A nuclear conundrum

The Fennovoima site in Finland

Last week in Brux I went to a dinner debate and briefing organised on behalf of Fennovoima, a new nuclear project in Finland which looks set to build the first new green-field nuclear plant in Europe for decades.  The project is backed by a long list of Finnish companies — utility companies, energy-intensive businesses, even some retailers — demonstrating that it is possible to build new nuclear capacity without state funding.

Here in the UK, though, we’re struggling.  Sir Bernard Ingham asks “Do we want nuclear at any price?”.  Jeremy Warner in the Telegraph points out that only the state-controlled French company EDF is still interested in new-build nuclear in the UK , and they are asking for a high guaranteed electricity price through the life of the plant before they’ll commit.  Warner says that this amounts to “paying an annuity for decades to the French tax-payer”.

This poses a dilemma for free-market politicians.  I hate and detest nationalisation.  I hate and detest direct government intervention in industry.  But what about a situation where, in effect, the free market looks at a project, and simply says: “We don’t like what we see, so we’re not going to bid”?  Right now, we seem to be facing a choice between a French nationalised company, or (whisper it quietly) direct UK government investment.  And the very low rates at which the government can currently borrow strengthen the case for a nationalised nuclear industry.

So let’s recast Sir Bernard’s question.  Not so much nuclear at any price.  More a choice between nationalised nuclear and no nuclear.

Let’s step back a moment and ask why no commercial operator is ready to engage.  It’s not the fault of the industry.  Let’s say it out loud: it’s the fault of government.  If we’re looking at a multi-billion pound investment with a 60 year time horizon, we are entitled to ask for at least one thing from government: regulatory certainty.  Suppose we make the investment, and ten years later, a new Angela Merkel, spooked by a new Fukushima, decides to pull the plug?  What if the EU decides on some new madcap regulatory régime?  What if George Osborne or some future Chancellor wants to tamper with the green subsidy régime?  OK, so I hate green subsidies as much as I hate nationalisation, but they make the weather for nuclear investors, so we can’t ignore them.

There’s nothing wrong with nuclear economics.  But there’s an awful lot wrong with the constant turmoil of ETS, carbon price floors, subsidies, incentives.  How are investors supposed to take a rational 60-year decision when circumstances change month to month and year to year?  It seems absolutely clear that regulatory uncertainty is the primary obstacle to nuclear investment.

If the government were to invest in nuclear, they would be both investor and regulator.  Clearly that creates a potential conflict of interests.  But at least it would force them to take a realistic and practical view of regulatory impact.

Of course I’d prefer regulatory certainty and private, free-market investment.  But if it’s a choice between government nuclear and no nuclear, I’d be forced to take what was on offer.

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8 Responses to A nuclear conundrum

  1. David C says:

    Extremely straightforward stuff, and very clearly expressed here thanks Roger.
    So why is politics stuffed with people who can’t see it? Are they ignorant themselves, or are they running scared of unthinking green sentiment in the hoi-polloi?

  2. Steve Halstead, retired power engineer. says:

    It’s quite obvious that wind power does not and cannot work to provide a stable, continuous power supply in all weather conditions.
    Coal can, gas can, oil can and Nuclear can.
    The recommissioning of coal mines is possible but only in the long term, gas (shale ) is feasible but……….., Oil is, quite realistically a non-starter other than very very short term and expensive at that. Nuclear is by far the best option. It’s clean and, with modern construction methods it’s safe, or at least as safe as it’s possible to be.

    Government Ministers have zero technical background and are poorly advised by those with ‘other’ agendas.

    Get some REAL Engineers on board, those that fully understand power generation and control.

  3. machokong says:

    Oh no, there’s “nothing wrong with nuclear economics” because we know it’s 99% inefficient and always runs on government subsidies anyway, we know this. What we need to look at are Thorium reactors which are the polar opposite in terms of efficiency; running at 99% efficiency!

    • Ian Hills says:

      Too true. What with huge decommissioning costs, ordinary nuclear reactors are only good for their “by-product”, weapons grade plutonium. Bring on the thorium.

    • rfhmep says:

      Thorium is worth a look, but the issue is the cost of the electricity, not theoretical efficiany figures. It is not true that nuclear “always runs on subsidies”. Finland has a very successful commercial model, and a new nuclear power station in the pipeline (see above).

  4. BB says:

    Roger, would you agree that if we had spent 100th of the money we have spent on climate change research/mitigation on thorium we would be a very long way closer to making that technology work for us?

  5. rfhmep says:

    I’ve discussed thorium with the industry ( in deference to its vocal supporters). It seems that it would be viable, but compared to uranium would need massive new development costs. Maybe you have the odd thirty billion to put behind it? And by the way, the Finnish commercial funding model includes the cost of decommissioning TWICE. The industry is funding its own decommissioning pot, but also paying the government which has a parallel fund.

  6. As as an old man I despair. Just a few years ago we were at the forefront of nuclear research and nuclear production. What happened? Is it worth looking, perhaps, at how we once used to build power stations?
    “Forward not backward” is wrong: how about looking at backwards not forwards? Or “things can only get worse?” (:>)

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