Politicians must back the best long-term optionby Malcolm Grimston / September 19, 2012 / Leave a comment
Published in October 2012 issue of Prospect Magazine
Before the recession it all looked quite clear—11 sites, subsequently reduced to eight, had been identified for new nuclear plants. The assumption was that all active nuclear stations, amounting to some 10,000MW, would be replaced by 2025. There was every prospect of further expansion after that. In the late 1990s, 30 per cent of the UK’s electricity came from nuclear—to return to that level would have required the construction of some 21,000MW of new capacity by 2030, representing around 13 reactors. At about £5bn a throw that was a lot of investment, and three consortia were vying for the contracts.
On the surface, government policy has not changed—it is still as confused as ever. In a single interview in June, Ed Davey, Energy and Climate Change Secretary, made two incompatible statements: “Britain could survive without nuclear power,” and “Nuclear power is an essential part of the country’s energy mix.” Like its predecessor, the current government sometimes speaks as though its job were to underwrite low-carbon power supplies; at other times it lays that responsibility on the market. So the government will not “subsidise” nuclear power; instead it finds a definition of the word “subsidy” that omits guaranteed power prices and a floor price for carbon emissions, both of which are designed to encourage the market to invest in low-carbon energy. But if the market does not want to, then what?
Nuclear economics are hugely front-loaded. Most of the cost of nuclear electricity goes on building the plant and servicing the capital, while for CCGT (Combined Cycle Gas Turbine) the costs are dominated by fuel, the stations themselves being relatively cheap and (vitally in a marketplace) quick to build. CCGT is much more flexible in output than nuclear or renewables and relatively uncontroversial in political and public perception terms. As problems with financing renewables and nuclear capacity have grown, so gas has looked more attractive, even discounting shale gas.
The crunch is coming. If the Electricity Market Reform draft bill does not deliver a vast amount of new low-carbon capacity including nuclear, then what happens? Will the government abandon carbon targets and allow a second dash for gas (probably the only thing a pure market would contemplate building in current circumstances), or will it abandon its market mantra and ensure the construction of nuclear power and renewables (and will Europe let it)? Although David Jones, the new Welsh Secretary, is a passionate supporter of new nuclear power station at Wylfa, Charles Hendry’s departure from the Department for Environment and Climate Change in the September reshuffle may be less good news for the low carbon—and nuclear—lobby.