Nuclear Costs and Finances

Dr William Blyth of Oxford Energy Associates told the House of Commons Environmental Audit Committee in written evidence to its inquiry into Energy Subsidies that:

 “Despite Ministerial announcements as recently as October 2010 that there would be no public subsidies for new nuclear plant, it is apparent that several subsidies will in fact be in place, some explicit, some implicit, driven in large part by the rapid escalation in the estimates of capital costs for building new nuclear plant.”

In 2008 Steve Thomas, Professor of Energy Policy at Greenwich University predicted that nuclear companies would eventually insist on receiving subsidies to build new reactors, and that after five years pursuing “a strong nuclear agenda“, the government would be forced to drop its refusal to give subsidies or abandon its nuclear ambitions. Regrettably his prediction has come true.

Ministers might balk at the word “subsidy”, but by offering new nuclear operators a guaranteed price – the so-called “strike price” – which the consumer will be forced to pay for nuclear power under the Contract for Difference system, the Government is effectively locking us all into subsidising nuclear power for decades to come. Negotiations over exactly how much subsidy EDF Energy will get for the electricity it hopes to generate if it decides to spend at least £14 billion on building two news reactors at Hinkley Point in Somerset have dragged on. EDF began talks in 2012 with the Department of Energy and Climate Change (DECC), and were meant to be concluded by the end of the year. Six months later Energy Minister Michael Fallon said the Government and EDF still disagree on “five or six” issues.

The UK government wants a strike price of around £65 to £70 per MWh, although other commentators have said £80/MWh. (In 2008 EDF talked about a price of £45/MWh). EDF now wants between £95 and £100/MWh. (See NuClear News No.49) That compares with the current market price for electricity of just £55-£60/MWh.

Added to this EDF says it needs the guaranteed “strike price” for between 35 and 40 years, rather than the expected 20 which means we could find that taxpayers are committed to paying more for the electricity than is justified until 2060. (See NuClear News No.50) “To build the full 16GW (gigawatt) at the same price would cost £250bn over 40-year contracts, and over 30-year contracts £150bn,” says Tom Burke, a founding director of the environmental campaign group E3G.

Caroline Lucas MP told the House of Commons during a debate about the Energy Bill that a Government which was serious about tackling fuel poverty and high electricity bills would not sign up to a 35 or 40-year contract which involved paying around twice the current market price for electricity. Yet that is precisely what the complex mechanisms for providing financial support for nuclear in the Energy Bill do. Lucas put forward amendments to the Bill which sought to simply return us to the coalition agreement position that new nuclear should receive no public subsidy. She said many people are hugely disappointed that Ministers have ditched this commitment so shamelessly. Essentially, we are writing a blank cheque for an expensive, inflexible old technology that we cannot afford and simply do not need. Former Labour MP, Alan Simpson points out that:

“Millions more will face rising fuel bills for energy set to become less and less affordable, while better choices slide off the table. This is not a programme, it’s a road crash. The only sources of energy with genuinely falling cost curves are all being sidelined.”

The Energy Fair group, which specialises in highlighting subsidies to nuclear power has also made a submission to the Environmental Audit Committee.  It details seven main kinds of subsidy, which existing nuclear power plants have benefitted from for years, several of which are substantial. Withdrawal of just one of these – the Limitations on liabilities, which mean nuclear operators of pay much less than the full cost of insuring against a Chernobyl-style accident or worse – would raise the price of nuclear power to at least £200 per MWh, much more than the unsubsidised cost of offshore wind power (about £140 per MWh).

Subsidies for nuclear power have the effect of diverting resources away from techniques and technologies which are cheaper and altogether more effective as a means of meeting our energy needs. Existing subsidies should be withdrawn and no new ones should be introduced. Renewables have clear advantages in cost, speed of construction, security of energy supplies, and effectiveness in cutting emissions of CO2. There are more than enough to meet our needs now and for the foreseeable future, they provide diversity in energy supplies, and they have none of the headaches of nuclear power.

A submission from the Association for the Conservation of Energy (ACE) argues that new reactors will require an unnecessary spending of the between £19 and £396 per year for 40 years by every single person in the UK, compared with alternative Energy Pathways detailed by DECC. That amounts to a total of between £1.19 billion and £24.97 billion per year and between £47.6 billion and £998.8 billion over the 40 year period. The alterative pathways all achieve an 80% reduction in CO2 emissions by 2050 and keep the lights on. In fact the evidence points to the alternative pathways being more reliable than the equivalent government pathways because they all rely on less imported energy than the government pathways. (See NuClear News No.51 – ACE submission to the Environmental Audit Committee not yet published.)

So by spending almost £1 trillion more than necessary we will get yet more nuclear waste, and an energy policy which goes nowhere near to preventing the eight extra deaths every hour due to cold related illnesses during winter months.

See also Eletricity Market Reform and Nuclear Subsidies.

Further information

A briefing on nuclear costs and finances is available at:
http://www.powerbase.info/images/2/20/Nuclear_Costs_and_Finances.pdf

 


 

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Published: 28 March 2009
Last updated: 21 June 2013