Wednesday, July 13, 2011

Nuclear power's £1bn windfall - the consumer will pay

Consumers will end up footing the bill for the £1 billion windfall that nuclear power companies can expect to get from the government's support for this dangerous technology.

The Carbon Price Floor system that has been proposed by the Treasury is estimated to provide £1 billion each for nuclear power developers and renewable energy development.

Yesterday, after the announcement of the Electricity Market Review in Parliament, Simon Hughes, the deputy leader of the Liberal Democrats, asked fellow-LibDem Climate Change Minister Chris Huhne whether this meant that the taxpayer will be subsidising new nuclear power stations, something which the party pledged not to do before taking office.

Huhne argued that the price floor is not a subsidy for nuclear power: "It is a price guarantee", he said.

This may be a subtle difference to you and I.

It just means that the cost will be passed onto consumers via their electricity bills rather than by tax increases.

Either way, the consumer ends up paying. But it gets the Lib-Dems off the hook.

In a sense, this is no different from the Non-Fossil Fuel Obligation (NFFO) which supported nuclear power in the 1980s, and led to the boycotting by protesters of that 13% of the electricity bill which supported the NFFO.

Huhne argued that as "new nuclear power is at an early stage of technological development as is offshore wind", it should have this kind of support.

I don't think so. Offshore wind needs support because the transmission network and installation chain needs to be made fit for purpose.

Nuclear power does not deserve our support because of the legacy of waste it leaves for tens of thousands of years.

Every household in the UK is already shelling out £1000 for 100 years (£73 billion in total) to deal with the existing radioactive waste.

The finger of Redpoint

The Government bases their calculation on the price of nuclear newbuild largely on two documents - the most frequently referenced one is by energy consultants Redpoint and was produced for the government Department for Business, Innovation and Skills (BIS) in 2008: Implementation of EU 2020 Renewable Target in the UK Electricity Sector: Renewable Support Schemes.

There, you will find the phrases: "The impact of renewables on the wholesale electricity price is greater where fuel and carbon prices are high.

"This result suggests that producers with mainly conventional or nuclear plant portfolios would be better off if they collectively did not invest in renewables."

In other words that the policy of investing in renewable energy is likely to discourage investment in renewables.

Conversely, to point out the obvious, if we don't build new nuclear power stations, there will be greater capacity and incentive to build a wide portfolio of different renewable energy generation plant.

Amongst these are up and coming resources like marine power, which the Carbon Trust said two days ago will match nuclear and offshore wind for cost in 14 years and have the potential to generate 20% of the UK's electricity by 2030.

Such a policy also maintains the stranglehold of the Big Six suppliers, responsible for keeping fuel bills high, by effectively making it harder for new companies to enter the market - allegedly an aim of the electricity market reform white paper.

In their report, Redpoint claims that the cost of new nukes will be £1500 per kilowatt in 2008, and £1425 per kilowatt in 2020 (table 31).

But these prices are not the real world prices since they only include all plant and project costs, but exclude interest during construction and decommissioning costs.

If this is taken into account, the cost of new nuclear power stations is at least double this.

Here's the evidence: the flagship EPR project at Olkiluoto in Finland, managed by the largest nuclear builder in the world, AREVA NP, has turned into a financial fiasco.

The project is four years behind schedule and at least 90% over budget, reaching a total cost estimate of £5.7 billion ($8.2 billion) or close to £3,500 ($5,000) per kilowatt.

But who cares? The Government wants nuclear power - and we're going to have to pay for it - unless we protest now.

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