The nuclear industry is in a bind. As I noted a couple of weeks ago, the risks associated with building new nuclear projects are too high to attract private finance and the costs are beyond the balance sheet of almost all companies.
Consumers, acutely aware of rising energy bills, are unlikely to take kindly to suggestions that they pay in advance — as in the regulated asset base (RAB) scheme being promoted by some UK government officials — for projects that can run years behind schedule and billions over budget.
Without a more equitable way of sharing the cost and risk, new nuclear development will be halted not just in the UK but also in France — where nuclear provides 75 per cent of electricity — and the US as many plants in both countries will soon be due for replacement. For those who think nuclear is necessary to meet the challenge of climate change, and for the powerindustry itself, an alternative is necessary.
Britain shows what is needed and what could be done, although the approach is applicable in many countries. Producing electricity is now a highly competitive business. The nuclear sector cannot take its place in the energy mix for granted or assume that governments will always provide subsidies. Energy security and the desired reduction in emissions can both be delivered at prices lower than the £92.50 per MW hour — indexed linked for 35 years — that was agreed in 2013 for the planned Hinkley Point C station in Somerset, south-west England.
Onshore wind, although unpopular in some countries, remains the cheapest source of supply. Offshore wind and solar have also seen costs fall dramatically. Companies have begun to develop creative solutions to the challenge of intermittency associated with renewables by providing natural gas as a balancing fuel to deliver maximum capacity.
The answer is to use the market — through an open, transparent auction — to fill future capacity requirements and meet government targets for cutting emissions without prioritisation of any one technology.
Can nuclear power compete in such a process? The European Pressurized Reactor model (used in Flamanville, northern France, for example) has been beset by problems but other options suggest the answer could be yes.
The first is the development of much smaller, simpler nuclear facilities. These can be developed in series and could use many existing nuclear sites. The UK’s Rolls-Royce believes that using advanced manufacturing and modular construction techniques, can keep the cost of producing the electricity down to around £60 per MW hour. Their project is now entering the detailed design phase before licensing. Last week, the French nuclear authority announced plans to develop its own modular reactor.
But for the immediate future there is another answer: extending the working lives of existing stations, wherever possible. Philippe Sasseigne, executive director of nuclear and renewable energies for the French state company EDF, argues that “extending the operating lifetimes of the plants beyond 40 years is the most effective and economical solution” to supporting the shift to a low-carbon economy.
EDF has been plagued by problems in constructing its EPR reactors at Flamanville, Olkiluoto in Finland and Hinkley Point. Delays and cost overruns are a big reason why private investors avoid the industry.
EDF, however, along with other companies, operates a substantial set of working reactors in the UK and France that produce electricity at a fraction of the cost of Hinkley Point. Despite passing the nuclear regulator’s tests, the cult of redundancy suggests that because they are typically 30 or 40 years old they will soon have to be scrapped.
That is illogical. If the reactors are unsafe they should be decommissioned immediately — and in one or two cases that is the likely outcome. But most of the rest should be allowed to keep producing power subject to tight regulatory scrutiny and the necessary investment in maintenance and refurbishment. Older stations cannot last for ever, of course, but this would buy time.
There are several potential longer-term options that have not yet been proved commercial at scale. Grid-level storage, linking production from renewables to technology that can hold electricity for use when needed, would transform the economics of the whole sector and make electricity irresistible as the main source of global energy supply. Fusion power finally seems to be making progress. Hydrogen produced either from natural gas or using renewable energy and water continues to attract interest and research funding.
Such alternatives require time for development. The challenge is to find a bridge for the immediate future with low-cost, low-carbon solutions. Nuclear should be given a chance to provide that — free from the culture of subsidies or other mechanisms such as RAB, which put an unfair burden on consumers.
The writer is an energy commentator for the FT and chair of The Policy Institute at King’s College London