January Newsletter No172

Posted by SONE on 1 January 2013 in Newsletters

Tagged with: EDF, Hinkley Point, Olkiluoto, Uranium, Vincent de Rivaz.

HOW NOT TO HANDLE NUCLEAR POWER AT THE CROSSROADS

Nuclear power is at the crossroads, according to the Paris-based Nuclear Energy Agency (NEA). They can say that again. That certainly is the situation here in the UK as EdF approaches the moment of truth: Will it or won’t it set the shovels digging on the “shovel ready” Hinkley Point site? We shall know within months.

Meanwhile, only two main bits of the jigsaw remain to be slotted in. They were set out by Vincent de Rivaz, EdF’s CEO, in a recent article in the Daily Telegraph. They are final planning approval and then “most crucially” the strike price – the amount agreed under contract that EdF will get for its nuclear power from any new Hinkley Point reactors.

Mr de Rivaz seeks a “balanced, stable and durable agreement” which is “fair and balanced for both our company and the Government”. Of course. But it is consumers who will meet the cost, not the Government or taxpayer as such, so the deal will have to be sold to them.

Depending on the amount, that will not be easy for several reasons. First of all, the negotiations have been linked with expensive renewables. Nuclear has now been identified in the public’s mind as expensive and subsidised instead of cheap at a time when fuel poverty is rising and much needed industrial growth is handicapped by costs.

Worse still, just at the wrong time, the Government will, in an excess of green zeal, unilaterally introduce from April its escalating carbon floor price starting at £20 a tonne compared with a recent record low of around £4 for the EU impost. Another self-inflicted wound to no purpose while at the same time playing into the hands of the unscrupulous Greens whose sole objective is to price nuclear out of the market.

THE PRIZE – BUT AT WHAT COST?

Having said that, our guess is that EdF will go ahead with its reputedly £14bn investment. Once again in his Telegraph article, Mr de Rivaz did not sound like a man about to take his bat home. He claims to have put together “a world class team” with experience of building the Olympic Park and Heathrow Terminal

  1. He will need it to overcome the delays and cost overruns with the same French technology in Finland and at Flamanville, France.

He says he has identified hundreds of companies across the UK with the capability and expertise he needs. If the project went ahead about 25,000 people would work on it during construction, with more than 5,000 employed on the site at peak periods. His early studies suggested that well over half the cost of construction could be spent in the UK. Moreover, the Public Policy Research think tank had claimed that the economy would be boosted by £5bn a year if all the nuclear power stations canvassed for the future are built.

It sounds good. It is a prize to be won. “Get it right”, Mr de Rivaz wrote “and the UK has a chance to secure the right energy mix for the long term. If collectively we duck this now, the opportunity to shape our own energy destiny will be lost – maybe for ever”.

That sounds very much like a monopoly supplier – as EdF unfortunately is for the foreseeable future – continuing to negotiate in public. Hinkley Point may not yet be in the bag. It will come down to money in the end – as indeed it will for the consumer. Let’s hope the cost does not help those who are irrationally resistant to nuclear.

SOME GUIDE TO THE EVENTUAL STRIKE PRICE

At present it is possible to point only to some parameters of the negotiation. Towards the end of 2011, the Office for Nuclear Development predicted nuclear as the most competitive source of power – and low carbon power at that – at £66-74/MWh. Like other estimates, that was streets ahead of most other sources.

Last July EdF denied it was negotiating for £165/MWh but did not, so far as we could establish, go out of its way to reject a press report that it was seeking £2.8bn a year for 25 years, or £70bn, to justify going ahead. Then in August the Daily Telegraph said de Rivaz was seeking something less than £140/MWh, which happens to be double the Government’s median projection in October 2011. Finally, at SONE’s AGM last October Jeremy Nicholson, director of the Energy Intensive Users’ Group, saw problems about presenting anything over £100/MWh as value for money.

We have also calculated that with a 90% load factor the two proposed Hinkley Power reactors would over 50 years bring in from £63bn at a price of £50/MWh to £88bn (at £70/MWh), £126bn (at £100/MWh) and £164bn (at £130/MWH). We do not know the annual cost of running two 1,600MW reactors, but some entirely unofficial estimates put it at the equivalent of £30/MWh.

None of this tells us much in the absence of a transparent deal, its duration, its provisions for review and possibly amendment, correction for inflation and whether nuclear is guaranteed to be run flat out as baseload. If we are lucky we shall only know when there is a done deal. In the second half of this year SONE will be preoccupied with working out what promotional assets we have left apart from nuclear’s security of low carbon supply.

RENAISSANCE OR DECLINE?

This takes us back to the NEA’s vision of the nuclear industry at “a new crossroads” that could mark the start of a renaissance or a slow decline as existing reactors are gradually retired. Its latest edition of “Nuclear Energy Today” sets out “fundamental reasons” to support nuclear energy – cost competitiveness, security of supply and the pace of its technological development.

It says nuclear is generally cost-competitive, even in liberalised markets, though investors face the challenge of large upfront construction costs while ensuring long term stability and political commitment to secure an adequate return over time. As part of a diversified mix nuclear can “significantly improve” security of supply. Uranium resources are sufficient to power reactors through this century at least. Nuclear technology has evolved continuously and improved with each generation to the extent that small modular designs for small grids and reactors able to generate large amounts of electricity at higher efficiencies are on the way.

But political decision makers wishing to use nuclear energy must engage in public dialogue and make a long-term commitment to minimise investment risk as well as enforce regulatory frameworks and ensure safe operation. Here the UK scores only one out of three. There is not much, if anything, wrong with Britain’s nuclear regulatory system or the operation of its plants but a strike price and the Energy Bill have yet to prove the Government has provided the necessary long term commitment and dialogue with the public scarcely exists.

It is not just Ministers and politicians who need to summon up the blood to lead Britain into a new nuclear age. So does the nuclear industry, however defined. Its traditional reticence must end. We return to this below.

NUCLEAR ALIVE, WELL AND KICKING

It is not, of course, true that nuclear is going down the pan – not even in the timid but invariably well-regulated West. Indeed, we cannot recall when we last had as much good news to impart to members. For starters, the world began this year with a total generating capacity 3,667MWe higher than 2012, taking account of closures on grounds of age or, in Spain, taxes.

Japan’s new Prime Minister announced he would endorse the construction of new nuclear power plants after Fukushima and a survey found that more than half the mayors of municipalities with nearby nuclear plants would approve re- starts of existing nuclear power plants if the regulator confirmed they were safe. Last September the previous government announced a nuclear phase-out by2030. The new Prime Minister said that the parties that ran away from nuclear power were not trusted at the election. People were worried about having enough electricity.

In Poland a very positive woman Minister and commissioner for nuclear energy – they are planning to go nuclear – said that without nuclear power in its mix Europe would be less competitive, industry would move abroad and jobs would be lost. Germany was alone in its anti-nuclear policy, though a Green Party move in Switzerland effectively to phase out nuclear by 2029 is to be put to a national vote. In the meantime new reactors were being built in Finland and France and were planned or under consideration in the UK, Slovakia, Hungary, the Czech Republic, Bulgaria, Romania and Lithuania.

Licensing, life extensions, commissioning and record s

In the UK the generic design assessment of Hitachi-GE’s Advanced Boiling Water Reactor has begun. Several years will, of course, elapse before it can be licensed for construction at Oldbury and Wylfa. Hungary has extended the life of its Paks nuclear station, supplying 40% of the nation’s power needs, for 20 years.

Elsewhere, the Argentine is commissioning a pressurised heavy water reactor with power generation planned for June. China, with an eye on exports, has begun construction of twin 100Mwe demonstration high temperature pebble bed modular reactors, costing $467m, to provide power by 2017. And Rolls- Royce, collaborating with Hitachi in the UK, has moved further into the nuclear business by buying the US engineering company, PKMJ, which supports the nuclear industry throughout the USA and Canada.

The year also began with two production records. EdF reported the highest output last year for seven years at its 15 nuclear reactors in the UK – nearly 50% higher than in 2008, the last year before it bought British Energy. It says it has invested £300m a year in the plants. The Czech generation plant at Temelin, which supplies 20% of the country, broke its generation record last year by about 7%.

The waste business, too

While we are covering positive nuclear developments we ought also to refer to waste management. We went to press before the outcome of a local authority decision in Cumbria, due on January 30, on whether to allow exploratory work on a long-term deep repository to go ahead. SONE members have been active on this issue and Lord Hutton, chairman of the Nuclear Industry Association, made the point in a Daily Telegraph article this month about the importance of the 10-year exploration phase since only when that work had been completed would Cumbria know whether it might host the repository.

Posiva, the Finnish nuclear waste management company has applied to build a final repository at Olkiluoto and the US Energy Department has started again from scratch after President Obama stopped work on the projected Yucca Mountain repository in Nevada. It hopes to find a site for a high level waste repository for use by 2048.

Back in the UK the Nuclear Decommissioning Authority is beginning an eight- month dialogue with four consortia to help them lodge their tenders in a competition for decommissioning and clean up. It involves the ten Magnox reactor sites, all of which have ceased generation apart from Wylfa, and two RSRL research sites at Harwell and Winfrith, currently owned by Babcock International. It is described as one of the UK’s largest public procurement exercises.

DECC gets a businessman at the top

In this context – and the nuclear strike price negotiations – it is interesting to note that the Department of Energy and Climate Change’s new top official – its Permanent Secretary – is Stephen Lovegrove, a former investment banker.

He is currently responsible in the Business Department for Government stakes in organisations like the Royal Mail and he oversaw the sale of the Government’s holding in British Energy to EdF. He takes up the job in February after the Prime Minister vetoed the Civil Service appointment of David Kennedy, head of the Committee on Climate Change, which is, of course, an inveterate supporter of renewables.

We shall be interested to see how long a businessman at the top of DECC can countenance the sheer waste of public resources being poured into wind and solar power.

TOLERANCE OF RATIONAL MAN TESTED

The last sentence raises a wider question, which, in itself, is good news. Just how much longer can a businessman – as distinct from environmental and renewables nutters – countenance an energy policy that falls further apart every time you look at it? It won’t deserve the name if nuclear power falls at the strike price hurdle.

Over the past month, the press have reported:
Only five households had by January 23 signed up for the Government’s Green Deal to make homes more energy efficient. This is not surprising perhaps since they are to be charged £80-120 for an assessment of their property and have to repay loans of up to £10,000 over 25 years through their energy bills for a pretty uncertain return.

The SNP government in Scotland is bringing democracy into contempt by approving the vast majority of large wind farm applications in spite of far more objections than signatures of support; 1,000 turbines are reported to be threatening the Clydesdale, Borders, landscape
Evidence of Tory Ministers ganging up against the Liberal Democrat Energy Secretary, Edward Davey, over wind power – Planning Minister Nick Boles wrote to Energy Minister John Hayes saying residents opposed to wind farms should not have their views “ridden over roughshod”; in December Boles suggested that wind farms should not be built less than 1.4miles from homes.

A study by Prof. Gordon Hughes, of Edinburgh University, showed that the economic life of onshore wind farms is between 10 and 15 years, not the 20-25 years used for Government projections.

The Commons’ Public Accounts Committee has suggested that Government has learned nothing from the £billions wasted on Private Finance Initiative projects with a £17bn scheme, drawn up by Ed Miliband and implemented by Chris Huhne, to encourage a new generation of offshore wind farms; as a consequence millions of families face years of higher electricity bills to meet the cost.

The electric car “revolution” has stalled after the $billions spent on battery- driven cars and the industry is switching to what is possible – internal combustion engines or hybrids.

Stephen Lovegrove has problems which, to repeat, is good news if the result is a move to a tolerably sensible energy policy, with nuclear power at its centre, before we are much older. There must be a limit as to how long the current mess can be allowed to last.

THE GREENING OF UK RAILWAYS

If you can take it, here is more good news. The Greens forever urge us to forego our cars and use public transport. Well, Network Rail has just struck a £3bn deal with EdF to supply power for its electrified lines. That means that the railways can assuredly claim to be one of the greenest forms of transport in Britain. Is it too much to hope that Greenpeace will properly recognise it? Probably.

We gather that roughly half of current rail traffic is electrically driven rather than by diesel but by 2020 Network Rail aims to make it 75%. EdF already supplies most of Network Rail’s power. This new deal makes it the exclusive supplier until 2024, with demand matched by the electricity generated by its nuclear power stations.

Network Rail’s CEO, David Higgins, said “Rail is already the greenest form of public transport and this partnership with EdF Energy will help us to make it greener still.” The aforesaid Mr de Rivaz, EdF’s CEO, saw it as a massive vote of confidence in nuclear energy.

It should also give big consumers like Network Rail the sort of ideas they have in Nordic countries where they become shareholders in nuclear generating plants, guaranteeing them supplies of the greenest power. Who will follow Network Rail, assuming EdF goes ahead at Hinkley Point on reasonable terms?

CAN WE MAKE RADIATION GOOD NEWS?

Unaccustomed as we are to good news, our cup overflowed – at least for a moment – when a Scottish member drew our attention to an article in Forbes’ Magazine which suggested that the UN had admitted the LNT theory on radiation – that there is no safe limit – was wrong.

In a way, it did. A report from the UN Scientific Committee on the Effects of Atomic Radiation (UNSCEAR) in May last year was quoted as saying that it “does not recommend multiplying low doses by large numbers of individuals to estimate numbers of radiation-induced health effects within a population exposed to incremental doses at levels equivalent to or below natural background”. On this basis Forbes went on to argue vigorously the case for a relaxation of the present dose limits.

We subjected the article to peer review, as it were, in SONE’s committee, which counselled caution. This seems wise since the case for relaxation is being made not by scientists but by a magazine, however reputable. But that does not mean that the issue, now raised internationally, should be left to lie on the table when the LNT theory seems to be more a product of the early Cold War and its scaremongering than considered science.

Confusion about risks

As Professor Wade Allison, of Oxford University, a SONE member, has pointed out, it costs a bomb, so to speak, and more realistic regulation could bring benefits similar to those resulting from the acceptance more than 100 years ago that motor cars could proceed without a red flag being paraded in front of them.

Our experience of the “nuclear industry” would suggest that it will do little to promote a more realistic regime largely because since Lord (Walter) Marshall and the old BNFL there has been no overall promotional strategy, let alone drive, to inform the public of the facts. There are many ways of using Forbes to create a debate without inviting the Mandy Rice-Davies response to a campaign by the nuclear industry itself. Why should it be left to Professor Wade Allison, of Oxford University, a SONE member?

Interestingly, in a new essay, Professor Allison records a nuclear inspector saying there are two negative aspects to radiation protection. One is where it outweighs concerns for industrial safety – e.g. workers wearing three layers of footwear in the name of contamination control climbing ladders with the risk they could fall eight metres on to piping. The other is the psychological stress for workers worried about working in even low levels of contamination.

Fukushima has pointed to the need for a more realistic approach since, as Professor Allison has pointed out, under its safety limits Japanese citizens would have to eat 1,000kg of foods in three months to absorb the radiation dose from a single CT scan.

OBITUARY

We regret to record the death of a distinguished member, Terry Price, at his daughter’s home in Somerset on January 7, aged 92. Mr Price was the first Secretary General of the Uranium Institute (now the World Nuclear Association) in 1975. This followed a distinguished career in the Government’s scientific service, including a period as deputy to Sir Solly Zuckermann as Chief Scientific Adviser to the Ministry of Defence. He wrote two books about nuclear power – Political Electricity and Political Physicist.