Who's going to pay for new nuclear waste disposal?

The government has published a new consultation on the decommissioning of new nuclear power stations and what to do about all the new radioactive waste they'll create.

It specifies guidelines and principles for developers of new nuclear power stations in how to set up a Funded Decommissioning Programme. It underlines the principle that developers alone, not taxpayers, should pay for the decommissioning of plants and the storage and disposal of waste, which is covered under a separate consultation.

But the question is, will the cap on developers' costs be set high enough to avoid taxpayers one day footing some of the bill?

What does it cost now?

Existing nuclear waste is currently managed by the Nuclear Decommissioning Authority. Its 2010-11 budget is £2.8bn, of which £1.69 billion comes from the taxpayer via DECC. DECC's overall budget in this year is £2.9bn.

This means that the cost of managing existing radioactive waste is a staggering 58% of the Department's total expenditure. Because of its nature, this expenditure cannot, of course, be cut.

What will it cost in the future?

To avoid future waste adding to this bill, the Government says that a fund should be set up by developers to pay for new costs, and the consultations explain how the funds should be managed and what they should be used for.

The cost for each new power station is estimated to be about £1 billion. The question is, whether this estimate is sufficient, given the history of escalating costs in this area.

A parallel Waste Transfer Pricing Methodology explains how the cost of disposal will be determined, since the hypothetical (currently) Geological Disposal Facility has yet to be constructed. Rough costs for such a facility were estimated by the NDA a year ago, at around £20 billion, at current prices, but are dependent on the geology of the site.

The government expects that a cap will be set on the waste transfer price, but at a very high level - three times current cost estimates. But it's impossible to be certain that costs will not exceed this figure, so there will be an additional "risk free" to compensate the taxpayer for accepting this risk.

Companies interested in building new nuclear power stations have been lobbying the government furiously in an attempt to keep the cap amount down. But if the cap is set at the wrong level, the taxpayer will end up footing the extra bill.

The first plant is expected to be built by EDF and Centrica by 2018. However, on Tuesday, Alistair Philips-Davies, energy supply director at Scottish and Southern Energy, said he was now unsure whether this schedule could be maintained. "Often these things are a little bit more expensive than you think and come in a little bit later than you think," he told a committee of MPs, raising some wry smiles.

The current position held by the Committee on Radioactive Waste Management (CoRWM), which advises the government on this matter, is that "a range of issues, including social, political and ethical issues, arising from a deliberate decision to create additional wastes should be considered as an integral part of the new build public assessment process."

These issues are not covered in the consultation, however.

There is also a new consultation on the Strategy for the Management of Solid Low Level Radioactive Waste from the Non-Nuclear Industry in the United Kingdom. This includes waste from hospitals, the pharmaceutical sector, research and education establishments.