With the news that a deal has been struck to build the UK's first new nuclear power station in a generation, here's a classic article from the vaults, originally published in April 2013, examining the costs of building new nuclear power stations...
Remember those smiling red sun badges from the Eighties with the slogan, “Nuclear Power? No Thanks”
These days the debate is more likely to be framed in stark economic terms. “Nuclear Power? How Much?”
That is not to say the safety and environmental concerns with nuclear power have gone away. Far from it. The disaster at the Fukushima nuclear power plant in Japan three years ago – where an earthquake and tsunami resulted in a loss of power for the cooling systems – sent tremors of fear and concern around the world.
Anti-nuclear campaigners are just as vocal as ever and Fukushima spooked the Germans enough for them to declare they would close down all their nuclear power plants and concentrate instead on wind and solar.
But in the UK an enviable safety record in the nuclear industry, coupled with increasing worries over power shortages in the near future, has re-focussed the debate around cost.
And these aren’t just any old costs. These are terrifyingly gigantic, sheer cliff faces of costs, with higher summits in the far distance as far as the eye can see. Sleepless nights? We’re talking decades of them.
Your average bog-standard, off-the-peg nuclear power station comes in at about £10bn. The proposed new plant at Hinkley Point (above) in Somerset, with two nuclear reactors, is estimated at around £14bn.
That’s quite a lot of money just to dig a big hole in the ground and fill it with boron rods and concrete, but the timescales are long and involved and as you might guess the specifications and regulations can get quite picky.
Now, multiply that £14bn by 10 – the number of new plants the government has suggested might be needed to meet climate change goals – and those mountainous costs are now poking into the stratosphere.
The new nuclear power stations are needed because the current ones are getting on a bit. They’re like a fleet of old cars that have started to splutter and although you can tinker with them to squeeze out some extra mileage, they will soon be failing the nuclear industry’s equivalent of an MOT.
The government wants private companies to fund the next generation of nuclear power stations, but has to entice them into the market by offering profitable returns on the price of electricity for the national grid.
Offer too little and the plants won’t get built. Offer too much and the government will be accused of giving public subsidy to private companies for decades with either the taxpayer or the consumer left to pick up the tab.
Martyn Jenkins, director of nuclear energy consultants Enkom, says: “The capital cost to build a nuclear power station is such that unless the company making the investment can see a clear revenue stream over the 40-year life-cycle, then there will be concerns about its viability.
“You have two huge capital expenditures – one at the start, for the land purchase, the technology and the construction. Then, taking the building down and the decommissioning costs at the end. It all comes in at a minimum of between £10bn to £15bn.
“Operating will cost tens of millions of pounds a year, but this is when revenue will be generated.
“The question is, what is the return on the investment. If there is a fixed minimum tariff for electricity prices, then you can work out the revenue stream. But, like any commodity, if you can’t guarantee that price, if the price ebbs and flows, and if you’ve pumped all the cash in at the one end, then you’re at risk of not recovering your investment. You might not even pay off the interest payments on your borrowing.”
That has been the fear of some of the companies who have folded their cards and left the table. In February of this year, Centrica – owners of British Gas – pulled out of a partnership with EDF to build four new plants.
Before that, the German companies RWE and Eon shelved their own plans to get involved and the fear now is that EDF, a French giant of the international energy market, could be the only player left in town.
That would put them in a strong bargaining position – and weaken the hand of the government – when it comes to agreeing the “strike price”, the amount the company generating the electricity would receive for each unit of energy produced.
It’s understood that some serious haggling is going on between the Treasury and EDF at the moment, with the government reported to be offering a price of £80 per megawatt hour and EDF wanting £100 per megawatt hour.
The clock is ticking because half of the UK’s 18 current sites are being pulled down and the other half will be ready for the scrapheap in only round 10 years’ time.
With new plants taking 10 years to construct, that leaves little time to chinwag over the price although the good news is that the stations will not need to be replaced on a like-for-like basis.
New nuclear power stations will generate about four times the electricity that the current ones manage, so as four are knocked down only one is needed to replace them.
That would only keep us where we are, however, which is a provision of around 19 per cent of the UK’s electricity generation from nuclear power. But if the climate change aims are to leave behind reliance on high-carbon fossil fuels, then it’s estimated that 10 swanky new nuclear power stations will be required.
If all this still makes you feel about as warmly disposed to nuclear power as the residents of Springfield are to Mr. Burns - “excellent, Smithers” – then it’s worth noting that Homer Simpson could be joined by 900 fellow workers in the nuclear industry by a new plant at Hinkley and there could be as many as 25,000 construction jobs.
Nor is Britain alone in considering that nuclear power has a big role to play in the future.Under sunshine that could fry an egg, never mind heat a solar panel, and within sight of the largest oil fields in the world, the United Arab Emirates have just started construction on their first nuclear power station...
Sizewell & Hinkley Point photos: Adam Timoworth and Joe Dunkley.