Our attention is on the risks but growth is possibleby Malcolm Grimston / March 23, 2011 / Leave a comment
The unfolding horror in Japan has thrown nuclear energy back into the public eye in the most dramatic way possible. Most of the country’s nuclear power stations withstood the earthquake and tsunami. But the problems at Fukushima (in plants built in the 1960s or commissioned in the early 1970s) and the failure of hydropower dams have cast into sharp relief the sometimes uneasy tensions between our needs for low-carbon energy and the challenges of the energy sources that could provide it. That the plants survived the earthquake was testimony to their designers’ skills; that their backup safety systems were knocked out by the tsunami shows the dilemma.
The unrest in the Middle East had given new force to talk of a nuclear revival. But although this idea had resurfaced regularly over the past few years, it had yet to translate into many orders for new nuclear plants in western Europe or North America, even before Japan’s disaster. The experience of the last big phase of nuclear construction, prompted by the oil price shocks of the 1970s, helps to explain why: the economic outcome was terrible. Safety concerns aside, potential investors would need good reason to be confident that there would be no repeat of this poor economic performance.
Several factors contributed to that disappointment. First, although nuclear capacity is relatively cheap to run, it is expensive to build. Typically, capital costs represent about 75 per cent of the cost of nuclear-generated electricity, compared with 25 per cent for gas. Coal-fired plants lie between these two. So, for nuclear power, it is vital that the station is built on time and budget, and that the cost of capital is not too high. Poor management of the construction can blight a plant’s economics forever. Projections from the latest Nuclear Energy Agency study, based on data from 11 countries, suggest a total cost of 8.2 US cents per kWh for nuclear, 8.9 for gas and 9.1 for coal (without carbon capture and storage). However, these figures assume that all plants are built on time and on budget, and that the same 10 per cent rate of return is applied to nuclear as to gas and coal-fired plants.
In the 1970s and 1980s, many projects took far longer to build than expected and cost far more. Plants now being built in Europe still give cause for concern. New projects at Olkiluoto (Finland) and Flamanville…