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2005 Jan, Nuclear Issues v27 01 |
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Written by Nuclear Issues
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Saturday, 01 January 2005 |
Nuclear Issues is also available as a pdf download
A nightmare scenario
While British Energy’s return to profitability for the year 2003/2004,
following the increases in electricity market price, could be seen as
presaging a brighter future later details from BE suggest that this
recovery may only be short-lived as further difficulties could lie
ahead.
In the first half year of 2003/2004 British Energy made an operating
loss of £9 million, but a better performance in the second half of the
year with a profit of £66 million gave an overall operating profit for
the year of £57 million. This recovery was not maintained and in the
first half of the next year (2004/5), to the end of September 2004, the
position worsened, with an operating loss of £83 million, compared with
a loss of £9 million in the same period of the previous year.
This increasing loss arises from two factors; a failure to take
advantage of increasing electricity market price, and poor operational
performance.
It is one of the perversities of NETA that BE is driven to sell as much
as it can of its electricity through fixed price contracts determined
well in advance of supply. Unlike gas-fired and to a lesser extent
coal-fired stations which can be shut down or started up rapidly to
ensure that contracted commitments to supply under the NETA rules are
met, nuclear plant is designed to operate continuously at full load. BE
is then susceptible to the financial cost penalty of having to buy-in
electricity, in the event that output falls below the commitment
through an unplanned shutdown or other problems, or to sell off any
excess, at a low price or even negative price should the plant
performance be better than expected. In 2003/4 to cover unplanned
outages BE had to buy in replacement power at a cost of £24 million.
For the first half of the year 2004/5 the average realised price was
only 17.8 £/MWh against a reported operating cost of 20.9 £/MWh – a
loss of 3.2 £/MWh. But BE has already sold virtually all of the planned
output for the year to end March 2005 at an average fixed price of
£21/MWh – only marginally above the operating cost for the first half
of the year. These advance sales could not take the advantage of the
increase in electricity prices which, from around £23.5/ MWh in March
2004, rose to £28.4 by June and reached £33.2/MWh by the end of
September. Hindsight is a luxury not available to BE, but if they had
held out for another £5/MWh on the average there could have been an
increase in earnings of over £300 million for the year 2004/5.
The decreasing profitability in the first half year of 2004/5 is also
due to the rise in operational cost up from 16.4 £/MWh in the first
half of 2003/4 to 20.9 £/ MWh in the same period of 2004/5. This
follows directly from the fall in nuclear electricity output in those
periods to 28.7 TWh in the half year to end of September 2004 from 33.3
TWh for the same period in the previous year. For the whole year 2004/5
BE now expects that nuclear output to be 59.5 TWh, a marked reduction
from the previous years - 65.5 TWh in 2003/ 4, 63.8 in 2002/3, 67.6 in
2001/2, and 63.5 in 2000/1. The need to improve performance is the key
to increasing profitability. A 1 TWh change in output would, at the
realised electricity price of £21/MWh, represent a gain or loss in
earnings of £21 million over the year. The question is whether this
fall is just an unfortunate one-off blip or the start of a downward
trend.
The cost of renewables
If the Government’s ambitious plan for electricity supply from
renewable energies is met – a target of 10% by 2010, and aspirations of
15% by 2015 and 20% by 2020 – the cost of subsidising the programme
through the Renwables Obligation could be high. The figures given on
5th May in the House of Lords by Lord Sainsbury, Parliamentary
Under-Secretary of State at the DTI, are that for the period 1990–2010,
the average annual cost is estimated to be very approximately £500
million per annum. For the period 1990–2015 the figure rises to £800
million per annum and for the period 1990–2020, it is £1 billion per
annum – amounting to a total subsidy of £30 billion.
To sugar the pill Lord Sainsbury compared these figures with the
current total annual cost of supplying electricity to all consumers in
the UK at around £15 billion. But this cannot disguise the fact that
the cost of such a programme would amount to a levy of up to 6% of
their costs on the electricity consumer for what can only be an
intermittant, variable, and indeed in Nuclear Issues 12 Ruvigny
Mansions Embankment Putney London SW15 1LE
some respects an unproven supply.
Some relief might be found in that, outside the DTI and the wind, wave,
and tidal power promoters, few believe that the programme will ever be
fully realised - an aspiration has been defined as “a target that is
unlikely to be achieved” – but the danger with this obsession with
renewable energies, is that by the time that the DTI finally recognises
its failure there will be insufficient time to start up a programme of
nuclear power stations to meet the energy gap of up to 20% of
electricity supply that will arise.
This gap will have to be filled by an increasing dependence on
ever-greater imports of natural gas at ever-increasing prices which
will also add to the discharges of a carbon dioxide – at a time when
the Prime Minister is said to have put global warming a the top of his
agenda!
There can be little doubt that the £30 billion would be better spent on
a programme of nuclear power stations which, in contrast to the
uncertainties of renewables, could give an assured electricity output,
no carbon dioxide discharges, and reduce our growing dependence on
imported energy at a time when the will be intense international
competition over limited supplies of oil and gas and growing concern
over global warming.
From the response by the DTI Energy Minister M. O’Brien to a House of
Lords report on the Practicalities of Renewable Energy it seems that
much still remains to be done before renewables can be considered as
providing a certain and secure supply of electricity. In the fist place
the government recognises that the key obstacles of planning issues,
grid capacity, public opposition and investment have yet to be overcome
– problems to be tackled by a ‘2010 Team’ working with the Renewables
Advisory Board.
In addition considerable sums are being allocated to research and
development projects. Around £20 million a year from the DTI goes to
research an development into sustainable energy technologies including
renewables; £9 million a year will come from the Research Councils; £60
million will be spent between 2005-2007 for projects under the
Renewables Innovation Review and up to £50 million will go to a new
Marine Renewables Development Trust Fund for work on wave and tidal
power. In total O’Brien said that, in addition to the support under the
Renewables Obligation, the DTI plans to spend £500 million on research
and development projects for long-term renewables and low carbon
technologies.
Such a buzz of activity is evidence of the Government’s commitment to
developing these technologies, and as such should be welcomed, but the
nature of all research projects is that the desired outcome cannot
always be assured. It would seem unwise or even irresponsible to base
the security of the country’s future electricity supply on the
uncertain ground of assuming a positive outcome to these efforts, while
rejecting nuclear power which is already a proven and reliable
non-carbon emitting source.
Transport problems
The apparently unstoppable increase in road transport, car ownership
and mileage driven represents a major and increasing source of
greenhouse gas emissions. World–wide the transport sector accounts for
25% of carbon dioxide emissions; the same figure holds good for the UK.
The transport sector accounts for almost half the total end-user
greenhouse gas emissions, or 25% of emissions by source. Some 80% of
this is from the road transport of goods. In France 85% of passenger
journeys are by car; 79% of goods traffic is carried by lorry.
Taking account of the occupancy rate, for the same energy usage, a
passenger could go 4.5 times further in a TGV than by car. For goods
transport the tonnage carried by sea and by rail would, for the same
energy usage, be respectively 5 and 4 times greater than by road.
If the experience of the past 40 years in the industrial countries is
followed by the now rapidly developing South this could give up to a
7-fold increase in transport so that by 2025 the passenger miles in the
countries of the South could equal that of the industrial North. For
goods, the transport in tonnes-kilometres has increased or more often
exceeded the increase in GDP, by 1.7times more in Europe and 2 times
more in India. Goods traffic by road could then rise from 5 000
milliards tonnes-kilometres in 1990 to over 40T000 milliards by 2060.
Given the doubts over the availability oil, which the Association for
the Study of Peak Oil expects to peak as early as 2010, and the effect
that this would have on the oil price, such an increase in road traffic
must seem unrealistic and unsustainable. Some reductions might be
expected by discouraging recent transport-extravagant market-driven
practices such as for instance taking prawns landed in Denmark to
Morocco for shelling and then returning them to Denmark for sale, or of
potatoes grown in Germany sent to Italy for washing and packaging
before being returned to Germany; Just-in-time deliveries reduce the
cost of holding stock, but at the expense of more frequent transport
movements. There are also very wide differences in the energy
consumption for transport in major cities, from between 200-400 kgs
equivalent per inhabitant in Europe (London. Paris, Hamburg etc) to
1000 in New York and nearly 2000 kgs in Houston. (Le Monde diplomatique
Jan 2005)
Some reductions in energy usage could come from the development of more
efficient internal combustion engines. Emissions of around 150
gram/kilometre are considered to be acceptable for the best of present
models of petrol or diesel vehicles. To improve on this, the Low Carbon
Vehicle Partnership and the Low Carbon Challenge, a UK initiative with
Government support, aims to produce a car with emissions of less than
100 grams/kilometre by 2012. But by the time this is realised it may
only be of limited value if oil itself is becoming less available and
more expensive.
This must point to the introduction and wide scale
January 2005 use of electric vehicles as the most practical solution to
reducing carbon dioxide emissions from the transport sector. One recent
development is the new Volvo concept, the 3CC. This small car, weighing
only 1,050 kg with a battery driven electric motor, claims a top speed
of 135 km/hour and an acceleration of 0 -100 in 10 seconds. The range
is more than 300 kilometres, and under normal driving conditions about
20% of the energy can be recovered through regenerative braking. The
aerodynamic design shows a 30% improvement on the Volvo S40. Under test
conditions the energy consumption is said to be 0.13 kWh per kilometre.
The environmental benefit in reducing greenhouse gas emissions will
depend on how the electricity is produced. If generated from coal the
corresponding emissions from the power station are said to be 105
grams/kilometre or 45 gram/kilometre from a gas-fired station. From a
nuclear power station the emissions would be almost zero. What on Earth
are we waiting for?
Unplanned outages
Any increase in the number of unplanned outages must be a cause of
concern. By their nature these arise from unexpected failures of
equipment or human error, the consequences of which may not be totally
foreseen. The present management of BE claims that the deterioration in
the material condition of the plant is in part caused by inadequate
investment over the past few years leading to a maintenance backlog and
failure to carry out required maintenance in time; they also point to
human errors in the operation and maintenance of the plant.
To remedy the situation a special Performance and Improvement Programme
has been set in hand, and for the year ending March 2005 investment in
plant projects, major repairs etc will be increased from £128 million
the previous year to between £140-170 million including £20 million for
PIP. There must however be some alarm that the implementation of the
PIP programme, expected to run into 2008, will depend on sufficient
“working capital headroom being available”. This implies that, in the
worst case, if the stations fail to generate sufficient profits, the
completion of some remedial work thought to be necessary will be
postponed. This carries the risk of further unplanned outages with
reduced output and lower earnings and less spending on plant
improvement - a downward spiral of decline.
One problem is that the AGR system of gas cooled graphite reactors is
unique to the UK. They were built in the 1970’s and 1980’s by different
consortia to different specifications, which hampers the transfer of
experience and solutions from one station to another. BE has reported a
number of problems which have led to shut-downs at different stations
from a variety of causes; amongst those listed are the corrosion of
cast iron pipes carrying sea water for cooling, concern over the
corrosion of prestressing tendons in concrete vessels, boiler tube
leaks, and risks of fire or flooding. In addition the general
obsolescence of components and computer systems could also lead to an
increase in unexpected failures, longer outages and higher repair
costs.
The concern in this is that the safety of the plants may be put at risk
from some unanticipated event. If that were to occur experience
elsewhere shows that any accidental event at a nuclear power plant,
however minor or of minimal consequences, would be magnified out of all
proportion to become a matter of great public concern and damage
confidence in the whole nuclear power programme.
On the positive side the condition of the UK nuclear stations and the
manner in which they operate is very closely monitored by the Nuclear
Power Inspectorate which can, and does, try to anticipate potential
troubles and require remedial action to be taken, which could of course
lead to the shut down of one or more stations.
As BE points out in a frank assessment of the risk factors that could
affect their plant, there can be no assurance that station lifetime
extensions will be achieved at any of the AGRs, five of which are due
to close by 2014. Indeed there is a danger that if the plants do not
perform as expected the income generated may not be sufficient to
maintain the plant to the standard demanded by the NII and would then
have to be shut down earlier than expected. It is possible that a
generic fault could be identified, such as severe corrosion or cracking
of the graphite moderator or other common problems which could
compromise the safety case for all the stations.
Attention should be paid not only to the length of unplanned outages
but their frequency. The AGRs are designed to operate at constant load.
Frequent temperature changes to the moderator graphite could add
thermal stresses to the radiation induced effects. This might be a
cause of an unanticipated axial cracking in two graphite blocks
recently identified at one of the AGR stations. The DTI should consider
withdrawing its ‘quasi-subsidiary’ from the NETA system which places
the flexibility of operation at a premium.
What if?
The loss of all or part of the 20 percent of electricity generated in
the nuclear stations, at any time within the next few years, would have
very severe economic and social repercussions. Output from renewables
now at about 0.6 TWh would clearly not fill the gap. If increasing
coal-fired generation is ruled out on environmental grounds the only
means of avoiding drastic power cuts or rationing would be to replace
the nuclear stations with production from gas-fired stations. This
would lead to an ever-greater dependence on imported gas supplies at an
ever-greater cost and an increase in greenhouse gas emissions. The
announcement by other electricity supply companies of plans to build
large gas-fired stations is already an indication of future trends.
In the event that any or all of the stations were to close before the
planned retirement date, or be unable to operate profitably, BE would
not be able to generate sufficient income to cover the payments into
the Nuclear Decommissioning Fund or to meet the 65% of earnings that
will be taken by the ‘nuclear sweep’ for the new Nuclear Liabilities
Fund the Government is setting up. The costs of decommissioning and
outstanding payments to BNFL for fuel reprocessing would then fall to
the Government. While the DTI has the right to buy for £1 any station
that is closed before its due retirement date there would be little
point in doing so if the station were being closed as a consequence of
failing to meet the NII safety case. This would apply to whoever had
ownership of the station.
With its close oversight of BE the DTI must be aware of the
possibility, even if remote, that rather than relying on a life
extension of the nuclear stations to cover a possible (but now widely
expected) shortfall in renewable electricity generation they may be
faced with their premature shut down.
The DTI should instruct its quasi-subsidiary to prepare for this
eventuality. It should be noted that BE’s decommissioning strategy
already assumes that the sites of its nuclear power stations will be
available for alternative use which presumably includes the
construction of new nuclear stations.
Changing attitudes
With the expectation that oil prices will stay high; with increasing
doubts over the availability of future oil and gas supplies when
production begins a slow decline from an output peak, as sooner or
later it must – supplies are finite; with the clear evidence that
energy demand in the developing world, lead by China and India, will
expand dramatically; and with ever-growing concern over, and evidence
of, climate change from emissions of greenhouse gases from burning
fossil fuels, it is not surprising then that public attitudes are
moving in favour of an increase in nuclear power output.
Speaking at the World Economic Summit in Davos Tony Blair accepted that
America would not sign up to anything on climate change that required
drastic cuts in living standards. But the reluctance to accept any
lowering of living standards is widely held throughout the
industrialised world. It brings with it a growing realisation that the
only secure means of maintaining electricity supplies without
increasing greenhouse gas emissions is to replace the burning oil, gas
and coal by nuclear power.
Regrettably this view has not yet penetrated to the DTI and DEFRA, the
UK government departments responsible for energy policy, which prefer
to rely on the expensive, uncertain and largely unpredictable renewable
energies, coupled with yet more exhortations to reduce our total energy
consumption
Yet in the United Kingdom, according to a MORI poll commissioned by the
Nuclear Industry Association (NIA), 35% of the public now support the
construction of more nuclear power plants. A similar poll in 2001
showed that only 19% of the population supported an increase in the use
of nuclear power. Now only 30% of people opposed the construction of
new nuclear and would advocate phasing out nuclear plants - down from
60% in 2001.
This shift in public attitudes is attributed to widespread concerns
about climate change and security of energy and electricity supply
supported by the announcements of highly regarded scientists, academics
and environmentalists in favour of more nuclear power.
In the United States fear over the security of energy supplies is
believed to have led to increasing public support for nuclear power. In
a poll (October 2004) 80% believed that nuclear will be important in
meeting US electricity needs, 67% personally favoured it, and 60%
agreed that more nuclear plants should be built. This view was
also supported by two thirds of self-described environmentalists who
presumably recognise the value of nuclear electricity in reducing
greenhouse gas emissions.
In contrast to the UK the US authorities are encouraging industry to
expand nuclear capacity through a number of regulatory initiatives
preparing the way for new orders. The extension of reactor lifetimes
from 40 to 60 years will also enhance the economic competitiveness of
plants. The industry now envisages 50 000 MWe of new nuclear capacity
by 2020. It is to be hoped that this nuclear expansion comes to
fruition before the US feels the need to “plant the flag of Liberty” in
more oil-rich states.
From Italy there are reports that the government might consider the
possibility of a return to the use of nuclear energy. Italians voted to
shut the country’s nuclear power plants in a 1987 referendum, but now
imports some 17% of its electricity (much of it nuclear) from France or
Switzerland. The country is also struggling to cut its greenhouse gas
emissions.
In Lithuania a decision on whether to construct a new nuclear power
reactor will be made in 2007. Current projections are that the country
will need new generating capacity between 2011 and 2020. The second
reactor at Ignalina (a Russian Chernobyl type reactor) is scheduled to
be closed in 2009. Replacement nuclear capacity is supported by both
the new government and President Valdas Adamkus, although there are
uncertainties about how it would be financed.
From Nigeria there are reports of proposals to build two 1000 MWe
nuclear power reactors to provide baseload electrical power. The
government proposes to increase power generation to 10 000 MWe by 2007
from the current level of below 3 000 MWe, in an effort to end frequent
blackouts. Support for this plan is being sought from the International
Atomic Energy Agency (IAEA).
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Last Updated ( Friday, 09 September 2005 )
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