NUCLEAR IS INDEED BACK ON THE AGENDA WITH A VENGEANCE
We have come a long way in three years. In that time we have moved from
a frankly irrelevant Energy White Paper of 2003 that sidelined nuclear
power to a new Government statement on July 11 that says “nuclear would
make a singular contribution to meeting our energy policy goals”.
Clearly, Tony Blair and Gordon Brown, for they can be considered together on this, have looked into the future and know that it does not work without nuclear power. It may be that some of us feel we are welcoming sinners come to repentance. Others may wonder what the Government is able to see now that was invisible in 2003.
The Energy Review may, for political reasons, still put the cart before the horse in leading with carbon reduction and energy saving instead of security of supply. But the fact remains that, after eight years of effort, SONE has a Government prepared to go on record saying it “believes that nuclear has a role to play in the future UK generating mix alongside other low carbon-generating options”.
It may be less than a ringing endorsement, the climate change levy may still be imposed on nuclear and we may believe that the Government is still dangerously optimistic about the potential of renewables and energy saving. But it has substantially taken all of SONE’s arguments on nuclear economics, carbon reduction, diversity of electricity supply, availability of uranium fuel, nuclear’s emissions and safety and security in terms of terrorism and proliferation. What is more, it is proposing action on pre-licensing, planning, power station sites and management of waste broadly in line with SONE’s prescriptions.
This does not mean that we can take a new generation of nuclear power stations for granted, especially in view of the rocky state of Mr Blair and the Government generally. An enormous amount of work has to be done if the nation’s interests are to be served – and saved. But energy policy has been given a push in the right direction and we should try to help maintain the momentum.
It is immensely encouraging that the anti-nukes are in a state of anguish, though the writing has been on the wall for them for a long time. It would help enormously if, instead of just welcoming the Energy Review, the electricity industry slapped in a conditional application to build a new nuclear power station. But we cannot have everything.
Nor have we got it. In the same three years under review, the Conservative Party has moved from tacit support for nuclear to regarding it as an electricity source of last resort. To the extent that the Tories are seen as the next Government, this will not have done much for investor confidence. The Tories have become a suitable case for SONE treatment. We promise to give it to ‘em.
REVIEW’S ACTION POINTS
We have also come a long way from the days when governments put out economically-printed statements to the Energy Review whose 216 pages, with supporting material, nearly breaks your arm such is the quality of the paper. Not much sign of energy conservation here.
We cull from the curiously constructed but wideranging review, the following action points of chief interest to SONE members:
· work to secure a continuing carbon price signal · Government and Ofgem to review incentives and barriers to more distributed power generation · a Coal Forum to secure a long-term future for coal-fired generation · a policy framework for new nuclear power to be set out in a White Paper at the turn of the year · new licensing guidance from HSE and NII towards the end of the year · new inquiry rules for applications under the Electricity Act by next Spring · establishment of a £100m National Institute of Energy Technologies, announced in the last budget, to bring a new “focus, ambition and industrial collaboration”.
SONE will submit its response to the Energy Review by the October 31 deadline. Responses should go to Energy Review: Nuclear Policy Framework, DTI, 1 Victoria Street, London SW1H 0ET;
Electronic copies of the Energy Review are on www.dti.gov.uk/energy/review
NUCLEAR ECONOMICS
We were told that the Energy Review would include a peer-reviewed economic assessment of nuclear power. It is to be found on Pages 113- 115. It looks at nuclear’s competitiveness in a number or scenarios with varying carbon and gas prices and low and high nuclear costs.
The central gas price is put at 37p/therm compared with an average of 20p for the past decade, though last year the average price was 42p/therm. The central case for nuclear’s costs is £38MWh with a high of 44 and a low of 30. It finds that with a central gas price and a carbon price of Euros 36/t CO2, the economics of nuclear remain robust for generating costs up to £43/MWh.
“This”, it says, “is well above the forecast cost of power generated from the Finnish nuclear project currently under construction, by a margin that far exceeds any historical cost overruns associated with nuclear projects – eg Sizewell B”. The Review also blows up another anti-nuke argument: nuclear fuel costs. It says the doubling of uranium prices since 2000 has had only a minor impact on final fuel and overall generation costs The anti-nukes cannot grumble about high gas or carbon prices. Logic suggests that they should accept the consequences: even more competitive nuclear power. They won’t, of course.
TORY TURNCOATS?
The Conservative Party chose to pre-empt the Government’s Energy review by five days. It produced an entirely political document on July 6 exuding nuclear scepticism. Its summary of its stance on nuclear was: “Where the Government see nuclear power as the first choice, under our framework it would become a last resort; where the Liberal Democrats rule out nuclear power, we rule out subsidies and special favours for nuclear power”.
The Tories approach owes more to political positioning than integrity of energy purpose.
Under its new management, it is determined to be like girls in the nursery rhyme: sugar and spice and all that’s nice – and, of course, green – and to do nothing that might, in its view, cost it votes - e.g. espouse nuclear power.
Since it is trying to be all things to all men, it is, of course, entirely possible to regard the Conservatives’ policy as the precursor of a new nuclear programme, whatever it says about its being a last resort.
It could be argued that its plans for a “cap and trade” regime for carbon emissions, a capacity payment system to guarantee sufficient electricity generating capacity, a level playing field for green energy – nothing is greener than nuclear – and the need for diversity of affordable supply could make nuclear the fuel of first resort with the market. Now that would be giving green energy a chance, as the Tories’ sloganising puts it.
In other words, the statement is pretty incoherent in energy terms but it provides a starting point for the party’s re-education. A number of members have already begun this process with Tory leaders.
As Peter Vey, a member of SONE’s committee, puts it in a letter to John Gummer, chairman of the Tories’ Quality of Life review, “If nuclear-generated electricity meets the criteria – which it does – why is it presented as the last resort?”
THE LEVEL PLAYING FIELD
Just what do we mean by a level playing field? We are entitled ask when a student of wind economics, Dr John Etherington, claims that the net subsidy for wind power under the complicated Renewables Obligation system is effectively £90/MWh. This, he says, is probably the largest per unit subsidy ever paid for any commodity - with relatively little return in carbon reduction.
A 2MW wind turbine generating 4,380MWh (25% of rated capacity) over the year thus earns a gross £394.200 per year. About half of this income, he says, is subsidy from the consumer and without it the turbine would be close to bankruptcy.
It is, of course, possible to argue that emerging technologies require some subsidy to help them on their way. But wind power has been under development in Britain for at least 15 years. This – and House of Lords’ criticism of its subsidy - probably explains why the Energy Review is proposing different levels of support for different renewable technologies. Wind is no doubt getting the wind up.
In the spirit of a level playing field, we think we are entitled to ask why the Government by implication and the Tories specifically argue that “there must be total transparency over the fulltime costs of nuclear power...and no subsidies and no special favours”. Surely, we should have transparency across the board. If we did, the public would be in a position to demand the cheapest option: nuclear.
…AND ANOTHER THING – THE SDC
Lord Vinson, a member, is pursuing a number of “anomalies” in the system through questions in the House of Lords. Recently, he inquired about the funding of Sir Jonathon Porritt’s Sustainable Development Commission. You will recall that earlier this year the anti-nuclear Porritt had an awful fright when his Commission came out against nuclear by only one vote in 15.
Well, according to Lord Rooker, Minister of State, DEFRA, the SDC is expected to get £3.8m from the taxpayer - £3.1m from DEFRA and the rest from the devolved administrations. But it could be more because it is funded by other Government departments for specific posts or projects.
Currently, it has 42 staff of whom 34 are fulltime DEFRA civil servants; 39 are in London and other three in Edinburgh, Belfast and Cardiff.
We consider it an utter scandal that the taxpayer should fund a Commission which gives Porritt an anti-nuclear platform to advocate what are, by definition, unsustainable energy policies.
MONEY NOT AN OBSTACLE
In the Energy Review the Government notes the Nuclear Industry Association’s view that nuclear skills are available for new nuclear build and that potential pinch points can be managed through planning and training.
We have consulted a patron, Lord Walker, a former Energy Secretary and vice chairman of Dresdner Kleinworts, about the availability of finance. He assures us that there is no shortage of money in the City provided the basic terms for investment are sensible. But he also stresses the need for stable policies and contracts.
Lord Walker’s bank recently obtained the mandate for financing a new nuclear plant to be built as a joint venture between Estonia, Latvia and Lithuania in competition with the Americans and Dutch.
INNOVATIVE FINANCING
This reminds us of the innovative form of nuclear power station finance put forward by Neil Collins in the business pages of the Evening Standard of July 20.
“What”, he asks, “if we could buy our fuel in advance – not just a few weeks or months, but decades ahead? What if we could buy a bond to build Sizewell C power station and get paid not in money, but in power? That way we would not have to worry about at least one important element in our future cost of living”.
Nowhere, he argues, does this investment model fit better than for nuclear power generators where capital costs are high but running costs small and predictable. A long-dated bond that paid in electricity rather than money would buy certainty for the supplier and be better than an indexlinked gilt for the customer. With a two per cent coupon, it would transform the economics of nuclear power and look like a bargain to the buyer, too.
The moral of this tale is that where there’s a will there’s a way. We shall discover how much will there is over the coming months.
PREPARING FOR REVIEW
In the run up to the publication of the Energy Review, your chairman, Sir William McAlpine, and Neville Chamberlain, former chairman of Urenco, wrote to leaders of the electricity industry – generators, distributors and others – urging a positive response to a positive outcome for nuclear.
Vincent de Rivaz, chief executive of EDF, said his company – “an investor in waiting” over nuclear power – was closer to making a decision on new nuclear build now that “we have a sense of direction”. The CBI and the Engineering Employers’ Federation both praised the inclusion of nuclear power but worried about the lack of liberalisation in European energy markets.
This concern was underlined by Ofgem, the energy regulator, who warned of “a great deal of uncertainty” about gas imports next winter.
We are enormously comforted by other reactions.
The aforesaid Porritt said the Government was “going to have to stop looking for an easy fix to our climate change and energy crises – there simply isn’t one.” So why doesn’t he admit nuclear as part of the mix.
Greenpeace saw an “enormous radioactive cloud hanging over the energy review which threatens to drown positive moves on decentralised energy, renewables and energy efficiency”. And a very good thing, we would argue, if it eliminates the impractical and uneconomic.
The Mayor of London, Ken Livingstone, declared war, promising to “use all my existing and new powers to pursue and alterative to the Government’s Energy review”. We are tempted to say that if he’s agin it, the Government, for once, must be dead right.
OTHER ACTIONS
As the Review approached, members of the committee were busy promoting nuclear power.
Keith Parker, director of the NIA, was engaged on planning and broadcasting; Paul Spare broadcast and gave a presentation about the “Paranoid or just Hysterical” in relation to nuclear safety and waste.
He concluded: “When it comes to the disposal of nuclear waste, we are afflicted by a plague of persons who contrive and believe the most infamous slanders against a technology to which they take exception.” Your Secretary spoke at the British-North America Committee (in a debate with Tom Burke, anti-nuke yet RTZ environmental adviser).
Fulham Women’s Institute (one of the youngest in the land and receptive to arguments); and the Association of Electrical Producers.
He also contributed a major essay on the case for nuclear to an Economic Research Council pamphlet “The New Economics of Energy Security” published just before the appearance of the Energy Review. The Secretary’s article brings together in one document a series of his presentations this year on the case for nuclear energy. The pamphlet is available from the ERC (www.ercouncil.org) at 7 St James’s Square, London SW1Y 4JU. The ERC’s chairman, Damon de Laszlo, is a SONE member.
GENERAL MEETING
About 30 members gathered in Warrington, courtesy AMEC, on June 27 for SONE’s annual meeting for members outside London to hear Sami Lutonen, head of institutional relations at Foratom, the European Atomic Forum. Mr Lutonen gave an excellent overview of the European energy scene and was essentially optimistic about the future for nuclear. His presentation is available by e-mail or in hard copy. Requests please to the Secretary on
or Tel 020-8660-8970.
Two slides summarise the position. Currently, 13 of the 25 EU member-states have nuclear power and this will become 15 out of 27 with the accession of Bulgaria and Romania. In the 25 there are 148 reactors operating, generating 31% of EU electricity.
For the future, energy demand in the 25 is expected to rise 21% between 2002 and 2030.
Overall import dependency will rise to almost 70% in 2030 and more than 750GW of new capacity will be needed by then.
As fossil fuel prices have doubled in the past two years or so, logically a lot of this new capacity should be nuclear, especially as it is clean. AGM, OCTOBER 24
Gremlins in last month’s copy left members confused over the date of the AGM. It is Tuesday, October 24 at the Royal Academy of Engineering, 29 Great Peter Street, SW1 – 12noon-3pm, with buffet lunch, courtesy NIA.
We are delighted to announce that the speakers will be the Energy Minister, Malcolm Wicks (12.15pm) and Professor Michael Laughton at 2pm. Mr Wicks will speak about the Energy Review and Professor Laughton will give an engineer’s view of energy policy.
