Economics is the Achilles heel of nuclear power. While the industry
has long held out the hope that nuclear power could compete with other fuels,
its proponents have had to put forward tortuous arguments to support such
claims. Creative accounting was essential to give Britain’s first generation
of power stations a semblance of economic respectability. It was decided
that the plutonium they produced should acquire a notional value as fuel
for further reactors – but they have yet to materialise, 30 years after
the first Magnox, gas-cooled reactor came on line.
The second generation of power stations, built around advanced gas-cooled
reactors (AGRs), was to have ushered in an era of genuinely economic nuclear
power, but construction difficulties ended that dream. Meanwhile, the true
costs of dealing with nuclear waste and of de-commissioning reactors are
still unknown.
And yet, as Britain’s coal miners discovered in October, economics can
change overnight. Nuclear Electric, the state-owned company that now operates
the 12 nuclear power stations in England and Wales, reported an operating
profit of Pounds sterling 482 million in 1991-92, up from Pounds sterling
326 million the previous year. It’s an extraordinary turnaround since November
1989, when nuclear power’s uncertain future, economically and politically,
forced the government to withdraw the nuclear sector from its privatisation
of the electricity industry the following year.
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Certainly, the company was helped by the fossil-fuel levy, which contributed
just over half of its turnover of Pounds sterling 2432 million in 1991-92.
This tax on users of fossil fuel provided Nuclear Electric with the equivalent
of 2.6 pence per unit (kilowatt-hour) of electricity that it sells. The
European Commission regards the levy as an illegal subsidy, enabling Nuclear
Electric to sell its electricity at just 2.3 pence per unit and still turn
in a profit. (The cost of electricity from coal-fired stations is expected
to fall from around 3.15 to 2.8 pence per unit next year, and to 2.6 pence
per unit in 1997 if the proposed deal between British Coal and the electricity
generators is signed. The cost of gas-fired electricity sits between 2.4
and 3 pence per unit.)
But this is only part of the story, insists John Collier, chairman of
Nuclear Electric. Since 1990, the company has improved productivity by increasing
its output from 40 to 50 terawatt-hours a year and by cutting its staff
from 14 200 to 12 000. With more improvements in the efficiency of existing
stations and the completion in 1994 of Sizewell B, Britain’s first pressurised
water reactor (PWR), he forecasts that output will continue to rise, ‘up
towards 65 terawatt-hours’. Though generating costs are still comparatively
high, at about 3.8 pence per unit, Collier says they will fall to a competitive
level, below 3 pence per unit, by the time the levy is withdrawn in 1998.
This is not good enough for some observers, including Simon Roberts,
national energy campaigner with Friends of the Earth. He describes nuclear
power as one of the few technologies that gets more expensive, rather than
less expensive, as it matures. The poor performance of Britain’s reactors
shows up in a report published earlier this year by the US National Research
Council under the title Nuclear Power: Technical and Institutional Options
for the Future. The report lists load factors – the amount of electricity
generated as a percentage of that which the reactor could have produced
had it operated at full capacity – for reactors in the industrially developed
countries that make up the OECD. Only the US achieved a lower load factor
– of 60.5 per cent over the lifetime of its reactors – than Britain’s 69.1
per cent. Switzerland and Finland performed best, at 85 per cent.
Collier blames nuclear power’s poor performance before privatisation
on the Central Electricity Generating Board, which ran the generating industry
in England and Wales until 1990. Nuclear plants accounted for only a small
proportion of the CEGB’s 80 power stations, and responsibility for them
was scattered around five different regions, each with its own operating
philosophy. ‘The really important thing that happened at privatisation,’
says Collier, ‘was that all of the nuclear plants were put under one management,
one engineering team, and with one remit, to make these things work.’
The CEGB may not have run reactors as efficiently as it might, but Nuclear
Electric has few complaints about the way in which the board set about building
Sizewell B, the power station the company hopes will herald a generation
of PWRs. Although winning approval for the project took a long time, with
a public inquiry lasting almost three years and the government taking another
two to make up its mind, construction has progressed swiftly since work
began in 1988. So swiftly, says Collier, that Nuclear Electric expects to
trim nine months from the original 72-month construction programme. This
would make the time taken to build the station the shortest for any modern
coal-fired or nuclear plant in Britain.
It would also mean that Britain can build nuclear power stations faster
even than France, the world’s most enthusiastic proponent of civilian nuclear
power, he adds. Such an achievement would be remarkable. Nuclear stations
completed between 1978 and 1989 in Britain took nearly 13 years, on average,
to build. Over the same period the US averaged just over 11 years, including
a regulatory delay of about two years for reactors completed after the accident
at Three Mile Island in 1979. France and Japan achieved average construction
times of 5.9 years and 4.7 years respectively.
One unexpected outcome of the success of the Sizewell B project was
an invitation earlier this year to Nuclear Electric from Westinghouse, the
American company that designed the first PWR power stations, to bid for
a contract to build a power station in Taiwan. If the bid succeeds, Britain
could finally begin to see something that has been promised for a long
time: hardware exports on the back of indigenous reactor construction. According
to Robert Hawley, Nuclear Electric’s chief execu-tive, the company’s designs
for Sizewell B could enable British firms to supply about a third of the
hardware for future PWRs.
TOLD YOU SO
One person who finds this prospect especially ironic is Walter Marshall,
now Lord Marshall of Goring, who as the last chairman of the CEGB pushed
through the proposal to build a PWR in Britain. ‘Ten years ago I told a
select committee that we would export PWRs,’ says Marshall. ‘The MPs laughed
at me.’
The nuclear industry realises that the promise of exports, higher productivity
and output, and building reactors ahead of schedule will not guarantee that
the government keeps the company in business. Going from 40 to 65 terawatt-hours
in five years would match the improvements made in the coal industry, says
Collier: ‘But look at what has happened to them.’
Like coal, nuclear power suffered in the scramble to privatise Britain’s
electricity business. To begin with there was what Marshall describes as
the government’s attempt ‘to transfer a mountain of magnox waste from the
government to the City of London’. This made nuclear power look about as
saleable as an outbreak of bubonic plague. Marshall says that the failure
of nuclear power to make a bigger impact in Britain has little to do with
technical issues, and much to do with politics. He believes that in countries
where governments have a genuine energy policy designed to preserve diversity
and to protect the environment, nuclear power has a brighter future.
The attitude of British governments to nuclear power has prompted Nuclear
Electric and Scottish Nuclear, the state-owned company that has run the
two power stations at Hunterston and Torness in Scotland since November
1989, to seek salvation in the private sector. Both companies are softening
up the City for the day when they might be privatised.
To Collier, privatisation offers a way of funding the construction of
nuclear power stations. This helps to explain why he now worries less about
the environmentalists and more about the City. ‘We don’t get a very rough
time from the greens,’ says Collier. ‘The credibility problem is with the
City, the banks, the investors. Those are the people we have got to convert.’
Hanging over any talk of privatisation are thoughts of 1994, the year
in which the government is promising to review nuclear policy. The industry
wonders what the government had in mind in 1990 when it announced the review.
Is it going to be about nuclear waste strategy, about investment in a reactor
programme, or about pulling out of the whole business?
Collier says investment is the key issue. ‘If our power stations are
operating very well; if we have increased our output to 65 terawatt-hours;
if we have reduced the cost from 5 pence per unit to below 3 pence per unit;
if we have got the productivity up by nearly 100 per cent; if we are profitable
in front of the levy without any subsidy whatever, what is there for the
government to refuse?’ But money for a generation of PWRs – and at least
Pounds sterling 3.65 billion would be required to build Sizewell C alone
– need not come from government.
Roberts agrees with the nuclear advocates on the inevitability of privatisation.
As he puts it, ‘money represents perhaps the most significant barrier to
the future development of nuclear power’. So a sell-off could well be the
government’s next move on nuclear power. ‘The government would see it as
too interventionist to close it down,’ says Roberts, ‘so it will leave it
to the market mechanism.’
PACKAGING FOR PRIVATISATION
Before the City can be expected to show any interest in nuclear generators,
however, the government will have to dispose of the Magnox heritage that
forced it to withdraw nuclear power from the first round of electricity
privatisation, says Collier. He believes that it might be possible to privatise
Nuclear Electric with the AGRs, and the single PWR at Sizewell.
The Magnox millstone exists not so much because of the high cost of
waste management and decommissioning, but because of the way in which successive
British governments have made allowance for these costs. At least, this
is the view of Ian Fells, professor of energy conversion at the University
of Newcastle-upon-Tyne, and Nigel Lucas, professor of energy policy at Imperial
College, London. In their report UK Energy Policy Post-Privatisation, commissioned
by Scottish Nuclear and published in 1991, they state: ‘The costs of waste
management and decom-missioning loom somewhat larger in the public mind
than are truly justified.’ Add these factors to the cost of generating electricity
in a modern nuclear power station and they amount to between 0.1 and 0.2
pence per unit, far less, they estimate, than the environmental ‘externalities’
associated with burning fossil fuels. ‘The financial problems arise because
past provisions for the work are not in the form of an invested fund and
the companies have continually to add to them to maintain their value.’
Hiving off the Magnox reactors would also release Nuclear Electric from
the shackles of British Nuclear Fuels (BNFL), the company that reprocesses
nuclear waste. Because spent fuel from Magnox reactors is stored in ponds
where it corrodes, it must be reprocessed as soon as possible – and BNFL
has no competition for this trade. Or, as Marshall puts it, operating these
reactors ‘gives a blank cheque to BNFL’.
Nuclear Electric also plans to reprocess AGR fuel, even though Scottish
Nuclear hopes to show that ‘dry stores’ could hold spent fuel from AGR power
stations for as long as the company chooses, before final reprocessing.
If Scottish Nuclear is successful, it could slash the immediate cost of
this part of the fuel cycle, although it would merely postpone the day of
reckoning on reprocessing. However, if the radioactivity is allowed to
decay, the cost of treatment should drop.
For PWRs, there is even less need to reprocess fuel as soon it leaves
a reactor. Reprocessing costs for PWRs are also lower, because PWRs use
about a tenth the amount of fuel needed to generate the same amount of electricity
in a Magnox reactor. (AGRs consume about half as much fuel as Magnox reactors
per unit generated.) ‘Effectively, fuel-cycle costs for Magnox are five
times as high as for a PWR,’ says Collier.
With economic competitiveness in its sights, as it sees it, the industry
has added another weapon to its armoury of pronuclear arguments. ‘By increasing
our nuclear output by 3 terawatt-hours last year,’ says Collier, ‘we saved
a further emission of 3 million tonnes of carbon dioxide.’ Nuclear power
sells itself on the grounds that it is the only way that Britain can meet
a growing demand for electricity while at the same time stemming the increase
in emissions of carbon dioxide.
This claim carries little weight with Roberts: ‘Nuclear power is one
of the most expensive options for reducing carbon dioxide emissions.’ He
says that substituting gas for electricity for heating, and more efficient
use of energy are more cost-effective.
Without knowing what the government will do it is impossible to predict
where nuclear power will stand at the turn of the century, let alone after
another 50 years. Collier says nuclear power stations should continue
to supply about 20 per cent of the country’s electricity. If no new stations
are built, the nuclear share could fall to 12 per cent by 2000.
To maintain the ratio, Collier wants Nuclear Electric to concentrate
its activities on a handful of sites, with PWRs steadily replacing Magnox
stations. Over the next 50 years he wants to see repositories for radioactive
waste in operation, proving themselves. As well as these national issues,
Collier says: ‘We want the Russian reactors upgraded to world standards
and a world licensing regime, like the civil aviation people.’
Will the public buy it? The past 50 years were all about technology
push, says Collier, with the technologists dreaming up fast reactors, fusion,
all types of nuclear power stations and so on. ‘The next 50 years are going
to be customer pull. Nuclear power will only survive if the public actually
believes that it is economic, safe and environmentally clean.’
Michael Kenward is a freelance writer.