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.

Coalition Government Ministers balked at the word “subsidy”. Former LibDem Secretary of State for Energy and Climate Change, Ed Davey, was still insisting that offering new nuclear operators a guaranteed price was not a subsidy. The so-called “strike price” – which the consumer will be forced to pay for nuclear power under the Contract for Difference system, is effectively locking us all into subsidising nuclear power for decades to come.  EDF Energy will be guaranteed £92.50 (at 2012 prices) for each megawatt hour (MWh) of electricity generated for 35 years – index linked. The difference between the wholesale cost and this minimum price agreed will be funded by a levy on household energy bills. If EDF also goes ahead with plans to build two more reactors at a second site at Sizewell in Suffolk, the subsidy will be lowered to £89.50. (see nuClear News No.56)

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

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 year contract which involved paying around twice the current market price for electricity. Yet that is precisely what the Government has done. 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.

The Tory Government finally confirmed in October 2015 that it was dropping the ‘no public subsidy policy’ [for nuclear power] of the previous administration.

Just the day before, energy minister Andrea Leadsom said: “It is vital that industries over time stand on their own two feet. I don’t think anyone here would advocate an industry that only survives because of a subsidy paid by the billpayer.” She was justifying 87% cuts to subsidies for solar power, just as they are on the verge of becoming cheaper than gas. The contradiction does not need spelling out. Nuclear power has had 60 years to stand on its own two feet.

Conservative opposition to windfarms means we could be missing out on one of the cheapest sources of electricity, according to Adair Turner, chair of the Energy Transitions Commission – a Shell-funded industry group. Lord Turner said a report by the commission found that the cost of wind power had fallen by 60% in the past five years. The analysis predicted that by 2040, wind and solar would account for 45% of the global power mix, with hydro and nuclear making up another 35%. The group said that by 2035, wind and solar could provide 98% of power in developed countries such as Germany and the UK, with gas power stations or batteries providing backup. Nuclear would not grow its share because of cost, while progress on carbon capture and storage of emissions from coal and gas power stations has been “too slow”. Lord Turner said he thought the UK government should only go ahead with new nuclear plans beyond those already established for Hinkley point “if we see cost reductions”.

Meanwhile a German auction has received the lowest-ever bid for an offshore wind power project in the North and Baltic Seas. The auction fetched an average bid of €44 per megawatt hour and one bid of zero euros, following a general trend of lower prices in similar auctions in Denmark and the Netherlands. In Germany, the bids are on top of the wholesale power price. As a result, a bid of zero euros will receive only the wholesale power price. In Denmark and the Netherlands, bids are an all-in amount, which comprises the wholesale power price, plus a “sliding tariff” that tops up the difference to the bid amount. In all three countries, successful bidders will receive a free onshore and offshore grid connection and connecting sub-sea cable. So as a result, a bid of zero euros, as in Germany, is not exactly unsubsidised. That said, it’s good to keep in mind that offshore wind projects take a while to build: the German auction was for projects to be completed by 2025 at the latest.

Unsubsidised renewables have become the cheapest source of new power — by far — in more and more countries, according to a new report from the United Nations and Bloomberg New Energy Finance (BNEF). In just one year, the cost of solar generation worldwide dropped on average 17%, the report found. The average costs for onshore wind dropped 18% last year, while those for offshore wind fell a whopping 28%.

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

 


Share

Published: 28 March 2009
Last updated: 8 May 2017