How much would an expansion of nuclear power cost us?
- 10 Oct 2012, 12:00
- Robin Webster & Chris Peters
In the midst of extensive media discussion about how much
renewables cost, the costs of nuclear power hasn't attracted as
much attention. But given the prospect for steep increases in the
amount taxpayers pay to subsidise the technology, a wider
discussion about nuclear costs is probably on the horizon.
Speakers at a Conservative party conference fringe event in
Birmingham yesterday which Carbon Brief attended agreed that,
despite protestations from politicians to the contrary, support for
nuclear does amount to a subsidy from the taxpayer.
Reports already suggest the government will have to
subsidise spiralling construction costs for new nuclear power
Data for 2012/13 from the Department of Energy and Climate
Change (DECC) also indicates that the total maximum cost to the
taxpayer of nuclear decommissioning is comparable to the total
maximum limit set on support for renewables and energy efficiency
via levies on consumer bills.
Background - too much gas
At a fringe event, organized by the free market thinktank the Centre for Policy Studies,
political and energy analyst Tony Lodge laid out the case for
Lodge argued that lack of planning since the electricity
sector was privatised means the UK has failed to replace its energy
assets. Old coal and nuclear power stations have been run
intensively without being replaced and many are now reaching the
end of their natural life. As a result, Lodge says, the UK is now
too dependent on gas.
The new Minister of State for Energy and Climate Change John
Hayes was also at the event. Earlier in the week, he
told the Sunday Telegraph that he is "extraordinarily
enthusiastic about nuclear" and "arguably the most pro-nuclear
energy minister in living memory, I suppose ever".
Hayes said that the UK is desperately in need of a more "mixed
economy" and "plural market" on energy generation. He added that
"The effects of competition to drive
down prices hasn't happened. The effects of the market on replacing
ageing stock hasn't happened"
The most important challenge facing the government in expanding
nuclear, said Hayes, is the financing - he stressed the need to
make investment attractive, adding that:
"The Energy Bill and the Electricity
Market Reform at its heart has to square nuclear from a commercial
point of view".
Government policy may already be working to attract nuclear
investors. Alexey Kalinin of Russia's nuclear energy conglomerate
Rosatom praised the
contracts for difference (CFD) scheme as "… the right mechanism
for providing confidence for investors".
Asked about the financial impacts of supporting nuclear for the
UK taxpayer, Mr Lodge said they won't be clear until the
government finalises a strike price for low carbon
electricity - a fixed minimum price that power companies can sell
their low carbon electricity for.
French energy company EDF Energy is
currently in negotiations with the government over the level of
support new nuclear reactors can expect, with a decision expected
by the end of the year.
The speakers were unanimous that it is the UK taxpayer who will
ultimately underwrite any strike price. But how much it's going to
cost overall is still an open question.
Government support for building nuclear stations and producing
power from them doesn't account for all of the cost of nuclear.
A few weeks ago Oliver Tickell in
the Guardian suggested that 86 per cent of DECC's budget goes
on decommissioning nuclear power plant.
DECC told us that this figure is wrong, and suggested that the
Guardian has probably incorrectly attributed the future costs of
nuclear decommissioning to current costs.
DECC told us that according to its latest annual report, the
costs of nuclear decommissioning for 2010/11 was £1.9 billion out
of a total budget of £2.7 billion, or 72 per cent of total
We haven't looked at the
annual report in any more detail - divining meaning from the
departmental budget was a little beyond us - but this graphic
illustrates the department's proposed spend in 2012/3 - (click to
Business Plan 2012-15, DECC. p.12.
It shows the proposed cost of decommissioning and dealing with
the "nuclear legacy" in 2012/13 is £2.59 billion. This is 76 per
cent of the total limit on spend given for the entire department.
Less than 86%, perhaps, but hardly insignificant.
This is slightly less than the maximum potential amount of £2.76
billion which is allocated to "levies and other", the category
which encompasses the cost of so-called green subsidies such as the
Renewables Obligation, the Renewable Heat Incentive, Feed in
Tariffs and the Warm Homes Discount. 'Levies and other' spend
doesn't come directly from DECC's budget, but instead is paid via
consumer energy bills.
Totting up the figures
Plenty of attention has been paid in government and the media to
the potential costs of renewable power. This may in part be because
those costs are paid on energy bills, and not as taxes.
It seems strange that very little attention has focused on the
costs of nuclear. But perhaps, as the government finalises
negotiations on a strike price for nuclear-generated electricity,
this could be about to change.