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Go nuclear, but keep your hand on your wallet

Irwin Stelzer

Wednesday, 12th March 2008

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

The government has also announced that it is willing to adopt ‘further measures’ to make low-carbon energy, which mostly means nuclear power, competitive with coal and gas-fired electricity generation. This might include such sensible steps as taxing carbon, or market-distorting measures of a sort that must already be circulating in the Treasury.

Finally, in what the government calls ‘extreme circumstances’, it is prepared to help meet the massive decommissioning and waste disposal costs — knowing full well that such extreme circumstances almost always attend decommissioning and waste disposal. Disposal sites are delayed, decommissioning costs are driven up by unforeseen events — that sort of thing.

Most important, the government has a rather simple way of passing any untoward costs of nuclear energy on to the public without breaking its promise not to use taxpayer funds to foot the bill. It can require existing distribution companies to include a mandated portion of nuclear energy in the mix of sources on which they rely. That will drive up consumers’ bills, but leave the Treasury free once again to use its Macavity defence — prices are up, but taxes aren’t, so don’t blame us.

None of this is to say that it is not in the national interest to encourage the replacement of existing nuclear plants, and the enlargement of the fleet. That depends on what you believe to be the social value of replacing carbon-emitting but lower-cost coal plants, and natural gas plants supplied by volatile regimes, with nuclear power. And how much you worry about terrorists gaining access to nuclear materials.

Meanwhile, investors will have noticed that Britain’s once one-off windfall profits tax, laid on utilities by the incoming Labour government, has again made its appearance, either directly or as an order to utilities to subsidise the bills of consumers afflicted with ‘fuel poverty’. It would not be completely unreasonable for investors to wonder whether such a retroactive assault on the profits they might earn from what is a risky investment — more than one American nuclear utility has gone bankrupt or close to it, in part because regulators have changed the rules after a plant was built — is in their futures.

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Ian

March 14th, 2008 12:05pm

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

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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