The claims
“I believe that nuclear electricity can and should play a part in our energy future provided that new nuclear is built without public subsidy.”
“Nuclear should still be the cheapest low carbon source of electricity”.
Chris Huhne, 13 October 2011
The background
Energy Secretary Chris Huhne, a former opponent of nuclear energy, appears to have undergone a conversion on the road to Dungeness.
In opposition, the Lib Dem minister railed against plans to build a new generation of reactors, but the full extent of his U-turn became clear in a speech to the Royal Society this week.
It’s clear that he now backs new nuclear power stations – but with one important caveat that was enshrined in the coalition agreement.
Revealing the shocking figure that £2bn is spent every year on storing radioactive waste that dates back to the 1950s, Mr Huhne said: “It is precisely because of that post-dated bill from past nuclear mistakes that I reiterate with exceptional feeling ‘without public subsidy’.
One of the key reasons he gave for backing the nuclear industry, despite its disastrous track record, was cost. Mr Huhne said: “Of the three large scale low carbon technologies, the costs estimated by Arup are as follows. Offshore wind is assessed at £130 per megawatt hour, gas with carbon capture at £95 per megawatt hour, and nuclear at £66 per megawatt hour.
“These figures take account of waste and decommissioning costs, so nuclear should still be the cheapest low carbon source of electricity.”
Let’s take these two claims – that new nuclear power stations can be built without public subsidy, and that atomic energy costs half as much as offshore wind power – one by one.
The analysis
When is a subsidy not a subsidy?
According to the World Nuclear Association, there are 432 commercial nuclear reactors in operation now in 30 countries.
Not surprisingly, given the multibillion-pound costs, it’s very difficult to find an example of one that was built without a hefty government subsidy.
Some commentators, like the environmentalist Jonathon Porritt, who used to be the chair of the Sustainable Development Commission, the government’s independent advisor on green industry, believes there are precisely none in existence.
So why is Mr Huhne so confident that Britain can buck the trend and build new nuclear purely out of private sector investment?
A chorus of critics would beg to differ when Mr Huhne states that there is in fact no state subsidy in the pipeline for the nuclear sector.
That’s because the government’s plans, as set out in the electricity market reform white paper, contain what have been described as “hidden subsidies” for nuclear.
The Carbon Price Floor strategy will effectively put an extra carbon tax on fossil fuels, hitting gas-fired power plants at the expense of their low-emission nuclear rivals.
But the move is also expected to raise the price of electricity, something that will hand a windfall to the nuclear sector.
And the government is proposing to tempt investors by offering all low-carbon energy producers long-term contracts with tariffs that will top up payments to companies if the price of electricity is lower than expected.
The anti-nuclear lobby says these plans come on top of existing indirect subsidies, such as the fact that operators would only pay a fraction of the insurance costs in the event of a Fukushima-style disaster, the government being obliged to cover the rest.
Mr Huhne has also specifically not ruled out offering to make the nuclear sector pay a fixed price for the disposal of waste, something designed to appeal to investors, but which carries risks that the taxpayer could lose out in the long run if clean-up costs spiral unexpectedly.
How can Mr Huhne get away with insisting that all this indirect financial assistance does not equate to a de facto subsidy?
In a ministerial statement last year, he said that “no subsidy” meant “no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation”.
He added: “New nuclear power will, for example, benefit from any general measures that are in place or may be introduced as part of wider reform of the electricity market to encourage investment in low-carbon generation.”
The slightly mind-bending logic of this appears to be that if you are indirectly subsidising several different industries at once, you cannot be accused of subsidising one of them in particular.
Some of the most vocal critics of this approach were members of the cross-party Commons energy and climate change committee.
The committee’s chairman, Conservative MP Tim Yeo, said: “The government must be upfront about the support it is giving to nuclear and not hide subsidies in a one-size-fits-all design for long-term energy contracts.
“Ministers believe that new nuclear could play a key role in keep the lights on and meeting our climate change targets – but they don’t want to own up to supporting it.”
The committee’s biggest criticism was that the reforms won’t help other renewables as much as nuclear. The rhetoric about helping all the low-carbon energies was a smokescreen for the real aim of giving the nuclear sector a financial boost, the MPs said.
The report concluded: “The White Paper should address the advantages, risks and challenges of promoting new nuclear generation head-on and honestly; it should not distort the market.”
Is nuclear really cheap?
Those statistics quoted by Mr Huhne in his speech certainly look compelling, but as so often in FactCheckland, the numbers are not as straightforward as they seem.
The Department for Energy and Climate Change (DECC) immediately admitted this key part of the speech contained an error.
The figures did not all stem from research by the consultants Arup. The cost of gas with carbon capture and nuclear come from a study by Parsons Brinckerhoff published in August (here, p17), while only the figure for offshore wind is in the Arup report (p287), which came out in June.
FactCheck asked DECC whether it is appropriate to put figures taken from two different research papers – carried out using different methodologies and assumptions – and put them side-by-side as though they were directly comparable. We did not receive an answer. (See Update below)
More importantly, not all auditors agree that nuclear power is cheaper than other renewables.
A study by Mott MacDonald for the independent government advisory committee on climate change came up with a similar spread of prices but added this important point: “It is clear that pushing deployment can affect the relative costs of technologies…it is possible to find cases where offshore wind, CCS, and nuclear are each lower cost than the other two.” (Here, pXV)
In other words, it is the government itself that effectively chooses which form of energy is most expensive by deciding which kind of technology it wants to push.
The verdict
If it were just a case of environmental groups railing against Mr Huhne (and we’ve only touched on some of the many ways campaigners say the state already favours nuclear over its rivals) we would be content to leave the FactCheck needle in the middle of the dial.
But many authoritative independent voices, most notably the energy and climate change select committee, are of the opinion that Mr Huhne just isn’t being upfront about the reality of nuclear power. It can’t be funded purely by private sector investment without the government tilting the playing field.
As for those figures on the price of the various renewables, until DECC can convince us that they are not comparing apples and oranges, we’re going to leave Mr Huhne’s nuclear aims in the realm of fiction.
By Patrick Worrall
(Update: After this article was published, a spokesman for the Department of Energy and Climate Change said: “The costs presented were based on the same core assumptions (with variations due to technological differences only) and we believe it is appropriate to compare them. While the data collection method used varies between the reports, DECC took care (as part of the commissioning of the work) to ensure that the approach to estimating the costs used by the individual consultants would be comparable with each other. Any differences in the approach taken was deemed appropriate given the different technologies examined.”)
Read more: FactCheck: Why Cameron’s problem families vow will cost billions
Comments
Cathy/Patrick,
Might be worth checking out if nuclear power plants are still the “nuclear bomb making factories” exposed long ago by Tony Benn. Why not contact him and follow this up? If it still goes on you’ll have a scoop there.
I’m sorry, FactCheck is usually reasonably good but this piece is simply biased. The ridiculous assumption that wind power or solar is as cheap as nuclear is crazy.
No government WANTS nuclear power, it is simply a necessity. If solar or wind were as cheap or cheaper or actually worked and produced energy then the government would heavily invest in them.
Renewable energies currently receive heavy subsidies and still they’re not taking off because they’re simply not very good.
Nuclear power is far more expensive than wind and solar PV, IF you take account the full lifetime costs of generation, including waste management and decommisioning costs. All the figures I have seen do not adequately account for these huge costs which until now have been borne by the taxpayer. The Nuclear Decommissioning Authority is spending around £1 billion a year for the next 70 years (yes more than £70 billion) on waste disposal and decommisioning the existing fleet. Nuclear is also only low carbon on comparison to coal and gas, producing 6 times the carbon over the full “cradle to grave” life cycle than wind power.
Germany is quite clear that it can move to a nuclear free future over the next 20 years, yet has a mere fraction of the renewable resources that we in the UK do, with out large coastline and greater wind resources. If we can develop an even better way of storing energy from renewables, such as methane or hydrogen, nuclear would not be in the frame.
We work in a relatively open energy market, so if nuclear is cheaper, then why have we not been building nuclear power stations before now?
Does the price per Megawatt hour for Nuclear include the £2 billion a year you cite plus an estimate of any increase in that cost as we add waste from new reactors?
I wish the renewables deniers would wise up. The most important thing in future energy provision must be diversity. We have been talking about renewables, and many people have been researching them for at least the last 30 years in the engineering industry. It’s the politicians who didn’t have the nous or will to back the research in all that time, so that we’ve now come down to the wire. There are also other renewable sources proved to work – how about pumped storage hydro (Cruachan and Dinorwig) and tidal/wave power? It doesn’t matter if each individual technology only works in certain areas of the UK – that’s why we have the National Grid.
Let me see if I understand this correctly.
They won’t accept an unsubsidised market price,
they won’t accept full liability in the event of a Fukushima-style disaster,
they won’t pay the full clean up costs for the disposal of nuclear waste.
Why because the banks and other investors aren’t stupid!
Who is stupid?
WE ARE for contemplating new nuclear power stations!
So basically it means the British public are paying and as going to pay considerably more for the priviledge of subsidising nuclear power.
Nuclear power that costs more to produce and is putting up all our power bills, that has the capacity to devastate hundreds of square miles for hundreds of years, and will leave a huge pile of nuclear waste as a lasting legacy for the future!
THis is the classic area (education is another) where we need to move away from the present model for taking long term decisions that affect all/most of us. We need an independent commission, whose finances & deliberations are wholly opeen & whose members are part expert, part elected – but all accountable. They should set out the various parameters to be taken into account in deciding on the future of energy provision & commission independent research on which sources/mix of sources of energy would best meet the UK’s long term energy requirements taking account of parameters such as security of supply, global warming, fuel poverty, etc. The financial interest of all who contribute information or to policy considerations should be public & the commission should be publicly funded. Reports of the commission – indeed all documents – should be public % any hearings should be open via direct attendance, webcast, podcast, etc. We cannot trust the political/energey complex to take decisions in our best interest. there is too much £££ involved & too many opportunities to obfuscate with figures & a compliant media(who also often have a financial interest in this) to help in…
There’s a lot of uncertainty on CCS too. For instance, will a CCS demonstration plant actually be built at all? Some nice links.
Well spotted, Matthew Toseland – we now know the projected one won’t, and one suspects no-one will now have the will to make another attempt. Looks like a shoo-in for nuclear, then. No diversity there, which is frightening.
The next enquiry into parliamentary lobbying must look at the nuclear industry. How can Huhne and Hendry be so gullible? Are they looking forward to cushy directorships if they allow foreign multi-national companies like EDF to rip us off financially, double the death toll from new build poisonous radioactive gases, pick up taxpayer subsidies for waste, insurance, construction, pay the extra costs to the NHS. There might be some savings in that life expectancy near nuclear sites will drop. DECC’s own figures show the UK can supply all its electricity without any nuclear by 2020. Invest in the Severn Barrage and build wind farms on all the UK coastal nuclear sites. It’s not rocket science; just common sense.