Economic Sustainability of Nuclear Power

4Nov
1998

One year after the EU made its CO2 emission reduction commitments in Kyoto and with the Buenos Aires conference on everybody’s mind, it was interesting to listen to the energy sector’s responses and those of EU policy makers. Certainly energy market liberalisation, global oil prices, public opinion and achievable energy policy changes all have an influence on how to honour those commitments. One inescapable topic touches all of those factors: the role of nuclear power. Recently, the European Commission’s Research Directorate General (DGXII) organised a symposium (“Nuclear in a Changing World”, Oct. 1998) aimed at assessing nuclear power’s role in the climate change debate. Despite the fact that nuclear power generates 1/3 of the EU’s electricity avoiding 700 million tonnes of CO2 annually (22% of the EU total), there remains uncertainties and disputes concerning acceptability and competitiveness of nuclear power.
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The debate was opened by Adrian Ham, Director of British Energy International, and chairman of one of the a/m DGXII symposium working groups.
The Director of the UK’s privatised nuclear generator started with a reflection on the whole spectre of a liberalised electricity market: competition demanding cost cuts leading to reduced prices, the removal of monopolies and of price fixing that allow the survival of uneconomic activities in the sector. Many nuclear power opponents, he said, predicted that this would ‘..put the final nail in the coffin of nuclear power…’. Why so?’ he questioned
Mr Ham contended that the choice of the means to make electricity, as for any goods in an open market, depends on the rate of return from investment. Apply this to even the well established renewable sources, such as wind power or hydro, and they become unaffordable compared to coal, gas and nuclear.
Looking to the future and, in particular beyond the EU, Mr Ham considered the likely effect of liberalised markets where developing economies are set to double their primary energy consumption in the next 20 years. He questioned whether these expanding markets will have potent environmental influences built in. Moreover, he said that carbon taxes or tradable permits are unlikely to be adopted in such economies if the OECD countries do not do so first. That implies the ‘polluter must pay’ principle or, in other words, internalising external costs. Without this principle, Kyoto targets are unlikely to be met and nuclear power is unlikely to be the market’s first choice for new capacity. Equally, as was provoked by Mr Ham, if the ‘polluter must pay’ principle is adopted, the market price for electricity and the costs for fossil fuel users will see a marginal increase. This alone will make nuclear power and some other clean production methods the market’s favoured choices for new capacities.
Turning to the UK market example, and in particular the performance of British Energy, Mr Ham explained how the truly liberalised and non-subsidised market had presented the nuclear industry with the challenge to become cost effective or die. Since 1989, he said, his company had cut its generating costs by 60% and increased its market share from 17% to 24 %. While at the same time, the gas share had climbed from 0% to 21% in a total market demand that had remained almost constant over the period.
Michel Poireau, European Commission DGXII symposium organiser, outlined their role in this sector. Over the last decade, nuclear energy has found itself against a changing background. The liberalisation of the energy sector, the considerable developments of the energy markets, and the debate on climate change have given a new dimension to nuclear-related issues such as safety, waste management, competitiveness and public acceptance. The objective of the symposium was to understand the complexity of these questions in order to establish to what extent research could provide some solutions.
The symposium gathered a wide variety of participants ranging from the representatives of the nuclear industry to its opponents, the policy makers, the regulators and the scientists. Mr Poireau pointed to the frankness of the open debate, the exposure of clear differences of opinion and, he hoped, an advance in the understanding of the subject before us.
Naturally, with such a diverse set of opinions, he said that it was clear messages, rather than clear conclusions, that had emerged. He advised the nuclear industry to be less shy about its achievements, to be dynamic in communicating an open image of the industry’s activities and to aim at building public confidence. He emphasised that this was the view that emerged from the symposium rather than any personal feelings. He concluded that when all the factors are taken into account, nuclear power does have a role in a balanced energy policy.

On research, he confirmed that whilst we do have some of the solutions to the problems of today, there remains much to be done and even more to discover. ‘The Commission’, he said ‘is committed to playing its role in research where the potential benefits are common to the whole energy sector and to the EU as a whole’. He reminded the audience there was a need beyond research activities with international security in mind and, particularly relevant to the current discussions, having an energy policy that addresses environmental issues.
During the ensuing debate, it emerged that the nuclear industry was aware of the need to be more transparent and to open itself to the general public if it is to be accepted.

Several issues were also raised:

The status of the personnel in a liberalised energy market. British Energy, as far as it is concerned, reduced the number of staff only through voluntary leave or retirement. On a broader scale however, it is essential for the industry and the policy-makers to be prepared to tackle this issue in a positive and creative way. Even more so when, in the perspective of the EU enlargement, one takes the example of a generator in Eastern Europe, which employs 50,000 people to produce 87 TWh while in the UK, British Energy, employs 5,000 people for 67 TWh.

The millennium bug in computer based control systems. British Energy pointed out that it has been testing all the possible situations on simulator reactors.

Concerning the NPPs in the former Soviet Union and the central and east European States, they are faced with the same problem but on a smaller scale. They are indeed less dependent on computers than in the West; and some of the recently equipped plants benefited straight away from the latest technology which had already taken the millennium bug into account. In this respect, it was underlined that EC programmes Phare and Tacis had helped alleviate many of the problems there.

Waste management. The nuclear industry, like most of the other technology-driven ones, is constantly improving the technology, hence working at solutions to solve this issue. Research is thus essential and needs to be stimulated.

The meeting, which emphasised the need for an energy mix including nuclear energy, recognised the fact that, under current energy supply conditions, new NPPs can only be profitable if the ‘polluter pays’ principle is applied.