Sunday, 23 August 2015

Nuclear costs: a demystification

Letter sent  to the Times:
In his letter (“Powering ahead,” 22 August, the chief executive of the Nuclear Industry Association makes several misleading assertions in respect of the contribution taxpayers (and electricity bill payers) could make towards the funding of proposed new £25 billion Hinkley Point C nuclear power plant.

The government and nuclear industry have deliberately constructed fiendishly complex financial mechanisms to fund the reactor project, that masks the degree to which state funds ie taxpayer funding will underwrite this project from inception to final dismantling.

Let me briefly address just two of these mechanisms.

While it is true EDF Energy, the owners of Hinkley C, will have to make provision to cover future radioactive waste management and decommissioning costs, the financial arrangements - called “fixed unit price”- put a cap on these liabilities.

Setting a “fixed unit price” for waste ‘disposal’ when approval is given for a new reactor effectively caps the cost to the operator of nuclear waste disposal and transfers the risk of cost overruns to the taxpayer.

In 2008 the then Labour Government stated that energy companies: “would be prepared to pay a significant risk premium over and above the expected costs of disposing of waste and spent fuel, in return for having the certainty of a fixed upper price”.

But in the interim period it has become clear that energy companies are not prepared to pay that significant risk premium and the “expected Fixed Unit Price” (eFUP) to be offered to prospective investors is a device to secure investment by reducing the amount of money nuclear operators have to set aside now while transferring yet further risks to the taxpayer.

It is irresponsible to accept cost estimates made now about something which will not happen until 2130. This attempt to fix the future will become an embarrassment before long and is bound to be revisited by the next five generations and 24 ‘fixed term’ Parliaments.

Secondly, the risk of an accident are almost entirely in the lap of taxpayers, not the nuclear plant owner/operator EDF Energy. The liability on EDF for a serious accident involving uncontrolled release of radioactivity will be capped at £1.3 billion, according to international conventions.

This figure should be contrasted with the real costs of serious recent nuclear accidents experienced. Chernobyl in 1986 has so far cost the Ukrainian State close to £250 billion while the 2011 Fukushima accident in Japan has so far cost Japanese taxpayers around £150 billion, and rising.


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