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Increasing costs stall the nuclear ‘renaissance’

Nuclear industry finds new plants are not so cheap   REneweconomy, By Giles Parkinson on 15 May 2012 The thin veneer supporting the nuclear industry’s claims of being the lowest-cost clean energy source is being rapidly eroded by a series of cost blow-outs and cancellations in the UK, Europe and the US.

The latest blow to the industry came in the UK, where earthworks for the Hinkley Point nuclear project in Somerset – the first to be built in the country for two decades – have been delayed amid reports of a huge cost blowout. And in the US, the country’s first nuclear plant to be built in three decades has also revealed significant cost over-runs.

The developments come hard on the heels of announcements by two of Europe’s biggest utilities – RWE and E.ON – that they have pulled out of a $25 billion nuclear project in the UK, and setbacks in the Czech Republic, and in Bulgaria, where ambitions have also been scaled down due to costs.

The industry, which is already having to deal with decisions in Germany, Italy, Switzerland and Belgium to reverse nuclear commitments, is also preparing to deal with the likelihood that France – the industry flag-bearer – will review its nuclear ambitions under the newly elected Socialist president, Francois Hollande.

Reports in the UK suggest that the cost of the two nuclear plants EDF intends to build in Somerset has risen by 40 per cent to £7 billion ($A11 billion) each. While this has yet to be confirmed by the consortium, Sam Laidlaw, the CEO of listed UK company Centrica, which proposes to take a 20 per cent stake in the project, told shareholders last week that “the investment case for nuclear has yet to be proven.”

The nuclear industry has long presented itself as the cheapest form of clean energy, indeed the cheapest form of any energy if a carbon price was applied to the gas and coal-fired generators.

But this is a combination of partial truths and the sleight of an accountant’s hand.  It is true that nuclear has one of the lowest short-run marginal costs of generation because, surprisingly to most people, the uranium fuel source is comparatively inexpensive.

However, the upfront capital costs are immense. The French nuclear industry, which supplies around 70 per cent of that nation’s electricity needs and is the one cited by most nuclear proponents, benefited from the government absorbing, and then writing off, virtually the entire capital cost of the fleet. The problem the nuclear industry now faces is how it can fund the replacement of those ageing reactors, let alone the construction of new capacity, particularly with new safety requirements and the added scrutiny post Fukushima……. http://reneweconomy.com.au/2012/nuclear-industry-finds-new-plants-are-not-so-cheap-55124

May 17, 2012 - Posted by Christina Macpherson | general