House of Commons - Environmental Audit

Select Committee on Environmental Audit Written Evidence

Memorandum submitted by nef (the new economics foundation)

CONTENTS

1. Outline

2. nef (the new economics foundation)

3. Summary and proposed comprehensive energy path assessment grid

4. The prospects for nuclear power

5. The real costs of nuclear power and comparisons with renewable options

1. OUTLINE

1.1 This evidence particularly addresses aspects of inquiry issues: B: Financial Costs and Investment Considerations.

1.2 The evidence is organised into three sections:

3.Summary and proposed comprehensive energy path assessment grid

4.The prospects for nuclear power

4.1 Historical context

4.2 Current development plans

4.3 The 2002 review

4.4 Cost reduction through "learning and scale"

4.5 Construction costs

4.6 Timescale and nuclear's ability to tackle climate change

4.7 Costs and hidden emissions

4.8 The problems of insurance

4.9 Questions of supply and cutting greenhouse gases

4.10 Security

4.11 Waste

4.12 Clarity, information and public message management

5. The real costs of nuclear power and comparisons with renewable options

5.1 Timing

5.2 Externalities

5.3 Energy costs and learning curves

In addition,this evidence includes the following tables and figures:

4.The prospects for nuclear power

Table 1: Power stations in the UK

5.The real costs of nuclear power and comparisons with renewable options

Figure 1: Preferences between nuclear and renewable energy at equal prices (2002)

Figure 2: Learning curve and cost reductions for nuclear and renewable energy

Figure 3: Projected electricity generation cost, 2020

Figure 4: Cost of carbon saving, 2020

Figure 5: The escalating cost of nuclear power (excluding insurance, pollution and terrorist risk)

Table 2: Job creation in the energy production industries

2. NEF (THE NEW ECONOMICS FOUNDATION)

2.1 nef (the new economics foundation) independent "think and do" tank that believes in economics as if people and the planet mattered. nef's work focuses on key policy areas including energy, climate change and international financial and trade issues.

2.2 Andrew Simms is Policy Director and head of the Climate Change programme at nef. Andrew is a board member of The Energy and Resources Institute (TERI) Europe. His publications include several reports on climate change, globalisation and localisation, and development issues. He has been a regular contributor to the International Red Cross's annual World Disasters Report, and his book Ecological debt: the health of the planet and the wealth of nations was published in Spring 2005.

2.3 David Woodward is Director of Global and National Economies at nef. David has worked for the Foreign and Commonwealth Office as an economic advisor, as technical assistant to the UK Executive Director to the IMF and World Bank; research coordinator on debt for Save the Children (UK); and development economist in the Strategy Unit of the World Health Organisation.

3. SUMMARY

Nuclear power has been promoted as a solution to climate change and an answer to energy security. On the basis of nef's analysis it is neither. On the one hand, as a response to global warming it is too slow, too expensive and too limited. On the other hand, it is more of a security risk in an age of terror-related threats, than a security solution.

In spite of newspaper headlines suggesting a come-back for nuclear power, this evidence finds no substance to claims that it has an increased role to play in a flexible, safe, secure, and climate friendly energy supply system. These, in fact, are the characteristics of renewable energy, which is abundant and cheap to harvest both in the UK and globally. Successive investigations by government and parliament have come to similar conclusions. The opposite conclusion is only possible if renewable energy technologies are negatively misrepresented, and if the numerous weaknesses, high costs and unsolved problems of nuclear power are glossed over.

The Government is committed to "evidence-based policy". This alone should rule out a nuclear comeback. The limited criteria of cost and security are enough to direct the UK down the path of renewable energy. By adding further, meaningful criteria to an assessment of energy choices, such a decision is merely confirmed. It is beyond the scope of this evidence to present a fully comprehensive energy path analysis, but not beyond its scope to recommend that such an analysis be carried out. The energy assessment grid below illustrates what such an analysis should include (see Table below).

Cost and the economic return on investment are issues at the top of many people's lists. Using unadjusted figures most renewables can outperform nuclear power. Using more realistic figures for the cost of nuclear power leaves renewables easily the better choice.

Renewables are quicker to build and need less energy pumped in for every unit of power subsequently generated. Because renewables, pound for pound, also generate far more jobs than nuclear power, they contribute much more to broad based economic development both at home in the UK and abroad. Importantly, renewables leave no legacy of radioactive waste that endures in the environment for tens of thousands of years.

It is clear that a new wave of nuclear power stations could only be built with some form of large public subsidy. But given that the public purse has limited resources, the Government must make the best investment on the taxpayers' behalf. In this case, the danger is that the huge and unpredictable costs of nuclear power will crowd out vital investment into renewable energy, as it has done for decades already.

In order to re-level the economic playing field for renewables two things are needed. First the Government should remove the existing direct and indirect subsidies to nuclear power that "feather bed" its prospects. Secondly, in order that they achieve their full potential, public support to renewables should rise to match the levels historically enjoyed by nuclear power.

In a recently issued manifesto the Renewable Power Association (RPA) called for particular fiscal measures that would, it said, deliver the best value for money. [230]These include:

— Extending Enhanced Capital Allowances to all renewables.

— Reducing VAT on wood-fuel boilers and other domestic-scale renewables.

— Introducing Stamp Duty concessions for buildings with renewables.

— Enhancing tax allowances for all renewable investments.

— A Cabinet-level Energy Minister.

A private members' bill on renewable energy, introduced earlier this year by Lord Redesdale, called for all electricity suppliers to be obliged to purchase electricity from microgenerators. It went further to require local authorities to set targets for their take up and categorise certain types of microgenerator as "permitted developments", to ease their planning path at the local level. [231]

On the international stage, there is the need for an International Agency for Renewable Energy to represent the sector at the global level and to balance the already-existing equivalent nuclear institutions.

An unacknowledged benefit of microgeneration is that it puts people back in touch with where energy comes from. We have taken fossil fuels for granted for too long, and ignored the importance of living in balance with the ecosystems upon which we depend. Renewable energy is a great reminder that also offers us the chance for greater independence. It is possible that nuclear power has only survived for as long as it has because its true costs have been hidden from us, and because its waste and pollution are invisible.

The potential for a climate friendly, non-nuclear energy supply system has been acknowledged by extensive research carried out from across government, parliament, the Royal Commission on Environmental Pollution, to the wider research community and civil society. There is now an opportunity and a need to make it happen.

4. THE PROSPECTS FOR NUCLEAR POWER

A generation has grown up in Britain having forgotten how and why the future of a once optimistic nuclear energy sector became so tarnished. For that reason it is necessary to revisit the industry's journey from post war promise, to become a sector in decline, and why it is that nuclear power is now back on the political agenda. If recent events are indicative, any renewed official enthusiasm for nuclear power will face significant obstacles.

Earlier this year days after Labour Government officials seemed to be positively entertaining the prospect of new nuclear generating capacity, news emerged of a leak of 20 tonnes of plutonium and uranium dissolved in nitric acid at the Thorp reprocessing plant in Sellafield. Classified on the International Nuclear Event Scale as a "serious incident", it was a poignant reminder of the Windscale reactor fire—whose scale and impact were kept secret from the British public for 25 years—an event that led to the plant being renamed Sellafield. The contemporary leak resulted in calls from the EU Commission for tougher safety standards. Soon after, it was reported that the Nuclear Decommissioning Authority wanted Thorp to shut for good. This was due partly to the fact that it was a loss-making operation, and partly because the controversial nature of reprocessing is seen within the industry as a potential barrier to winning the argument for a new generation of reactors. [232]

4.1 Historical context

Discovered in the 1930s, nuclear fission was later pioneered in the 1950s by the United States, the UK, France, Canada and the former Soviet Union as a way of supplying electricity. [233]

The UK's first nuclear power station was Calder Hall in Cumbria, a Magnox gas-cooled reactor, which came on stream in 1956. Several of these aging Magnox reactors are still in operation. The design was also exported. DTI proudly cites the stations built in Italy and the one in Japan, which is still operating. They omit to mention that North Korea's current controversial nuclear programme is based on these same early generation British-designed Magnox plants. [234]France used similar technology early on then later followed the US focus on water-cooled reactors. In the 1960s Britain went on to develop advanced gas-cooled reactors before opting for pressurised water reactors (PWRs) in the 1970s.

Their development is instructive for the current debate about the potential of nuclear power to ward off climate change. A public inquiry into the UK's first PWR, Sizewell B in Suffolk, ran from January 1983 to March 1985 and it wasn't until 14 February 1995 that it began operations. Prime Minister, Margaret Thatcher, planned to build a whole series of new nuclear power plants, but as the DTI observes, "Since Sizewell B, no further nuclear reactors have been built or ordered in the UK."

When plans to privatise the electricity supply sector were announced in 1988, nuclear power was left out of the proposals. High capital costs of construction, decommissioning and waste disposal were the main reasons. But the other problem that beset the nuclear sector then and still does today was, according to the DTI, the serious "uncertainties over the costs" of financing new stations.

In 1994 the Government undertook a Review of the Future Prospects for Nuclear Power in the UK. After analysing the "economic and commercial viability of new nuclear power stations", it concluded that public support, or "subsidy", for building new stations would constitute a significant and unwarranted intervention in the market.

In 2000, the final explicit subsidy to nuclear power was removed and replaced with an obligation on UK energy utilities to buy 3% of power from renewable sources. [235]There are 31 operating reactors at 14 powers stations currently in the UK. See Table 1.

Table 1

POWER STATIONS IN THE UK

BNFL Magnox	Capacity MW	Published Lifetime
Calder Hall	194	2003
Chapelcross	196	2005
Sizewell A	420	2006
Dungeness A	450	2006
Oldbury	434	2008
Wylfa	980	2010

British Energy Capacity MW Published lifetime

Dungeness B 1110 2008

Hartlepool 1210 2014

Heysham 1 1150 2014

Heysham 2 1250 2023

Hinkley Point B 1220 2011

Hunterston B 1190 2011

Sizewell B 1188 2035

Torness 1250 2023

(source DTI)

The Government's Performance and Innovation Unit (PIU) published a review of UK energy policy in February 2002. It concluded that new sources of low cost, low carbon energy should be developed. It called for renewables to play a central role, and left the nuclear option open. [236]

In February 2003, the Government published its Energy White Paper Our energy future—creating a low carbon economy. [237]It sets energy efficiency and renewable energy as Government's priorities. The White Paper says that, "while nuclear is currently an important source of carbon free electricity [note: this is not factually correct], the current economics of nuclear power make it an unattractive option for new generating capacity and there are also important issues for nuclear waste to be resolved." Consequently and clearly ruling out the prospect of any future public subsidy, the DTI notes that, "In common with all generation options, the initiative for bringing forward proposals to construct new nuclear plant lies with the market and the generating companies".

So it was with an apparently strong contradiction that the Government came to the aid of the financially crippled nuclear sector in 2002, supporting British Energy with a £650 million credit facility. The European Commission challenged the UK Government under its rules prohibiting state aid to industry. [238]

The timescale for nuclear phase-out suggests all Magnox reactors will close by 2010 and, with some exceptions, Advanced Gas-Cooled Reactors (AGRs) by 2020. This implies nuclear power's share of generating capacity falling from its current level of 23% to 7%.[239]

In April 2005, the Government launched the Nuclear Decommissioning Authority (NDA), to manage the task of cleaning up the contamination left on the sites of the 40 nuclear reactors that have operated in the UK. Very conservatively the costs are estimated at tens of billions of pounds over the coming decades. [240]The transfer of assets and liabilities from British Nuclear Fuels (BNFL) to the NDA is considered to remove "polluter pays"-type obligations from BNFL. As the State is providing an advantage to a company, the EC considers that it falls into the category of potentially prohibited "state aid". An in-depth inquiry has been instigated. [241]

4.2 Current development plans

Currently there is no active programme of new nuclear build anywhere that electricity-generating markets have been liberalised. [242]In the US no new nuclear power stations have been ordered for over 25 years. In Europe, Germany, Belgium, the Netherlands and Sweden are committed to closing existing plants. Only one is being built in Western Europe in Finland. If new build were to happen, the Westinghouse Advanced Passive 1000 (AP1000) reactor is reportedly the most likely candidate. [243]A Government review of 2002 says that 20 years would be the minimum timeframe to develop a programme using this technology, ruling out any role for nuclear in cutting carbon emissions to control global warming in the period in which the growing scientific consensus dictates that action is essential.

In an attempt to escape the private sector's deep antipathy toward the economic uncertainties of nuclear power, British Energy is reported to be talking to city institutions about the possibility of private funding for a nuclear-power building programme. Contrary to past official assurances that there would be no new subsidy to nuclear, the Treasury is also reportedly considering tax breaks for private companies willing to support a new-build programme. Such an approach would partly circumvent the twin barriers of the Government's reluctance to use public cash directly, and British Energy's lack of resources. [244]

British Energy is currently banned from operating any newly built stations until 2010, because of the settlement terms resulting from its brush with the European Commission after the Government's credit bail-out. According to news reports, bankers have told British Energy at London meetings that the "huge initial costs of building nuclear stations, coupled with volatility in the power market makes funding impossible" without a change of government policy. [245]

4.3 The 2002 review

One of the problems of dealing with the strictly economic aspects of choosing an energy path is the opaqueness of figures offered by the nuclear industry. The 2002 report by the PIU lists these reasons why the industry's figures about the costs at which it could deliver new generation should be questioned: [246]

4.4 Cost reduction through "learning and scale"

The nuclear industry is over-optimistic about reducing costs through "learning and scale effects":

— The former because necessarily strict regulation to do with the inherent dangers of nuclear materials, means that it is unrealistic for the industry to "learn" substantially from its mistakes, because a mistake in nuclear power terms might be disastrous.

— Even where possible "learning effects" will be less for nuclear than renewable because, "Long lead times for nuclear power mean that feedback from operating experience is slower."

— The latter "scale effects" would also be constrained because, compared to the scale benefits for renewable technologies, "The scope for economies of large-scale manufacturing of components is less."

4.5 Construction costs

The nuclear industry is over-optimistic about construction costs:

— It claims that it can achieve costs below the bottom of the range given in an assessment of nuclear's potential by the International Energy Agency. But such an outcome would depend on:

— Achieving very high operating availability.

— A series build of 10 identical reactors.

— Short construction times; and regulatory stability.

— The technology proposed for a new series of stations is the AP 1000 which:

— Is yet to be built anywhere in the world.

— Carries "first-of-a-kind risks".

— Comes at a time when no new stations have been ordered in OECD Europe since 1993.

— Performance will be difficult to guarantee at proposed levels.

4.6 Timescale and nuclear's ability to tackle climate change

The earliest that new nuclear capacity could be introduced means it can't tackle climate change:

— Twenty years was considered to be the earliest that a new generation of nuclear reactors of this type could be introduced, whereas the scientific community say that action to reduce greenhouse gas emissions is urgent with the next decade.

— Given the sceptical tone of the PIU review and the clear recommendations of the recent Energy White Paper in 2003, the question the industry has to answer is, what if anything has changed in the intervening period to justify re-opening the nuclear box?

4.6 Costs and hidden emissions

One of nuclear power's main problems is that it has proved incompatible with any kind of market system for energy. Its high, unpredictable costs and unknowable and potentially uncontainable liabilities deter investors. Its inflexible method of power generation renders the industry largely incapable of responding to changing market conditions by varying output. The bailout of British Energy in 2001 was attributed to a fluctuating market price that went below nuclear power's operating cost, and to which the sector could not respond by simply switching off reactors. [247]

Even the World Nuclear Organisation happily concedes that when the external costs of various fuel cycles are studied, the cost of wind power is up to four times cheaper than nuclear power. [248]With reference to the same methodology, however, they say that the external costs of nuclear—those not to do with immediate generating costs—are much lower than most fossil fuels. However, specialists in the measurement of ecological footprints say that the footprint of nuclear power is at least equal to many fossil fuels. Footprint analysts Best Foot Forward comment, "The losses through Chernobyl alone suggest a footprint per nuclear energy unit larger than that of fossil fuel. Life cycle studies of nuclear energy also reveal the fact that a substantial amount of pollution is produced in the production and processing of nuclear materials and the construction of power stations." [249]

According to the US-based Nuclear Information and Resource Service, the fossil fuel intensive processes involved in uranium mining, conversion, enrichment, transport and construction of power stations, mean that, "Nuclear power produces direct and indirect emissions of 73 to 230 grams of CO₂ per kWh electricity." [250]

4.7 The problem of insurance

The nuclear power industry is underinsured. The limited insurance it does have is effectively subsidised by public funds. The nuclear industry is unable to get commercial insurance cover and governments have had to step in, taking on the burden instead. This is a substantial, and largely hidden subsidy to the industry. [251]

In several countries the law sets a maximum liability for any nuclear facility, regardless of what the real economic, human and environmental costs of an accident will be. Under the Canadian Nuclear Liability Act the limit for an installation is CAD$75 million and is underwritten by the federal government. [252]In the United States, coverage for a "catastrophic nuclear accident" is set in law under the Price-Anderson Act of 1957 at a much larger US$9 billion, although this too has been labelled "inadequate".[253] Arguing for the industry to meet more of its own insurance costs, Senate Democrat and chair of the Senate's Transportation, Infrastructure and Nuclear Safety subcommittee Harry Reid said, during negotiations to renew legislation for the insurance programme, "We cannot allow nuclear power plants to operate without adequate insurance." [254]

The 11 September attacks on New York and Washington raised fears about the vulnerability of nuclear installations to attack. In response American Nuclear Insurers, which administers the industry's collective insurance pool, limited the industry individual operator's liability to $200 million. In the US, such a government-backed insurance programme for industry is considered unique to nuclear.

To put these figures into context, the Ukraine estimated in 1998 that, up to that point in time, it had lost between $120 and $130 billion thanks to the Chernobyl disaster over a decade earlier, whilst neighbouring Belarus estimated its economic loss at $35 billion. Of course the damage from that one incident spread much wider and, for example, still affects the hill farmers of Wales today. [255]Figures released in 2004 in response to Parliamentary questions by Labour MP Llew Smith, showed continuing damage to sheep farming in the UK from the fallout from Chernobyl. [256]In North Wales restrictions remained at 359 farms covering 53,000 hectares; [257]in west Cumbria in England, near Sellafield, nine farms were still affected covering 12,100ha; [258]in Northern Ireland, in Counties Antrim and Londonderry, 153 farms covering 8,752ha were still affected; [259]and in SW and central Scotland, 14 farms covering 16,300ha remained affected. [260]

In terms of the international communities' ability to respond to major nuclear accidents, the Chernobyl case is instructive. A limited plan to manage the contaminated accident site was pulled together in 1996 known as the International Shelter Project. It was estimated to cost $758 million, not including the costs of actual fuel removal or the decommissioning and decontamination of the site. G7 nations pledged to contribute $300 million towards the $758 million cost, topped up by a further $37 million from 40 other countries, together making up less than half the total estimated cost. [261]

The insurance circumstances of the nuclear industry represent a double subsidy. Firstly installations are underinsured, and secondly the state ultimately picks up the bill. As the retired Royal Navy Commander Robert Green, (who navigated nuclear strike aircraft during two decades of service) observed, "No commercial insurance company has ever insured either nuclear-powered merchant ships (which were all economic failures) or electricity generation plants, because a worst-case accident, like the 1986 Chernobyl reactor explosion, cannot be ruled out." [262]

The insurance industry's deep antipathy towards the nuclear sector was underlined by a call in 2003 from Swiss Re for contracts to be rewritten and laws to be changed to explicitly remove any exposure of the insurance and reinsurance sector to the nuclear industry. [263]

4.8 Questions of supply and cutting greenhouse gases

People rarely consider the question of finite resources in relation to nuclear power but uranium is in limited supply. Given current nuclear output one estimate from a body representing the renewables industry suggests that uranium reserves will be depleted in around four decades. [264]

But even the International Atomic Energy Agency (IAEA), a UN body that promotes peaceful uses of nuclear power, cites known conventional, recoverable resources of uranium at 4.6 million tonnes—enough to last only another 85 years at the rate of use in 2002. It also observes "The period for which resources are sufficient decreases the more nuclear power is assumed to grow in the future." [265]

Another question is whether, even with a major building programme, nuclear power could make much difference in terms of global greenhouse gas emissions. The IAEA's 2004 review of the sector looked at two different scenarios. In the first, in which no new nuclear stations beyond those already planned get built, "Nuclear power's share of global electricity generation decreases after 2010 to 12% in 2030, compared to 16% in 2002," meaning that its relative contribution to fighting global warming falls also. However, ironically, nuclear power's potential relative contribution to reducing greenhouse emissions is even worse under the IAEA's more optimistic high-growth scenario.

This is because the model takes account of the fact that in order to pay for a major nuclear building programme there would have to be high economic growth, which would still be largely powered by even faster growth of fossil-fuel use. Hence the conclusion that under the high nuclear growth scenario "generation steadily increases by a total of 46% through 2020 and by 70% through 2030", but, "overall electricity generation increases even faster than nuclear power, causing nuclear power's share of overall electricity to decline. By 2030 the nuclear share is down to 11%".[266]

Fast-breeder reactors are meant to solve the problem of limited uranium supplies, but they require much higher energy "investments". As the UK Atomic Energy Authority wrote in 1989, "In practice, it is now not clear how [the use of fast breeders] would be achieved on an expanded global scale without encountering basic plutonium shortages, not to mention serious problems with waste disposal, power plant decommissioning and nuclear weapons proliferation." [267]

If fuel supply was not a problem there is another one. Margaret Thatcher as Prime Minister planned 10 new nuclear power stations and managed only one. In the context of declining global oil and gas production, to meet unmanaged growth in energy demand, would require an unfeasibly large programme of new build. According to one estimate between 2015 and 2040, 1,700 stations would be required. [268]Add to that the new demand to provide the energy necessary for the global economy to grow at 2% beyond 2015, and another 5,000 stations could be needed. Based on this estimate, over the 25-year period up to 2040, approximately five new stations would need to open every week. There would be significant problems in finding suitable sites outside earthquake zones and where the cooling water would not harm the marine environment, and where local opposition was not strong. Given that most stations take ten years to build, work would have to start almost immediately. [269]

Another estimate comes from the US-based Nuclear Information and Resource Service (NIRS): to meet the IAEA's high-growth scenario for nuclear power an average of 115 power stations of 1,000MW would need to be constructed annually, with a new station opening approximately every three days. [270]

A report on the Future of Nuclear Power, recently published by MIT said that to increase nuclear power's share from 17% of world electricity to just 19% by 2050 would mean nearly trebling nuclear capacity. Between 1,000 and 1,500 large nuclear plants would have to be built worldwide. [271]

Even a report produced in 2004 by the IAEA to mark the 50th anniversary of nuclear power conceded that nuclear power could not stop climate change. In an interview Alan McDonald, an IAEA energy analyst, admitted that, "Saying that nuclear power can solve global warming by itself is way over the top." [272]

4.9 Security

Global reinsurance giant Swiss Re cites three scenarios for nuclear terrorism in the post 9/11 world: [273]

(1) A radiological dispersal device, otherwise known as a "dirty bomb".

(2) Attack or sabotage on a nuclear installation.

http://www.dti.gov.uk/energy/nuclear/technology/history.shtml (downloaded 21 Apr 2005).

Centre for Non-Proliferation Studies (CNS) at:

http://www.nti.org/db/profiles/dprk/nuc/fac/reactors/NKN_F_5mwrct_GO.html

http://www.dti.gov.uk/energy/nuclear/technology/history.shtml (downloaded 21 April 2005).

http://www.bellona.no/en/energy/nuclear/sellafield/33726.html (downloaded 20 April 2005).

Nuclear Decommissioning Authority (2004) "Nuclear Decommissioning Authority publishes its 2005/06 Annual Plan", NDA Communications Team.

http://www.feasta.org/events/debtconf/sleepwalking4.htmpanel1 (downloaded 6 Apr 05).

(3) An "improvised nuclear device", either taken from military sources or "home made".

All imply long-term contamination and extremely high costs in both human and financial terms.

So far, no convincing response has been given to this key security question, which explains the nervousness of the insurance industry. There are fears that the degree of new security measures necessary to address such concerns, could, in themselves, represent a victory for terrorism and lead to a police state. There is also the problem of materials "leaking" to supply the market for state sponsored nuclear proliferation. [274]

One recent estimate put the cost to BNFL of providing security against terrorism, including armed police, at £50 million per year. This is roughly the same as the total amount recently allocated to a new wave and tidal development fund in the UK, to be spread over several years.7[275]

Chernobyl demonstrated what happens when a reactor core is penetrated without first having shut down safely. Private nuclear industry calculations are understood to have shown that the effect of a plane being flown into the Intermediate Level Waste stores at Sellafield could result in 3,000 deaths within two days of the attack. [276]

With the industry arguing the case for their own renaissance in the context of climate change, there is another, ironic, potential obstacle. The challenge of finding appropriate sites for new wind farms is dwarfed by the task of choosing sites for new nuclear reactors. Given public opposition, a common official fallback position is to advocate building new reactors at existing nuclear sites. However, following the sector's much-criticised "dilute and disperse" approach to waste management, nearly all nuclear plants are to be found on the coast. But as observed in a newsletter produced by Defra, "With sea levels rising due to climate change, this does not seem to be a good location." [277]

4.10 Waste

Britain has over 10,000 tonnes of radioactive waste, set to increase 25-fold when current nuclear facilities are decommissioned. Most high and intermediate level waste, around 90%, is in "unconditioned form", not held in a form suitable for long-term storage. [278]

The total amount of nuclear waste in the UK, including waste generated over the next century from existing power stations and their decommissioning, is 470,000 cubic metres when conditioned and packaged—enough to fill the Royal Albert Hall five times over. The nuclear waste volumes can be divided as follows:

— High level waste—2,000 cubic metres.

— Intermediate-level waste—350,000 cubic metres.

— Low-level waste—30,000 cubic metres.

— Spent fuel—10,000 cubic metres.

— Plutonium—4,300 cubic metres.

279

On average, people in Britain live only 26 miles from a major radioactive waste site, including power plants and military bases. [280]

A recently released consultation document from The Committee on Radioactive Waste Management (CORWM), based on an investigation of different options over a period of 18 months, recommended that waste should be either buried underground or stored temporarily in facilities above ground in anticipation of better technologies. No recommendation, however, is forthcoming on where these sites should be located. 283[281]

The high cost of waste management was a factor in another controversial government decision to do with the industry. In order to help meet waste management costs, in late 2004 the UK Government reversed a 30-year-old policy to not store foreign intermediate-level nuclear waste on British soil. But where the new waste from Japan, Germany, Italy, Spain, Sweden and Switzerland will be stored is unclear. Many observers believe that the current storage site at Drigg, near Sellafield in Cumbria is nearly full. [282]

Both sides are calling for a new debate about disposal of nuclear waste. Along with the question of security and cost, waste management remains a thorn in the industry's side. For example, the UK Government faces court action from the European Commission for safety failures and for having no reliable figure for the amount of plutonium and uranium contained in waste tanks at Sellafield. The problem goes to the heart of the technology: murky water in the tanks and radiation prevent proper inspection of the content of the holding tanks. When the problem came to light, a national newspaper commented that, "The European court of justice could in theory levy unlimited fines on the UK for failing to comply with Euratom safeguards to prevent diversion of nuclear material for military purposes." [283]

4.11 Clarity, information and public message management

Shortly after Margaret Thatcher became Prime Minister she announced a plan to build 10 new nuclear power stations. In spite of her extraordinary grasp on power in Britain, as mentioned above, just one was commissioned. With peculiar symmetry, shortly after Tony Blair was re-elected in 2005, a Whitehall plan was leaked, appearing to allow for a series of ten new nuclear power stations. In the event, according to former ministerial advisor Tom Burke, it turned out to be merely one of numerous options papers produced "like confetti" for incoming ministers. [284]

But the return of nuclear power to public debate didn't just happen. It has been carefully engineered. Over the course of the previous year a range of bodies representing the industry invested heavily in new staff and capacity to engage in a press and public affairs. A combination of British Energy, the Nuclear Decommissioning Agency, the UK Atomic Energy Authority (UKAEA) and the Nuclear Industry Association used a range of strategies and newly employed lobbyists to try to revive debate about the industry's prospects. [285]Even nef was invited to become part of the process in the build up to the political party conference season in 2005 by a public relations firm, Grayling Political Strategy, taken on by the UKAEA. In spite of such efforts, it seems the most important audience is yet to be convinced. This year only 15% of the senior management of Britain's energy utilities expected current reactors to be replaced. [286]

5. THE REAL COSTS OF NUCLEAR POWER AND COMPARISONS WITH RENEWABLE OPTIONS

According to the PIU, British Energy (BE) and BNFL estimate the costs of nuclear generation at between 2.2 and 3.0p/kWh. Having criticised the over-optimism of many of their assumptions, PIU proposes a range of 2.2-5.0p/kWh as more realistic, with a narrower range of 3-4p.

However, this range appears too low, and unrealistically narrow for new technology that remains untested. Even if the BNFL and BE assumptions are accepted, the 2.2p/kWh figure is the lowest estimate for the eighth reactor to be built in a series of new build, which presupposes the construction of seven previous reactors at highest cost; and it is based on a 20-year plant lifetime. Using the PIU's standard assumptions of an 8-15% discount rate and 15-year plant lifetime, even with an optimistic view of the reduction in costs between the first and eighth units, BE and BNFL estimates imply an average cost for all eight reactors between 3.1 and 4.3p/kWh.

However, the PIU highlights reasons beyond vested interests, to believe that these figures themselves are an under-estimate. The following adjustments are based on the PIU figures for sensitivity analysis. However, since these are themselves based on an 11% cost of capital and a 20-year plant life, they are adjusted by +/-10% to correct and bring them broadly into line with the standard PIU assumptions.

First, BE/BNFL estimates of construction costs are below the lower end of the range of IEA estimates for expected construction costs of new nuclear capacity in seven OECD countries ($1,518-$2,521/kW). Based on the PIU's own sensitivity analysis, this suggests an increase in the upper end of the UK cost scale in excess of 1.1-1.3p/kWh. The estimated £100-300 million of additional "first-of-a-kind" costs excluded from the BNFL and BE figures, if spread across eight reactors, would add up to a further 4% (approximately) to construction costs, and up to 0.07p/kWh to the overall cost.

It should also be noted that these estimates are based heavily on "engineering judgements", in which the lower limits to the costs of producing certain types of structure are directly estimated. In other words, while the lower end of the range is a minimum, there is much greater potential for upside risk.

Past experience of nuclear power—particularly in the UK—suggests that such risks may be very considerable. Dungeness B, for example, took 23 years to complete instead of five years, resulting in a construction period longer than its productive life, while construction costs were more than 400% above the original projection. If this were repeated, it would increase the price per kWh by around 11-12p/Kh. A moderately cautious estimate of potential time and cost overruns (five years' delay and 50% cost overrun) would increase the upper end of the cost range by a further 1.5-1.8p/kWh.

Together, these considerations suggest additional costs of 0.1-3.2p/kWh, increasing the cost range to 3.2-7.5p/kWh.

BE/BNFL also assume operating availability substantially above the IEA's estimate of the current average OECD lifetime performance (75-80%). Interpreting "substantially" as a margin of 5-10%, and lowering the assumption to the IEA estimate would increase all costs (including additional costs based on the sensitivity analysis) by 5.3-11.1%. This further increases the range to 3.4-8.3p/kWh.

By comparison, if the industry estimate of 2.5-3.0p/kWh were under-estimated by the same margin as its 1995 estimate (3.5p/kWh) compared with the actual cost (6p/kWh), the true range would be 4.3-5.2p/kWh.

5.1 Timing

PIU suggests a planning/construction period in the order of a decade for each nuclear plant—a figure that may prove optimistic in the light of the controversy of planning applications and past experience of delays in construction. This suggests that electricity supply would come on-stream no earlier than mid-2015, even if the planning period began immediately.

However, there are a number of reasons to expect substantial further delays. Recent official briefings suggest that even an initial decision to pursue a nuclear option is far from immediately likely and possibly very far away, if it exists at all. Such an option has been, and remains highly controversial. Popular opinion towards nuclear power is roughly equally divided between supporters, opponents and undecided. [287]An added complication is the absence of a policy on nuclear waste disposal, and the finding of the Royal Commission on Energy Policy that new nuclear construction should not be permitted until this issue has been resolved to the satisfaction of the scientific community, and the public at large.

In view of these considerations, it seems unlikely that production will begin until at least 2020, and possibly well after this. This has two very important implications. First, it means that new nuclear capacity cannot contribute significantly, if at all, to the 20% reduction in carbon emissions required between now and 2020. Secondly, it means that the relevant cost comparison is not with the cost of renewable (or non-renewable) energy sources now, but in around 2020—after any cost reductions resulting from increased economies of scale and learning-curve effects in the meantime.

In fact, the delay could extend considerably further into the future. In 1981, the Monopolies and Mergers Commission (now the Competition Commission), deploring the performance of CEGB with respect to AGR plants such as Dungeness B drew the following conclusion:

"Again with hindsight it is clear from the views we have received that work on the AGRs has been at the frontiers of technology. The implication of this is that there were many components of the AGR which could not be fully tested before full-scale operation began, nor were relationships between the variables in the design sufficiently understood even to allow simulation of certain potentially damaging conditions. Nevertheless a full-scale prototype AGR was not built before proceeding to the programme. It is the CEGB's policy not to repeat that mistake in the current proposals for the future nuclear programme."

(Competition Commission, formerly the Monopolies and Mergers Commission, 1981)

Avoiding this mistake with AP1000 technology might reduce the risk of construction delays (although construction of Dungeness B took a further ten years after the completion of Hinkley Point B). However, it would delay the process by around another ten years, to 2030 or later.

5.2 Externalities

The PIU explicitly excludes consideration of unpriced externalities. Taking account of these could add considerably more to the economic cost of nuclear power, and to its financial cost if mechanisms were introduced to price them.

For example, there is the question of the insurance of nuclear installations, explored above. This is a cost borne largely by the State, which in the UK accepts liability for insurance costs above £140 million, and is therefore an uncounted subsidy. Secondly there is the issue that the limits set on insurance liability, where costs from major nuclear accidents are unlimited, represents a second subsidy passed onto the environment and wider community. The nuclear industry assumes that these costs are of minimal value, in which case the question remains, why should the nuclear industry not be insured at going market rates, and if the costs really are minimal why is the industry not prepared to take them on?

The risk of theft of nuclear materials, for example by terrorists, is also ignored. Given the increased level of perceived risk since 9/11, this is a serious omission. Again, it should be included in the calculations, and valued at the commercial cost of insurance against 100% liability for the damage caused. This would add significantly to costs. Additional security costs for storage and transport of inputs and waste could also increase costs significantly.

An indication of the existence of such uncompensated externalities is the public preference for renewable energy over nuclear power, excluding price effects. Asked by MORI in July 2002 about their preferences between the two, if the cost of either option were equal, 72% expressed a preference for renewables, and only 6% for nuclear (see Figure 1).

Figure 1

PREFERENCES BETWEEN NUCLEAR AND RENEWABLE ENERGY AT EQUAL PRICES (2002)

Source: MORI (2002) "Renewable Energy Wins Support From British Public"[288]

5.3 Energy costs and learning curves

A more positive externality arises from learning effects—the progressive reduction in costs arising from gaining experience in production. However, these effects are relatively limited in the case of nuclear power. While learning effects are typically in the order of 10-30% for each doubling of cumulative production, and 5-25% for the energy sector as a whole the figure for nuclear power is only 5.8%.[289]

There are a number of reasons for this:

— Nuclear power stations are large, one-off projects, which need to be individually designed according to local conditions. This limits the scope for learning from one case to another, even where the same technology is used.

— The large scale of nuclear power stations means that relatively few units are built; and the scope for standardisation of components is more limited than in most other productive sectors (including energy sub-sectors). The resulting short production runs for components limits the potential for economies of scale through increasing production.

— As the current cases of Iran and North Korea demonstrate, the potential for international sharing of learning is limited by security considerations, and particularly concerns about nuclear proliferation. Such concerns also limit the potential scope for use of nuclear power as an alternative to fossil fuel use globally.

— The gestation period of construction for a nuclear power station is very long—at best several years—and extended still further by an extensive planning and approval process, necessary for safety reasons. This means that, where lessons are learned which could reduce production costs, there is a considerable built-in delay before they can be put into practice.

http://www.antenna.nl/wise/index.html?http://www.antenna.nl/wise/568/5405.html (downloaded 18 Apr 2005).

www.bellona.no

IAEA (2003) "Guidance for the evaluation of innovative nuclear reactors and fuel cycles: Report of Phase 1A of the International Project on Innovative Nuclear Reactors and Fuel Cycles (INPRO) " IAEA-TECDOC-1362, June. http://www-pub.iaea.org/MTCD/publications/PDF/te_1362_web.pdf

— Learning is further delayed by the need for rigorous safety assessments of any significant changes in technology or design.

This is a critical issue. The diversification away from fossil fuels is, by nature, a very long-term process. The implications of current decisions for the future costs of non-carbon production are therefore at least as important as the effects on current energy costs. The relevant consideration, therefore, is not limited to the immediate effect on energy prices, but the long-term effect into the indefinite future of producing energy from alternative non-carbon means.

By contrast, learning effects for renewable technologies have been found to be much higher—around 18-20% for wind and PV. This reflects the more conventional nature of the production process, at least for wind and solar power, which is based on the production of a much larger number of more standardised units, with considerable scope both for learning and for economies of scale.

However, these headline figures seriously understate the scale of the differences they imply. In the case of renewable energy sources, if cost falls by 18-20% for every doubling of cumulative production, it will take an increase in cumulative production by a factor of around 10 for costs to be halved. In the case of nuclear energy, with a learning effect of 5.8%, costs would be halved only when cumulative production had been increased by a factor more than 3,000. To underline this crucial point, it means that nuclear power is 300 times less efficient at lowering its costs compared to renewables.

A further issue arising in comparing nuclear power with renewable technologies, and particularly micro-renewables, is the relative maturity of these sectors. Empirical work on learning effects shows that cost reduction is proportional to the change in cumulative production. Since nuclear power has been operating on a substantial scale for half a century, new production increases cumulative production by a relatively small amount. Thus the 5.8% learning effect is applied to a relatively small number, limiting cost reduction still further.

Most renewable technologies (except hydro), have thus far been much smaller in scale—and microrenewables still more so. As well as having much greater potential learning effects, increases in their production are therefore substantially larger relative to cumulative past production, so that these higher ratios are also applied to substantially larger numbers. The result is a much greater benefit in terms of reducing the cost of future non-carbon energy production.

Thus there are two distinct factors, each of which makes this consideration much more positive for microrenewables than for nuclear: first, the nuclear learning curve is shallower than that for microrenewables; and secondly that nuclear is further along the curve, which becomes progressively shallower as production increases (see Figure 2).

In other words, not only would halving nuclear prices require an increase in cumulative production 300 times as great as that for wind or PV, but the much greater production to date means that it would take many times longer to increase cumulative production by a given factor for nuclear than for renewables.

Even further, increasing the production of microrenewable capacity by a factor of 10 is more than plausible; it is probable. Increasing nuclear capacity by a factor 3,000, regardless of strictly limited supplies of uranium, is highly improbable and more likely impossible.

Figure 2

LEARNING CURVE AND COST REDUCTIONS FOR NUCLEAR AND RENEWABLE ENERGY

First it should be noted that the starting point for learning-curve effects, according to our calculations is that the real cost of any new nuclear generation will be much higher than the industry-quoted figures. In Figure 4 the curve marked N represents the cost of producing electricity from nuclear power at a given level of cumulative production, and R is the corresponding curve for renewables. R* and N* show the current combination of cumulative production and costs in the renewable and nuclear industries respectively. It will be noted both that the N curve slopes down more slowly than the R curve (reflecting the smaller learning effect), and that N* is further along the curve than R*, so that the slope of the curve is still shallower. The result is that if production of renewables in a given year is Q, PR reduces the cost of production substantially; but the same production from the nuclear sector will reduce cost by a much smaller amount, PN.

Even though our figures show that renewables already generally represent better value than nuclear on a range of criteria, there is a still further powerful argument for much greater public investment into research and development with regard to renewables and microgeneration. According to analyst Robert Williams, "When new technologies are introduced into markets, their costs tend to be higher than the costs of the technologies they would displace. Early investments are needed to `buy down' the costs of new technologies along their experience, or learning, curves to levels at which the technologies can be widely competitive. In principle, a firm introducing a new technology should consider experience effects when deciding how much to produce and consequently to `forward-price': that is, it should initially sell at a loss to gain market share and thereby maximize profit over the entire production period. In the real world, however, the benefits of a firm's production experience spill over to its competitors, so that the producing firm will forward-price less than the optimal amount from a societal perspective. That phenomenon provides a powerful rationale for public-sector support of technology cost buy-downs." [290]

Figure 3

PROJECTED ELECTRICITY GENERATION COST, 2020

Source: PIU Energy Review (2002); DTI/ofgem (2004) Distributed Generation Coordinating Group, PO2a Working Paper Three: The Economics Value of Micro Generation, Technical Steering Group (except nef/nuclear—nef estimate)

Even based on the PIU's estimate of 3-4p/kWh for nuclear power, offshore wind (2-3p/kWh) is at least as cheap, and could cost as little as half as much; and onshore wind (1.5-2.5p/kWh) is between 17% and 60% cheaper. Large CHP is also at least 33% cheaper. The cost range for nuclear energy overlaps with those for energy crops and mCHP, which may be slightly cheaper, and with wave power which may be somewhat more expensive. However, the corrected estimates for nuclear provided above suggest that it will almost certainly be substantially more expensive than any form of renewable energy with the exception of photovoltaic (which remains substantially more expensive in the UK) and possibly wave power.

Also included in Figure 3 are estimates for the cost of electricity from microrenewable energy sources. The maximum cost is that estimated by the Distributed Generation Coordinating Group Technical Steering Group in November 2004; the minimum assumes cost reductions of up to 50% by 2020 as a result of learning effects. These figures suggest that micro-hydro is likely to be one of the lowest cost sources of electricity in 2020. While the cost reduction assumption may be over-optimistic in this case, it remains highly competitive even at the maximum level (ie with no cost reduction).

The estimate cost range for micro-wind power is broadly comparable with energy crops and the PIU estimates for nuclear power (though well below our estimates for the latter). MicroPV, however, is still more expensive than larger scale PV.

Figure 4

COST OF CARBON SAVING, 2020

Source: PIU Energy Review (2002), Table 6.1 (except nef/nuclear—nef estimate; microwind/hydro—nef estimates based on P02a Working Paper Three: The Economic Value of Micro Generation, Technical Steering Group, DTI/ofgem (2004) Distributed Generation Co-ordinating Group)

Figure 4 shows the corresponding figures for the cost of carbon savings, in pounds per tonne (excluding PV). This suggests that mCHP saves money as well as carbon, as may large-scale CHP, onshore wind and micro-hydro. Offshore wind and micro-wind power are in the middle of the range. Nuclear power is near the upper end of the scale even on the PIU figures, equal with energy crops at £70-200/tC, and cheaper only than wave power. On our revised estimate for nuclear, the cost rises to a range broadly corresponding with that of wave power (£110-430/tC), though still cheaper than PV (£520-£1,250/tC), and considerably cheaper than micro-PV (£1,450-£3,200/tC).

Figure 5 illustrates the effects of correcting the various sources of under-estimation of the maximum cost of nuclear power. Starting from the BNFL/BE estimate of 3p/kWh, averaging the costs of the first eight reactors adds 1.3p/kWh, as does substituting the IEA range for OECD construction costs, while "first-of-a-kind" (FOAK) costs add about 0.1p/kWh, taking the figure to 5.7p/kWh. Allowing for delays and cost-overruns could add a further 1.8p/kWh, and lowering the assumed performance to current levels 0.8p/kWh, taking the total to 8.3p/kWh—177% above the BNFL/BE figure.

Table 2

JOB CREATION IN THE ENERGY PRODUCTION INDUSTRIES

Sector	Jobs—year/TWh (fuel production and power generation)
Petroleum	260
Offshore oil	265
Natural gas	250
Coal	370
Nuclear	75
Wood energy	733 - 1,067
Hydro	250
Mini hydro	120
Wind	918 - 2,400
Bioenergy (ie: sugarcane)	3,711 - 5,392

Source: Goldemberg (2004) [291]

The nuclear industry is highly capital intensive and one of the least labour intensive methods of energy generation. Due to technological changes, any new cycle of nuclear power stations would employ fewer people than existing plants. Renewable energy, on the other hand, has rich potential for job creation.

The European Commission estimated that the predicted growth in the renewable energy sector would create nearly one million (900,000) new jobs by 2020, with at least 15,000 being created in the UK. [292]

30 September 2005

230 Renew, Issue 155, NATTA, The Network for Alternative Technology and Technology Assessment. Back

231 Ibid. Back

232 "Close nuclear leak plant for good says Sellafield", The Observer, 15 May 2005. Back

233 DTI (2003) Nuclear power generation and the UK industry, Back

234 Marquand, R (2004) "North Korea's nukes: advanced, but hidden", The Christian Science Monitor, 21 December 2004. Back

235 "British Energy planning new nuclear programme", The Business, 27-28 March 2005. Back

236 Full report at: http://www.piu.gov.uk Back

237 http://www.dti.gov.uk/energy/whitepaper/index.shtml Back

238 DTI (2003) Nuclear power generation and the UK industry, Back

239 Evans A (2003) The Generation Gap, ippr: London. Back

240 "BNFL launches nuclear clean-up business", Bellona, 6 May 2004, Back