK on a par with Italy that has no nuclear generation: the penalty being that electricity prices there are 45% above the EU average.

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