Nuclear power. Critical mass

Date: 03/12/05

A revival of nuclear power generation looks more likely than ever

ENERGY policy is meant to be for the long term. So it was odd to see Tony Blair this week announce his second review of energy strategy in two years, including whether to build a new set of nuclear power plants. This is an option the government had said looked "unattractive" last time round. Since then several of Mr Blair's advisers have been busily undermining that conclusion. Sir David King, the government's chief scientific adviser, is in favour of nuclear power. Even Margaret Beckett, the environment secretary (long thought to be a sceptic), recently signalled her grudging support. Many Westminster-watchers see the review as a fig-leaf, needed only to justify a nuclear revival that Mr Blair has already decided on.

Why the change of heart? In a speech on November 29th to the Confederation of British Industry, disrupted by protesters, Mr Blair listed high energy prices, supply worries and climate change as reasons for a rethink. All three are of more concern now than they were two years ago. Greenhouse gas emissions are rising again. North Sea oil and gas reserves are declining, and as Britain becomes a net energy importer, there are fears about over-reliance on Russia and North Africa. Dearer oil has sent utility bills spiralling upwards, while the prospect of a cold winter pushed gas prices last week to record levels.

In principle, atomic energy looks like an attractive solution to all these problems. Fuel costs have only a small effect on nuclear electricity prices, unlike gas or coal-fired generation. Uranium can be bought from stable countries like Canada and Australia. And fission creates no greenhouse gases (although mining and enriching the uranium do). The government also has a big hole in power generation to fill caused by the closure within the next 18 years of all but one of the nuclear plants that currently supply about a fifth of Britain's electricity. Back in 2003, the government said renewables such as wind or wave power were the answer. Now Mr Blair admits that they will not be enough.

Nuclear boosters claim that dear fossil fuel is here to stay, but critics reckon gas prices will fall as new infrastructure is built. What's not in doubt is that emissions trading, which is now catching on, makes carbon-free nuclear energy look much more attractive than before.

The biggest problem with nuclear is still cost. Nuclear power plants are long-lived and expensive. That makes their economics extremely sensitive. Accounting assumptions about capital costs and discount rates make a big difference, as do variations in electricity prices. Historically, the industry has been a money-pit.

Up to now, ministers have insisted that any new plants be paid for by the private sector. But worries about the political risks attached to nuclear power and the fact that current carbon-trading arrangements run only until 2008 have made investors reluctant to get involved. Several studies have tried to guess how much new reactors might cost, but their answers vary widely.

Not everyone thinks subsidies are bad. Sir David, whose main aim is to curb emissions, has floated the idea of a levy on fuel bills to pay for new power stations. Such talk has upset some Labour MPs, about half of whom, according to a recent poll, do not want new nuclear power plants. Last week, 41 of them signed a Commons motion condemning the idea. Opposition Conservatives, however, are in favour.

Despite the difficulties, nuclear power looks as if it is on the way back. Even the timing of the review looks convenient. Its authors are to report early next summer when a separate report on nuclear waste disposal is also expected. A credible plan for dealing with nuclear waste would make it easier to sell new power plants to environmentally-concerned voters.

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