Memorandum by the Nuclear Industry Association
The Nuclear Industry Association (NIA) is the
trade association and representative voice of Britain's civil
nuclear industry. It represents over 120 companies including the
operators of the nuclear power stations, those engaged in decommissioning,
waste management, nuclear liabilities management and all aspects
of the nuclear fuel cycle, nuclear equipment suppliers, engineering
and construction firms, nuclear research organisations, and legal,
financial and consultancy companies. Among NIA's members are the
principal nuclear power station operatorsas well as companies
engaged as contractors and manufacturers in the forefront of nuclear
In our submission to the Government's Energy
White Paper consultation in September 2002, the Nuclear Industry
Association (NIA) stated that:
"Britain's energy market is at a cross roads
where the path taken will affect the entire economy over the ensuing
decades. Two key factors will influence the direction of energy
policythe environment, in particular global warming, and
the probability that the UK will soon become a major energy importer.
Set against this background is the need to replace a large tranche
of existing power stations as many older nuclear and coal stations
reach the end of their economic lives... The long lead times of
most energy projects and systems means that it is vital that the
White Paper establishes a clear, predictable framework which allows
energy industries and investors to plan ahead and so ensure that
the nation's energy needs are met sustainably, securely and efficiently."
Over three years later, those statements are
still relevant and indeed have attained even greater pertinence.
In the intervening three years:
Carbon emissions have risen due to
increased coal use while the impacts of climate change have become
more apparent and the need for effective action more urgent.
The country has become a net importer
of gas sooner than expected, and could be reliant on gas imports
for up to 70% of its electricity generation by 2020. Recent geopolitical
developments, particularly in Russia and the Middle East, have
sharply increased the price of oil and gas and highlighted the
potential risks to the security and cost of the UK's future energy
Investment in renewable sources of
energy, even though boosted by the availability of Renewables
Obligation Certificates (ROCs), has been slow and renewables only
account for 4% of the generating mix, short of achieving the Government's
target of 10% by 2010.
Volatility in the wholesale electricity
market has brought investment in new conventional capacity to
a virtual standstill and the country still faces a "generation
gap" in the next 10-15 years as the existing coal and nuclear
power stations are due for retirement. Around 30% of Britain's
electricity generating plant will need to be replaced by 2020.
Against this background, there remains a compelling
need to create the appropriate framework in which the market can
operate to deliver the Government's objectives for secure, clean
affordable energy for the long-term.
NIA welcomes the Government's decision to review
its energy policy and we are pleased to submit this response to
the Committee's inquiry. In this response we will address the
question relating to the issues of new nuclear build. We will
also provide additional information about the capability of the
UK nuclear supply chain to support potential new nuclear build
derived from NIA's report, "The UK capability to deliver
a new nuclear build programme" (March 2006).
(QUESTION 3 OF
This response seeks to highlight the benefits
of nuclear energy in terms of its contribution to diversity and
security of energy supply, and to the achievement of environmental
objectives relating to the mitigation of climate change. There
is a compelling case for the UK to put itself on route to a secure,
low carbon, affordable energy mix for the long term. Nuclear has
a major role to play in that mix, but it can only do so if steps
are taken now towards replacing baseload capacity coming to the
end of its life by and beyond 2015. In response to this question
we will concentrate on what needs to be done to retain the nuclear
option so that it can continue to provide those tangible benefits.
Modern nuclear reactors take around five years
to construct. However, it would take perhaps an additional five
years to get to the point where the industry could start construction.
Thorough scrutiny of prospective reactor designs and sites by
the safety, environmental and security regulators is required
before investment decisions can be made. A suitable regulatory
framework must be developed in order to allow this to happen in
a timely manner, and to avoid the lengthy delays that occurred,
for example, in the planning and approvals processes for Sizewell
B which took 14 years in total from initial application to the
generation of electricity.
The industry's best estimate is that it would
take about a decade to bring the first of a new generation of
nuclear stations on line.
The private sector is fully capable of taking
forward replacement nuclear build if there is an appropriate arrangement
for sharing risks and returns. However, these do not exist in
the current energy market. A number of actions are therefore required
from Government if nuclear is to compete for investment with other
forms of generation.
These measures do not involve financial support
and should also benefit other large-scale low carbon technologies.
Their adoption by Government would clearly not imply any commitment
to go ahead with a nuclear new build programme. Indeed it is not
for Government to make such a commitment.
Clear Government statement that nuclear is an
important strategic component of the UK's energy policy
No investment in new nuclear (particularly funding
for preconstruction activities) will be forthcoming unless Government
first confirms that nuclear is a politically acceptable option.
Government needs to make clear it sees nuclear as part of the
generation mix in the UK's long-term energy policy, and is prepared
to take the necessary steps to encourage investment in new build.
Government also needs to provide direction on the scope of any
potential programme and the timescales required.
Review of the consents and approvals processes
to ensure their efficient, timely and predictable delivery of
all necessary regulatory clearances
Delivery of a new nuclear station to budget
is crucially dependent on achieving the necessary timescales.
Under the current system the time taken in obtaining planning
and regulatory approval has had a significant impact on the costs
of new capital projects. Government therefore needs to work with
industry and regulators to consider what improvements could be
made to provide greater clarity on the scope and timing of the
regulatory process whilst maintaining its necessary integrity
and robustness. The following options could be considered:
Integrating the delivery of consents
and approvals. A regulatory process roadmap could set in place
the detailed logic of activities to secure all consents and approvals.
Two important areas to be covered are the planning and public
inquiry process and nuclear safety licensing. Each organisation
involved needs to have clear accountability defined for effective
and timely decision making in respect of regulatory consents and
approvals and appropriate interfaces need to be set up to achieve
Initiating early regulatory design
review to meet the ten-year programme and to preserve essential
skills in the regulators.
Agreeing a process to pre-license
reactor technology to facilitate effective delivery of a standard
internationally proven design. This should provide assured "once
only" review of the plant design and ensure that there is
low residual regulatory risk to programme and capital costs at
the time of plant order when the major funding commitment is made.
Supporting the timely recruitment
and development of regulatory resources to enable a streamlined
process to be followed. The appropriate regulators (NII, EA, SEPA
and OCNS) should be encouraged to plan for sufficient resources
to be available in time to cope with the substantial workload.
Clear policy framework and strategic approach
for long term radioactive waste management
The nuclear industry currently suffers from
the absence of clear Government policy on waste management. A
common objection to replacement nuclear capacity is the lack of
an agreed route for the ultimate disposal of waste, and this affects
both public and investor confidence. Developments elsewhere in
the worldin, Finland Sweden, and the USAindicate
that publicly acceptable technical solutions are available to
deal with the problem. In the UK it is essential that a long-term
policy on waste management is established to provide confidence
to investors about costs, and to the public that an acceptable
solution is available. The Committee on Radioactive Waste Management's
(CoRWM) recommendations on management options, due to be delivered
to government in July 2006, should contribute substantially towards
providing that degree of clarity and assurance, provided that
government acts quickly to respond to the committee's findings.
It must be emphasised that the bulk of the UK's
inventory of intermediate and high level waste is part of a "historical
legacy" and is not an accurate indicator of future trends
of material from civil nuclear electricity generation. Replacement
nuclear stations of world standard would generate significantly
lower quantities of waste per unit of electricity produced. For
example, replacing the current nuclear fleet with light water
reactors (LWRs) would add only about one tenth of existing waste
volumes for lifetime operation. The establishment of the Nuclear
Decommissioning Authority to deal with Britain's historic legacy
of nuclear liabilities is a welcome sign of movement on this issue.
While the nuclear industry is able to manage
all the technical aspects of spent fuel there is currently insufficient
visibility on the long-term arrangement for dealing with the spent
fuel from a new generation of nuclear stations. Government needs
to agree and implement a clear policy framework and strategic
approach for long-term radioactive waste management.
Financing waste management
The UK could adapt financial models that have
been successfully implemented in other countries (such as the
USA, Sweden and Finland). Under this arrangement Government could
set a waste disposal "levy" or fee on the basis of nuclear
power generated, and charge for this at the time of generation.
To determine this fee, the government would make assumptions about
the waste disposal cost, when the cost would be incurred, and
the return realised on levy monies between the date of receipt
and the date of incurring the cost.
Future costs and fund performance would be reviewed
regularly to ensure that the levy remained adequate, but if this
were set in a prudent way at the outset then any changes would
be marginal. The new nuclear generators would therefore be paying
a "fair rate" for their waste management but would have
a large measure of up-front certainty. Third party responsibility
for packaged waste and fuel would be assumed at an agreed time
after reactor closures and would allow the third party full access
to the fund at that point in time.
By acting decisively to implement the sorts
of measures recommended here the Government could demonstrate
their commitment to tackling some of the barriers to nuclear energy's
future contribution to the transition towards a sustainable, low-carbon
New reactor types
In the nearly thirty years since the UK last
ordered a new nuclear reactor technology has advanced and the
reactor types currently available have many advantages over those
built previously. These include:
New, licensable designs, such as
the Westinghouse AP 1000 and Areva's European Pressurised Water
Reactor (EPR) are available now for introduction into the UK given
the right conditions for investment.
Modular design features, coupled
with the benefits of standardization and series build of these
reactors, would deliver significant construction and generating
cost reductions and improved competitiveness.
Passive safety systems based on proven
technology enhance the safety, and reduce the complexity and cost
of the new generation of reactors.
New generation reactors produce less
waste. Replacement of the UK's entire existing nuclear capacity
with AP 1000 units, for example, would add only 10% to the country's
waste inventory over a 40 year station lifetime.
Nuclear fuel costs represent only
a small proportion of overall costs, making nuclear less vulnerable
to fluctuations in fuel prices than fossil fuelled alternatives.
New nuclear stations could be built
adjacent to existing sites with secure and established grid connections,
reusing existing infrastructure and providing continuity of employment
for a skilled workforce.
For these reasons there is high confidence in
the cost estimates for the new generation of reactors available
to the UK.
The economics of new nuclear build
Electricity prices have risen significantly
in the recent past, largely driven by the global rise in gas prices.
It has been shown that the overall generating costs of nuclear
energy can be competitive with fossil-fired generation if there
are no artificial barriers, such as those currently posed by UK-specific
planning risks. Nuclear energy is consistently shown to be much
cheaper than the leading renewable alternatives.
OECD analysis of power generating costs for different
Projected costs of nuclear energy from different
|Rates of return||11.5%||8% & 15%
|Capital cost||$2,000/ kW|
| $1,000-$2,000/ kW (£610-1,210/ kW)
|Economic life||15 yrs||20 yrs
||15 yrs||25 & 40 yrs
||35-50 yrs||40 yrs|| 40 yrs
|Construction period 5 yrs ||Not identified
||5-7 yrs||5 yrs||5 yrs
||5 yrs|| 4-6 yrs
Nuclear energy is relatively insensitive to changes in the
price of the raw uranium fuel, and provides an element of stable
cost generation in the generating portfolio, which is helpful
in keeping overall prices to consumers low. This contrasts with
gas-fired generation, where the cost of raw gas can represent
60% or more of the total generating cost and as we have seen is
subject to volatility.
Does the UK have the capability to deliver a new build programme?
If the energy review were to conclude that new nuclear build
is desirable, the UK nuclear supply chain could deliver. A recent
study by the NIA has shown that companies operating in the UK
nuclear sector have the capability to undertake up to 80% of new
nuclear power station projects.
The specific conclusions of the NIA study are:
Much of the engineering and construction work
on a new nuclear power plant is not directly nuclear related,
but is similar to work being carried out by many companies on
major projects throughout the UK and worldwide.
Advances in programme and project management,
construction techniques, and innovative financing arrangements
have substantially improved the delivery of major projects in
the UK, including nuclear projects. These improvements are characterised
by significant attention to the integration and streamlining of
The UK nuclear supply chain could currently supply
over 70% of a new nuclear plant, and with investment in resources
and facilities, this proportion would be increased to over 80%.
Contractors would make those investments in facilities, and recruiting
and training staff if they were confident that a programme of
several stations would proceed without undue delays.
These additional resources could be put in place
within the period for project development, planning and licensing
(around five years). Even with additional investment in the UK
supply chain there would still be some specialised components
that will require to be imported, for example reactor pressure
The requirement for civil engineering resources
to build a new nuclear power station would represent only a small
proportion, around 2%-3%, of the national capability. Similarly,
mechanical and electrical resource requirements are only 4%-5%
of the national capacity. Competition for resources from other
major projects should not be a problem (for example, any new nuclear
build would occur predominantly after construction for the 2012
An assumed programme of five twin reactor power
stations constructed over a period of 15-20 years should generate
64,000 man-years of work; a further 22,000 man-years of work would
be generated in the community through indirect jobs in the support
An established home market and close associations
with international nuclear power station vendors would give UK
companies access to business opportunities in many countries around
the world where there is significant investment in new nuclear
(QUESTION 2 OF
Decisions taken now will affect the security of Britain's
energy supply for decades to come. Until recently, reliable electricity
supplies in this country could be taken for granted: the UK benefited
from a balanced and diverse electricity sector, and the rapid
shift towards gas powered generation plant in the 1990s was underpinned
by substantial domestic reserves of gas. However, as the UK becomes
a significant net gas importer our access to reliable and affordable
electricity could be severely compromised if we become over-dependent
on one fuel.
Dependency on gas imports
The consultation paper notes that imports could be meeting
up to 40% of total gas energy demand by 2010 and 90% by 2020.
Key sources of gas will in the short term include Norway (need
to check when these declinethe consultation paper suggests
could last for decades) [sic] and in the longer term Russia,
Africa and the Middle East. Surface pipelines will pass over very
long distances and through many countries en route to the UK,
raising concerns over the prospect of interruptions to the supply
of gas to the UK, highlighted by Russia's decision to cut off
supplies of gas to Ukraine in the New Year.
Diversity in sources of gas supply, including the expected
import of a substantial amount of liquefied natural gas (LNG),
and the construction of storage capacity, can help manage these
risks. However, in the case of LNG the UK will be competing with
other countries which are poised to become LNG importers. The
recent diversion of UK bound tankers to the US following Hurricane
Katrina shows that the market cannot be relied upon to ensure
security of supply.
More generally, diversity in gas supply cannot protect us
against longer-term price movements in the world gas market. Free
commodity markets alone will not assure stable prices. The huge
gas price increases this winter demonstrate the potential risks.
The electricity generation mix
Decisions taken now will have a major impact on our future
electricity supply. Our transition to a net gas importer comes
at a time when a great deal of generating capacity will be retiring
from the electricity grid and will need replacement. As the consultation
paper recognises much of our coal and nuclear generating capacity
faces closure over the next two decades. Coal's contribution to
our electricity requirements could shrink from 32% to around 15-20%
over the next 10-15 years, with nuclear's share in generation
falling from the current level of around 20% to just 7% by 2020
and even less shortly thereafter.
The UK will therefore need shortly to embark on an unprecedented
investment programme to replace up to 20 GW of generation capacity.
Since power stations generally have significant lifetimes the
fuel types selected for this new build will have a major impact
for many years, not only on the UK's security of supply but also
on our ability to meet current and future climate change targets.
The wrong decisions taken now could lead to high and volatile
electricity costs and conceivably to supply interruptions, causing
major damage to the economy over many decades.
Our existing energy framework will lead to further gas plant
Unless changes are made to energy policy and the current
regulatory environment the retiring coal and gas plant are likely
to be replaced predominantly by CCGT stations. This is because,
as Deloitte point out in their report, 2020 Vision: meeting
UK power generation objectives in 2020a strategic insight
(February 2006, p 21), "the private sector would build and
operate the most efficient plant available, irrespective of the
fuel supply, [or] environmental or market issues associated with
each available technology... This would imply further investment
dominated by CCGT as the technology of choice..."
Although there will also be some growth in renewables supported
by the Renewables Obligation, this will not fill the gap created
by the closure of coal and nuclear stations, and the broader impact
will be an even greater reliance on imported gas. From the environmental
perspective, since plant built now could still be operational
in 2050, the UK will also be locked into a high carbon economy
for several decades.
Renewables contribution is important but limited
Renewables produce indigenous and low-carbon electricity
and can help fill part of the gap. The Government is right to
encourage their development. However there are concerns over the
difficulties in accommodating intermittent renewables generation
in a reliable electricity supply system if the amount of renewables
exceeds the 15% target set for 2015. Because the bulk of renewables
over the next two decades will be from wind power the generation
provided will be intermittent, and any large-scale development
will require backup from fossil fired generation.
Looking to the future new coal (and gas) plant fitted with
carbon capture and storage (CCS) could make a contribution in
providing carbon free generation. However the technology is as
yet unproven and there are legal and other issues to be resolved.
Given its potential, efforts should continue to develop this technology
to the point where a decision can be taken on its viability. However
we are not currently at the position where a decision could be
taken to rely on CCS for meeting our future energy needs.
Nuclear is a secure and competitive energy source
Currently nuclear energy is the only proven, reliable, large-scale
low carbon electricity supplier. Because nuclear's operating costs
are much less dependent on fuel costs than either coal or gas
plant it provides enhanced security of supply. Uranium is plentiful
and comes from politically stable countries and can be stockpiled
if necessary. As the energy review paper acknowledges reserves
would last for around 50 years at current levels of demand and
consumption, with more available from decommissioned plant and
weapons. As demand for uranium increases the price is likely to
rise, encouraging renewed interest in uranium prospecting for
further deposits of economic high grade ores.
Following the recent rise in electricity prices nuclear generation
has become much more competitiveas shown by British Energy's
dramatically increased profits over the past year. While gas prices
are unlikely to remain at their current historically high levels,
informed commentators believe that increasing world demand and
the growth of the Chinese and Indian economies means they are
unlikely to revert to the low levels we have been used to. Against
this background it is likely that, given the right market framework,
new nuclear would be competitive with fossil fuel generation.
In terms of low carbon generation studies have consistently shown
that nuclear energy can be much cheaper than the leading renewable
Barriers to nuclear development
That said there are a number of barriers to nuclear development
and economics alone are insufficient to encourage investment in
new plant. A number of planning and regulatory conditions will
need to be met before such investment will be forthcoming; these
are set out in the response to the previous question. In particular
the current electricity market contains too many uncertainties
to facilitate long-term investment in projects that may take many
years to produce positive cashflow. This applies equally to other
large-scale low carbon projects, and indeed wind power projects
would not have progressed in the absence of support from the Renewables
The private sector can deliver new nuclear build, but only
if the market framework provides more predictability for investors.
The current energy framework will not deliver the government's
Energy White Paper objectives of cutting carbon emissions and
maintaining competitive, diverse and reliable supplies.
What steps should the Government take to ensure reliable energy
Current Government policy is to allow the market to make
decisions within the right regulatory framework. But importantly
the Energy White Paper also said that diverse sources, fuel types
and trading routes should be promoted to avoid the UK becoming
too reliant on too few international sources of oil and gas.
For the reasons outlined above the NIA believes that the
UK needs a balanced energy mix including gas, coal, renewables
and nuclear. Replacing our existing nuclear stations with new
ones will enable the UK to maintain the current share of nuclear
generated electricity in the energy mix, combating global warming
and providing the diversity we require to safeguard our future
If the Government wants to encourage investment it needs
to consider introducing market mechanisms to recognise the benefits
of low carbon generating plant. The aim would be to create a market
environment that signals a clear commercial opportunity that would
encourage investors to engage in the programme.
In a world of rising demand for gas and increasing concerns
about the effects of climate change it makes no sense to replace
our retiring coal and nuclear stations with gas fired plant alone.
The NIA believes that, along with renewables and other low carbon
sources, new nuclear plant have a major role to play in ensuring
that we have the balanced energy mix we need. Government should
take the appropriate steps to create a market framework which
would enable nuclear and other low carbon projects to attract
the necessary investment.
UK ELECTRICITY DEMAND
While the NIA are not experts in the field of microgeneration,
many of our members are heavily involved in microgeneration projects.
NIA believe that microgeneration technologies in combination with
improved energy conservation, and a balanced mix of generation
including low carbon sources supplied via the grid, have an important
role to play in ensuring security of supply and reducing our carbon
emissions. However, microgeneration alone will not solve the security
of supply and greenhouse gas emission issues. In particular it
will not help in supplying large scale energy intensive industries.
It also has to be recognised that small scale generating technologies
will require extensive adaptations to the grid infrastructure
which will take a considerable time and large scale investment