By 2020, the earliest time any new nuclear power station could be built in the UK, the market for its electricity will be disappearing because of the explosive growth in photovoltaics (PV), according to a new report.
And because consumers will be able to buy electricity from anywhere in Europe, a nuclear energy strategy will become obsolete, argues the paper from the Energy Fair group.
It describes how the falling cost of PV will continue to lead to a booming market for solar panels, generating large amounts of power during the day when the demand for electricity is greatest. And there will be stiff competition from wind power and other renewables that work at night.
The likely completion of the European internal market for electricity and strengthening of the European transmission grid will enable consumers, including large commercial and industrial consumers, to buy their electricity from anywhere in Europe.
The report argues that since most of the cost of nuclear electricity is in the capital cost of nuclear plants, since build times can be 7 years or more, and since payback times can be 30 years or more, investors in new nuclear plants are exposed to financial risks from inaccurate estimates and from changes in markets in the future.
There is currently increasing recognition in the business world that investing in new nuclear power stations is commercially risky.
The new report describes five major types of risk for any investor considering putting money into new nuclear plants, with particular emphasis on the situation in the UK:
• Market risk. By the time any new nuclear plant could be built in the UK (2020 or later), the market for its electricity will be disappearing, regardless of any possible increase in the overall demand for electricity. The rapidly-declining cost of photovoltaics (PV) with the falling costs of other renewables, and the likely completion of the European internal market for electricity with the strengthening of the European transmission grid, will be transforming the market for electricity in the UK, and throughout the rest of Europe and beyond. Consumers, large and small, will be empowered to generate much of their own electricity (on their own sites or elsewhere) or to buy it from anywhere in Europe, and this without the need for subsidies. Explosive growth of PV is likely to take much of the profitable peak-time market for electricity. And there will be stiff competition to fill in the gaps left by PV, from a range of renewable sources, many of which are better suited to the gap-filling roll than is nuclear power.
• Cost risk. There is good evidence that, contrary to the often-repeated claims that nuclear power is cheap, it is one of the most expensive ways of generating electricity. The inflation-adjusted cost of building new nuclear power stations has been on a rising trend for many years. The introduction of new safety measures after the Fukushima disaster will push up prices further. Meanwhile, the cost of most renewable sources of power is falling.
• Subsidy risk. Although nuclear power is a long-established industry which should be commercially viable without support, it depends heavily on subsidies. This is a clear breach of the principle of fair competition. At any stage, some or all of the subsidies may be withdrawn, either via formal complaints to the European Commission, or via the European Court of Justice, or via decisions made by politicians. All state aid which is deemed to be illegal must be repaid. Consumers may refuse to pay surcharges on electricity bills. There is additional subsidy-related risk arising from the great complexity of government proposals in this area, with its potential for unexpected and unintended consequences.
• Political risk. Apart from the risk that politicians may decide to withdraw some or all of the subsidies for nuclear power, it is vulnerable to political action arising from events like the nuclear meltdowns in Fukushima. That disaster led to a sharp global shift in public opinion against nuclear power and it led to decisions by politicians in several countries to close down nuclear power stations and to accelerate the roll-out of alternative sources of power. The next nuclear disaster — and the world has been averaging one such disaster every 11 years —i s likely to lead to even more decisive actions by politicians, perhaps including the closing down of nuclear plants that are still under construction or are relatively new.
• Construction risk. The delays and cost overruns in the Olkiluoto and Flamanville nuclear projects are just recent examples of nuclear projects where actual build times and actual costs greatly exceed what was estimated at the outset. But the extraordinary complexity of nuclear power stations—which is likely to increase, after Fukushima, with the added complexity of new safety systems—means that construction risk will remain a major hazard for investors for the foreseeable future.
There is abundant evidence from reputable sources that, in general, renewables can be built much faster than nuclear power stations, they are cheaper than nuclear power (taking account of all subsidies), they provide greater security in energy supplies than nuclear power, they are substantially more effective in cutting emissions of CO2, there are more than enough to meet our needs now and for the foreseeable future, they provide diversity in energy supplies, and they are largely free of the several problems with nuclear power.
Around the world, solar power and wind power are growing fast, while the number of operational nuclear reactors in the world is shrinking.
"The disappearing market for nuclear electricity means that there is absolutely no case for subsidising nuclear power with 'contracts for difference' or any other subsidy," said Dr Gerry Wolff of Energy Fair.
"If the Government presses on with that policy, we may be saddled with expensive nuclear white elephants that will be paid for by consumers for 25 years or more. This would be worse than the PFI fiasco or the debacle of the West Coast Main Line."