After years of denying that the planned nuclear renaissance would be subsidized by the taxpayer, the Government has been forced to backtrack, pressed into a U-turn by industrial blackmail, particularly from the French company EDF. It appears that the nuclear companies have been told that if the Copenhagen climate change summit in December fails to deliver a significant boost to the market price of carbon (up from 13 euros a tonne now to at least 30 euros), then a new carbon levy would be imposed adding nearly 10% to the average annual electricity bill. It’s true that the tax would also benefit low carbon generators of electricity such as clean coal and renewables, but nuclear would be far the biggest beneficiary. This is a big subsidy, it would not be done except for nuclear, and it makes one wonder how much one can trust any Government commitment in the face of industrial lobbying. But despite this total reversal of policy, there are still good reasons for thinking this won’t work.

The nuclear industry has always had a history of massive cost overruns, government bail-outs, and big subsidies. Anyone who doubts it should look at the Olkiluoto nuclear station being built in Finland which should have cost 3bn euros, but will now cost at least 5.3 euros – a point that the British authorities should bear in mind when Areva, part of the Franco-German consortium that is building it, plans to build 4 nuclear stations in the UK. This illustrates clearly the basic problems for nuclear. Nuclear stations are far more expensive to build than coal and gas – upwards of 4bn euros, compared with only 600m euros for a slightly smaller gas station. There are other problems too which are particular to the UK. Unlike in Finland, UK energy producers are reluctant to sign long-term supply contracts to support investment in a new reactor. And in the fully liberalised UK energy market, if for example EDF makes a loss on building reactors, it is much harder to pass on the costs to consumers.
The truth is, the whole life cycle cost of nuclear is increasing and becoming prohibitive. The cost of building a nuclear reactor has recently soared, partly because of the Finnish debacle, but also because of the fast-rising costs of steel and other construction materials. The industry has recently said that the price of new reactors quoted to utlities has risen almost 3-fold in just 3 years during 2005-8. At the same time in the last 2 years coal and gas prices have fallen by half, dragging down wholesale electricity prices and leaving nuclear stranded, unable to compete with its very high fixed costs. Moreover, even if this large subsidy now proposed were implemented, it would still lock the UK into long-term commitments to huge costs, to the detriment of pursuing other options.
This issue is far from over. The whole matter of soaring and unpredictable costs should now be dealt with vigorously and in public. What is needed now is a public inquiry before an irrevocable step is taken which will later be deeply regretted.

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