The UK will follow Finland and France as the next European country to invest in next generation nuclear technology, if the general view at the recent European Nuclear Congress (ENC) is to be believed. Chairman and CEO of Electricité de France (EdF) Pierre Gadonneix told the opening session on 12 December 2005 that his company would be ready to invest in a new build programme, which he considered to be a likely prospect so long as the government provides the lead.
But it was not even three years ago that the current government published its energy white paper, titled Our energy future – creating a low carbon economy, which stated: “This white paper does not contain specific proposals for building new nuclear power stations.” The only hope the white paper gave to the nuclear industry came in the form of a vague future possibility: “We do not rule out the possibility that at some point in the future new nuclear build might be necessary if we are to meet our carbon targets.”
Greenpeace protester at the CBI conference where UK prime minister Tony Blair announced an energy review
Now, with barely any time allowed to implement the policies outlined in the white paper, UK prime minister Tony Blair has announced a review of the country’s energy situation, which would include the question of “facilitating” new nuclear build. The announcement was front-page news in the UK, thanks largely to a protest staged by Greenpeace. Moments before Blair took the stage to address the Confederation of British Industry (CBI) conference in London on 29 November, two Greenpeace protesters climbed ceiling rafters to unfurl a banner reading: “Nuclear: wrong answer.” The pair then released hundreds of small stickers with the same message over nonplussed business leaders before the hall was cleared. About 45 minutes later, delegates assembled in a side room to hear Blair say: “The issue back on the agenda with a vengeance is energy policy.”
POLICY U-TURN
Preparing the ground for such a crude reversal in government policy on nuclear power, Blair told the parliament’s Liaison Committee one week earlier: “The reason why we are coming back to that in the context of the energy review that we will announce shortly is because the facts have changed over the past couple of years.” But it is hard to see which facts in particular have changed. As far as Greenpeace is concerned: “All the problems of nuclear power remain. The only thing that has changed is the quality of the marketing.”
It would be hard to argue this point. The 2003 white paper rejected new nuclear build on the grounds that nuclear’s “current economics make it an unattractive option for new, carbon-free generating capacity and there are also important issues of nuclear waste to be resolved.” There is no evidence to suggest that nuclear power is more economic now than it was in 2003, unless one considers recent hikes in oil and gas prices to be indicative of what is in store at least ten years hence. And on the waste issue, the Committee on Radioactive Waste Management (CoRWM) is due to deliver its recommendation on the long-term management of radioactive waste to the government at the end of July 2006. Whether the government is capable of turning CoRWM’s advice into any kind of solution remains to be seen.
Therefore, aside from the fact that the government might be beginning to realise that the policies set out in the white paper might not be achievable, the facts in the UK have not changed. It is still the case that, soon after 2020, Britain will have lost around 20% of total electricity generating capacity as its Magnox and AGR plants reach the ends of their lives, leaving the Sizewell B PWR as the country’s only operating nuclear plant. (British Energy has of course recently announced that it will pursue lifetime extensions where practical, but this development only lessens the urgency of new nuclear.) In addition, coal plants accounting for 10% of generation would also have been retired. In total, about 14GWe of replacement capacity must be planned. “Some of this will be replaced by renewables but not all of it can,” said Blair, whose CBI conference speech also contained warnings about the dangers of over-reliance on any one fuel.
THE CLOCK IS TICKING
UK energy minister Malcolm Wicks will head the review, and produce a policy statement in the early summer of 2006. “It will include specifically the issue of whether we facilitate the development of a new generation of nuclear power stations,” said Blair.
Assuming the policy statement does end up recommending new nuclear, there still remains a big question mark over the timing. As already noted, CoRWM makes its recommendation at the end of July, before which time the government is likely to remain silent on future new build. While it is near to certain that some form of phased deep geological waste repository will feature in CoRWM’s recommendation, the public reaction to CoRWM’s findings is far from certain and could derail, or at least postpone, any decision on new nuclear build.
Should the government manage to get past the waste hurdle following CoRWM’s recommendation and issue a policy statement that recommends new nuclear, there then follows a further review. Although no new legislation is required for new nuclear build in the UK, the 2003 white paper states: “Before any decision to proceed with the building of new nuclear power stations, there will need to be the fullest public consultation and the publication of a further white paper setting out our proposals.”
This point was confirmed on 3 November 2005, when the secretary of state for trade and industry, Alan Johnson, told parliament: “In line with the commitment that we gave in the 2003 white paper, if the result of the new review announced by the prime minister is that we should go down the nuclear new build route – that is a very big if, because factors such as waste and cost have to be taken into account – we will need to publish another white paper and to have the widest possible consultation.”
Johnson went on to say: “We need to ensure that we publish a white paper that examines all the arguments and issues, such as waste, cost and renewable energy alternatives. If that is done properly, it will form the basis of a very constructive debate, regardless of the conclusion reached.”
A conservative estimate for such a debate would be around one year, so the publication of the next energy white paper is highly unlikely before late 2007. (The 2003 white paper followed around 18 months of consultation.) This brings us to very near the end of Blair’s premiership, assuming he keeps to his promise to step down before the next election. It is highly probable that Blair’s successor (almost certain to be the current chancellor Gordon Brown) will take on the leadership before mid 2008. So, if everything runs in the nuclear industry’s favour, implementation of the policy set out in the next white paper is likely to fall to the next Labour leader. Furthermore, there is little or no chance that the next Labour leader would have the same level of enthusiasm for nuclear power as Blair – especially with a general election looming.
PROVIDING LEADERSHIP
Time is clearly not on the side of new nuclear build under the present administration, unless the government reneges on its promises. In spite of this, there are many in the industry who seem to be under the impression that the green light for a new build programme will be given much sooner – in not much more than half a year’s time. Whatever the timing may be, there nevertheless remains the more challenging question concerning what the government needs to do to provide the conditions in which new plants will be ordered.
This very question has recently been looked into by the parliament’s Environmental Audit Committee. In its inquiry, Keeping the Lights on: Nuclear Renewables and Climate Change, the committee asked senior executives from BNFL and British Energy what the nuclear industry would require to facilitate new build. BNFL technology director Richard Mayson told the committee on 9 November that the government would need to provide a strong lead. “Our view is that it is
really a question of a definition of a regulatory strategy; that somebody actually thinks through how these things will all come together in order to enable new build rather than any specific requirement to change any legislation or any such thing,” he said, adding: “I think it is about effective coordination of what is a relatively complicated regulatory arrangement for such a venture.”
In his evidence to the committee, British Energy company secretary Robert Armour also said that regulatory clarity was necessary. “We are not looking for reduced scrutiny,” he said, but rather a process where “the regulators provide us with a clear view of what it is that is needed by way of scrutiny and by way of public debate.”
While such requests may seem reasonable to the nuclear industry – and recent experience in the USA shows that the provision of a clear and predictable regulatory process can initiate new build activity – the committee was sceptical. The chairman, Conservative member of parliament Peter Ainsworth, told Armour: “I think you are asking for some abnormal privilege here.”
Later in November, when the committee asked the trade and industry secretary of state about the possibility of providing guarantees such as a cap on waste disposal costs, sharing initial planning costs, or perhaps guaranteeing the price of generated electricity, Johnson stated: “I would be very surprised if we issued that kind of guarantee.” He went on to say: “In terms of the government issuing guarantees, I do not think there is going to be an awful lot of that emerging at the other end of this review.”
Ainsworth’s response to this is interesting: “What is the industry waiting for?” he asked. “We have had real trouble getting to the bottom of this. They are all sitting around saying: ‘We are waiting for a steer from government; we are waiting for a green light, for a sign.’ Do you know what sign they are waiting for?” To this Johnson suggested that it would be best to ask the nuclear industry. Ainsworth replied: “We have and it is entirely unclear.”
Johnson was pressed several times on what the government would have to do to initiate a new build programme. He seemed to think that the government merely needed to state that it wanted to “encourage and hope for a nuclear new build programme.” When Ainsworth ventured that such a statement might not lead to the necessary financing coming forward, Johnson begged the original question, saying: “There might be some practical measures.”
While refusing to say what these practical measures could be, Johnson would have been well aware of the industry’s view. At the beginning of November, Vincent de Rivaz, chief executive of EDF Energy, told the committee his company would be ready to invest in new nuclear build, so long as there would be “clear policy in terms of licensing, in terms of planning, in terms of putting in place a safety authority, a clear vision and government which delivers.” Contradicting what seemed to be the overriding view of the committee, de Rivaz said that new nuclear is an attractive investment, despite the poor economic history of the UK’s nuclear industry: “The idea that nuclear requires special subsidies, special state financial aid, is, with respect, an old-fashioned view of the nuclear industry.”
THE ‘S’ WORD
In any case, it would take an extremely brave politician to advocate anything that could be interpreted as a subsidy for nuclear – the culture and the political climate in the UK effectively rule out subsidising the nuclear industry. Although Peter Waller, head of the energy industries and technologies unit at the government’s Department of Trade and Industry (DTI), has previously said that it is “not impossible” that the market could be tweaked in a way similar to that used to promote renewables, the closest a politician has come to such a statement was when Blair stated in his speech to the CBI that the energy review would look into the issue of “facilitating” new nuclear build.
Clearly certain government guarantees must be made first, and it is questionable whether the current government would be able to weather accusations of subsidising nuclear and provide those guarantees. While certain measures such as relieving nuclear from the Climate Change Levy (effectively a tax on non-renewable energy use by the industrial sector) and changing the ‘renewables obligation’ into a ‘low-carbon obligation’ would obviously be welcome concessions
for the industry, would-be investors need guarantees that they would be protected against, for example, so-called ‘vexatious litigation’ (baseless legal action from campaign groups), which could lead to late design changes or planning overruns.
Recent studies into financing new build in the UK confirm that a certain level of subsidy/support is required. In June 2005, economics consultancy Oxera published its report, titled Financing the nuclear option: modelling the costs of new build, which stated: “The nuclear option is by no means closed, although economic investment is likely to require government support.”
More recently, in December 2005, ratings agency Standard & Poor’s said in its research document, titled UK Security Of Supply Fears Spark Renewed Interest In Nuclear Energy: “If new construction of nuclear power is to become a reality in the UK, Standard & Poor’s has significant concerns over the future structure of the generating industry. In particular, the potential for increased regulation of the liberalised generating industry, a higher level of political interference in the market structure, and the ongoing prospects for nuclear power in a competitive power market. Standard & Poor’s expects that investment in nuclear power will rely on the long-term sustainability of high electricity prices in the UK energy market.”
The government is likely to be deeply concerned that some analysts are implying that the guarantees needed would effectively amount to subsidising the industry. Therefore, assuming that the energy review recommends new nuclear, it is highly questionable whether the current administration – even under Blair – would have the political willpower to implement the policies that would facilitate new build.
In any case, there’s still a very long way to go before that question is even broached. Blair has only initiated the process, but no decision has yet been made. As Johnson told the Environmental Audit Committee on 23 November: “He has not made a decision on nuclear new build – I am absolutely confident on that – and neither have I and neither has my energy minister. If some newspaper correspondent thinks we have, they are wrong.”
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