Memorandum by British Nuclear Fuels plc
BNFL welcomes the opportunity to comment on
these important issues as they are increasingly a focus for public
and political attention.
We will be submitting a full response to the
Energy Review at the end of March, including a supporting paper
looking specifically at nuclear energy issues, and we will copy
both the submission and the supporting paper to the Committee
at that time.
In this response we focus on the three specific
questions raised by the Committee as the topics for its initial
The "particular considerations that should
apply to nuclear new build" (Question 3 of the Review).
The "implications of increasing dependence
on gas imports" (Question 2 of the Review).
The capacity of microgeneration to meet a substantial
proportion of UK electricity demand in the medium- and long-term.
Our responses to these questions are presented
in the remainder of this document.
The "particular considerations that should
apply to nuclear new build" (Question 3 of the Review)
Three issues need Government consideration and
action if new nuclear build is to have a role in helping to meet
UK energy policy objectives.
Many consents are required before construction
and operations of a nuclear power plant can start. Predictable
timescales for decision-making at every stage through to operation
are needed, coupled with public transparency at each of those
stages to give confidence that there has been a robust examination
of all relevant issues and that appropriate measures have been
put in place.
Granting of key approvals before plant order,
with a well-defined scope and timetable for further approvals
during construction and commissioning, is vital to avoid scope
changes that result in cost escalations and delays to operation.
Therefore an integrated strategy which will involve
all regulators, stakeholders and government departments should
be developed with the object of achieving efficient and timely
delivery of consents and decisions.
This approach builds on work already underway
and will ensure the UK is better informed about future reactors
and their UK implementation. Design review, strategic environmental
assessment and any work on nuclear justification can then start
in advance of, or concurrent with, investors coming forward.
Identification and delivery of a long-term strategy
for the management of radioactive waste is also important. CoRWM
will make recommendations to Government in July 2006, on the option(s)
for managing UK radioactive wastes that protect people and the
There is extensive UK and international experience
of managing reactor wastes and decommissioning nuclear facilities.
In other countries long-term solutions are already being implemented
safely and effectively.
Modern reactor design means that waste volumes
are much less than those from earlier designs. A new fleet of
nuclear stations would add less than 10% to the volume of nuclear
waste that the UK is already committed to managing.
Various approaches for funding waste management
and decommissioning are well established internationally, and
private sector organisations have substantial experience of provisioning
for long term liabilities. Although such organisations will be
prepared to accept financial responsibility for decommissioning
and their fair share of waste management costs, they will not
be able to accept open-ended liabilities relating to waste and
fuel disposal. Government are the ultimate legatee of nuclear
wastes and must be prepared to accept title to packaged waste
within a decade or two of a plants closure. Private organisations
will also need to understand, and agree with Government, what
their repository costs are, prior to making investment decisions.
CoRWM have been looking ahead to implementation,
and it is vital that this momentum is maintained by Government
during this next phase. To this end we encourage Government to
respond to CoRWM's recommendations via the Energy Review.
CoRWM's considerations should draw upon the overseas
experience of implementation in countries such as Sweden and Finland,
but we believe that all important aspects have been identified
One or more bodies to oversee and
deliver the recommended options.
An implementation strategy with a
statutory basis with clear milestones, monitoring and reporting
arrangements and legal instruments to ensure continuity through
A site selection process to identify
and evaluate the range of relevant scientific, technical, legal,
social, economic, environmental and ethical factors that may influence
Transparent approaches for volunteerism,
veto and incentives.
A modified planning process which
ensures that national issues are considered nationally, followed
by local consideration of local issues.
Arrangements for continuing involvement
of the public and stakeholders.
We do not have any specific suggestions for Government
in these implementation areas. Whichever approach is adopted the
key issue is that Government should take decisions quicklya
timely, fit-for-purpose solution is needed which commands public
support and will work in practice.
Government action is required in the UK electricity
market. Currently low carbon electricity is encouraged by a series
of short-term measures, most notably the EU emissions trading
scheme. Even the next phase of the ETS however, only runs until
2012, and there is no clarity over allowance levels for this phase,
nor over whatif anythingwill be the mechanism for
incentivising reductions in emissions in the middle of the next
decade and beyond.
This timescale is the earliest by which the first
of a potential new series of nuclear plants might come into operation.
It also has the potential to be a crucial period for the construction
of other new low-carbon capacity.
Informed private sector investment decisions
on such schemes can only be made if Government provides increased
clarity over the provisions for supporting low-carbon generation
in the decades beyond 2012. In doing so, it is important that
support associated with existing low-carbon projects (such as
wind farms already operational or in the development stage) is
retained, to ensure their continued viability.
Long-term clarity over the price at which consumers
can buy their electricityand over the price at which a
utility can sell the electricity that it generatesis beneficial
for both. Price certainty is particularly important for enabling
investment in technologies that do not rely on fossil fuels, as
their operating costs are not correlated with revenues in a market
where fossil fuels set the price.
There are also other specific considerations
which feature in the nuclear debatesuch as safety and security,
public opinion, uranium resources, insurance, and so on. None
of these requires specific Government action, as none presents
an obstacle to a new programme of UK nuclear generation. A more
detailed supporting document will be provided to the Energy Review
team at the end of March, alongside BNFL's submission to that
review, dealing in some depth with these and other issues relevant
to nuclear energy. We will also provide a copy of that supporting
paper to the Trade and Industry Committee at that time.
The "implications of increasing dependence
on gas imports" (Question 2 of the Review)
We believe there are two main concerns over
supply securityincreased dependence on gas imports and
the projected growth of renewables.
Given the UK's steadily increasing demand for
gas, the fact that imports could account for 40% of all UK supplies
by 2010, and 90% by 2020
is a clear cause for concern. The fact that we are moving so rapidly
towards this position, having been a net gas exporter as recently
as 2003, heightens this concern.
Increasing reliance on gas imports brings many
risks. These can be political (suppliers may refuse to supply),
physical (the pipelines, LNG ships or import terminals may not
be available or may be damaged) or commercial (the price may be
so high as to make the UK uncompetitive).
We note the recent events in Ukraine, Georgia
well as the disruption of supplies to Belarus in February 2004and
as a result conclude that reliance on pipeline supplies for substantial
portions of our needs presents a significant and growing risk.
The alternative to pipeline gasLNGpresents
its own risks. The market is growing dramatically, increasing
the risks of non-delivery to UK terminals (a situation already
Reliance on import terminal infrastructure is high, which also
Greenhouse gas emissions from gas-fired generation
will also rise as the UK becomes more reliant on imported gas.
Transporting gas over long distances by pipeline means that minor
leaks are unavoidable, and the longer the pipeline, the greater
the quantity of gas that is likely to leak. Natural gas has a
much higher global warming potential than CO2,
so even leakage of a small proportion of the gas can increase
the overall greenhouse gas impact significantly. Similarly, both
liquefaction and re-gasification of imported LNG are energy-intensive
operations that, even if leaks can be avoided, result in additional
carbon emissions. It has been reported
that these considerations can make the lifecycle greenhouse gas
emissions associated with using imported gas from Qatar or Russia
50% higher than those from simply burning gas from the North Sea.
We encourage the development of a co-ordinated
approach across the EU to dealing with gas importsin particular
We support the further development of renewable
technology, which increases the diversity of the electricity generation
portfolio without the direct emission of CO2. Yet, whilst the
output variability associated with the UK's current renewable
capacity is readily accommodated, dedicated backup capacity will
be needed if penetration is to reach 15% or more as targeted.
A recent Oxera study
highlighted that for one quarter of the hours in a typical year,
the national power demand is over 70% of the overall maximum demand,
whilst simultaneously power production from a geographically dispersed
set of wind turbines is less than 40% of the rated output.
Recent practical experience of the E.ON Netz
(the largest in Germany with a combined capacity of over 7,000MW)
shows that average output during 2004 was only around 20% of capacity,
and the baseload capacity avoided by the output from this fleet
was only 8% of its rated capacity. Although the UK has much better
wind resources than Germany, this experience raises questions
over the impact of renewables growth on supply security.
We welcome the decision to ask HSE to review
safety issues of all leading power generation technologies, including
LNG and gas storage, carbon capture and storage, renewables and
recognising that there are new concerns associated with the planned
growth in LNG, particularly in relation to transport and storage.
The HSE study should ensure that an objective and consistent approach
is brought to this important area.
We believe Government should take the following
Clarify the accountabilities for
ensuring security of energy supplies, as well as the interfaces
between bodies such as DTI and Ofgem under normal and abnormal
situations. We note that historically consideration of such issues
has been unnecessary, but the erosion of capacity margin since
privatisation, coupled with increased reliance on fuel imports,
has increased the potential for supply interruption.
Ensure that any market mechanisms
that are developed to encourage increased security and/or diversity,
do not adversely impacting on investment decisions (some of them
long term) already made by utilities.
Consider how to stabilise the investment
cycle, avoiding a "boom and bust" approach to investment,
which would see a lot of the same technology built quickly, followed
by long periods with very little investment.
The capacity of microgeneration to meet a substantial
proportion of UK electricity demand in the medium- and long-term
Microgeneration could make a substantial contribution
to meeting overall UK demand for electricity (and for other forms
of energy) in the coming decades.
We support measures to increase the proportion
of cost-effective microgeneration which contributes to power production
in the UK. We recognise that it reduces the demand placed on the
centralised grid and also that many microgeneration technologies
are renewable, and so play a part in helping to reduce UK carbon
emissions. However, there are very considerable practical barriers
to be overcome if microgeneration is to achieve its full potential.
For example it would require marked behavioural change. Large
numbers of householders and businesses would need to be persuaded
to invest in the technology, and persuading so many separate decision
makers will be a major challenge, for several reasons.
The cost/benefit argument is unlikely to be persuasive
in itself, with long payback periods being the norm.
In Annex A of the DTI's consultation paper on
data are presented to illustrate the pay back time required to
recover the cost of investing in the technology, based on the
grid electricity costs avoided. These calculations of payback
time indicate that with many forms of microgeneration current
systems will not repay the investment costs for very many years.
Indeed the payback times are likely to exceed both the owner's
stay in the property and the lifetime of the equipment. Both solar
PV and wind turbines have operating lifetimes of around 20 years.,
payback periods will be lower for equipment installed during the
building of the property, as this is more cost-effective, but
the pace with which microgeneration can make an impact on this
basis is then reduced to the rate at which we construct new buildings.
Substantial change, therefore, will still take some decades.
|Solar Thermal Hot|
Water (in a property
heated by electricity)
|Solar Thermal Hot|
Water (in a property
heated by gas)
Even these pay back calculations have been made on the assumption
that a net metering arrangement will be in place, where households
will receive a similar credit for the electricity they export
as the price of electricity they buy from the gridassumed
to be around 6-7p/kWh (as noted in footnote 34, page 43 of the
consultation document). If a lower price were to be received for
electricity supplied back to the grid, then payback periods would
be even longer. To achieve the full potential of microgeneration
in this way, the technology to allow export of power back to the
grid (during times of high output from the microgeneration equipment)
needs to be developed and deployed in parallel with the equipment
itself. New metering equipment and pricing policies will also
need to be developed, to allow for the fact that homes and businesses
with such equipment will be both customers and suppliers, and
to ensure they pay fairly for their use of the public networks.
In summary, it is most unlikely that microgeneration will
be attractive to potential investors based on the current economics.
Substantial support will be necessary if such technologies are
to break into the market on a significant scale, and therefore
begin to deliver economies of scale from mass production. The
extent to which this hurdle can be overcome remains to be demonstrated.
Micro-wind is seriously limited for most dwellings by the
effect of screening by nearby buildings, trees, higher ground,
etc. For such properties, the full benefit would only be achieved
by installing the turbine on a tall pole, which would add significantly
to the cost, potential structural impact, and visual intrusion,
as well as bringing new issues of safety and maintenance.
Solar PV (photovoltaic) technology is limited to those buildings
which have a reasonably south-facing roof or wall which is not
Micro-scale hydro is restricted to very few locations.
Domestic CHP is likely to have a low load factor other than
in mid-winter. Operating such systems in "electricity only"
mode, although possible, would be very inefficient compared with
centralised generation. Paradoxically, the more that homeowners
insulate their homes and hot water tanks, (which is the right
and sensible thing to do) the lower the demand placed on their
boiler, and so the lower the efficiency of a micro-CHP system.
Furthermore, a recent Carbon Trust study into domestic CHP
has shown that there is no evidence of any saving in emissions,
and presumably therefore, minimalif anyenergy saving,
from CHP on this scale.
For householders, the technology may not look attractive as
an addition to the property, andat least while the technologies
are in their infancyhouseholders may fear that such a feature
would be an obstacle to a future sale.
Those considering investing may also fear that their obligations
in respect of care and maintenance will be non-trivial (both in
financial terms and in terms of the potential effort involved).
There is no immediate "functional" or "quality
of life" benefit. This is in contrast tofor instancethe
investment in a satellite TV dish (which also presents a visual
impact on the property, as some forms of microgeneration technology
would) or investment in double glazing or a property extension.
As the payback period of the investment is decades long, the
investor is likely to notice the outlay, but not really to notice
the annual benefit.
It is difficult to see a clear way in which a shift to achieve
such adoption can be accomplished, but it is likely to require
both a major campaign of public awareness (aimed at making microgeneration
a "high status" attribute of a home or property) coupled
with some substantial form of financial support to the investors
in such technology (acting as an incentive to balance the cost/benefit
issues noted above).
On present evidence, we support the conclusion reached in
the recent report from the Sustainable Development Commission,
"Microgeneration seems unlikely to become a major contributor
to UK energy or electricity supply for many years, even in the
most favourable circumstances, and its capacity to deliver significant
carbon savings in average households is not yet proven."
In addition to the barriers to deployment, there are implications
for the grid of a notable growth in microgeneration.
The impact of microgeneration on supply security in the rest
of the electricity supply sector may not always be helpful. The
widespread adoption of microgeneration would tend to reduce the
load factors of large generators, which in turn would tend to
encourage marginal plant to close and would discourage investment
in new capacity. It would also reduce the number of large generators
available to the grid system operator for balancing the variations
of generation and demand. If the combined output from all the
country's microgeneration were well correlated with demand, and
did not vary randomly, this would not be a major concern. However
some microgeneration is poorly or inversely correlated (for instance
PV produces most power during the summer, but much less in winter
mornings and evenings, when demand is highest). This will tend
to result in reduced plant margins at peak periods, and so may
reduce overall security of supply. In addition, having a greater
surplus of power capacity at times of low demand means that the
system may not represent the most cost-effective overall scenario.
The impact on losses from the transmission and distribution
networks also needs to be considered. Many observers have claimed
that large power stations lead to huge losses and inefficiencies
in transmitting the power over long distances to users, and that
small/distributed generation therefore makes a major saving. In
factalthough this sounds plausiblethe opposite is
in fact the case.
Figures from the Digest of UK Energy Statistics
show power losses equal to 7.5% of energy generated, of which
around 1.5% is lost in the high voltage transmission system, 5.5%
is lost in the local distribution systems, and the remaining 0.5%
is attributable to theft, fraud and accountancy errors. This illustrates
the fact that transmitting high power long distances at high voltage
is significantly more efficient than distributing low power short
distances at low voltage. Or, to put it another way, in transmitting
power from a large distant power station to your home, around
half the losses occur in the last couple of miles near your front
door. The installation of a lot of distributed or micro generation
which reduces power flows on the high voltage transmission system,
but increases flows at low voltage, would be unlikely to
cause any significant reduction in the losses, and could well
see them increase.
This conclusion is supported by a study by the University
of Cambridge, which
showed that distributed generation is environmentally and economically
inferior to centralised generation. In fact, in countries such
as France where the centralised generation is substantially carbon-free,
it would be better to move towards increased centralisation.
In this situation it is environmentally far better to stop heating
properties using gas-fired central heating and instead to start
using electrically-powered heat pumps.
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"Rift threatens Belarus ties with Russia after gas supply
is cut during ¸20C winter"; Independent; 20
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times more damaging than CO2.] Back
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may be Dangerous say Environmental Campaigners"; Friends
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"The Non-Market Value of Generation Technologies";
Oxera; June 2003. Back
"E.ON Netz Wind Report 2005"; E.ON Netz; 2005. Back
"Microgeneration Strategy and Low Carbon Buildings Programme";
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"The Carbon Trust's Small Scale CHP Field Trial Update";
The Carbon Trust; November 2005. Back
"The Role of Nuclear Power in a Low Carbon Economy-Paper
4-The Economics of Nuclear Power"; Sustainable Development
Commission; March 2006. Back
Digest of UK Energy Statistics, DUKES 2005; Paragraphs
5.12 and 5.65; DTI; 2005. Back
"Distributed Generation versus Centralised Supply: A Social
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