Nuclear - now it's "how" not "if"...
- 12 Jun 06, 12:03 PM
Gordon Brown's most recent statement flagging up a change in energy policy; plus the thin smidgeon of a revelation present in today's are further evidence that the government Energy Review will propose the rebuilding of old nuclear power stations with new ones. The green lobby, which had tactically retreated from waste disposal and safety arguments to the high ground of "it's uneconomic" now finds that ground giving way. I take no view for or against new nukes, but here is how I am being briefed that the economic argument has been won...(by the way, it is said the review will appear in the last week before the parliamentary recess, yet I am told the policy document has been written already)...
1) Planning: for the energy industry to find new build economic it will have to have agreement in principle on a particular type of power station, reducing local planning process to site specific issues. Since Alistair Darling signalled the siting of new Liquid Petroleum Gas facilities would be the subject of similar fast-track planning, the industry is assuming it will get fast track planning on new nukes.
2) Consortium: the three key players will need to form a consortium to oversee new-build. None will admit to being in discussions over this; however it is assumed by senior consultants in the industry that a consortium will be formed; each of the three big players has its own domestic customer base and therefore selling the juice direct as "base load" is not assumed to be a problem.
3) Economic incentive: nobody is talking direct subsidy. What the industry seems to want is a long term, bipartisan price signal from government on the cost of carbon permits. If the government signals the cost of carbon is going to remain high - i.e. that it is committed to the Kyoto principles beyond 2012, then the industry can raise money from banks at a rate of return attractive to them. As one insider said to me: the ultimate issue is rate of return to banks - if it can be signalled long term, they will lend, and the nuclear power stations will be built.
From the FT's story this morning two points are salient: "soaring gas prices and the rising cost of tradeable carbon permits" make nuclear power nominally cheaper (says the source) than carbon fuels. I have been told by a "near outsider" to the process that the policy document has been written, arguing in favour of new nukes. However what the generation industry wants is detail: a decision in principle for new nukes is no use to them - they need specifics on the planning regime and the carbon price. It looks from what the FT is reporting that the "peer reviewed government study" - which no-one has heard of before - will provide that.
(One thought that springs to mind: if said study shows nuclear more economic than gas, will it also show clean coal/carbon store and caption is cheaper than gas? I predict it will - and it leaves energy giants still with an option to invest heavily in coal again.)
Now what about releasing that study for a bit of peer review right now, I hear you ask? I will put in a call... Meanwhile those close to the green anti-nuke lobby who know anything about public affairs are asking how it could have gone to sleep and failed to come up with a united campaign at the crucial point where government minds are being made up. At stake is not the decision in principle, which I believe has been taken, but the size of the bone Blair and Brown will have to throw in the direction of renewables to neutralise the argument that investment in nukes will starve renewables of investment.
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The argument had only shifted to economics because the anti-nuclear lobby thought that point was easier to win in the short term (probably a tactical mistake, since safety always has been the real issue). Expect a shift back to the arguments about safety, vulnerability to terrorism, nuclear proliferation, and full lifecycle carbon impact.
Unfortunately, it may be that the only way for the safety argument to be won is if there were another major accident, although no-one would want that just to prove a point.
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If the nuclear clean-up costs are "rolled-up" and included in the initial capital it will double or even triple the sum to be raised. The paying of an annual levy into the Nuclear Liability Fund is unacceptable, because if a station closes for any reason or runs out of fuel before the generating cycle is complete, then insufficient funds would have accrued. In the rescue of British Energy, the Β£5 billion "nuclear liabilities" were passed to the taxpayer. So each new reactor needs its own "pension fund" to pay for its retirement and eventual interment.
Finland's Olkiluoto project appears to offer a model for financing and waste management, but its future is insecure. The fuel elements will be manufactured in France, so only the spent fuel amounting to 2,500 tonnes over the 60 years of the stations operational life will accrue in Finland. The bulk of the radioactive waste will remain in France and at the uranium mines elsewhere. The French are over-exposed to uranium shortages, because they have little diversity of supply, having 80% of their electricity as nuclear. French generation will take priority over foreign needs as the coming uranium supply deficit looms. The Finns will swop reliance on Russian gas and oil for dependence on French nuclear fuel. The French will simply rack up the cost of the fuel to cover their manufacturing and waste management costs and the Finns will have to grin and bear it!
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