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Cost of nuclear waste could kill off plans for a new fleet
Posted by tracy on 27 March 2008.
The government says the decision on building new nuclear reactors will be entirely up to the market and utility companies will have to pay their "full share" of decommissioning and waste management costs, but Gordon Brown is going to have to cook the books like a cordon bleu chef he if wants to attract new investment.
While Brown teams up with French president Nicholas Sarkozy at Emirates stadium today to push through his dream of a new nuclear era, a government advisor is publishing a new cost analysis that suggests energy companies cannot be charged a fully commercial price for waste disposal without "killing the prospect" of a new generation of nuclear reactors.
The analysis by Ian Jackson, who has worked in the nuclear industry for over 20 years and is a former nuclear regulator, says that a "fully commercial price would make disposal far too expensive, killing the prospects of any new nuclear build programme in Britain".
That means that the government could not charge energy companies the rates already being paid by foreign utility companies storing waste at Sellafield - which, commercially speaking, they should be - without scuppering any plans for new nuclear reactors. The government would need to cap costs at six to 12 per cent of their actual commercial value to make it worth while for investors.
"The problem is that unfortunately the fully commercial price would make disposal far too expensive, killing the prospects of any new nuclear build programme in Britain," said Mr Jackson.
"In plain language, the energy companies want fixed price caps on nuclear waste disposal; an understandable position given that the Nuclear Decommissioning Authority's waste management cost forecasts have escalated by 9 per cent annually in recent years."
Storing waste from the new reactors alongside waste from existing reactors in the £10 billion repository would add about another £500m to the cost. Ultimately taxpayers would end up having to subsidise new nuclear power stations contrary to the government's promises. If nuclear power had to stand on its own two feet in a truly liberalised energy market, there's no way anyone would be talking about building new reactors.
Now maybe some people will think that £500m is a bit of a bargain for climate friendly energy. But the fact is a new generation of nuclear reactors will not be built within the next eight years which is when scientists agree C02 emissions have to be on a downward trend if we are to have any hope of averting the worst impacts of climate change. The government's own figures show that a new fleet of reactors will only reduce our emissions by 4 per cent sometime after 2025.
Worse still, the taxpayer money that will be needed to kick start investment in new nuclear could instead be used for solutions that could deliver greater cuts in CO2 emissions in the time frame needed.
You can download an extract from Ian Jackson's book "Nukenomics - The commercialization of Britain's nuclear industry" (pdf) which will be published next month by Nuclear Engineering International.
Full share of the _cost_
How exactly does this translate into a "subsidy"? The article by Jackson states that the operators of UK nuclear plants will be paying more than the cost of disposing of the waste regardless. They might not pay as much as foreign operators pay for disposing of waste in the UK, but they would still be paying enough to cover the cost (and more). It is not subsidised.
Is Greenpeace advocating that we should maximise our profits by disposing of foreign waste in the UK instead?
Subsidies
Actually, this looks very much like a subsidy. A subsidy is a form of financial assistance generally paid by government to keep prices artificially below what they would be in a normally functioning liberalised market. The assistance in this case is an artificially low cost of dealing with high-level radioactive waste from new nuclear power stations. The government is likely to pick a fixed unit price for waste disposal at the lower end of estimates because if they charge companies the full whack then the economic case for a new reactor falls apart. This happening does not fit with their policy of facilitating new nuclear power.
I'm afraid there's no assurance that new nuclear operators will be made to pay more than the cost of disposal. The risk premium the government has talked about charging is no cast iron guarantee, especially when you consider the propensity the costs of nuclear waste storage have for skyrocketing. £50m per reactor is peanuts and taxpayers will have to shoulder the risks of rising waste bills while the industry gets off without being charged the NDA’s standard commercial rate.
What the government's doing (on a nod and a wink behind closed doors in Whitehall, incidentally - none of this is up for public consultation or discussion) incentivises investment in new nuclear by offering a regulatory advantage for waste disposal, historically one of the most thorny problems the industry has to deal with. This, along with some sort of fixed carbon price, are the two areas they have repeatedly requested help from the government on, and they seem to have got at least one of their wishes.
Cheers,
Bex
gpuk
Re: subsidies
If subsidy means the govt are paying "financial assistance" to somebody, who are they paying it to in this case?
They are not paying anything to anybody. They are only (possibly) allowing domestic nuclear waste to be disposed of at a lower price than foreign waste producers are willing to pay. It is still above the marginal cost for disposal so it doesn't cost the taxpayer anything (unless you count the lost opportunity of using the same repository space to dispose of foreign waste at a higher price). Does anybody in the UK pay the full "commercial" rate?
Re: subsidies
We're not saying the government are "paying" financial assistance to anybody. What they are doing is artificially incentivising new build by offering a regulatory advantage that wouldn’t normally exist in a free market. Which is a form of subsidy. And paying slightly over the marginal cost of say around £12,200 / m3 of waste is no guarantee that enough money will be put aside by nuclear operators, not least when considering the vagaries of estimating the cost of prolonged interim storage and final disposal. And don't forget that the role of the NDA (who will be in charge of building and handling the repository) is to maximise public revenue from their decommissioning and waste disposal operations. That means they should charge utilities a full commercial rate for new build waste disposal. Or have I missed something?
No company pays the full commercial rate for waste disposal in the UK because our reactor fleet is either owned by the NDA themselves or by British Energy – the NDA aren’t going to charge themselves full whack to deal with their own waste and they’re not likely to do the same for BE because their waste liabilities are currently covered by the taxpayer
Bex
gpuk
Re: subsidies
Bex, I was just going by your definition that "subsidy is a form of financial assistance generally paid by government". As I said, the government isn't paying anything.
I agree that the NDA should maximise their income, but if they demand a price that is too high then they won't get any new income. A service is only worth what people are willing to pay for it.
Now, if you are saying that the NDA should preferentially accept foreign waste because they can make more money from it, then I would have to agree with the logic. But I hardly think that is what you are advocating.
Anyway, there is an argument that the govt should incentivise new domestic nuclear build, both because of its potential for carbon reductions and because it adds variety to our generating options and therefore security.