Nuclear power has always been an emotive topic, dividing public and political opinion. And with the increasing environmental conscience of the past decade the opposition to nuclear power seemed to harden. Germany and Sweden both legislated to phase out their nuclear capacity, joining Italy, that had abandoned nuclear following the 1987 Chernobyl disaster. With the exception of the pro-nuclear French, and the decision to build a new reactor in Finland, nuclear had almost become a forgotten word up until last summer. But with last May’s UK Energy White Paper endorsing a new nuclear build programme to meet energy security and climate change goals, the endorsement of nuclear by the IEA for the first time in its history, growing calls for Germany to reverse its decision to phase out nuclear power, and finally the government’s being forced into a second nuclear consultation following a successful High Court challenge by Greenpeace, nuclear was thrust back into the media spotlight.
There are no surprises in the government’s Nuclear White Paper, which is the formal response to the nuclear consultation process. While the report into the consultation by the Nuclear Consultation Working Group criticised the use of ‘framed questions’ to derive the desired answers, concluding that the consultation had failed and calling for a more open third consultation, the government defended the process as being full, open and fair, and reasoned that the consultation was never intended as a nuclear referendum.
Environmentalists wrongly believe that future green energy solutions are undermined by the adoption of nuclear power. Responding to the white paper, Friends of the Earth's director, Tony Juniper, said that new reactors will not solve the UK’s energy problems nor tackle climate change. Calling for investment in ‘cleaner, safer solutions such as renewables, combined heat and power, energy efficiency and the more efficient use of fossil fuels’ he said the ‘government's nuclear love affair is likely to lead to the continued underinvestment in these technologies.’
The renewable industry echoed these sentiments but took a more subtle approach. Conceding that nuclear ‘may well play apart in the UK’s long-term energy supply,’ British Wind Energy Association chief executive Maria McCaffery reminded that nuclear cannot address the urgent need to fill the UK's growing energy gap over the next 10 years. She argues that the solution is renewable energy, explaining: ‘The UK needs to take swift action to ensure the security of supply for our energy as our traditional supplies are retired. We cannot afford to wait until a new generation of nuclear is ready. There are already enough wind energy applications within the planning system to reduce significantly the impending energy shortfall.
Aside from the risk to ‘greener energy solutions’ the other major stick used to beat the nuclear industry is economics. Greenpeace argues that the White Paper uses questionable financial estimates to build the government’s economic case for nuclear, including cost of capital and carbon price assumptions; shows how nuclear companies will be able to cap their liabilities, leaving the taxpayer exposed if estimates for dealing with nuclear waste change; and openly admits the government will have to provide extra money if cost estimates are wrong.
Nuclear economics are arguably more important than the impact of nuclear build on renewable energy. The near-bankruptcy of British Energy earlier this decade is still a potent reminder of nuclear economics and few are under any illusions that investing in nuclear within a fully competitive energy market carries a number of risks. To appease environmentalists, and the Conservative opposition, the government has assured that new nuclear build will be subsidy-free. But what if the economic assumptions are wrong? If the development costs are higher than forecast and wholesale electricity prices slump (as was the case with British Energy’s problems) then nuclear power presents a financial headache. EDF Energy may well be bullish in its forecasts for the UK, pointing to its successful development and management of nuclear power in France, but the French electricity market is not competitive and EDF is also part-owned by the French government. It would not have these safety nets in the UK.
It is worth comparing the economic issue of nuclear with that of renewable energy. Last December the government announced plans for a major offshore wind push in a Scoping Document that projects that the UK could have 20GW of offshore wind capacity by 2020. But to achieve such a significant increase (and indeed other renewable energy sources such as wave and tidal power) requires making the economics more attractive to investors. This will be achieved, says the government in its proposed Energy Bill, by banding the Renewable Obligation to favour less economically viable renewable projects.
In banding the RO the government has effectively created a two-tier energy market comprising a subsidised renewable sector and a non-subsidised fossil fuel/nuclear sector. This cannot be in the best interests of the market.
The BWEA may well extol the ‘values’ of wind power, with 2.1GW approved and awaiting construction (including the 1GW London Array), with another 13GW of wind power awaiting approval. Yet even if all this capacity came online by 2015 it would still not plug the impending energy gap, which by 2015 could be between 15 and 20GW if no new capacity comes inline, because the wind farms will only produce their full capacity for around a third of the time. Thus the ‘effective output’ of this potential new wind capacity will be nearer 5GW, and the wind capacity shortfall of up to 10GW would have to be covered by other plant, such as gas or coal.
If the government is to push offshore wind power through its banded RO it also needs to push low-carbon generation as ‘backup generation’ otherwise the zero carbon value of wind power will not be fully realised. And the best way to achieve this is through financial incentives for low-carbon sources such as clean coal.
Since its Energy White Paper in 2003 the government has had four main goals: reduce emissions, ensure energy supply security, ensure a competitive energy market, and reduce fuel poverty. Its policy may have changed in last year’s White Paper, with the introduction of nuclear, but the goals remained he same.
Perhaps not surprisingly, there has been palpably little progress toward these goals since 2003: energy security is a growing, not receding, concern; CO2 emission reductions are well behind target, and forcing the government to drop its 2010 target cut; the government itself is now concerned that the energy supply market is not sufficiently competitive following retail tariff increases this month; and the higher energy prices are not helping fuel poverty, which remains a major embarrassment to the government.
The new energy policy is an improvement on 2003’s effort but it may still not be sufficient to enable the government goals to be met. If the nuclear decision had been taken in 2003 then it is possible that much of the security and emission concerns would have dissipated. But pressing the nuclear button, albeit four years too late, will not be the energy market’s panacea and neither will a ramp up in wind power.
Nuclear is only a small part of the energy solution. If the energy gap is to be plugged and emissions reduced then the real investment has to be in clean coal (supercritical, ultra-critical boilers) and not just carbon capture and storage. Yet with the new government incentives behind renewables and the expected ‘nuclear rush’ where will clean coal come in the investment league? Arguably much higher up if the government believed in a level generation investment field and introduced a low-carbon obligation.
Energy security and climate change are emotive topics, but emotions are not helpful in achieving business solutions. In 2003 the government channelled its emotions into renewable energy, and this year into nuclear. Yet if it had used its head it would have realised that the most efficient and economical option to secure Britain’s energy supplies and progressively reduce CO2 emissions would be clean coal.
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