Meeting the Energy Challenges � Nuclear White Paper January by whereitsat

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									“Agreeing to nuclear power is like a dog's walking on his hind legs.
It is not done well; but you are surprised to find it done at all."
                                                                            after Samuel Johnston

Quarter Speed Ahead – UK Nuclear White Paper

In January, after almost a year of                   forms of generating electricity and the
consultation and deliberation, the UK                displacement of gas as the main source of
Government agreed to endorse nuclear                 heating homes, offices and factories. The
power. However, the endorsement was so               construction of a only couple of large
hedged around with conditions and doubts             nuclear power stations, even with a major
that it amounted not to the “full steam              expansion of renewable energy is likely to
ahead” for which the industry had hoped;             result in failure to meet both targets for
rather it is a limp “quarter speed ahead”.           carbon emissions and security of supply
As a result progress with the construction           for the foreseeable future.
of any new nuclear power stations in the
UK will be very slow. Hence, the                     In the White Paper, Gordon Brown set out
Government’s central assumption is that              the Government’s decision to enable
one or two new nuclear stations might be             private investment in nuclear, reversing
built by 2020.                                       the 2003 Energy Review’s opposition to
                                                     nuclear power. While he recognised that
This position seems oddly out of line with           the issue of climate change is world-wide
the Government’s commitment to an                    and cannot be solved by the UK alone, his
energy policy driven by the twin goals of            view is that the UK has to take urgent
climate change and energy security. This             action to address carbon emissions at
policy requires energy savings, urgent               home.
replacement of coal and gas with cleaner


             “The Government believes new nuclear power stations should have a
             role to play in this country’s future energy mix alongside other low
             carbon sources; that it would be in the public interest to allow energy
             companies the option of investing in new nuclear power stations; and
             that the Government should take active steps to facilitate this.”
                                                  Prime Minister Gordon Brown 2008


Conditional Go-ahead                                 Any new nuclear power stations will be
                                                     built, funded and operated by the private
The UK energy policy as laid out in the              sector. The reasons for this are:
2006 Energy Review, and in the
subsequent 2007 & 2008 Energy White                   UK has an open and competitive
Papers, is multi-faceted.                              electricity market, which might be
                                                       distorted by Government investment in
The Government’s view is that no single                one major element of generation;
technology will provide an adequate or
secure response to the long term                      The record of Government involvement
challenges. UK energy should be allowed                in nuclear investments is a poor one;
to include a significant nuclear component,           The political arguments against nuclear
alongside energy saving, growing                       will be more easily handled, if it is a
quantities of renewables and perhaps the               private sector decision to build nuclear
potential in the longer term for CCS                   power stations.
applied to clean-up coal and gas
generators. However, the impression is               One significant point is the Government’s
given that if the private sector does not            removal of any limit on the amount of new
wish to invest in nuclear the Government’s           nuclear that can be built. This seems to be
energy policies can still be delivered,              a positive signal, because it removes the
though probably at an additional cost.               implied limit of 20% of electricity



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generation being nuclear indicated in the        events and communication exercises were
2006 Energy Review.                              held.
As well as no upper limit, there is no lower     The responses showed that there is
threshold.                                       considerable support for nuclear power.
                                                 However, many people were prepared to
This policy shift could be interpreted as the    support nuclear only on the basis that their
weakening of the previous commitment to          concerns about safety, waste disposal,
replace the current nuclear generators.          decommissioning costs, maintaining other
Thus the construction of a single new            energy options etc. are adequately
reactor could be construed as a success          addressed.
rather than the six to ten power plants
required to replace the historical nuclear       This large effort by the government has
capacity. More importantly, at least double      been important both in terms of public
this number would be required to make a          acceptance and because it is quite likely
significant impact on the UK energy policy       that Greenpeace with take the
objectives.                                      Government back to the High Court as
                                                 they believe that there was not a level
The UK accepts that climate change is an         playing field in the consultation and
extraordinary problem that requires              decision making processes. Greenpeace
significant intervention such as subsidies       have until early April to apply to the High
and quotas for renewable energy sources          Court for a judicial review of the White
such as wind. One is led to ask why is the       Paper. If there is recourse to the courts,
response on nuclear so neutral?                  the process of planning the build of new
                                                 nuclear stations will be further delayed.
If nuclear is part of the answer to the
problems of UK energy, why does the              Two significant points included in the
White Paper lack urgency and why is it           White Paper were:
silent on targets?
                                                 1. Assessment of the marginal cost to the
                                                    public of cutting carbon emission by
Nuclear Consultation                                different technologies and the scale of
                                                    benefit showed:
The main purpose of the White Paper is to
set out an analysis of the many responses            Energy savings have negative costs
to the Government’s consultation on                   and could make a substantial
nuclear. Earlier consultations on the 2006            contribution to carbon saving;
Energy Review were judged by the High                Wind power – onshore and offshore
Court to have been flawed and                         windmills could make a large saving
inadequate. Therefore over 100 of the 190             but at a high cost - £200 & £300/tne
pages of the Review deal in a very careful            of carbon saved;
and detailed manner with the questions               Bio-mass and CCS technologies are
posed for nuclear consultation, and the               currently expensive and therefore
issues that arose during the process.                 will not make a large difference to
                                                      carbon emissions in the near term;
The consultation process was extensive. It
                                                     Nuclear could make a large
examined the issues by means of 18
                                                      contribution and would have a
broad questions in a consultation paper
                                                      neutral or minor effect on energy
that was publicised heavily and circulated
                                                      costs.
widely. In response to the consultation
paper, 2700 submissions were received.
                                                 2. BERR have considered the schedule
Direct contact was obtained through
                                                    for new build and mapped a program
stakeholder meetings held throughout the
                                                    which is longer than previous
UK, nine meetings with local groups living
                                                    estimates with first power from new
close to existing nuclear facilities, followed
                                                    build moving back until 2019. This
by a further nine public consultation
                                                    slippage appears to be caused by
workshops. In all 1600 interested parties
                                                    increased time for safety regulators to
and members of the general public
                                                    assess the new reactor designs.
attended these events. Other supporting




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Facilitative Actions                                under schemes to be approved by the
                                                    Government;
The Government has a program of                   Operators will have to pay their full fair
activities that are designed both to               share of deep repository costs. The
address the concerns raised during the             ways of satisfying these requirements
consultation and to prepare the ground for         are to be laid out later in March;
new nuclear power stations.
                                                  The payments have always to be
These actions deal with:                           adequate with any potential shortfall
                                                   due to early technical problems or
     Sites & planning;                            company insolvency covered either by
     Justification of nuclear power under         bonds or insurance;
      European Law;                               The funding scheme will be covered by
     Pre-licensing of new reactor designs         a legal framework and be administered
      – Westinghouse AP1000, GE -                  by a new Nuclear Liabilities Financing
      ESBWR, Areva EPR and AECL -                  Assurance Board.
      ACR1000;
     Mechanisms for the funding of new
      build decommissioning & waste costs;       Funding of new Build
     Changes to carbon trading                  A major reason why the White Paper is not
      arrangements through EU ETS, or            “full steam ahead” is the absence of
      otherwise.                                 secure revenue which is required to attract
                                                 private funding in the scale required. An
Some of these actions have their own             assessment of generating economics re-
White Paper and separate legislative             states the position that nuclear is
processes – e.g. The Climate Change Bill.        economic on a life-time levelised basis
Other issues such as potential sites are         when compared to other means of large
important because they will be a                 scale generation, including gas and coal,
battleground between utilities. Existing         but this depends on the future price of gas
sites are attractive, at least for the initial   and the traded price of carbon.
reactors, because they will facilitate
approval and they match the closure of           Funding of new plants requires there to be
older reactors and are close to centres of       a degree of certainty about the future price
growing demand in the South of England.          of electricity. The Government’s chosen
                                                 method of supporting the price of
Utilities such as EdF and Eon need access        electricity currently is the EU ETS. This
to these sites but they are all owned by         trading scheme prices permits to emit
British Energy, who regard the sites as          carbon. If the ETS operates to deliver a
their main bargaining asset to gain              dependable price for carbon permits it
entrance to any new build program.               could stabilise the market price of
                                                 electricity.
The White Paper covers the principles of
the funding of decommissioning and waste         Banks planning to fund new nuclear power
for future reactors. The main points are:        stations are expecting changes to the ETS
                                                 so that carbon trading can provide an
 Government intends to pursue long              effective floor to the price of electricity and
  term deep geological waste disposal            hence a floor to the revenue of generators.
  and new reactor wastes will be                 However, the ETS needs to be reformed.
  included in these plans;
 Operators will be responsible for their
  own reactor decommissioning and                The weaknesses of the current trading
  interim storage of spent fuel and other        scheme are well known. The oversupply of
  wastes until the deep repository is            carbon credits and the short duration are
  ready;                                         acknowledged in the White Paper.
 Operators will have to make payments           However, no specific ways of resolving
  into an independent fund for                   these problems were laid down. The
  decommissioning and waste disposal,            timetable for the next phase of the ETS
                                                 postpones these decisions until 2010 or
                                                 later.


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Phase 3 may well cover only the 5-10            Therefore the first one or two reactors are
years from 2013, a period much too short        likely to funded based on the developers
to affect the funding of new reactors.          own balance sheets. This would restrict
The trading scheme is owned collectively        early investment to the large European
by the EU countries, therefore UK cannot        nuclear utilities such as EdF, RWE and
make changes unilaterally, though there         Eon. Also, as a result of these funding
are hints that the UK might set up a            restrictions perhaps only a single nuclear
separate arrangement if the ETS cannot          power station would be built by any
be reformed. The delay of significant           developer, in the first phase. In this case,
decision about phase 3 until 2010/11 sows       the new nuclear program would amount to
uncertainty. Therefore it is “quarter speed     only one or two new nuclear stations in the
ahead”.                                         period up to 2020.

                                                This rate of build can be compared with
Delivering UK Energy Policy                     the performance of the French nuclear
                                                programme in the early 1980’s when at its
Governments and commentators                    peak four reactors were being
constantly remind the public that climate       commissioned each year. There are clear
change is the issue of the new millennium.      differences between the situations. The
It will affect international power structures   French programme was at its height after
as countries rich with energy gain power        15 years of development and funding was
and influence, while major consumers of         guaranteed by the Government. Even
energy will be have to pay higher prices        recognising the different requirements of
both to buy energy and to convert it into       private funding and that it would take
cleaner forms for use.                          some years to build up to this scale, the
                                                French experience shows what would be
It is natural to ask:                           possible with a more whole-hearted
                                                commitment to nuclear power.
 If nuclear is one of the few proven large
  scale providers of clean energy, is the       One of the constraints of the current
  Governments’ neutral policy consistent        approach is number of Government
  with the seriousness of the situation?        departments involved. The sponsoring
                                                department for all of these energy sources
 If the decisions taken in the next few        is the department of Business Enterprise
  years to replace 30% of the UK energy         and Regulatory Reform, while the planning
  supply will have consequences on              issues are the responsibility of the
  emissions up to 2050, should the              Department of the Countryside and Local
  Government be agnostic about the type         Government. Climate Change targets and
  of generation that is selected?               responsibility lies with the Department of
 If the UK is committed to cutting its         Environment Food & Rural Affairs which
  production of carbon by 15% by 2020,          also leads on carbon pricing and ETS as
  should the current nuclear contribution       well as nuclear waste matters. The
  be allowed to fall from about 20% of          Treasury maintains a watchful eye over all
  electricity to below 10% in the same          these activities. As a result, the divided
  time frame?                                   responsibilities impede speedy decision
                                                making and therefore action.
New Build Program
                                                Putting new nuclear in the broader context
                                                of climate change, it is one of only three
The likely timetable to construct the first     large scale means of clean generation
new reactor is laid out in the White Paper.     identified in by the 2006 Energy Review.
The schedule is at least 11 years from          Only nuclear, wind power and the yet to be
2008, with first power from a new nuclear       demonstrated CCS are candidates for the
station coming on stream in 2019.               wholesale shift from a carbon based
                                                energy economy to clean energy.
Because of the lack of a clear floor price
for wholesale electricity in the UK market,
debt funding will not be forthcoming.




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                                                        current clean energy output and installed
        Possible Growth in Clean Energy                 capacity (see Box) – including more than
        Supply Sources 2006 – 2035                      20GWe of new nuclear generation;
                                                      Broken down barriers through a cross-
                                                       department taskforce or agency tasked to
                                                       ensure the programme is delivered;
                                                      Brought the scale of funding required
                                                       (~ £120bn over 20 years) by engaging more
                                                       positively with private enterprise.

                                                     It is legitimate to ask whether the Government’s
                                                     rhetoric about the importance of early action to
                                                     address climate change is matched by the urgency
                                                     to get new forms of generation, including nuclear,
                                                     built quickly and in substantial numbers?

An energy policy attuned to the seriousness of the   That is why sadly, this White Paper signals a
issue of climate change would have:                  “quarter” rather than “full speed ahead” for nuclear.
 Set much bolder but still feasible targets for
  clean energy – perhaps 40% of total energy (ex
  transport) ~350-400TWh within 25 years –
  requiring growth of more than 5 times the




Tony Roulstone                                                              24 February 2008




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