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May 18, 2006

New Nukes

Tom Burke:

The nuclear industry will certainly oblige the prime minister by building new nuclear power stations provided he makes it attractive for them to do so. This means paying for its higher costs. There are only two ways to do this: either the taxpayer pays or the consumer pays. The government has clearly and repeatedly ruled out the first option. The second will require a quite heroic decision from the prime minister, but he has not yet taken it.

The nuclear industry will build new power stations if the revenue from selling its electricity is guaranteed for the next 30 years or so. This means abandoning one of the government's more successful energy policies - that of driving down the cost of electricity - and setting a floor below which the electricity price cannot fall. In effect, the prime minister will commit British businesses and homeowners to paying more than they might otherwise have to for their electricity. It is hard to see how such a step would advance his social justice and competitiveness agendas.

Well, yes, new nukes will indeed require subsidy. But then again, so do all the renewable technologies. As we already pay through the various obligations on the power companies to source some fraction of their throughput from such.

The question is, which requires more or less subsidy? We could, of course, simply insist that no subsidy be paid at all, in which case it would be very tough to deal with the externalities of CO2 production and thus climate change. Or we could tax CO2 production (as we arguably already do) and not tax energy production that doesn’t emit CO2. This absence of a tax would be described by some as a subsidy, of course. If we were to do this via the Climate Change Levy, that tax that is there for that purpose, we wouldn’t be taxing current nuclear: but we do, bizzarely.   

But if we accept that there is going to be some subsidy/tax differential to deal with emissions, then obviously we want to spend such to best effect. The only report I know ofthat looks into this is the one done by Oxera. Which shows that nuclear would require 1/3 the subsidy of renewables.

So nuclear it is then, eh?

May 18, 2006 in Nuclear | Permalink

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Comments

Unless I remember that Oxera report wrong, the ratio of 1/3 referred specifically to wind farms, not to "renewables".

Tim adds: Could be so, I haven’t read it in 6 months myself. But isn’t wind the most cost competetive of the renewables?

Posted by: dsquared | May 18, 2006 9:30:36 AM

Oh, Tim, "the most cost competetive of the renewables" is whichever you haven't built yet.

Posted by: dearieme | May 18, 2006 10:49:44 AM

The French make nuclear at 1.5p a unit < www.uic.com.au/nip08.htm > which is considerably less than anything we do. British nuclear is a bit more expensive since we are dealing with bespoke 1960s reactors. The problem from the commercial producer's view is that it is only a few years since Labour's regulator enforced an artificially low cost to electricity (in very much the same way a judge found that they hadn't done to Railtrack). Everybody lost money making electricity but because the fixed costs are almost al of nuclear costs British nuclear was effectively bankrupted.

This rather destroyed investor confidence, particularly in nuclear where so much of the cost is up front, & potential investors, not unreasonably want to know it won't happen again, or at least that they have got some profits out before it does. By comparison the French have been perfectly willing to spend £3 billion building a reactor complex at Cherburg whose main customer is likely to be England but is run by France.

Posted by: Neil Craig | May 18, 2006 12:41:05 PM

Could we not just get France to build more and import it?

Posted by: AntiCitizenOne | May 18, 2006 12:53:11 PM

Accepting that CO2 emissions should be progressively taxed into obsolescence over the next few decades, surely its a matter for the capitalist generators alone to decide what technologies they resort to. They take the risk and reap the profit, there's no need for governments to pay for anything.

The one thing that governments ought to do, is let the capitalists know what the "progressive" tax regime will be over the next few decades, then the genenerators can get on with deciding what they are going to do without having to worry that the government is going to undermine their investments with reckless tax changes.

Let the capitalists carry the risk, for it is their nature to do so.

Posted by: johnny bonk | May 18, 2006 2:21:43 PM

It's a bit silly to concentrate on CO2 when we get so much of our energy from pumping a highly flammable gas, eight times worse as a greenhouse gas, around the country.

Posted by: Rub-a-dub | May 18, 2006 9:01:27 PM