New Nuclear: A Programme on It's Knees
July 2012
The government’s programme to promote the building of ten new nuclear power stations providing 16gw of power by 2025 is now on its knees, and serious questions need to be asked about how so much has been done, with so much disruption of other energy programmes such as renewable energy in order to achieve what looks like so little. This is now – but the ambition ,and the plan that subsidies should be smuggled into the programme under the guise of new ‘low carbon’ underwriting, began with high hopes on the day of the signing of the coalition agreement immediately after the last election. The agreement pronounced that
‘Conservatives... are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects (under a new National Planning Statement), and also provided that they receive no public subsidy’
It soon became apparent that the Government had plans for far more than ‘replacement’ of the ageing nuclear fleet, Government has stuck to its projection that future capacity ‘mix’ requires the deployment of 16GW of new nuclear power- far more than just numerical ‘replacement.’ The ‘replacement’ envisaged is clearly one of maintaining the percentage of nuclear within overall generating capacity – and would, if achieved by 2025, return us to the present level of nuclear generation (15%) as a proportion of overall output..
This interpretation of ‘replacement’ places an enormous strain upon resources and timetables. Since nuclear is so front-loaded in terms of its operation (i.e. most of its cost is in construction and financing those costs during a ten year design, planning and build period before any income is generated from operation), the capital cost of procuring ten new nuclear power stations each with two reactors to produce the required capacity is between £55 and £70 billion on current estimates coupled with an uncertain period of further financing before any income from generation actually arrives.
This is the central problem for any new programme of nuclear power. These sums are, in capital terms not easily fundable by the private sector. Once funded and built however, (assuming costs and build times do not escalate wildly) then the actual price of nuclear power itself probably stands as competitive with other forms of electricity output.
However, the government is now struck with the ‘no public subsidy’ formula. Instead of providing overt subsidy, it has pursued two other paths – smoothing the way to build, and covertly subsidising revenue streams.
It has, firstly, moved to smooth the path towards possible new development, through fast-tracking planning and design requirements, and effectively ‘pre-booking’ develop sites through designation in National Planning documents. A longer than ten year period between conception and production has come down to under eight years, with a smooth path from start to finish guaranteed. This is potentially very important to the overall calculation of 16 GW by 2025- the foreshortened planning and permissioning process would, in principle, allow construction to ‘catch up’ over the latter half of the decade, assuming commitments are made now.
Secondly, the Government has sought to provide certainty of income for nuclear generation by weaving nuclear generation income support into general low carbon ‘Contracts for Difference’ (CfDs) in the new electricity market processes set out in the Energy Bill. By dissolving the Renewables Obligation in 2017, and redefining underwriting as encompassing ‘low carbon’ generation, the aim of the nuclear CfD is to provide certainty of income at a negotiated ‘strike price’ for perhaps thirty years.
These are substantial incentives for new nuclear development, even if one discounts additional agreements by Government to limit insurance liabilities and cap decommissioning and disposal costs.
However, all these careful preparations to provide new nuclear with a secure development path and a guaranteed generating income seem to have had little effect on the willingness of private companies to come forward and invest in plant. In 2010, there seemed to be at least an outline cumulative interest in developing almost the planned 16gw of capacity –with three consortia encompassing all the ‘big six’ energy utilities and others claiming to be developing plans on various sites: Since this high water mark of intention, instead of plans developing to concrete commitments (as would have by now been necessary for the Government’s long claimed generating debut of the first new power in 2018) interest and commitment has been peeling away. Scottish and Southern withdrew from the NuGen consortium in September 2011; NuGen has radically scaled down its overall ambition to build, restricting plans now to Sellafield only and putting off any decision on its plans until 2015. In March 2012, the entire Horizon consortium was abandoned and put up for sale by its joint partners, stating that they felt they could not fund the proposals as they stood. EDF (with minority partners Centrica) remain committed in principle to develop on two sites, although the EDF CEO has now stated that this is the limit of their future ambition and has indicated that, anyway even Hinkley C will not be on stream until at least 2021. Work has recently stopped there on the pre-build earth moving programme.
In reality, the almost-collapse of the nuclear build programme is a catastrophe for plans to reach 16GW capacity by 2025. There is now no prospect that the target of 16GW will be reached, and the distinct possibility, on the other hand that as little as 3.9GW will be in place by that date.
All this points to a central issue in nuclear new build, which is that no power station anywhere in the world has ever been built without the active participation of state enterprise or direct state subsidy in capital works. The Government has, in attempting to clear the ground for new build and secure its revenue, been working very hard on precisely the wrong targets, and still stands to throw astronomical amounts of underwriting at the revenue business of a company that does not need it. In this respect, the ‘’no subsidy ‘ route has already palpably failed.
So new nuclear as a proposition for being a major part of the longer term future energy ‘mix’ is now on life support. Probably the only way this can be ‘saved’, if the government has the will to do it, is to break the coalition ‘no subsidy’ agreement and offer underwriting to capital programmes overtly – and perhaps negotiate the obstacle of EU ‘state aid’ in the process. But then, of course, the debate will be joined as to how much that subsidy realistically will come to, and what could be purchased or underwritten alternatively, to get the same or a better outcome for future UK energy capacity. And at that point, it clearly wouldn’t be nuclear.
This article will be published in the upcoming issue of New Ground, published by SERA, the Socialist Environment and Resources Association
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