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2005 Mar, Nuclear Issues v27 03 |
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Written by Nuclear Issues
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Tuesday, 01 March 2005 |
Nuclear Issues is also available as a pdf download
Decommissioning and waste costs
It is becoming increasingly difficult to understand and
reconcile the different figures being cited for the costs of
decommissioning nuclear plant and facilities and in disposing of the
radioactive wastes.What follows is an attempt to shed some light on the
problem by raising questions which may or may not have an obvious
answer.
It seems that almost any number can be put forward for the cost of
“nuclear liabilities” as long as it is in billions of pounds. The
figures are also quoted with a suspiciously spurious accuracy (to three
places of decimals!) given that the greater part of the expenditure
will not be called for until some time into the far distant future. If
for instance the life of Sizewell B is extended to 60 years it could be
operating until 2055. After that, if a safestore policy is adopted, the
final dismantling of the reactor may not take place before the middle
of the next century. It is quite impossible to predict now how
attitudes towards nuclear waste and the availability of technology for
dealing with it might have changed by then. Even on a shorter timescale
for the final disposal of high and perhaps intermediate level wastes
which are already accumulating, it is not yet known if, how, when or
where any final repository for wastes will become available.
There is also confusion over whether the costs are expressed in current
prices or the same sums discounted back to the future date at which the
costs will have to be met. The discount rates used also vary between 3%
and 5%. The money that will accumulate through a unit charge on the
electricity generated will be dependent on the individual lifetimes of
each station and the electricity output it will produce, so that the
possibility of lifetime extensions and increases or decreases in output
must also be taken into account.
Nuclear liabilities of British Energy
Although the costs of dealing with BE’s nuclear wastes are now
generally regarded as a major problem this was not always the case. In
happier days, before the wholesale price of electricity was, following
the replacement of the pool system by NETA, temporally forced down to
below the cost at which BE could generate, all BE’s waste and
decommissioning costs were being fully met as a part of the company’s
operating costs.
Station decommissioning
The costs from decommissioning the nuclear stations are relatively easy
to understand. Before the reconstruction BE made regular payments into
the Nuclear Generation Decommissioning Fund; a segregated fund
supervised by independent trustees with a five yearly review.
The NGDF was set up to provide a secure source of finance to meet the
future decommissioning costs. BE was the only contributor to this fund
to which its final payment would have been made in 2035, the projected
date at which Sizewell B would be taken out of service. On
privatisation the NGDF received a partial endowment of £228 million, a
contribution from the pre-privatisation decommissioning liabilities of
its nationalised predecessors.Up to September 2002 British Energy had
paid £114 million into the Fund which invested the money. In fully
meeting the Fund’s anticipated decommissioning obligations future
payments and costs were discounted at 3%. To meet the final £3.4
billion cost of station decommissioning, the Fund depended on
investment returns and contributions from British Energy at about
£17-£18 million a year. The Fund is currently worth about £450 million.
Under the reconstruction arrangements the NGDF has been swallowed by
the new Nuclear Liabilities Fund set up by the Government to deal with
all nuclear wastes. BE is required to make annual “Decommissioning
Payments” of £20 million (indexed to RPI and tapering as stations are
closed) into the NLF.These payments presumably, and somewhat generously
for the Government, replace the £17-18 million a year previously paid
into the independent NGDF.
In addition the reconstruction requires BE to pay £150 000 per tonne of
PWR fuel loaded into Sizewell B as well as an annual. Cash Sweep
Payment of 65% of its adjusted net cash flow into the NLF. It is
assumed that none of this is required for decommissioning the reactors
but for other liabilities.
Back end fuel costs
Before the reconstruction all back-end fuel costs, the costs of
reprocessing and storage of spent fuel and disposal of nuclear waste,
were charged to British Energy’s profit and loss account under their
contracts with BNFL in proportion to the amount of fuel burnt, and they
were fully met as part of the company’s operating cost. They amounted
to about 25% of British Energy’s total operating costs.
The word ‘liabilities’ seems to have crept in with regard to future
back-end costs, estimated at December 2002 as £1.6 billion
(discounted), associated with total quantity of fuel that would be used
up to the time when the stations were finally closed down. These total
lifetime fuel discharges are put at 7 400 tonnes of which some 65% are
covered by reprocessing or storage contracts with BNFL. Any liability,
requiring Government support would only arise to the extent to which BE
in some future years might be unable to meet, in part or in whole, from
its operating costs, the payments due under its back-end contacts with
BNFL, or for as yet uncontracted fuel, at a time when the stations have
to be kept running to provide essential public electricity supply. Yet
to cover this now hopefully remote possibility BE is now saddled with
annual payments, by the appropriately named “nuclear sweep” of 65% of
its cash flow into the Government NLF whether or not any ‘rescue’
payments are required.
The terms of the reconstruction package for BE seem to have been based
on the assumption that the post-NETA electricity prices would stay at a
low level and that BE, forced to operate at a loss, would for the
foreseeable future be unable to meet the back-end costs. To remedy this
and enable BE to continue to generate its much-needed electricity the
Government took the responsibility to pay for BE’s liabilities arising
from its previous “historic” contracts with BNFL and for uncontracted
nuclear liabilities “in so far as the NLF is unable to meet these
liabilities” from BE’s contributions to the fund. In other words the
Government would make good any shortfall in BE’s ability to pay in
full. In the House of Lords on 2nd November 2004 the Parliamentary
Under-Secretary of State, Lord Sainsbury, was then able to refer to the
reconstruction which had taken from BE “£2.185 billion worth of the
costs of decommissioning spent fuel” as a “very good deal for the
company”.
But the assumptions behind the reconstruction have proved wrong.
Electricity prices have risen sharply and are likely to stay at a high
level or even increase further. It is then probable that BE’s payments
into the NDF will not fall short but rather exceed the liability
requirements. In that case the excess is not returned to the company,
but pocketed by the DTI.
Lord Sainsbury’s £2.185 billion however seems to derive, not from any
estimate of what the actual back end costs might be, but from a cap set
by the European Commission on the amount to which the Government is
permitted to fund the back-end costs or shortfall in the payments by BE
into the NLF. It is questionable whether the term liabilities is
appropriate with regard to back-end charges as long as BE can operate
at a profit. Now that electricity prices have risen from their NETA
low, largely as a result of the apparently ever increasing gas prices –
for which a further 20% increase has just been announced – BE’s
profitability should be assured, provided the plants are operated
without too many unplanned shutdowns. If this is the case the
‘liabilities’ for decommissioning and back-end costs, provided they are
met within BE’s operating costs, are likely to be nil, – or well below
the artificial figure of £2.185 billion.
BE is also being penalised through the mind-set of continuing low
electricity prices in that it now has to pay more under the new
‘reconstruction’ back-end contacts with BNFL than under the “historic”
contracts. The new contracts were intended to reduce BE’s fuel costs by
providing for a discount when the electricity price is below a
specified amount, set at £16/MWh, and a surcharge when above. Now that
electricity prices have risen to over £30/MWh and are likely to stay
high BE is, and will continue paying more than under the previous
pre-reconstruction contracts.
Far from being “a very good deal for the company” it seems that BE is
being used to finance the Government nuclear decommissioning plans.
We appologise if through misunderstannding we have misrepresented the
complex issue of back-end and waste costs. But if we don't understand
them how about the general public.
The delusion of energy efficiency
Increasing the efficiency with which energy is used in the belief that
this will reduce energy consumption and hence reduce emissions of
greenhouse gases is a key factor in Government energy policy. An
opposing view is that increasing efficiency in use will in effect cut
the cost of energy in the purposes for which it is being used. Unless
that use is already at a maximum this will tend to increase, not
reduce, energy consumption and carbon emissions.
This effect can be seen in figures from the US DOE International Energy
Outlook for 2004. Between 1990 and 2001 world carbon dioxide emissions
went up from 21 563 to 23 899 million tonnes. Yet over the same period
the carbon intensity, expressed as tonnes of carbon dioxide per million
1997 US$ of GDP, decreased from 877 to 739 indicating an increase in
the efficiency with which the energy was used. This increasing
efficiency of use was a factor which, by cutting energy costs, made
funds available for an increased usage or more general expansion of the
economy and thus contributed to the increase in GDP in which the
greater total use of energy for transport, production of goods and
sevices etc gave rise to a greater discharge of carbon dioxide which
outweighed the gains (reductions) from the increased efficiency.
More to come
One sure way to reduce carbon emissions is to increase energy output
from non-fossil fuel sources, most notably from nuclear power, but
extrapolating from present and probable developments in fuel policies
the International Energy Outlook, sees little change in this respect.
The increasing emissions of greenhouse gases are then likley to
continue, despite the continuing improvements in the efficiency of
energy use, to reach 37 124 million tonnes by 2025. This increase comes
despite continuing improvements in efficiency of use as the the
emissions of carbon dioxide per million $ US GDP are expected to to
fall to 566 by 2025.
At the recent summit meeting in Brussels EU leaders said that
industrialised countries should reduce their greenhouse gas emissions
by 15 to 30% by 2020; the directly contrary IEO forecast, that carbon
dioxide emissions from the industrialised coutries will rise by 50%,
shows that without drastic measures to change present energy policies
the EU target is mere wishful thinking.
Of world energy-related carbon dioxide emissions in 2001, 42% came from
oil use, 37% from coal and 20% from natural gas. By 2025 the the share
of gas increases slightly at the expense of coal; oil remains unchangd
at 42%, coal falls to 35% and gas rises to 22%.
These forecasts are however based on national energy policies as at
October 2003; on the now dubious assumption that fossil fuel prices
will remain relatively low; that large increases in oil and gas supply
will be met; and they also ignore any changes in energy policy that
could be made to meet the requirements of Kyoto.
Electricity
Electricity generation is expected to nearly double between 2001 and
2025, from 13 290 billion kWh to 23 702 billion kWh with strongest
growth in the developing world, where net electricity consumption rises
by 3.5% per year, compared with a projected average increase of 2.3%
per year worldwide. For the industrialized world and the EE/FSU, more
modest annual growth rates of 1.5 and 2.0%, respectively, are projected.
The natural gas share of total energy used to generate electricity
increases from 18% in 2001 to 25% in 2025, at the expense of oil and
nuclear power, both of which are expected to lose market share of the
world’s electricity by 2025. Natural gas is also projected to be the
fastest growing primary energy source, maintaining average growth of
2.2 % annually over the 2001-2025 period. On this basis the world
natural gas consumption would be required to rise from 90 trillion
cubic feet in 2001 to 151 trillion cubic feet in 2025. There must now
be growing doubts about whether such an expansion can be achieved
without significantly increasing the cost with the large investments
that will be required not only in production facilities but in
pipelines across continents and in the construction of LPG container
ships. Such doubts together with the slower than expected decline in
nuclear power generation have already led the IEO to reduce its
forecast of 2003 from 176 to 151 trillion cubic feet by 2025.The shares
of hydroelectricity and other renewable energy resources, as well as
that of coal use for electricity generation, are expected to remain
fairly stable.
Worldwide, consumption of electricity generated from nuclear power is
expected to increase from 2 521 billion kWh in 2001 to 2 906 billion
kWh in 2025. The prospects for nuclear power have been reassessed since
the 2003 report in light of the higher capacity utilization rates
reported for many existing nuclear facilities and the expectation that
fewer retirements of existing plants will occur than previously
projected. Extensions of operating licenses (or the equivalent) for
nuclear power plants are expected to be granted among the countries of
the industrialized world and the EE/ FSU, slowing the decline in
nuclear generation. The prospects for new construction of nuclear
plants in several countries, have also been revised in terms of both
earlier completion dates and the number of new units that may be
constructed. World nuclear capacity is now projected to rise from 353
gigawatts in 2001 to 407 gigawatts in 2015 before falling to 385
gigawatts in 2025. As would be expected from the higher rates of growth
for electricity in the developing world, this is where the major part
of nuclear expansion will take place. Of the 44 gigawatts of additional
installed nuclear generating capacity projected for developing Asia, 19
gigawatts is projected for China, 15 gigawatts for South Korea, and 6
gigawatts for India.
When considering renewable electricity, projected to grow by 1.9%
annually, the IEO links conventional hydro power, by far the largest
source, with other renewables, wind, biomass etc so that much of the
growth in renewable energy sources is expected to result from
large-scale hydroelectric power projects in the developing world.
China, India, Malaysia, and Vietnam are already constructing or have
plans to construct ambitious hydroelectric projects in the coming
decades. (which attract as much opposition from the environmental lobby
as does nuclear power).
IAEA more optimistic
A recent forecast from the International Atomic Energy Agency (IAEA) is
slightly more optimisitic than the IEO on the prospects for nuclear
power. It expects 60 new plants to come on line within the next 15
years. This would see an increase in world nuclear capacity from 367
GWe today to 430 GWe by 2020. Like the IEO however the big increases
are seen as coming in the newly industrialising countries. From their
present low levels, the nuclear capacity in India is expected to
increase by a factor of ten and in China by a factor of six.
The IAEA list of world nuclear generation gives the share of nuclear
elctricity in 2004 in the top five countries as Lithuania 79.9%, France
77.7%, Slovakia 57.45, Belgium 55.5% and Sweden 49.6%. The bottom five
are China 2.2% Pakistan 2.45, India 3.3% Brazil 3.6%, and the
Netherlands 4.5%. This striking difference shows the room for
additional nuclear power growth in the industrialising countries such
as China, India and Brazil.
China presses ahead
It is interesting to see that China is pushing ahead with nuclear power
on two distinct lines. One is its own indigenous design and the other
involves the import of best international technology. Of the indigenous
design there is the country’s first nuclear plant at Qinshan-1 which
was a cautious 300 MWe then a larger 600 MWe plant for Qinshan-2. Now
the indigenous design has been increased to a more significant 1000 MWe
and has just been ordered for two units Lingao phase 2 were it will be
built close to similar sized French supplied plants operating at Daya
Bay-1 & 2 and Lingao-1 & 2.
In the meantime the international industry has been asked to bid for
two two-unit stations to be sited at Yangjang for the China Guangdong
Nuclear Power Company and at Sammen in Zhejang province for China
National Nuclear Corporation. These will be the latest third generation
plants. Bid are being prepared by Westinghouse for its latest
AP-1000 design which has recently received design certification from
the Nuclear Regulatory Commission, by the Franco-German Framatome ANP
company for their huge 1600 MWe European Pressurized Water Reactor
(EPR) design which has just reached the start of construction phase in
Finland and from Russia an AES-92 which is there latest design of PWR.
In addition China is active in the next generation of reactor and has
recently joined in a development project with the South Africans on the
novel pebble bed design of high temperature gas-cooled reactor. The
South Africans will be contributing their work on a Pebble Bed Modular
Reactor (PBMR) for which they are proposing to build a 125 MWe
demonstration plant in the near future while the Chinese are already
operating a small 10 MW pebble bed reactor at temperatures up to 950ºC
and are working on a 195 MWe demonstration plant design. These project
aim to develop an advanced extremely safe modular reactor of a design
that was once of much interest in Europe and America but which now only
receives moderate support.
The way things are going China will soon be one of the most advanced countries in nuclear power applications.
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