Report on financial problems in investing in new nuclear power

Around the world, solar power and wind power are growing fast, while the number of operational nuclear reactors in the world is shrinking

THE FINANCIAL RISKS OF INVESTING IN NEW NUCLEAR POWER PLANTS

www.energyfair.org.uk, March 2012 Since most of the cost of nuclear electricity is in the capital cost of nuclear plants, since build times can be 7 years or more, and since payback times can be 30 years or more, investors in new nuclear plants are exposed to financial risks from inaccurate estimates and from changes in markets in the future.

There is increasing recognition in the business world that investing in new nuclear power stations is commercially risky.
This report describes five major types of risk for any investor considering putting money into new nuclear plants, with particular emphasis on the situation in the UK:

• Market risk. 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 rapidly-declining cost of photovoltaics (PV) with the

falling costs of other renewables, and the likely completion of the European internal

market for electricity with the strengthening of the European transmission grid, will be

transforming the market for electricity in the UK, and throughout the rest of Europe and

beyond. Consumers, large and small, will be empowered to generate much of their own

electricity (on their own sites or elsewhere) or to buy it from anywhere in Europe, and this

without the need for subsidies. Explosive growth of PV is likely to take much of the

profitable peak-time market for electricity. And there will be stiff competition to fill in the

gaps left by PV, from a range of renewable sources, many of which are better suited to the

gap-filling roll than is nuclear power.

• Cost risk. There is good evidence that, contrary to the often-repeated claims that nuclear power is cheap, it is one of the most expensive ways of generating electricity. The

inflation-adjusted cost of building new nuclear power stations has been on a rising trend

for many years. The introduction of new safety measures after the Fukushima disaster will

push up prices further. Meanwhile, the cost of most renewable sources of power is falling.

• Subsidy risk. 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 formal complaints to the European Commission (Energy Fair has

already submitted a complaint about subsidies for nuclear power), or via the European

Court of Justice, or via decisions made by politicians. All 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.

• Political risk. 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 in several different

countries 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.2

• Construction risk. The delays and cost overruns in the Olkiluoto and Flamanville 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, with the added complexity of new safety systems—means that construction risk will remain a major

hazard for investors for the foreseeable future.

There is abundant evidence from reputable sources 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 are largely free of the several problems with nuclear power.

Around the world, solar power and wind power are growing fast, while the number of operational nuclear reactors in the world is shrinking…… http://www.nirs.org/neconomics/risks_of_nuclear_investment_published.pdf

April 30, 2012 - Posted by Christina Macpherson | business and costs, Reference, UK

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