Memorandum submitted by the British Energy
Group plc
I. SUMMARY
A. THE EXTENT
OF THE
"GENERATION GAP"
1. The electricity supply sector is set
to undergo a major transition over the next two decades. Decisions
over the next five years will determine the nature of this transition.
2. Significant new capacity will be needed
to replace about 160 TWh of existing generation which will likely
be retired over the next 15 years; in any event, further new capacity
will be needed to satisfy increased demand over the same period
amounting to about 44 TWh. To put these into context, the sum
of the "new" generation required amounts to about 58%
of the generation in 2004; assuming the current generation mix
this would be equivalent to about 42 GW of plant.
3. There is considerable uncertainty in
the way the markets will work in the next few years and it is
not yet clear that market signals will encourage the required
investment in a timely way. Further, any market signal would have
to encourage investment in plant of differing load factors to
match the daily and seasonal demand profiles and to provide sufficient
capacity headroom to "replace" plant that becomes unavailable
due to planned and unplanned outages.
B. FINANCIAL
COSTS AND
INVESTMENT CONSIDERATIONS
4. There have been many studies on the relative
costs of different generation options. In general these have shown
that nuclear can be cost-competitive. Most recently the UK's Royal
Academy of Engineers has carried out a thorough analysis of the
cost of generation for all technologies using information drawn
from around the world (although the cost of gas assumed in their
analysis is about half that prevailing today). They have included
in this work the cost of carbon to the fossil technologies of
coal and gas, and the cost of providing standby plant for intermittent
generation (wind). When expressed in terms of p/kWh, nuclear generation
is competitive with current benchmark CCGT technology and cheaper
than the other options.
5. Financial Institutions around the world
have shown themselves willing to invest in all forms of generation,
including nuclear. In the UK the investment community is most
concerned with a "transparent measurement of risk-return
profile ie markets will bear measurable risks against acceptable
return levels".
6. It is not clear what—if any—direct
financial support will be needed from the Government in order
for private sector investment in new nuclear build to take place.
Before it is possible to form a view on this question, it is necessary
to assess the options to address particular classes of risk and
to identify the extent that the private sector is able to take
these risks without Government financial support.
C. STRATEGIC
BENEFITS
7. Nuclear power brings a number of benefits
to the UK including the provision of large quantities of emissions-free
electricity, a contribution to security-of-supply, and can help
mitigate electricity price volatility.
8. Nuclear power arguably makes the biggest
contribution to the UK's climate change targets. In 2004, 73.7
TWh of nuclear generation avoided the emission of about 49 MtCO2
that would otherwise been emitted by the prevailing fossil fuel
mix. To put this into context, about three quarters of all the
cars on the roads would have to be removed to get the same climate
change savings as those associated with nuclear generation. This
emissions-free generation will have to be replaced if these benefits
are not to be lost.
9. Nuclear power contributes to UK security-of-supply
(SOS). Using the Government's own projections the sum of "indigenous"
generation as a percentage of the total is seen to decline from
almost 100% in 1990 to about 50% by 2020 and just 25% by 2030,
primarily due to an increased reliance on imported gas. New nuclear
build to the level indicated in the EAC's Inquiry will increase
this index from 25% to 45%. Further, nuclear generation results
in the avoided consumption of significant quantities of gas, again
improving the UK's SOS position. Finally, keeping the nuclear
option improves the reserve margin, helping to mitigate the risk
of electricity supply disruptions.
D. OTHER ISSUES
10. An independent full life-cycle analysis
has recently been carried out of British Energy's nuclear AGR
plant at Torness using a well established methodology. This work
shows that for all intents and purposes nuclear generation can
be considered carbon dioxide free when compared to coal and gas
technologies.
11. There has been considerable progress
in resolving the nuclear waste issue in a number of countries,
including Finland, Sweden and USA. In the UK, the Committee on
Radioactive Waste Management (CoRWM) has been established to bring
forward concrete proposals for dealing with legacy and ongoing
waste streams when it reports to Government in July 2006. The
Government then needs to establish the policy framework and implementation
plan to deliver its preferred solution to this problem for the
industry and country.
12. Recent work has established that the
amount of waste from a new build programme on the scale proposed
will add very little to the waste that in any event needs to be
dealt with—the legacy of past military and civil programmes.
The facility built to deal with the legacy waste can be designed
to accommodate the extra waste from a new build programme. New
nuclear build can be progressed in parallel with the siting and
building of the long term repository.
II. RESPONSE
TO QUESTIONS
A. THE EXTENT
OF THE
"GENERATION GAP"
1. What are the latest estimates of the likely
shortfall in electricity generating capacity caused by the phase-out
of existing nuclear power stations and some older coal plant?
How do these relate to electricity demand forecasts and to the
effectiveness of energy efficiency policies?
(a) Figure 1 shows that demand in recent
years has been satisfied by a mix of coal, gas and nuclear, with
only a minor contribution from a renewables and imports. The future
of the sector is hard to predict but what is certain is that it
is set to undergo a major transition over the next 10 to 15 years
brought about by increasing demand and a decline in coal and nuclear
generation as new environmental policy initiatives and old age
lead to plant closures. Significant new capacity will be needed
to replace existing plant which currently supplies about 160 TWh
but will likely be retired over the next 15 years; even if this
is not the case, further new capacity will be needed to satisfy
increased demand over the same period amounting to about 44 TWh.
To put these into context, the sum of the "new" generation
required amounts to about 58% of the generation in 2004, and based
on the current mix this is equivalent to about 42 GW of plant.
(b) The DTI's Energy Paper 68 and its various
updates set out projections for the UK energy scene to 2020. No
"generation gap" is predicted from this work with the
supply dominated by gas technology. The projections make important
assumptions including:
— Supply is automatically provided
to deliver the required demand with the lowest cost technology
the preferred option.
— Energy efficiency will help limit
demand.
— The Renewables Obligation will
deliver 10% of supply by 2010 and 15% by 2015.
(c) However, the generation sector may not
evolve in this manner because:
— Fossil fuel prices in general,
and gas prices in particular, are higher than expected and look
set to stay at these levels for the foreseeable future raising
the cost of the benchmark technology (gas). These costs must be
passed onto the consumer if new build investment is to be encouraged.
— Renewables and energy efficiency
are not delivering on the scale anticipated despite major subsidies.
NGT assumptions are of a 1.3% per annum increase in demand to
2012; new CHP and renewables supply over the same period serve
to reduce the growth in demand on the grid to 0.8% per annum.
— The EU Emissions Trading Scheme
will place additional costs on fossil generation raising the barrier
for new gas (and coal) build. The Large Combustion Plant Directive
will accelerate retiral rates for the older coal plant. Assuming
80% of the existing coal plant shut post-2015 about 108 TWh of
flexible coal generation may need to be replaced (in addition
to the 53 TWh of nuclear generation).
— The UK will be importing the
majority of its fossil fuel needs to support the generation sector
and could be subject to fuel supply disruptions and/or cost volatility.
— There is considerable uncertainty
in the way the markets will work in the next few years—there
is very little new build fossil plant underway and it is not yet
clear what market signals will encourage such investment in a
timely way. Further, any market signal would have to encourage
investment in plant of differing load factors to match the daily
demand profile and to provide sufficient capacity headroom to
"replace" plant that becomes unavailable due to planned
and unplanned outages.
(d) For these reasons, it is entirely possible
that a convergence of events could lead to a "generation
gap", the scale of which would depend on the severity of
the events, and lead to costly electricity supply disruptions—the
supply industry and Government have important decisions to make
over the next five years.
B. FINANCIAL
COSTS AND
INVESTMENT CONSIDERATIONS
2. What are the main investment options for
electricity generating capacity? What would be the likely costs
and timescales of different generating technologies?
The main investment options and their likely
contribution to the generating mix are as follows:
(a) Gas—remains the preferred option
because of the relative ease of delivering new capacity onto the
market; whether the capacity will be forthcoming will depend on
a number of factors over the next decade or so, including the
certainty or otherwise of gas supplies, the cost of carbon, and
the reserve margin.
(b) Coal—investment in conventional
coal technology is unlikely because of the severe environmental
conditions that must be met; investment in new IGCC and "clean"
coal technology (ie plant fitted with Flue Gas De-sulphurisation
technology to remove SOx, low NOx burners and Carbon Capture and
Sequestration to address carbon dioxide emissions) is possible
but at a much higher cost to the consumer.
(c) Oil—investment in this technology
is unlikely because it is no longer cost competitive against the
benchmark technology, gas.
(d) Nuclear—investment in this technology
is possible depending on electricity prices ie this option becomes
more favourable as the electricity price rises, particularly if
the latter is brought about by higher gas (and coal) prices, and
the cost of removing sulphur and nitrogen oxides and carbon dioxide
are factored into the running costs for the fossil technologies.
Prospects for this technology will also increase with more certainty
on waste, and a clear signal of government commitment.
(e) Renewables—government has taken
a long term view of these technologies and provided significant
subsidies to encourage their development. With this in mind more
wind (both onshore and offshore) is possible; biomass can contribute
but is more expensive than wind and the Renewables Obligation
does not provide the differential support needed to encourage
investment in this technology in preference to onshore wind at
this time; PhotoVoltaic technology will remain a niche player
at best in the short to medium term while marine technologies
are at the early stages of their development and if they are to
contribute at all, they will only do so in the longer term.
What are the likely construction and on-going
operating costs of different large-scale technologies (eg nuclear
new build, CCGT, clean coal, on-shore wind, off-shore wind, wave
and tidal) in terms of the total investment required and in terms
of the likely costs of generation (p/kWh)? Over what timescale
could they become operational?
(a) There have been many studies on the
relative costs of different generation options. In general these
have shown that nuclear can be cost-competitive. Most recently
the UK's Royal Academy of Engineers has carried out a thorough
analysis of the cost of generation for all technologies using
up-to-date information. They have included in this work the cost
of carbon to the fossil technologies of coal and gas, and the
cost of providing standby plant for intermittent generation (wind).
Figure 2 suggests that when expressed in terms of p/kWh, nuclear
generation is competitive with current benchmark CCGT technology
and cheaper than the other options.
(b) Renewed interest in the nuclear option
has spawned a number of studies on the economics of new nuclear
build (including the RAE work) and these are summarised in Figure
3. Despite the fact that these studies have been carried out by
various independent groups, and in different countries, they show
remarkable consistency. The key difference is the rate of return
applied. Many of these studies have also found that nuclear is
competitive with the benchmark CCGT technology; when the cost
of carbon is added to the latter the comparative benefit of nuclear
to consumers is greater.
(c) Table 1 attempts to illustrate the
timescales over which the various technologies could be deployed
to the level indicated in the Inquiry (ie for nuclear, 8 AP1000
or their fossil equivalent; for each renewable technology a significant
contribution towards a 20% supply target (the approximate amount
equivalent to that from 8 AP1000)).
(d) On a short time-scale only gas and
conventional coal technology can be built to the scale required.
If "clean" coal means plant that is totally emissions
free, this could be achieved over a 20 year period subject to
the development of coal import infrastructure and the successful
development of carbon capture and sequestration technology.
(e) Although nuclear plant can be built
in five years, past UK experience suggests that another five or
more years will be needed for planning and licensing, even if
the intent were to build accepted international design on sites
already designated safe for nuclear generation. Government would
have to address these issues to ensure a shorter pre-build time
frame. It is possible to construct 8 GW of nuclear plant over
a 12-15 year period.
(f) To deliver a portfolio of renewables
requires a much longer time frame for the reasons outlined elsewhere
in this submission.
With regard to nuclear new build, how realistic
and robust are cost estimates in the light of past experience?
What are the hidden costs (eg waste, insurance, security) associated
with nuclear? How do the waste and decommissioning costs of nuclear
new build relate to the costs of dealing with the current nuclear
waste legacy, and how confident can we be that the nuclear industry
would invest adequately in funds ring-fenced for future waste
disposal?
(a) The numbers shown in Figure 2 are robust
when considering new build in the UK because:
— They have been validated by independent
groups on the most up-to-date information. There may be uncertainty
associated with vendor quotes for projects but these can be largely
removed through fixed price quotes.
— The programme will not use a
prototype technology—the "winning" technologies
have emerged (ie the AP 1000, EPR and Candu designs). New plant
will be smaller, less complicated than before, based on "off-the-shelf"
modular systems.
— New plant has a much smaller
ecological footprint and will adhere to international standards
of safety and operating regime. Figure 4 compares an early Magnox
station at Chapelcross in the UK, a 200MW station which started
generating electricity in 1959 and closed in June 2004, with the
new fifth reactor in Finland, a 1600 MW station expected to begin
generating electricity in 2009. The new reactor in Finland is
not only physically much smaller but it also produces much less
waste than the early reactors in the UK.
(b) The "hidden" costs are conservatively
allowed for in the estimates of the cost of nuclear generation.
Addressing the specific concerns in the question:
— Waste. The UK needs a repository
to deal with its legacy waste, including that from its civil programme.
A process to deliver a solution to the waste issue has begun with
the establishment of the Committee on Radioactive Waste Management
(CoRWM). The latter is charged with investigating all options
and to deliver its Report to Government in July 2006. There is
an expectation that Government can then establish its policy on
this issue followed by a detailed implementation plan. A new build
programme can progress in parallel with the siting and building
of the final waste repository.
The waste addition associated with a
replacement programme is relatively small and can be factored
into repository requirements at an early stage. Even so, it will
require industry and Government to establish the arrangements
and cost of waste disposal from any new build programme.
— Insurance. Under the UK's Nuclear
Installations Act the operator has to provide cover for an aggregate
limit of £140 million per site; any shortfall must be paid
for by Government. These requirements are being revised in light
of amendments to the Paris Convention and the supplementary Brussels
Convention. The liability to the nuclear operator will now be
700 million—the liability of the Government
will be
500 million and the liability of the pool of funds
contributed to by contracting parties will be
300 million [11].
— Security. The industry pays for
its own security, following government guidelines, and taking
note of international best practice.
(c) It is widely accepted that the cost of
decommissioning is not a major contribution to the overall cost
of nuclear power. New plants such as the AP1000 have a much smaller
ecological "footprint" which means this part of the
project is an even smaller contribution to the total cost than
before. Nonetheless, industry will be expected to cost this activity
as part of its project proposal and it will require Government
to deliver its preferred long term waste solution.
Is there the technical and physical capacity for
renewables to deliver the scale of generation required? If there
is the capacity, are any policy changes required to enable it
to do so?
(a) The Government has a target of 10% of
supply by 2010 and 15% by 2015—in 2004 the figure was 4%
with main contributions to this number being hydro (1.35%), landfill
gas (1.16%) and wind (0.5%).
(b) British Energy is developing wind projects
in joint ventures that if successful will deliver up to 700MW
capacity. This is of a similar magnitude to the total wind capacity
currently in the UK and would thus contribute about 0.5% to the
UK targets.
(c) Technical capacity. Onshore wind and
to a lesser extent biomass are available but offshore wind still
needs some development for the UK situation. It is not clear what
this level of "intermittent" generation means for grid
stability. Lessons learned from elsewhere suggest there is a limit
to the maximum level of "intermittency" possible but
the lack of physical connectivity across national boundaries means
the UK is more vulnerable than other European countries to this
problem.
(d) Practical capacity. Despite significant
subsidies the 10% target by 2010 and 15% target by 2015 look very
challenging.
(e) Despite the provision of generous subsidies,
there are two fundamental flaws to the Renewables Obligation (RO)
that serve to limit its potential—projects become increasingly
less attractive as the RO is reached, and it cannot provide the
stimulus to technologies that are more expensive than wind, or
are some way from market commercialisation.
What are the relative efficiencies of different
generating technologies? In particular, what contribution can
micro-generation (micro-CHP, micro-wind, PV) make, and how would
it affect investment in large-scale generating capacity?
(a) The thermal efficiencies of the various
fossil plant are reasonably well established. However, it is not
meaningful to compare nuclear and fossil thermal efficiencies.
The only purposes for comparing efficiencies would be if it gave
an indication of relative costs or resource use, and since these
technologies use radically different fuels it is not possible
to draw these comparisons from efficiency data.
(b) The development of micro-generation systems
requires a different kind of technical, practical and financial
capacity than for the more established renewables technologies.
It is then a long-term "project" for the UK and as such
will contribute very little in the next 10-20 years.
(c) Many of the decisions for investment
in new large-scale generating capacity will have to be made over
the next 10 years or so—any modest development of the micro-generation
sector is unlikely to have an impact on these decisions.
3. What is the attitude of financial institutions
to investment in different forms of generation?
(a) Financial Institutions have shown themselves
willing to invest in all forms of generation. They have been keen
to gain a proper understanding of the market structure and of
the risks that might exist and the respective allocation of these
risks to relevant parties.
(b) A wide spectrum of these institutions
has substantial investments in a range of utilities that have
nuclear power as a part of their generation portfolios in Europe
and the US and there is no evidence that they have demanded different
rates of return for the nuclear component of these investments.
For example, 35.2% of British Energy debt and equity is held by
these investors.
What is the attitude of financial institutions
to the risks involved in nuclear new build and the scale of the
investment required? How does this compare with attitudes towards
investment in CCGT and renewables?
(a) Financial Institutions have shown themselves
willing to support nuclear new build around the world. Most recently,
in Finland, 75% (
2.25 billion) of the capital for the build of a new
nuclear station at Olkiluoto has been provided from the capital
markets with only 25% being contributed by the plant owners. This
financing has been handled by a consortium of Scandinavian, Continental
European and US banks.
(b) In other markets, the question of private
financing for nuclear new build is less well advanced. However,
the reported rapid progress of efforts by privately-held utilities
in the US to obtain site and design permits suggests that these
companies believe that access to the requisite capital will not
be an insurmountable obstacle.
(c) There has been some public debate in
the UK about the financing issues surrounding new nuclear—and
the relative merits of different technology investments. A senior
investment banker has stated recently that "From the financial
market's perspective, this framework must allow transparent measurement
of risk-return profiles—i.e the markets will bear measurable
risks against acceptable return levels. If so, the market believes
such investment propositions offer significant liquidity for new
investment, particularly in a UK environment increasingly experienced
in public-private partnership."
(d) For the UK to reach this point requires
clarity over longer term policy. It is noteworthy that the only
sector today where there is substantial capital market funding
of new build efforts is the renewables sector where investors
have been able to take comfort from the relative surety of the
Renewables Obligation scheme to justify the risk-to-return trade
off to their capital committees. Otherwise the case for any investment
has been hampered by regulatory uncertainty around environmental
legislation, price volatility in the oil, gas and carbon markets
and the increasingly illiquid and short-term nature of the wholesale
electricity market.
How much Government financial support would be
required to facilitate private sector investment in nuclear new
build? How would such support be provided? How compatible is such
support with liberalised energy markets?
(a) It is not clear what—if any—direct
financial support will be needed from the Government in order
for private sector investment in new build to take place. Before
it is possible to form a view on this question, it is necessary
to assess the options to address particular classes of risk and
to identify the extent that the private sector is able to take
these risks without Government financial support. The major risk
components where greater clarity is needed are:
— The approach to making provision
for the costs of decomissioning the station and handling spent
fuel and other arisings.
— The approach and timetable for
regulatory and planning review of any new build proposals.
— The scale of any new build efforts
to be undertaken.
— The market arrangements under
which the power will be sold, including the future of European
arrangements such as the later phases of the Emissions Trading
Scheme.
(b) In the US, the government has concluded
that a programme of incentives are required to address the potential
first-mover disadvantages associated with the early stages of
a wider new build effort. This has led to joint funding of the
design and site reviews by the public and private sector, insurance
against regulatory delays, continuation of the Price-Anderson
insurance arrangements and has also resulted in tax incentives
that will be available to the first plants to be commissioned.
It is not clear whether any of these will be appropriate in the
UK context. However, there is a lot of evidence that these can
be made to work against the backdrop of a liberalised and competitive
energy market. For example, the UK has incentives for renewables,
for energy efficiency and now for the development of new "clean
coal" demonstration projects and has been able to accommodate
these in a deregulated market.
What impact would a major programme of investment
in nuclear have on investment in renewables and energy efficiency?
(a) Very little because they service different
parts of the supply sector, and all carbon free, "indigenous"
technologies will be needed in the future if the Government's
environment and security-of-supply needs are to be met. The Government
has well established initiatives to promote the renewables sector
and energy efficiency, with excellent financial support mechanisms,
and a clear signal that these programmes will continue for long
periods of time.
C. STRATEGIC
BENEFITS
4. If nuclear new build requires Government
financial support, on what basis would such support be justified?
What public good(s) would it deliver?
To what extent and over what timeframe would
nuclear new build reduce carbon emissions?
(a) Nuclear power was originally developed
to deliver large quantities of baseload electricity. Because it
is essentially emissions free, it is fair to say that this form
of generation has contributed hugely to the UK's climate change
and air quality targets over the last 30 years or so, and it will
continue to do so for some time to come.
(b) The scale of contribution by the nuclear
power sector to the UK's climate change targets is shown in Figure
5. The contribution can be considered in three phases: the climate
change benefits associated with the existing nuclear plants over
their original stated lifetime; the benefits associated with life
extension of six of the seven AGR stations already declared, and
the potential life extension of the seventh AGR at Dungeness B;
and the potential benefits of a new build programme phased in
over an assumed 15 year period to the level outlined in the Inquiry
terms of Reference (ie "nuclear new build is used to refer
to a programme of at least eight AP1000 reactors, or equivalent").
(c) Figure 5 shows the carbon dioxide contribution
to the UK's Kyoto target of 12.5% greenhouse gas (GHG) reduction
on 1990 levels—this contribution was estimated originally
at about 8% of the 12.5% GHG reduction. Nuclear power today arguably
makes the biggest contribution to this target. In 2004, 73.7 TWh
of nuclear generation avoided the emission of about 49 MtCO2 that
would otherwise been emitted by the prevailing fossil fuel mix.
The scale of contribution by the nuclear industry is about the
same as the 8% reduction originally estimated, which is a major
contribution that will have to be found elsewhere if the nuclear
component to the generation mix disappears. To put this into context,
about three quarters of all the cars on the roads would have to
be removed to get the same climate change savings as those associated
with nuclear generation.
To what extent would nuclear new build contribute
to security-of-supply (ie keeping the lights on)?
(a) Security-of-supply (SOS) can, for example,
refer to import dependence of fossil fuels or reserve margin for
electricity generation, or both. Both of these aspects of SOS
will provide challenges to the UK's energy system.
(b) Nuclear power can be considered "indigenous"
and as such can contribute to UK SOS. It is instructive to sum
the indigenous components of the UK generation mix: indigenous
coal and gas, nuclear and renewables.
(c) Figure 6 shows that using the government's
own projections the indigenous contribution to the UK's electricity
supply will decline from almost 100% in 1990 to about 50% by 2020,
primarily due to an increasing reliance on imported gas. These
figures assume a successful Renewables Obligation—40 TWh
by 2010 and 58 TWh thereafter, that energy efficiency measures
will suppress energy demand, and the successful declared life
extension programmes of the AGR nuclear fleet. A small extension
in time to 2030 sees indigenous supply decline further to about
25%.
(d) It is not clear what constitutes an acceptable
SOS for the UK because the country has not been in this position
before. The issue is made more complex because the UK has relatively
little connectivity with other European countries which would
serve to make SOS less of an issue than it is.
(e) Figure 6 also shows that new nuclear
build to the level indicated in this Inquiry will increase SOS
markedly—from about 25% indigenous to about 45%, and this
capacity will be available to the UK for most of the 21 century.
(f) It is often stated that the UK has benefited
from a diverse set of energy sources. However, this diversity
will diminish if, as currently projected, coal and nuclear are
replaced by gas, leading to a more vulnerable electricity sector.
(g) In the same way as nuclear generation
avoids the emissions of harmful pollutants, it also avoids the
consumption of finite fossil fuel reserves that would have been
used for power generation, particularly gas. It could be argued
that British Energy's eight nuclear plants avoided the consumption
of about 13 billion cubic meters of gas, of which about 1 billion
cubic metres would have been imports, in 2003. To put this in
context, this saving is equivalent to about 38% of the domestic
use of gas in the UK.
(h) Figure 7 shows the total projected avoided
gas consumption because of nuclear generation over the next two
decades, the total value of this resource, and the level of imports
involved. Clearly this helps the UK SOS situation and is of significant
benefit to the UK economy.
(i) The reserve margin is the amount by which
the total installed capacity exceeds peak demand. Experience suggests
that a value in excess of 20% is needed to support a modern economy.
The Royal Academy of Engineering, in their Submission to the European
Commission Inquiry into the UK State Aid Case for British Energy
[14], recognized the importance of nuclear power to the reserve
margin, particularly as their analysis based suggested a decline
in this important indicator over the next decade or so under a
number of plausible scenarios. Their recommendation was that it
was important the UK maintain the nuclear option if it was to
meet not only the reserve margin challenge but for all aspects
of SOS.
(j) Figure 8 compares the current UK generation
mix with some those of other EU countries. Italy would appear
to be the least secure because it relies heavily on gas and oil
generation. However, the UK also relies heavily on gas generation
at this time and as shown in the figure will become overwhelmingly
more so by 2020, and as indicated elsewhere in this submission,
almost all of this will be imported. This could place the UK at
a disadvantage when compared to our main European competitors
Germany and France.
Is nuclear new build compatible with the Government's
aims on security and terrorism both within the UK and worldwide?
(a) Yes, if the plant, processes and systems
are designed and operated well. Nuclear facilities and their related
operations are already very well protected through robust construction
and a recognised responsibility to maintain a high security culture
at operator and national levels. New plant will naturally have
enhanced security protection through improved design.
(b) However, it is also recognised that confidence
in the industry needs be improved and this can be achieved by
informing the public of our commitment to enhancing security in
cooperation with the appropriate authorities.
(c) With its long established civil nuclear
programme the UK has a tradition of participating in international
co-operation programmes. The UK can continue to do this for the
foreseeable future but only in the context of a declining role
as the existing plants are closed. A new build programme would
help shape the way in which the UK responds to the threats to
security and terrorism in this important area, both at the national
and international arenas.
5. In respect of these issues [Q 4], how
does the nuclear option compare with a major programme of investment
in renewables, microgeneration, and energy efficiency? How compatible
are the various options with each other and with the strategy
set out in the Energy White Paper?
(a) A new nuclear build programme would provide
more certainty than the other options currently available in terms
of delivering climate change (CC), security-of-supply (SOS) and
electricity price stability benefits to the UK. In reality it
is not a case of a preference for one option over the others—all
these technologies will be needed to address the UK's CC and SOS
needs over the long term.
(b) It is fair to say that the nuclear option
requires greater security to counter terrorist risks. However,
such risks can be minimised through strict adherence to the Government's
guidelines in these areas, maintaining a culture of vigilance
and the development of robust security processes.
(c) The Energy White Paper placed emphasis
on policies and measures for the deployment of renewables (including
micro -generation technologies) and the encouragement of energy
efficiency; it left the nuclear option open, to await the success
or otherwise of this strategy. Developments since publication
of the White Paper suggest that the nuclear option should now
be given serious consideration.
D. OTHER ISSUES
6. How carbon-free is nuclear energy? What
level of carbon emissions would be associated with (a) construction
and (b) operation of a new nuclear power station? How carbon-intensive
is the mining and processing of uranium ore?
(a) An independent full life cycle analysis
has been carried out on British Energy's nuclear AGR plant at
Torness by the consultants AEA Technology using a methodology
which will shortly be adopted by the International Standards Organisation.
Figure 9 summarises the carbon emissions associated with each
stage of the process, with emissions associated with the extraction
of the fuel the biggest contributor of all the stages. Total life-cycle
emission are just 5 g/kWh, a little higher than the 3.3 g/kWh
average value reported by Vattenfall in a similar analysis on
their BWR and three PWR power plants.
(b) Figure 10 compares the total carbon emissions
from the life-cycle for Torness with those associated with the
operational component for coal and gas technologies alone. It
is clear from this comparison that for all intents and purposes
nuclear generation can be considered carbon dioxide free.
(c) A similar analysis can be conducted for
sulphur and nitrogen oxides, key components of photochemical air
pollution. Once again, nuclear generation is essentially emissions
free when compared to coal and gas generation.
7. Should nuclear new build be conditional
on the development of scientifically and publicly acceptable solutions
to the problems of managing nuclear waste, as recommended in 2000
by the RCEP?
(a) There have been a number of important
initiatives in the last few years that will help to resolve the
legacy and ongoing waste streams from the nuclear sector, most
prominent of which has been the setting up of Committee on Radioactive
Waste Management (CoRWM) and the Nuclear Decommissioning Authority
(NDA).
(b) CoRWM will make concrete proposals for
dealing with the waste when it reports to Government in July 2006.
The Government then needs to establish the policy framework and
implementation plan to deliver its preferred solution to this
issue for the industry and country. New nuclear build can be progressed
in parallel with the siting and building of the long term repository.
(c) Recent work has established that the
amount of waste from a new build programme on the scale proposed
will add very little to the legacy waste that in any event needs
to be dealt with. The facility built to deal with the legacy waste
can be designed to accommodate the extra waste from a new build
programme.
(d) Lessons learned from other countries—Finland,
USA and Sweden in particular—suggest there are no technical
barriers to dealing with the waste issue. Rather, it requires
political will and an honest and transparent dialogue with the
public in general and the local community where the facility will
be located in particular.
(e) The 1976 RCEP Report expressed the concern
that there was a lack of work being done at that time by the Government
and by the nuclear industry on the treatment and disposal of nuclear
waste. The Report recommended:
"There should be no commitment to a large
programme of nuclear fission power until it has been demonstrated
beyond reasonable doubt that a method exists to ensure the safe
containment of long-lived highly radioactive waste for the indefinite
future".
Lord Flowers, 1976 RCEP Report [16]
International developments since the Report was
published have demonstrated there are viable solutions to this
problem, as recognised earlier this year by Lord Flowers:
". . . a method to ensure safe disposal
for the indefinite future—namely, underground storage—has
been demonstrated beyond reasonable doubt in other countries,
especially Finland."
Lord Flowers speaking in House of Lords, January
2005 [16]
(f) In light of the comments (b)-(e) we believe
new nuclear build can proceed on the scale proposed in this Inquiry.
REFERENCES 1. Digest
of UK Energy Statistics, Department of Trade and Industry,
July 2005, http://www.dti.gov.uk/energy/inform/energy_stats/index.shtml.
2. Updated Energy Projections (updating
Energy Paper 68), Department of Trade and Industry, November
2004, http://www.dti.gov.uk/energy/sepn/uep.shtml.
3. GB Seven Year Statement, National
Grid Company plc, May 2005, http://www.nationalgrid.com/uk/library/documents/sys05/default.asp.
4. The Cost of Generating Electricity,
Royal Academy of Engineering (RAE), ISBN 1-903496-11-X, March
2004.
5. Future of Nuclear Power, Massachusetts
Institute of Technology, ISBN 0-615-12420-8, 2003, http://web.mit.edu/nuclearpower/.
6. The Economics of Nuclear Power,
Energy Review Working Paper, Performance and Innovation Unit (PIU),
http://www.strategy.gov.uk/work_areas/energy/background.asp.
7. The Economic Future of Nuclear Power,
University of Chicago Study, August 2004.
8. General Directorate for Energy and Raw
Materials (DGEMP) of the French Ministry of Economy, Finance and
Industry.
9. Nuclear Power: Least-Cost Option for
Baseload Electricity in Finland, Proceedings of 25 International
Symposium, Tarjanne & Rissanen, Uranium Institute, 2000.
10. Projected Costs of Generating Electricity
(2005 update), OECD, March 2005, http://www.oecd bookshop.org/oecd/display.asp?sf1=identifiers&st1=662005011P1.
11. Introduction to the Official List of British
Energy Group plc Shares, Warrants and British Energy Holdings
plc Bonds, 2005.
12. National Atmospheric Emission Inventory,
2003, http://www.naei.org.uk/.
13. Wybrew, Energy Review Meeting, British Management
Data Foundation, October 2000.
14. Response to the European Commission Directorate-General
for Competition: State Aid—United Kingdom Restructuring
Aid in Favour of British Energy PL, Royal Academy of Engineering,
August 2003.
15. EPD for Torness Nuclear Power Station,
AEA Technology (for British Energy Group plc), 2005.
16. Lords Hansard, 12 January 2005, Column 331.
21 September 2005
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