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New-Build Nuclear Power: A High-Risk Gamble

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Energy Fair report cites five major risk areas for investors in new nuclear plants

A new report from the Energy Fair group warns investors considering an investment in new nuclear plants that they face five major areas of risk: market risk, cost risk, subsidy risk, political risk and construction risk.

According to Energy Fair, there are many changing conditions stacked against new large scale nuclear power stations.

The report says by the time any new nuclear plant could be built in the UK (2020 or later), the market for its electricity will be disappearing, regardless of any possible increase in the overall demand for electricity.

The cost of photovoltaics (PV) and other renewables is falling rapidly, the European internal market for electricity should be set up within the next eight years and the European transmission grid should be stronger than it is today. All of this means that consumers, large and small, will be empowered to generate much of their own electricity or to buy it from anywhere in Europe, without the need for subsidies.

Much of the peak-time power is consumed during daylight hours, and the explosive growth of photovoltaics is likely to take much of the profitable peak-time market for electricity. There will be stiff competition to fill in the gaps left by PV, from a range of other sources, many of which are better suited to the gap-filling role than nuclear power.

Nuclear Power Is Expensive

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Energy Fair says there is good evidence that nuclear power is one of the most expensive ways to generate electricity, notwithstanding repeated claims that nuclear power is cheap. They say the inflation-adjusted cost of building new nuclear power stations is a rising trend, and has been for many years. New safety measures, triggered by the Fukushima disaster, are likely to further increase costs.

Meanwhile, the cost of most renewable sources of power is falling.

Although nuclear power is a long-established industry which should be commercially viable without support, it depends heavily on subsidies. This is a clear breach of the principle of fair competition. At any stage, some or all of the subsidies may be withdrawn, either via complaints to the European Commission, or via the European Court of Justice, or via decisions made by politicians.

Energy Fair has already submitted a complaint to the Directorate General for Competition of the EC about subsidies for nuclear power. State aid which is deemed to be illegal, must be repaid. Consumers may refuse to pay surcharges on electricity bills. There is additional subsidy-related risk arising from the great complexity of government proposals in this area, with its potential for unexpected and unintended consequences.

By the time any new nuclear plant could be built in the UK, the market for its electricity will be disappearing.

Apart from the risk that politicians may decide to withdraw some or all of the subsidies for nuclear power, it is vulnerable to political action arising from events like the nuclear meltdowns in Fukushima. That disaster led to a sharp global shift in public opinion against nuclear power and it led to decisions by politicians to close down nuclear power stations and to accelerate the roll-out of alternative sources of power. The next nuclear disaster - and the world has been averaging one such disaster every 11 years - is likely to lead to even more decisive actions by politicians, perhaps including the closing down of nuclear plants that are still under construction or are relatively new.

The delays and cost overruns in the Olkiluoto (Finland) and Flamanville (France) nuclear projects are just recent examples of nuclear projects where actual build times and actual costs greatly exceed what was estimated at the outset. But the extraordinary complexity of nuclear power stations - which is likely to increase, after Fukushima (Japan), with the added complexity of new safety systems - means that construction risk will remain a major hazard for investors for the foreseeable future.

Renewables Faster To Build Than Nuclear

In general, renewables can be built much faster than nuclear power stations, they are cheaper than nuclear power (taking account of all subsidies), they provide greater security in energy supplies than nuclear power, they are substantially more effective in cutting emissions of CO2. There are more than enough to meet our needs now and for the foreseeable future, they provide diversity in energy supplies, and they are largely free of the several known problems with nuclear power.

The commercial opportunities lie in renewable sources of power. They are growing fast while the numbers of operating nuclear plants in the world is falling. Renewables are, commercially, much less risky than nuclear power.

"Energy Fair has provided an excellent review of the risks facing investors in new nuclear plants. The accessible language, the abundant bibliographical evidence, and current examples make the report important reading not only for investors and policy-makers worldwide, but for all stakeholders concerned with nuclear energy. The report makes the already questionable economics of new nuclear plants appear even less convincing."
- Ivan Kotev, Candole Partners analyst

Research by the Energy Fair group has identified several existing subsidies for nuclear power and some potential new subsidies. They are summarised in "Forms of support for nuclear power" (PDF), and described more fully in the following two documents, each with an executive summary.
- "Subsidies for nuclear power in the UK government's proposals for electricity market reform" (PDF).
- "Nuclear Subsidies" (PDF).

Research by Energy Fair shows that, in general, renewables can be built much faster than nuclear power stations, they are cheaper than nuclear power (taking account of all subsidies), they provide greater security in energy supplies than nuclear power, they are substantially more effective in cutting emissions of CO2, there are more than enough to meet our needs now and for the foreseeable future, they provide diversity in energy supplies, and they have none of the many problems of nuclear power.

According to Energy Fair, the average annual growth of wind power, globally, in recent years, is more than 27% and the annual growth in solar power around 30%. In 2010, the worldwide growth of solar power was 70%. At the same time, nuclear plants are being shut down.

Substantial Growth Of Clean Power

The falling cost of PV and other renewables is likely to lead to an explosive growth of PV and substantial growth in clean power from onshore and offshore wind power, combined-heat-and-power (CHP), wave power, tidal stream and tidal lagoon power, power from biomass, biogas and biomethane, enhanced geothermal systems (EGS), hydropower, and large-scale generation of solar power and wind power in desert regions.

Another 'dash for gas' may also undermine the market for UK nuclear electricity. Although there may be increases in demand from the electrification of road transport, there are likely to be reductions in demand from super-insulation of buildings and the roll-out of super-efficient LED lighting.

"This is an excellent piece of work. It is essential reading for anyone considering putting money into new nuclear power stations. The downside of any such investment is much greater than any possible upside and contrasts starkly with the huge opportunities that are opening up in renewable sources of power."
- Tom Burke CBE, Founding Director of the campaigning group E3G
The European internal market for electricity is expected to be completed by 2020. This market is expected to be supported by the British Government. The transmission system needs to be improved, to fix transmission bottlenecks. In general, Energy Fair says, transmission links can be built quite fast, as indicated by the 18 months it took to complete the link between the Netherlands and the UK.

See the Energy Fair report, "The financial risks of investing in new nuclear power plants" (PDF).

Dr Gerry Wolff PhD CEng, Energy Fair Coordinator, is in the UK, and has previously contributed letters to the editor and stories, to NewsBlaze.
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