Small or atomic? Comparing the finances of nuclear and microgenerated electricity.
14th June 2005
Alan Whitehead - Rebecca Willis
As the nuclear debate intensifies, there is a growing 'wisehead' mantra, which goes roughly thus: 'of course renewables are fine in theory, and it would be nice to think that we could power our country this way, but it's not realistic is it? Now I'm as keen on the low carbon economy as the next person, but if we're going to get anywhere near the targets we have set on CO2 emissions, we'll just have to bite the bullet and commission new nuclear. I know it's got problems, but if we don't do something in the next two years or so, you know, the lights will start going out '.
This emerging 'commonsense' has benefited greatly from some assiduous and carefully placed public relations by the nuclear industry, and as with many such sayings, it has more than an element of truth in it. It is not true that 'the lights will go out' if we do not adopt nuclear shortly. It is true, however, that the most likely way to stop the lights going out over the next twenty years, in the absence of anything else, would be to continue to expand investment in new gas plant. The private sector has shown high willingness to put money into gas generation and would continue to do so. Unfortunately, placing reliance on new gas plant would put an end to any ambition of radically reducing CO2 emissions from energy supply, and would increasingly need to be fuelled by imports from potentially problematic parts of the world.
The UK is now beginning to make real progress with large scale renewables. Offshore wind, in particular, is coming on stream and with larger scale projects such as the London array taking off, will mean that initial targets for renewable electricity supply are within reach of being met. But even so, the argument goes, over the next twenty years, a successful large scale renewable programme would do no more than stand still as far as CO2 emissions from energy are concerned, because at the same time, older nuclear power plants would be closing down, so that by 2023, if nothing is done, electricity generation from nuclear plants would reduce from the present 20% to the output of one station only - Sizewell B representing about 2% of electricity generation So efforts to cut CO2 emissions from generation would simply be running very hard to stay in the same place.
It is the sheer apparent size of the gap that seems to emerge that prompts the 'bite the bullet' conclusion. Surely we can't make up all that gap with windmills, untested tidal turbines and hay-burning furnaces? Doesn't it make new nuclear power stations inevitable?
Well, let us go along with the scenario for a while: let us discount the problem that there are, as yet, no reliable means of disposing of nuclear waste, and the concern that a new generation of nuclear power stations in known and almost unprotect able locations would be high security risks in their own right. Finally, let us ignore the fact that nuclear power is not really renewable, that there is more than a cloud on the horizon of the availability of economically mineable uranium in the medium to long term, and that it is, in any event mined from precisely the same band of potentially problematic countries that we might consider obtaining our long term gas supply from.
Let us, instead, concentrate precisely on the scenario envisaged by the 'wise heads' and assume that -say- in 2007 we do indeed take the fateful decision that we, as a country will invest in a new generation of nuclear power stations. We would need to do this in something like that timescale because of the very long lead time before a single kilowatt of electricity would emerge from the first of the new generation of power stations. The process of commissioning, financing, obtaining planning and other permissions would probably mean that the first 'new generation' nuclear power would emerge in about ten to twelve years time - that is, between 2017 and 2019. With a bit of luck and some stretching of life before decommissioning, we would still have somewhat more than 2% of electricity generated by nuclear - perhaps the Hartlepool and Heysham 1 Reactor would just about still be working, and the Heysham 2 and Torness reactors would certainly be producing. That is, there would be an overlap: at the point new capacity came on stream we might find that 6% of our needs could reliably be met by the fag end of 'old' nuclear, and a further 4% possibly.
So if we want to make progress on CO2 emissions, and large scale renewables do as well as we think they will there would still be a big gap between the decision point and the year in which the new generation came on stream. The gap would be notched - that is, it would widen in steps as large nuclear plant closed down - 4% per year in 2008-9, almost 6% in 2010, and then up to 14% in 2014. We would, in the meantime, still need to make this gap up, and the gas generation route would be the only way to do it, assuming large scale renewables cannot be ramped up further. We could invest in some medium term gas, and take a hit over the years 2010 -2020 on CO2 reduction. In order to remain on track for later we would have to compensate with a nuclear programme far larger than simply replacing the present power stations as they go out of commission - we would have to 'row back' that 10% and make an accelerated dent in emission figures over the following decade. This brief analysis suggests that, in order to compensate for the long time lag between commissioning and production that would be an inevitable consequence of a new generation of 'going nuclear', we would have to commission, over the next few years, far more than a simple replacement programme for existing nuclear generation.
But even if we only commissioned a replacement programme, what would it cost? In taking the decision to commission, we would have to know that the funding was available as it were, 'on the table'. The financial dimension of the decision would have to be judged in terms of the capital cost of building sufficient reactors, and could not take into account the amortisation of the cost over the subsequent life of the reactor. The nuclear industry, in presenting cost models is coy on this point, referring to costs per kilowatt over the lifetime of reactors, rather than up-front cost. As Rebecca Willis demonstrates in her analysis, it would be likely to cost, before any new power was generated, a minimum of £10 billion, assuming that the whole programme, unlike all previous nuclear commissions, came in on budget.
Furthermore, unless such a programme proved unlike any other major nuclear project past or present, the vast majority of such money would need to be found from Government, either directly or indirectly. There are currently, for example, no private sector takers for new nuclear reactors in the United States, despite the existence of a favourable climate for such investment. Some investment might be engineered in by guarantees of favourable prices subsequently, or by extensive underwriting schemes, but in truth, the Government would have to commit itself to this order of forward finance either as actual payment or guarantee, over the next four to five years, in order to start and continue an effective programme.
So if, having taken the best possible case for replacement nuclear power and discarded the costs and dangers of its side-effects, we are left with a likely up-front bill of £10 billion or more, a reasonable question to put into the debate is, what CO2 efficient renewable or near renewable plant could be purchased with such an amount, and would it have a better effect on power supplies than a new nuclear programme?
Rebecca Willis analyses what it would cost to purchase a portfolio of microgeneration capacity - domestic CHP, Solar PV and home-based wind energy, and the answer in these terms is - quite a lot could be purchased for £10 billion and it would, overall have a comparable effect on power supplies. It is difficult to make exact comparisons because in neither instance does capacity equal output - in the case of renewable and micro generation, because output at any one time would only be a fraction of capacity, and in the case of nuclear power stations, unless a monopoly of power supply were granted to nuclear, output would equate to what was produced from the grid on the basis of a future version of BETTA. Even so, for a cost in the region of £10 billion, more capacity would be brought than if the same £10 billion were invested over the same time scale in new nuclear. Such investment would not do more than make up the gap - renewable and near -renewable electricity sources would thereby account for perhaps double the current projected target by 2023, but the majority of power would still be provided by other means and would sustain an easily adequate base load capacity. In its own right, though, a distributed generation capacity would, through the aggregate decisions of the millions of small power generators it encompassed, provide an additional reliable base load, and at little additional cost in conversion works to the national grid system.
But there would be two additional factors to be taken into account in this counter-scenario. Firstly, the calculation is based on the assumption that the micro generating plant would simply be given away (or in the case of CHP boilers, replaced at the same cost as that of a conventional boiler). It also - conservatively - discounts the economies of scale that would apply to the cost calculations were such a large programme of domestic CHP wind and PV to be introduced. It is likely, however, that a programme would not need to be completely free to succeed. The very modest Clear Skies programme has demonstrated how incentives can drive take up, and it would be likely that some cost element of the installation could be recouped , making the programme, unlike the comparable fixed cost of new nuclear stretch far further for a £10 billion input. Scale cost reductions would further strengthen the efficacy of the investment.
Secondly, and perhaps most importantly, CO2 reductions would start the day after the investment started being spent. Domestic wind turbines start saving on conventional electrical demand the moment they are plugged into the mains and CHP boilers produce electricity the moment they are fired up. Such boilers, incidentally, use approximately the same gas to function as condensing boilers do currently: the generated electricity would not only be on stream immediately, but would in real terms be a completely carbon free bonus to the grid. There would be no residual 'gap' as we waited for new plant to be commissioned, planned and built.
There are two versions of the 'go nuclear now' argument. One suggests that nuclear power would produce electricity alongside a surge in renewables and near renewables, and would act as a clean partner of those different sources. The other suggests that renewables will simply fail, and that we should contemplate investing in replacement nuclear capacity only as a first part of a predominantly nuclear future - further tens of billions of pounds invested decade by decade leading up to 2050. On the line of argument presented here, generous as it is to the side arguments about the intrinsic desirability of nuclear power, we would have to commit to the second scenario if we started down the route of replacement nuclear power: government, in order to make up the gap in CO2 reduction now facing us even if we started almost immediately, would have to commit more and more money to further nuclear capacity between 2020 and 2040. In doing so it would effectively crowd out renewables by placing almost all public underwriting in the nuclear basket, and it would crowd them out completely if, in order to entice industry to come up with even a small part of the investment needed, it artificially fixed the price of nuclear sourced electricity in the years ahead.
In short, the nuclear option is probably the worst one we might consider, even if we analyze it on finance alone. On timescale and capacity it doesn't add up. Even if we really did simply give everyone a free boiler or windsaver it would probably amount to a better long-term choice for future energy. If we want to make early sustained and secure reductions in CO2 energy emissions, the microgeneration option, in addition to the development of large scale renewables makes elementary sense It downside is that it doesn't sound half as reassuring as the ability to pull a big lever in a large building somewhere and watch the expensive and eventually highly poisonous electricity flow.