Nuclear power. Going critical

If Britain wants more nuclear power, it must take some difficult decisions

AFTER years in the wilderness, nuclear power is back on the agenda. Officials have been hinting at a revival for several years, pointing out that it is a carbon-free source of electricity that can contribute to energy security. At first, Tony Blair promised a decision by the end of this parliament. Last week Malcolm Wicks, the energy minister, firmed up the timetable, promising to decide one way or the other by the end of next year. Many observers now believe that ministers will approve new power plants. If they do, they will have to make some tricky decisions first.

Such as about the finances of nuclear power. Historically, atomic energy has been a money pit. Only two years ago the government completed a multi-billion pound bail-out of British Energy, which operates Britain's newest reactors. The pro-nuclear lobby argues that consolidation in energy markets and simpler, cheaper reactor designs have driven costs down in recent years. And experience from South Korea and China, both of which have big nuclear programs, supports the idea that building several reactors of the same design can save money.

Even so, few observers think that nuclear power pays its way in today's electricity market. Boosters say that schemes like the European Emissions Trading Scheme (ETS), which puts a price on carbon emissions, will in future make nuclear energy profitable.

Some disagree. Robin Smale of Oxera, a consultancy, thinks that more money will be needed. “The problem with the ETS is that member states set the emissions limits, which means they can control the price,” he says. Investors will want stability, just as other businesses do (see box on previous page). “If you want a project with a long lifetime and big financing requirements you need something that looks more like a contract and less like a trading scheme full of political risks,” he says.

He believes that the government will have to consider guaranteeing a carbon price. Some might see this as akin to direct subsidies for nuclear power, something that Mr Wicks has ruled out. But Mr Smale points out that renewables generators, which are already subsidised, would benefit from the new scheme as well.

Keith Parker, chief executive of the Nuclear Industry Association (NIA), says planning needs reform. Sizewell B, the last nuclear power station commissioned in Britain, needed 14 years and one of the most expensive public inquiries in British history before it was ready. He says that new planning policies are needed to prevent a repeat performance and calm investors' nerves. Planning applications for big renewables projects are already handled by Whitehall rather than by local authorities, and some observers think something similar may be needed for nuclear power. Mr Parker wants changes to the licensing regime, so that once a reactor type is approved, inquiries into safety design do not have to be revisited each time one is built.

Decommissioning costs may be a sticking point. Earlier in the year the government launched the Nuclear Decommissioning Authority, a public body that will dismantle Britain's state-owned nuclear sites at a cost to taxpayers of £56 billion. If taxpayers want to avoid a clean-up bill, they need a way to finance future clean-up costs privately. They could follow the American approach, in which nuclear generators are required to set clean-up money aside. But forecasting costs decades into the future is as much luck as it is judgement. If anything goes wrong, taxpayers will have to pay.

A policy on nuclear waste is overdue. Britain has been splitting atoms for half a century and governments have been skirting the issue of waste disposal all the while. The problem is not technical (every expert recommends burying the waste deep underground) but the difficulty of finding someone willing to accept it. Experience from Finland, which finalised its waste-disposal plans in 2001, suggests that towns with ties to the nuclear industry are the most tolerant, though strong opposition is likely wherever the stuff ends up. Again, investors want a clear plan.

All of this feeds into the most important challenge of all: persuading voters that nuclear power is a good idea. This may not be as difficult as you might think. A poll conducted in January for BNFL, a state-owned operator, showed that more people had a favourable impression of the nuclear industry (28%) than an unfavourable one (26%) for the first time since 1999. It may be harder for the government to convince its own MPs: a MORI poll last week showed 45% of Labour MPs opposing new nuclear plants, with only 36% in favour.