The ‘energy gap’ is looming large, and FDs will soon feel its vice grip as
energy companies hike their prices. NPower, EDF and British Gas have all
announced plans to increase their prices by anywhere between 15% and 23% in
2008, and with resources becoming scarce and concerns over securing supplies,
the government is now looking at alternative energy sources with new enthusiasm.
Ahead of a return to coal, or finding more gas, nuclear energy has emerged as
the front-runner in a government statement issued in January on UK energy
A white paper published last May on nuclear power’s ability to meet targets on
reducing emissions at home and abroad was backed whole-heartedly by John Hutton,
secretary of state for business, enterprise and reform.
According to Hutton, nuclear is the solution to the problem of the UK
securing access to clean and affordable energy in the future but while in one
stroke stressing that the UK should not come to rely on any one supplier, the
proposal aims to make nuclear one of the country’s main providers as it hopes to
treble electricity sourced from renewables by 2015.
Nuclear currently accounts for around 20% of the UK’s energy supplies, but
many plants are nearing the end of their life cycle, and it is thought that
within 20 years all but a handful of nuclear and coal-fired power stations are
due to close.
To help companies meet the challenges of climate change and energy demand,
the government held a nuclear consultation last year and identified a number of
steps to make way for companies to invest in power plants.
• Legislation to impose a duty on operators of nuclear power stations to meet
the full costs of decommissioning, and their full share of waste management and
• Improved use of the planning bill to ensure nuclear new build projects are
treated like other critical infrastructure projects and are effectively dealt
with through the use of a national policy statement;
• Running a Strategic Siting Assessment to develop criteria for determining the
suitability of sites for the stations. This will be combined with taking
consideration of high-level environmental impacts of the site through formal
strategic environmental assessment;
• Running a process of justification to meet the requirement of European law
that the economic, social or other benefits of specific new nuclear power
technologies outweigh any health detriments;
• Strengthen the resources of regulators, especially the Nuclear Installation
Inspectorate. This includes assisting regulators to pursue new build design
proposals through a process of generic design assessment to complement the
existing site-specific licensing processes; and
• Strengthen the EU Emissions Trading Scheme (ETS) so that investors have
confidence in a long-term multilateral price signal. The government is also
keeping open the option of further measures to reinforce the operation of EU ETS
in the UK if this is necessary to provide greater certainty for investors.
An interesting aspect of Hutton’s white paper is the funding element. The
government has said it will not provide subsidies for companies investing in
nuclear power plants, including decommissioning and waste management. However, a
Nuclear Liabilities Financing Assurance Board (NLFAB) is to be established to
provide independent advice on the suitability of decommissioning programmes
submitted by new companies. Companies will also have to provide the NLFAB with
adequate financial safeguards, to provide some protection for power stations
against the effects of a company going bust.
Waste management is also an aspect not to be taken lightly according to Ben
Ayliffe, senior nuclear campaigner at Greenpeace. He says that the radioactive
waste produced by nuclear power plants can last up to 100 years, and that many
companies are not likely to be around, or cannot plan that far ahead financially
to tackle any issues that may arise.
According to Ayliffe there are a number of hidden costs that have not been
accounted for. The national grid may have to be expanded to cope with the surge
of nuclear power stations added to it, posing the question of insurance
companies not wanting to take on the responsibility for accidents or
decommissioning from involvement in power plants. Additionally, according to
some eco campaigners, even building 10 new nuclear reactors would only cut the
UK’s emissions by 4% after 2025.
The current front-runner for proposed power plants is EDF energy. It hopes to
complete construction of one of four new plants by the end of 2017.
Although the government believes that nuclear may be the answer to the
current predicament of filling the energy gap, there are some within the Labour
party who believe that nuclear should not be given the backing it has received
because it would come at an enormous cost to businesses and individuals alike.