Select Committee on Environmental Audit Written Evidence

Memorandum submitted by the Institution of Civil Engineers


  The Institution of Civil Engineers (ICE) is a UK-based international organisation with over 75,000 members ranging from professional civil engineers to students. It is an educational and qualifying body and has charitable status under UK law. Founded in 1818, ICE has become recognised worldwide for its excellence as a centre of learning, as a qualifying body and as a public voice for the profession.


  The ICE welcomes the opportunity to present the following statements and evidence as part of the inquiry.

A.   The extent of the "generation gap"

Q1.   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?

  1.1  The Supply and Demand Forecast for Electricity shown in the Annex is taken from the JESS (Joint Energy Security of Supply working group) report of November 2004. This is based on Dti 2004 projections. It shows that by 2020-35 to 40% of electricity supply will need to come from generation capacity which does not exist at present. This capacity is needed to replace ageing nuclear and coal generation stations. The estimate assumes that the government target for renewables of 15% of electricity supply will be met and that the balance of 25% of electricity supply will come from new gas CCGT capacity. Please see the Annex.

B.   Financial costs and investment considerations

Q2.   What are the main investment options for electricity generating capacity? What would be the likely costs and timescales of different generating technologies?

Q2.1  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?

  2.1.1  The table reproduced below from the Nuclear Industry Association "Energy Choices", website[198] provides a comparison of capital and generating costs and construction periods for nuclear, gas, coal, on-shore and off-shore wind. The table identifies the relatively high capital cost for nuclear compared to other generation options but that most of the studies show that nuclear generating costs are competitive.

Q2.2  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?

  2.2.1  As can be seen from the previous answer there is a range of new build costs for which there is a consensus of agreement from a range of different bodies. Confidence in the robustness of the new build estimates will however depend on the approach adopted for the implementation of a new build programme.

  2.2.2  In the past UK nuclear power station project experience was characterised by:

    —  "Cost plus" type contracts.

    —  Virtually every design is different from its predecessors.

    —  Designs are all of "UK-origin" (apart from Sizewell B).

    —  Designs often re-designed throughout licensing and approvals process, leading to extra costs and delays.

    —  Lengthy and unpredictable licensing processes and public inquiries.

  2.2.3  New build cost estimates are realistic and robust providing some straightforward and practical framework for building new units is implemented.

    —  Consortia formed possibly from major utility groups where risk is shared among the parties.

    —  "Turnkey" contractual arrangements with reactor vendor and major constructors and equipment manufacturers.

    —  Adoption of a proven internationally recognised design, implemented in the UK with minimum modification.

    —  A regulatory approach that takes account of licensing approval obtained for the reactor design in its country of origin and elsewhere.

    —  Implementation of the current UK licensing and approvals processes in a way which ensures timely and predictable delivery of regulatory clearances and planning consents.

  2.2.4  With regard to the "hidden costs" referred to in the question, the position is as follows:

    —  Waste—nuclear waste management costs are all included in the overall generation costs indicated above. Irrespective of the final solution for the disposal of power station wastes they only represent a small proportion of nuclear generating costs. It is important to separate costs for the small volumes of waste produced by the latest reactor designs from the cost liabilities associated with the very large volumes of "legacy" wastes produced the UK military programmes and previous and less efficient reactor designs.

    —  Insurance—UK nuclear power stations carry both material damage and liability insurance. This insurance cover is in place for every civil nuclear site in the UK. It is understood that there is an upper limit currently of £140 million as set in the Nuclear Installations Act and that this may increase to

    700 million under EU legislation The UK insurance industry should be able to provide this cover on a commercial basis.

    —  Security—As any new stations would be at least as structurally robust as existing stations no new issues of principle or policy are anticipated. The security costs are only a minor part (about 2%) of overall operational and maintenance costs.

Q2.3  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?

  2.3.1  No, it is un-realistic to suggest that renewables could provide all the new capacity needed in the timescale required. Many of the renewable technologies still need many years of development. However mainstream incineration with energy recovery is technically proven, the biodegradable fraction of mixed waste is classified as a renewable, and this could generate over 4% of the UK's power by 2020[199]. Wind energy and hydropower are also developed technologies. We should make as much use of these as we can. However there are limitations to what is feasible, especially for hydropower due to our low topography. Therefore the rate of increase in generation by renewables would have to be far greater than can be expected in order to fill the gap which will be left by retirement of existing nuclear and coal fired stations.

Q2.4  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?

  2.4.1  Micro generation should be seen in the context of generation at the point of use of electricity, and therefore some electricity transmission costs are reduced. However there is a small increase in the additional costs of fuel transport to the consumer's premises, (except in the case of micro renewables). In the near to mid term, micro generation will not make a significant contribution to the nation's generation capacity, but in the longer term these advanced technologies, in conjunction with energy efficiency measures might contribute up to 20% of domestic energy consumption on an annual basis.

  2.4.2  It is important to note the difference between capacity (in MW) and energy (in MWh). Adding base load power, operating efficiently, as part of a mixed generation portfolio would substantially reduce emissions. Considered use of large scale and distributed storage technologies would ensure that base load plant and stochastic renewable generation were integrated and operated efficiently.

Q3.   What is the attitude of financial institutions to investment in different forms of generation?

Q3.1  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?

  3.1.1  The perceived risks (and therefore obstacles) to investment in new nuclear build principally relate to uncertainties over the timescales and costs associated with the licensing and approvals processes and the current lack of a long term waste management policy planning. Uncertainty in the future power generation market is probably less of a factor than these two areas.

  3.1.2  The large-scale nature of the investment required in a new nuclear programme (ie £1 billion plus per station) should not be an overriding obstacle. Other major infrastructure projects require and attract similar or greater levels of investment.

  3.1.3  Investment in CCGT and renewables are both subject to uncertainty. In the case of CCGT there uncertainties surrounding future gas costs and gas supply availability that is in direct contrast to nuclear, which has secure and stable fuel costs, and availability. Renewables are subject to the same planning process uncertainties which would potentially impact on a nuclear programme, are also subject to investor concern over the timescale and extent of financial support through the Renewables Obligation and are also faced with technical uncertainty particularly for offshore installation.

Q3.2  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?

  3.2.1  Any decision by the private sector to invest in new nuclear build will be subject to a detailed commercial appraisal of capital and operating costs, current and long term market conditions and the perceived risks to the success of the programme. It will also be dependant on how risks are shared between the parties to such a project. The exact scale and nature of any Government support required is difficult to quantify without the results of such an analysis. Depending on the structure of developer and constructor consortia etc, Government financial support may not be required, providing the key uncertainties of licensing and approvals timescales and waste policy, are addressed by Government. In this event the issue of compatibility with liberalised markets would not apply.

Q3.3  What impact would a major programme of investment in nuclear have on investment in renewables and energy efficiency?

  3.3.1  Government has made it quite clear that any investment in a new nuclear build programme will come from the private sector. If this is undertaken on a purely commercial basis (with no subsidies) it should not impact on renewables and energy efficiency providing Government support for these areas remains unchanged.

C.   Strategic benefits

Q4.   If nuclear new build requires Government financial support, on what basis would such support be justified? What public good(s) would it deliver?

Q4.1  To what extent and over what timeframe would nuclear new build reduce carbon emissions?

  4.1.1  1GWe of nuclear power over its operating life would reduce annual carbon dioxide emissions by:

  Around 7.5 million tonnes if displacing coal-fired generation,

  Around three million tonnes if displacing gas-fired generation.

  If a new build programme replaced the current nuclear power station fleet it would in total save around ten times the above figures.

  4.1.2  If a new build programme was initiated immediately it should be possible to have commissioned the first new station by 2015-16 with an additional new station commissioned every 18 to 24 months. This would go some way to offsetting the projected closure of the existing nuclear power station fleet (particularly if potential life extensions are implemented) and would ultimately replace and maintain the current contributions made to carbon emission reductions by the UK nuclear power stations.

Q4.2  To what extent would nuclear new build contribute to security of supply (ie keeping the lights on)?

  4.2.1  Recent history has shown that reliance on one fuel source (eg coal at the time of the miners strike) makes the UK electricity supply vulnerable to the actions of individual groups. If gas becomes as dominant a fuel source as coal was in the 1980s the situation could be repeated with the added dimension that that influencing factors could lie outside the UK. This can be avoided by ensuring there is a diverse energy mix gas, coal, renewables and nuclear which reduces the impact of the loss of a particular fuel sector. This will require a construction programme of new nuclear stations to be started soon otherwise nuclear will be providing just 3% of UK electricity in under 20 years time, compared with around 20% today.

  4.2.2  A new nuclear programme would provide reliable baseload generation using a fuel (ie Uranium) that is plentiful as a raw material, and comes from stable countries such as Australia and Canada. Furthermore, it is highly credible to retain strategic stocks of nuclear fuel to offset the risk of any sustained disruption to supply. The fabricated fuel to supply a fleet of 10 new reactors (sufficient to replace the current nuclear fleet) for a year would occupy only around 100 cubic metres.

  4.2.3  A new nuclear programme would provide reliable baseload generation using a fuel (ie Uranium) that is plentiful as a raw material, and comes from stable countries such as Australia and Canada. Furthermore, it is highly credible to retain strategic stocks of nuclear fuel to offset the risk of any sustained disruption to supply. The fabricated fuel to supply a fleet of 10 new reactors (sufficient to replace the current nuclear fleet) for a year would occupy only around 100 cubic metres.

  4.2.4  In addition to supply reliability a nuclear power fraction would also provide valuable cost stability. This is because the cost of raw uranium ore accounts for only 5-10% of the overall generating cost of electricity from nuclear stations. Any increase in the global market prices for uranium fuel would therefore have a relatively small impact on nuclear generating costs.

Q4.3  Is nuclear new build compatible with the Government's aims on security and terrorism both within the UK and worldwide?

  4.3.1  It is the responsibility of the Government's security regulator Office for Civil Nuclear Security (OCNS) to ensure the security of all aspects of nuclear operations in the UK. The OCNS Director in his 2004 annual report continued to confirm confidence in the security provisions of the nuclear industry and that the security measures applied are proportionate to the threats faced.

  4.3.2  Nuclear power stations are amongst the most robust civil structures in the world and their design and construction undergoes rigorous regulatory review. A key part of the design process is to take account of impact from forces generated by external events both natural and manmade including terrorist attacks. The layout and structural design fully accounts for these extreme events and impacts. In addition to the design measures the operation of the stations are also subject to rigorous security arrangements covering staff vetting, access control etc. As a result the potential threat to nuclear power station from external forces is minimised.

Q5.   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?

  5.1  The nuclear option is not an alternative to renewables. Both are needed as part of a balanced energy supply. The generation gap will be too large to be filled by either one alone. Microgeneration is at far too early a stage to judge what contribution it may make in the future. Energy efficiency should be a contributor to the energy supply equation but it seems unlikely to make any more than a small contribution. Total electricity consumption has increased from 382TWh in 1999 to 401TWh in 2004; so energy efficiency appears, at best, to have limited the increase in consumption.

D.   Other issues

Q6.   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?

  6.1  Nuclear energy scores well on full life cycle emissions of carbon dioxide when compared with other generation sources. Nuclear is comparable with renewables and is considerably lower than fossil fuel plants.

  6.2  A recent International Atomic Energy Agency (IAEA) report shows the results of assessments both direct and indirect emissions for different generation sources. For nuclear it provides figures for the full life cycle ie mining, fuel enrichment and manufacturing and spent fuel treatment. The report concludes that in general nuclear energy is almost a factor of 20 lower than the best fossil fuelled plant (latest gas-fired technology) and a factor of over 60 lower than older, coal-fired technology. The latest nuclear power stations can achieve further improvement by more than a factor of two on these figures.

Q7.   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?

  7.1  The Committee on Radioactive Waste Management (CoRWM) ongoing process to identify the most appropriate UK solution for the management of radioactive wastes is scheduled to make recommendations to Government in 2006. The depth and quality of the work done to date by CoRWM, gives every confidence that an effective and technically feasible solution will be identified and the report will be delivered on schedule.

  7.2  Once the recommendation has been made and adopted by Government that should clear any perceived obstacle to new nuclear build. The start of a new build programme should not be conditional on further development of the preferred option. Indeed there should be no reason to delay the start of early activities such a review of energy policy and the potential future role of nuclear whilst the CoWRM process is being finalised.



  Electricity generation by fuel type—UK

  7.3  Context: The chart shows how electricity demand is likely to be met by different forms of generation. It is based on current DTI's projections and illustrates the potential requirement for new investment.

  7.4  Key points: Within the overall total, changes are likely in the generation mix and new investment will be needed to replace generation plant once closed. By 2010 gas fired generation is modelled to be producing 18 TWh more than was produced in 2000, rising to an additional 94 TWh in 2020. A mixture of large-scale plant and CHP will meet this generation, although the exact contribution of both, and of gas itself, will be dependent on relative costs and availability of other sources. In contrast nuclear's contribution is expected to drop from its peak of 90 TWh in 1998 to 65 TWh in 2010 and 27 TWh in 2020. In DTI's Updated Energy Projections renewables are modelled to reach their 10% target in 2010 and their 15% target in 2015, remaining at that level in 2020.

  7.5  Background: The data presented are measured in TWh, therefore improvements in efficiency and utilisation can increase output without the need for new build.

22 September 2005

Projections: Current DTI Projections November 2004.

198 Back

199   Lee, P, Fitzsimons, D, & Parker, D "Quantification of the Potential Energy from Residuals in the UK"; Report commissioned by The Institution of Civil Engineers & The Renewable Power Association, March 2005. Back

200   Historic: DTI, Digest of UK Energy Statistics 2004-Table 5.6 and corresponding tables in earlier editions. Back

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