Monday, 31 October 2016

Confidential government papers show how taxpayers could pick up massive costs of Hinkley nuclear waste storage

This Observer article is based on documents grudgingly released to me at the 11th hour by the Energy Department after an FOI application went through three stages of appeal, having been rejected each time. What is really disturbing is that the Information Commissioner's Office inexplicably took the side of Government and a private foreign nuclear company (EDF)  in backing secrecy.
Secret government papers show taxpayers will pick up costs of Hinkley nuclear waste storage

Documents show steps Whitehall took to reassure French energy firm EDF and Chinese investors

Observer, Sunday 30 October 2016


Taxpayers will pick up the bill should the cost of storing radioactive waste produced by Britain’s newest nuclear power station soar, according to confidential documents which the government has battled to keep secret for more than a year.

The papers confirm the steps the government took to reassure French energy firm EDF and Chinese investors behind the £24bn Hinkley Point C plant that the amount they would have to pay for the storage would be capped.

The Department for Business, Energy & Industrial Strategy – in its previous incarnation as the Department for Energy and Climate Change – resisted repeated requests under the Freedom of Information Act for the release of the documents which were submitted to the European commission.

“The government has attempted to keep the costs to the taxpayer of Hinkley under wraps from the start,” said Dr Doug Parr, Greenpeace chief scientist. “It’s hardly surprising as it doesn’t look good for the government’s claim that they are trying to keep costs down for hardworking families.”

But, earlier this month, on the very last day before government officials had to submit their defence against an appeal for disclosure of the information, the department released a “Nuclear Waste Transfer Pricing Methodology Notification Paper”. Marked “commercial in confidence”, it states that “unlimited exposure to risks relating to the costs of disposing of their waste in a GDF [geological disposal facility], could not be accepted by the operator as they would prevent the operator from securing the finance necessary to undertake the project”.

Instead the document explains that there will be a “cap on the liability of the operator of the nuclear power station which would apply in a worst-case scenario”. It adds: “The UK government accepts that, in setting a cap, the residual risk, of the very worst-case scenarios where actual cost might exceed the cap, is being borne by the government.”

Separate documents confirm that the cap also applies should the cost of decommissioning the reactor at the end of its life balloon.

Hinkley Point C developers face £7.2bn cleanup bill at end of nuclear plant's life

French and Chinese developers will be the first nuclear operators in the UK that will have to pay to decommission the site

Read more

The level of the cap is unclear. But Dr David Lowry, a senior research fellow at the Institute for Resource and Security Studies in Cambridge, Massachusetts, who made the FoI request, said it was clear that the risk of footing the bill for a significant cost overrun had been transferred from Hinkley’s operator to the taxpayer.

“This shows that the government cares more about the economic future of a foreign power generator than British taxpayers,” Lowry said.

In return for the cap, the document reveals that Hinkley’s operator will pay the government a risk fee which “is expected to be relatively low, reflecting the high level of confidence that the cap will not be breached”.

But Lowry pointed out that the nuclear industry had form when it came to sizable cost over-runs. He warned that an accident that could force the closure of the reactor, either because of problems with it or at another plant, as happened in Japan, would leave the taxpayer having to pay billions of pounds for the clear-up years after it ceased generating revenues.
A government spokesman said: “All operators of new nuclear power stations in the UK are legally obliged to meet the full costs of decommissioning and their full share of waste management and disposal costs. They will also pay the UK government to dispose of the waste produced at the end of a plant’s life

Waste costs for UK new build

09 December 2011


Disposing of waste from new UK nuclear power plants will cost operators a maximum of 71p per MWh of power produced, less than 1% of the cost of delivered electricity.


UK leaders have been clear for several years that they wish to facilitate private companies in building new nuclear power plants, but not to subsidise the technology. A key aspect of this is fairness in paying for a single waste disposal facility to hold the new privately produced radioactive waste as well as similar wastes from the former national program and everything from research and weapons programs.


Yesterday, energy and climate change minister Chris Huhne announced to parliament a framework for this, including a charging mechanism meant to give cost certainty for new plant builders and protect taxpayers at the same time. It came after a consultation that ran from October 2010 to March this year.


The framework is complex, but at its core is an estimate of the expected cost of the required geologic disposal facility. At present this is highly speculative - without a site or design firmly in mind - and so this will be revised every five years until the facility comes into operation in 15-30 years.


From the start of generation, operators of new nuclear power plants will be required to set aside enough money to meet this expected cost. A cap has also been set, giving operators certainty of the maximum that they would pay, and this is set at about three times the current estimate.


However, the government is responsibile for building the disposal site and wants to cover the risk it is taking that costs could escalate further. For that reason it will add on certain risk premiums set so that the UK taxpayer would not lose out unless the cost of building the disposal facility grew by over five times the current estimate.


What this boils down to is a charge per unit of electricity generated. An operator can expect to pay £0.20 ($0.31) per MWh if the facility is built to current cost estimates with a cap of £0.71 ($1.11) per MWh. These compare to current prices of electricity for a large industrial user of about £83 ($130) per MWh.


The UK government said its objective "is to ensure the safe disposal of intermediate level waste and spent fuel from new nuclear power stations without cost to the taxpayer and to facilitate investment through providing cost certainty." It added that it "is not seeking to make profits over and above a level consistent with being compensated for the level of risk assumed, but does expect operators to meet their full share of waste disposal costs."

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