Power Engineering - Independent energy research group caution against UK nuclear viability

10 July 2006 - The UK government is widely expected to sanction a new generation of nuclear power stations this week. But energy experts at the University of Sussex Energy Group have concluded that the nuclear option will be rejected by the market in favour of other cheaper and more familiar options.

Firms are unlikely to go for the nuclear option unless they are given price
guarantees or some other form of subsidy, for the following reasons:
· there are considerable uncertainties around the costs of nuclear power
· all of the reactor designs being put forward are new, creating further
uncertainties and licensing costs
· nuclear stations require huge up-front capital investment and have long
lifespans - so to be sure of a decent return, investors will demand price
guarantees as part of a 'stable regulatory environment'
· there are still unresolved problems with decommissioning power stations
at the end of their life and dealing with the waste.

For these reasons, without subsidies or guarantees - and leaks suggest that
government has set its face against such subsidies - the market will not
buy nuclear.

The UK's electricity market is highly competitive and has been carefully constructed over the past 15 years since privatization. This process of 'liberalisation' forces firms to compete, mostly on price, and this results
in greater efficiencies and lower prices for consumers.

Dr Jim Watson, Senior Fellow in the Sussex Energy Group, said: 'Liberalisation has encouraged firms to go for the cheapest forms of power generation - mostly gas but also increasingly wind power. Because these technologies are so well known, companies can predict their cost profiles fairly accurately - although the rising cost of fossil fuels has introduced new uncertainties for gas recently.

By contrast, nuclear is complicated, and the reactor designs now being offered are new. There are signs from experience elsewhere that this is already causing problems - a reactor is being built in Finland and although the project started 9 months ago it is already 9 months behind schedule.'

Dr Alister Scott, also of the Sussex Energy Group, said: There also remain considerable problems with dealing with waste. Government is only now beginning to decide what to do with the waste creating during the last 50 years of nuclear power. The cost of dealing with the existing waste stockpile has risen in the last year from estimates around £65bn to £90bn ($120-167bn), and is widely predicted to rise further.'

In its response to the energy review, the Sussex Energy Group warned that
any attempt to parachute a new generation of nuclear power stations in
would require so many changes to the market, or subsidies to those building
the power stations, that competition would be seriously compromised.
Government would also run into the opposition of the existing providers -
who receive no such special treatment - and also from the European
competition authorities.

Dr Scott said: 'We are in danger of repeating history. At the end of the 1980s, Margaret Thatcher - widely thought to be a 'strong' Prime Minister - ordered a new generation of ten new nuclear power stations. In the end she got just one - Sizewell B. We fear that this may be about to happen again'.

Dr Watson said: 'A focus on nuclear will be likely to divert political and economic resources away from other, cheaper options. During the last few weeks,
Secretary of State for Trade and Industry Alistair Darling has made it clear he wants to make radical changes to the way energy is produced and sold to the public. His wish for energy suppliers to help consumers save energy requires a fundamental rethink to energy policy. This might be hard to implement alongside a renewed commitment to large-scale nuclear generation'.

The Sussex Energy Group is one of the world's largest independent research groups on energy policy. It has core funding from the government-funded Economic and Social Research Council.

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