Opinion: Getting a better deal for consumers from nuclear power

Shearon Harris Nuclear Plant - Some rights reserved by John O DyerFollowing the vote at last September’s conference, the party now supports new-build nuclear power. This has been a hard road for many, but ultimately the UK needs to replace the 82% of UK nuclear generation capacity that is due to decommission by 2023. This is fully 51% of all UK low-carbon generating capacity, and unlike renewables today, nuclear can provide baseload generation.

It is this combination of baseload capability, capacity at lower cost than the cheapest renewables means that nuclear new build should go ahead.

But nuclear new build shouldn’t be at any cost. Today, CentreForum has published a new paper on whether the new Hinkley Point C project is value for money to taxpayers, and what needs to be done to maximise value for money in future projects.

The findings are surprising. Due to Labour’s inability / unwillingness to proceed with new-build nuclear, and then a politically driven decision to force all of the financing into the private sector, Hinkley Point C is far more expensive than it should have been; instead of paying £81.00 per megawatt hour (MWh), UK consumers will pay £92.50 per MWh, falling to £89.50 per MWh if a second plant is built at Sizewell, Suffolk.

A minimum of £12.4bn more expensive over 35 years, specifically. This is nearly £550 a household more than it should cost, solely because of the financing package. If it isn’t unpicked by the European Commission, Hinkley Point C will probably go ahead on these terms. Given when the existing nuclear plants will retire, the Government had a limited choice on Hinkley Point C.

But if the Hinkley Point C deal can’t be re-negotiated now, it mustn’t be allowed to happen in future. The key problem was the lack of an auction to determine the minimum level of subsidy that would be required, and the failure to drive out value through a robust public sector comparator.

CentreForum recommends that all future nuclear new build should include a robust public sector comparator in the form of a state-owned but independently operated company like Network Rail. And unlike Network Rail which has debts scheduled to hit £50bn by 2020 and which will likely require refinancing, a new nuclear operator would actually be profitable, and would be able to pay its debts back.

New nuclear also offers the opportunity to help clean up the products of the existing nuclear programme. Specifically, new nuclear should integrate the disposal of the UK’s 140 tonne plutonium stockpile left over from reprocessing and the weapons programme. We’re currently spending £40m a year to store the plutonium, and if we decide to store it long-term, we’ll need to spend an additional £500 million spent on new long term storage facilities if it is not disposed of through being used as mixed oxide fuel (MOX).

MOX needs a fabrication plant, and the costs of the MOX plant should be included in the financial modelling at the options analysis stage. Moreover, some of the technologies on offer can help the existing nuclear clean up by reusing existing high-level nuclear waste as fuel, transmuting it to isotopes that emit less decay heat, meaning that we can increase the amount of high level waste that can be stored per square metre in the long-term geologic repository. To the extent that this transmutation reduces the cost of the geologic storage, this should also be incorporated in the options analysis. Finally, we should actively include monetising the existing public-owned sites for future nuclear build.

Taken together, these practical measures will allow the UK to make better decisions about the future nuclear new-build to maximise value for money. The British people deserve no less.

* Toby Fenwick is a Research Associate of the British American Security Information Council (BASIC), has written extensively on the UK Trident programme, and served on the party’s last Trident Working Group. This article is written in a personal capacity.

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  • Jenny Barnes 8th May '14 - 1:45pm

    As a customer, I really don’t mind what technology produces my electricity, as long as it’s cheap and available.. As a citizen, I want the tech to minimise CO2 and other noxious emissions, like nuclear waste. I hope the EU does unpick it; I find government ministers HumptyDumptying about whether the contract for difference isn’t a subsidy unconvincing. I’m also unconvinced that HPC is cheaper than well sited onshore wind per MWh.
    It may be that the technologies you put forward, reusing our plutonium stockpile for example, are indeed the best option. However, surely what is needed is a generally agreed process for working out how to decide these things.
    For example, why not spend the money on interconnectors to Norway (hydropower can work when the wind doesn’t blow) and some offshore wind? Or the Severn barrage? Or another interconnector to French nuclear?

    We keep getting articles about how the latest bit of magic technology will solve the problem, no big picture.

  • Any future nuclear strategy should include building Thorium powered nuclear reactors. There was a great fringe meeting at conference about this – for an overview have a look at http://www.world-nuclear.org/info/current-and-future-generation/thorium/

  • Toby Fenwick 8th May '14 - 4:16pm

    @Jenny: As you identify, the main issue with renewables is their intermittent nature. We should have a policy of more of all of these, but in the timescales and the current costs of offshore wind and solar pv make nuclear at this point is still required.

    @Gareth: There aren’t any operational thorium reactors currently available, and we need capacity in the 2023 timescale. Additionally, U232 contamination of U233 in the thorium cycle is a heavy gamma emitter which makes handling it troublesome. If India goes down the Thorium route, proves it commercially, and the price differential of the fuel versus Uranium is meaningful (fuel is one of the least influential elements in the cost of nuclear electricity) then we should consider it, but not before.

  • 1 We should really be putting much development money into battery technology, which as I understand has already made big strides – then we can stop fussing about “it’s only intermittent”. Frankly, that’s a denier, and an anti-windfarm argument anyway. In the SW, small scale renewables have often found that having a turbine, and a solar PV installation go some way to complement one another when onstream.

    2 While we talk of international interconnectors, nothing after all these years, has been done about the old idea of accessing Icelandic geothermal power.

    There are so many alternatives which will be cheaper (and safer if hit by extreme weather conditions or “terrorism”) than nuclear, that we should really be getting on with them. I am amazed that Conference bent the knee to nuclear, and the quicker that is reversed, the better.

  • Jenny Barnes 8th May '14 - 5:55pm

    “the main issue with renewables is their intermittent nature. ”
    Any one type of renewable, can be intermittent. But if you use a range of renewables, and several sites for wind, then when it isn’t windy one place, it might very well be another; the sun can be shining on the PVs and concentrated solar plant, (which when using salt as a working fluid can run well into the evening) the severn barrage and norwegian hydro can fill in where the others don’t…. and we can still pick up more French nuclear if we want to.
    And, talking of intermittent, what happens if a couple of your “baseload” nukes go off line, eliminating 6GW?
    Anyway, I’m not against nuclear as such, just against nuclear when it’s subsidised.

    Geothermal power in Iceland: According to Wikipedia just over a quarter of their electricity comes from geothermal plant, a total of 0.5GW. It’s worth having, no doubt, but another 2 GW interconnector to France or Denmark or Norway or all 3 would come earlier in my priority list.

  • Jenny Barnes 8th May '14 - 5:58pm

    PS. It seems to me the best place to build nuclear power stations is on offshore platforms. HItachi (or whoever) can make them in Japan, and we could bid for them ready made, No risk of flooding as sea levels rise, and a really good local heat sink for the back end of the turbines. Connect to the grid with a HVDC line, job done. And if you’re not paying enough for the megawatts, they can up sticks and sail away…

  • Jenny Barnes 8th May '14 - 6:03pm

    PS2 Apparently 70% of the Icelandic geothermal energy goes into aluminium production. I’m not sure how easily turnonandoffable that is, but it does imply they have 350MW that could be used when there was a long period of low wind.

  • Richard Dean 8th May '14 - 6:25pm

    It seems to me that offshore platforms are likely to be a bad place to build nuclear plants.

    If things goes wrong with the plant, like in Japan, there would be nothing to stop a huge environmental catastrophe. Also, offshore platforms themselves can be built to be as structurally safe as you need them, as long as you can pay, but achieving that for a platform that can “up sticks and sail away” would be an order of magnitude greater civil engineering challenge. Protection from unauthorized access is possibly a lot harder to achieve offshore.

    From a PR perspective too, nuclear plants on offshore platforms may be harder to sell. And I don’t see an ability to buy from Japan as necessarily a good selling point.

  • Toby Fenwick 8th May '14 - 8:13pm

    @Jenny: I agree that we need to have a range of investments, but I just don’t see how you can hope to have a diverse enough renewable base at anything like a reasonable price, particularly if you need to build expensive interconnectors and gas turbine power stations to cover gaps. Only gas could be constructed without subsidy at this point- power prices are too low. I don’t think this will change fast enough to address our problem.

    @Dave: Yes, the lack of investment since Sizewell B has led us here; but that’s where we are, unfortunately.

  • The debate about nuclear always seems to turn into a ‘nuclear vs renewables’ argument. When really, the debate should be ‘nuclear vs fossil fuels’.

    We will remain heavily dependent on imported fossil fuels for the foreseeable. And yet, apart from being heavy polluters, these come from countries like Russia and Colombia will terrible records on human rights and worker conditions.

    In terms of lesser evils, surely it makes more sense to go with nuclear from UK power stations – where we can at least be sure the power is generated by reasonably ethical working practices – than coal and gas from despotic regimes abroad?

  • Toby Fenwick,
    You start our piece —
    ” Following the vote at last September’s conference, the party now supports new-build nuclear power. ”
    Could you reminds us exactly what the party agreed to in September 2013 ?
    Am I correct in remembering that the vote of party members in favour of the policy put before the conference was less than 300 ?

    Was it not the case that at the time of this vote in September, Ed Davey was promising “no subsidy” for new nuclear in line with the Coalition Agreement?

    It was in October 2013 that he announced a very big subsidy for new nuclear at Hinkley ‘C’.
    So is it true that the policy of subsidy for Hinkley ‘C’ is not Liberal Democrat party policy ?

  • http://www.renewablesinternational.net/french-governmental-agency-puts-price-tag-on-nuclear-disaster/150/537/60424/

    This link is to an article which includes the following points relevant to any discussion of the future (or otherwise) of new nuclear —

    Eurosafe published a report by France’s Institute of Nuclear Safety (IRSN) that estimated the cost of a nuclear disaster in France at a whopping 20 percent of GDP. 

    Meanwhile, the price tag for Fukushima continues to rise.

    Recent news from other countries also suggests that nuclear faces a dismal future.

  • In reality, the world faces a likely reduction of nuclear by the mid-2030s.

    Only two nuclear plants are being built in Europe right now (in France and Finland, both grossly over budget and behind schedule).

    The Czech Republic has canceled its plans, and Brussels is investigating whether the UK’s proposed subsidies for new nuclear are legal.

    Europe’s fleet is scheduled to be almost entirely decommissioned over the next two decades even if the plants have their commissions extended.

    Germany, Italy, Switzerland, Belgium, and Austria have resolved to phase out nuclear.

  • Toby Fenwick 8th May '14 - 11:09pm

    Thanks to all for their contributions

    @John Tilley: But Conference did vote for nuclear power, and one of the things that I love most about being a LibDem is that conference is still taken seriously. I didn’t get the answer I wanted on Trident, either, but it is for conference to decide.

    The chance to make low carbon choices other than nuclear has been lost for a generation – I’d like to see a Severn Barrage, a national water network with enough pump storage to make it an effective battery, and lots of work on batteries and fusion. But none of this can deliver for 2025, and so it is the responsible choice to go with low-carbon power now, but make sure that we do so whilst delivering best value to tax payers.

  • Jenny Barnes 9th May '14 - 8:47am

    BBC report on 2013 conference ( http://www.bbc.co.uk/news/uk-politics-24100833
    “Mr Davey said he was absolutely determined not to sign any contract for new nuclear power stations which relied on public subsidy, adding: “New nuclear must be cost-competitive. We will not repeat the history of mistakes on nuclear.”

    So this highly subsidised contract for difference on HPC is actually contrary to his stated policy…. but of course it’s “not a subsidy”.

  • Toby,
    If you really do believe what you say when you wrote —
    “…so it is the responsible choice to go with low-carbon power now, but make sure that we do so whilst delivering best value to tax payers.”
    Then surely it is your responsibility to get the right answer not go along with the wrong answer for thirty years because someone has made a mistake.

    You did not answer my question about exactly what the Conference agreed to.
    Similarly you ignored the point about the false premise for that decision, ie Ed Davey’s misleading statement that he would only go for new nuclear with no subsidy.

    These facts lead me to believe that you are engaging in a bit of public relations, lobbyist film-flam to provide covering fire for Ed Davey and to distract attention from his fundamental error.

    Prove me wrong. Explain why if you are interested in “low carbon” you do not agree that renewables are much the best, best value for money, and crucially safest form of energy production.
    Explain why you think virtually every other government in Europe is moving away from nuclear.

    If you are really motivated by “low carbon” in the next twenty years, why do you say so little about use of oil ?
    Isn’t oil a very much greater problem for those concerned about carbon?

    If you ask the wrong question, you get the wrong answer.
    If you asked the question “How can I best provide cover for Ed Davey’s wrong-headed, expensive, illegal subsidy for Hinkley ‘C’ ?” then maybe you have provided an answer of sorts.
    But just maybe, that is the wrong question.

  • Toby Fenwick 9th May '14 - 11:32am

    @John: I’m not a lobbyist for anyone, and I know that DECC don’t agree with my report because of my opposition to the subsidy levels inherent in the CFD regime proposed. You’ll find the critique of the HPC CFD regime on pp. 14-17 of my report if you’ve not had a chance to read it yet. It’s here: http://centreforum.org/assets/pubs/uk-new-build-nuclear-power-web.pdf

    I don’t agree that renewables are “much the best, best value for money, and crucially safest form of energy production” for the UK today. We’ve discussed intermittency above, so renewables will require additional CCGT capacity (at cost, especially as it won’t always be being used) as well as the interconnectors (this is power that needs to be available rather than the ability to buy others’ excess.). Given that offshore wind is currently at £140/MWh (before building the standby CCGT capacity), and that there’s no appetite for onshore wind at the scale required, nuclear at a public sector cost comparator of £81/MWh is much better value for money.

    The question for the rest of Europe reflects their internal politics. Germany took a (very expensive, repent at leisure) decision to phase out some of the world’s most advanced nuclear plants on purely political grounds. Let’s see how the rest of Europe responds to ageing plant, dependence on Russian gas and the intermittency problem of current renewables.

  • Toby Fenwick 9th May '14 - 11:46am

    @Jenny: I agree that the CFD regime is a quasi-subsidy, and that’s why so much of the report is taken up with an HPC critique which reduces the required cost to £81MW/h. I’m not concerned about subsidy per se – the cheapest electricity at the moment (and for the medium term) will remain Combined Cycle Gas Turbines (CCGT). So if we want low carbon electricity (and for climate change reasons we do), then we’ll have to pay for it; I wish the party had been clearer about this last autumn.

    If the answer is low carbon, then the cheapest baseload route today is publicly financed nuclear – which in the case of HPC would save £12.4bn over 35 years – money well worth having.

  • Toby

    You did not answer my question about exactly what the Conference agreed to.
    Similarly you ignored the point about the false premise for that decision, ie Ed Davey’s misleading statement that he would only go for new nuclear with no subsidy.

    But Jenny Barnes has provided a helpful reminder with the link —
    BBC report on 2013 conference ( http://www.bbc.co.uk/news/uk-politics-24100833
    “Mr Davey said he was absolutely determined not to sign any contract for new nuclear power stations which relied on public subsidy, adding: “New nuclear must be cost-competitive. We will not repeat the history of mistakes on nuclear.”

    So this puts the decision of the conference into context.
    The vote took place and the small majority achieved against the background of Ed Davey’s solemn promise of “No Subsidies”.
    A month later came his cynical announcement that an enormous subsidy is a key part of the Hinley ‘C’ deal.

    The whole tone of your paper and your comments here in LDV are enthusiastic about nuclear.
    You may not be a lobbyist but have you considered that you might have missed your vocation? The nuclear industry has very deep pockets and is paying a large number of lobbyists and not a few parliamentarians and journalists; you could probably make a bob or two making their case for them.

  • Toby Fenwick 9th May '14 - 3:35pm

    @John: I’ve explained why I think nuclear needs to be part of a low carbon energy mix, which I note you do not contest. I assume that you’re ideologically anti-nuclear, and I’d welcome your costed analysis on what should’ve been done instead to ensure low-carbon baseload over the next 40 years.

    As for you ad hominen views on lobbying, I’ve already explained that I’m not a nuclear lobbyist. The fact that you are directly accusing some Parliamentarians of corruption and journalists of unprofessionalism suggests that you have some evidence of this, in which case I’d invite you to share it.

    As I said in response to Jenny, I think that DECC has met the letter but probably not the spirit of the party resolution. I take the view that the resolution should have been worded “recognising the importance of nuclear power in a low carbon electricity mix, Conference endorses a subsidy regime subject to market testing and a robust public sector comparator to maximise VFM”. But I wasn’t the one writing the resolution.

  • Toby
    You do not need my costed analysis – I assume you are familiar with the costed analysis of the German government .
    I am happy to trust the analysis of the governments in Germany, Italy, Switzerland, Belgium, the Czech Republic and Austria who have all resolved to phase out nuclear. Why aren’t you?

    You are I expect aware of the financial considerations of most private capital which would not touch new nuclear without government subsidy because it is simply not a sensible or rational investment.

    It is quaint that you are happy to accuse me of being “ideologically anti-nuclear” but protest about ad hominem attacks.
    I have no idea what you mean by “ideologically anti-nuclear”. Perhaps you could explain?
    If you are trying to paint me as some drug-crazed hippy who does not know one end of a costing analysis from another you might find that you are on to a loser; I am a tee-total, retired civil servant living in suburban Kingston upon Thames.

    My opposition to nuclear is based on the facts and the experience of Three Mile Island. Chernobyl, Fukushima and the several thousand lesser “accidents” that have occurred at the less than 450 nuclear plants that have existed throughout the world.
    Would you ever get into a plane if their major failure rate was one in a hundred ?
    My opposition to nuclear is based on the economic experience of the last fifty years; Nowhere in the world has nuclear power generation been established and maintained without enormous government expenditure, subsidy and special treatment. Nowhere in the world have they saved the hproblem of safe disposal of nuclear waste.
    My opposition to nuclear is based on the improvements in technology which enable us to generate cheaper, more reliable and safer electricity from solar, wind, wave, hydro etc.
    Combined with other improvements in technology which reduce the energy demand we do not need the dinosaur thinking that says we have to endure the risks and the expense of nuclear.

    As for the parliamentarians and journalists who have been bought lock, stock and briefcase by lobbyists — I refer you to the excellent website produced by George Monbiot, who would disagree with me on nuclear power but who recognises a corrupt political system when he sees one.

    Actually Toby, before the general election of 2010 the Liberal Democrats and even Nick Clegg recognised that there was just such corruption in our political system. Nick Clegg devoted more than one speech and party political broadcast to such a theme. Perhaps that is another inconvenient truth that some would now prefer to brush under the carpet. I don’t suppose Centre Forum will be publishing a paper on political corruption any time soon?

  • Toby, thanks for raising this important topic. Energy is so important that if we get it materially wrong we will pay a very high price. Some observations:

    1. Gordon Brown as PM sold off British Energy’s eight nuclear sites to EdF in 2008. Now it’s theoretically possible that new build reactors could be sited elsewhere but my guess is that the government simply doesn’t have the appetite for the planning rows that would kick off and the time it would take to get permissions for other sites. Moreover existing sites have the advantage of some grid connection infrastructure even if it would require beefing up. If my reading of this is correct then Brown cleverly granted a de facto option to EdF over our nuclear future.

    2. I suspect the £500m price you quote for long term storage is the cost for plutonium only. Figures I have seen for all high level waste come in much much higher – tens of billions and apparently rising sharply with every reappraisal. Reprocessing to make MOX fuel doesn’t solve this problem and in any case I don’t believe MOX is a sensible route to take.

    3. The cost of capital is crucial to the overall economics of major projects. For instance if it is 10% and the project takes 10 years to build then a million spent in the first year rolls up around 1.5 million in interest alone during the construction phase. Conversely if it’s only 1% then the interest cost of that million is nearer £100k. I haven’t seen anywhere that spells out if the announced capital cost of Hinkley Point included rolled up interest or is the ‘overnight’ cost (i.e. excluding the interest element) or what the cost of capital is. At present the government is prepared to ‘give’ capital to the banks next to no cost so why not do the same for our energy infrastructure? Whatever the actual figures here the putative advantages of risk avoidance are certainly dwarfed by the certainty of higher costs for the government’s chosen route. What lies behind this is the curious determination to frame the government’s role as purely a customer (and not even a very smart one) when in reality its role is central – this wouldn’t happen without its intervention.

    4. PWR reactors (Hinkley Point is just a variant on this theme) are not a good solution in that they are fundamentally NOT fail-safe in multiple ways. Combine that with the UK’s dreadful record on regulation even when it’s important (the financial meltdown for instance) and you have a really toxic mix. What’s really daft is that fail-safe alternatives could be built. Sadly, all we get is helpless hand waving. What would Brunel, the Stephensons, Whittle and many others think?

  • What happens if the private sector messes up? Will we be forced to bail it out, in order to keep nuclear power going?

  • Jenny Barnes 10th May '14 - 9:27am

    Toby> the cheapest electricity at the moment (and for the medium term) will remain Combined Cycle Gas Turbines (CCGT). So if we want low carbon electricity (and for climate change reasons we do), then we’ll have to pay for it; I wish the party had been clearer about this last autumn.

    Yes, quite. And ATM coal fired is quite cheap too, because of displaced coal in the US market. I’d like to see a policy of taxing CO2 emissions, which of course would increase domestic fuel costs, possibly combined with either a direct domestic fuel subsidy, or lower taxes, or citizen’s income, to make it revenue neutral. CO2 emissions have a cost, but it’s not borne by the emitter. And such a tax (something in the region of £50-100 a tonne to start with) would have the effect of rebalancing cost away from CO2 emitting technologies.

  • Toby Fenwick 10th May '14 - 10:08pm

    Again, many thanks to all for a good discussion.

    @John: I’m afraid that there does need to be some data to back up the non-nuclear case. Germany’s decision was political, and has been cushioned by economic recession in Europe and significant interconnectors (including to nuclear power across the border). Poland is looking at new nuclear, as is the Czech Republic – so it is incorrect to suggest that the UK is acting alone. I note that you’re yet to provide a costed, implementable, low CO2 alternative to nuclear.

    On political corruption, I’m sure you’d be welcome to pitch a paper to CentreForum – but friendly advice: it’ll need to be evidenced based to be published. But do call the office on 020 7340 1160.

    @GF: Nuclear Decommissioning Authority (NDA) retain a number of sites (http://www.nda.gov.uk/sites/) which I understand under consideration.

    Yes, the £500m is for the construction of new plutonium storage facilities if the decision were made not to burn the UK Plutonium stockpile as MOX fuel. I’m not sure why you’d oppose the disposal of existing separated Plutonium as MOX – it is a viable nuclear fuel that otherwise is just waste. However, we’re not proposing to reprocess any further spent fuel after the last MAGNOX fuel has been dealt with.

    I agree that the cost of capital is a key driver of cost. In my view, if you accept the case for nuclear (and I accept that many do not), then it seems mad to spend any more on it than necessary. For this reason, I think a government led and financed project would provide better value to Britain’s taxpayers and bill payers alike.

    Our existing PWR (Sizewell B) has a good safety record, and the EPRs destined for Hinkey are designed to be safer still. I’m not sure how I can address your concerns, though – perhaps the NII and those conducting the Generic Design Assessment could help?

    @Voter: Risk transfer – or in my view, the lack of it – is the nub of the issue here. I agree – if it goes financially wrong, the public sector will have to pick up the losses after any profits had been privatised. This is why I advocate a Network Rail style approach.

    @Jenny: The Carbon Tax should do what you suggest, but it is too low and too political to do so – and I’m afraid that there is no political will to change it (not least because of the impact on petrol and diesel prices). If we can’t have that (and I’d prefer it), then this sort of approach of implicit subsidy is the obvious way forwards.

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