From end to beginning

The UK government has recently released policy papers on planning and energy, two crucial consultations are currently underway – one on new nuclear and one on a final radwaste disposal facility – and four vendors have entered the reactor licensing race. At the same time, sections of the public and politicians are warming to nuclear’s low-carbon credentials. It would be fair to say that the nuclear industry has not been so buoyant for decades. The scene appears to be set for a fleet of third generation nuclear plants to be built, at least in part of the UK.

NEW BUILD CONSULTATION

The most important development as far as new build is concerned is the launch of the nuclear consultation, titled The future of nuclear power: the role of nuclear power in a low carbon UK economy, on 23 May 2007, the same date as the energy white paper was issued. The UK government had intended to include the use of nuclear power within the energy white paper, but was instead forced into the present consultation following a February High Court ruling. The ruling stated that the previous consultation process, leading to the decision to support new nuclear build as part of the 2006 energy review, was procedurally flawed (see NEI April 2007, p38).

In the energy white paper, the UK government says it sees its role as providing a policy framework that encourages development of a “wide range of low carbon technologies” in order to reach its target of cutting carbon dioxide emissions by 60% against a 1990 baseline. The white paper adds: “We recognise that, as with all generation technologies, there are advantages and disadvantages with new nuclear power. But having reviewed the evidence and information available we believe that the advantages outweigh the disadvantages and that the disadvantages can be effectively managed.

“On this basis, the government’s preliminary view is that it is in the public interest to give the private sector the option of investing in new nuclear power stations. This view is subject to the consultation we are launching on this issue alongside this white paper. However, if the government confirms this preliminary view, it would be for the private sector to fund, develop, and build new nuclear power stations in the UK, including meeting the full costs of decommissioning and their full share of waste management costs.”

A key factor in UK government thinking is the conclusion that not allowing energy companies the option of investing in new nuclear would increase the risks of not achieving long-term climate change and energy security goals or of reaching the targets “at higher costs.”

Most industry observers are in little doubt as to what will be the outcome of the consultation. During prime minister Gordon Brown’s first Prime Minister’s Questions on 4 July 2007, he was asked by Liberal Democrat leader Sir Menzies Campbell whether the UK government would abandon its “headlong rush towards a new generation of nuclear power stations.” To this, Brown replied: “We cannot rely on an energy policy that makes us wholly dependent on one or two countries or regions across the world. That is why we have made the decision to continue with nuclear power, and why the security of our energy supply is best safeguarded by building a new generation of nuclear power stations.”

The closing date for submissions to the consultation is 10 October, following which the UK government is likely to decide by the end of the calendar year whether to give the ‘green light’ to new nuclear build. The consultation contains several documents, including ones on potential sites, waste arising from new build, and a cost/benefit analysis. Also included are documents on two separate consultations, one dealing with a justification process, the other on a process for a combined strategic siting assessment and strategic environmental assessment.

WASTE MANAGEMENT

The previous energy white paper published in early 2003 famously stated that nuclear’s “current economics make it an unattractive option for new, carbon-free generating capacity and there are also important issues of nuclear waste to be resolved.” Thus the UK government committed itself to at least making considerable progress on the management of radioactive waste before proceeding with new nuclear build. With the

setting up of the Nuclear Decommissioning Authority (NDA) and recommendations made last year by the Committee on Radioactive Waste Management (CoRWM) on the long-term management of radioactive waste, significant progress has undoubtedly been made recently. Furthermore, on 25 June this year, the UK government commenced a consultation on siting and delivering a disposal facility. Responses must be submitted by 2 November.

The consultation on Managing Radioactive Waste Safely: A framework for implementing geological disposal seeks views on repository design and build, as well as the process and criteria to be used in deciding where a repository would be located. The then UK environment minister, Ian Pearson, claimed the repository process is “an entirely new approach” based on communities volunteering.

The department heading up the consultation, the Department for Environment, Food and Rural Affairs (Defra) said that planning and developing geological disposal would be based on four pillars: partnerships with potential host communities; implementation by the NDA; strong independent regulation; and independent scrutiny and advice by a reconstituted CoRWM.

The UK’s radioactive waste management programme has indeed come a very long way since former secretary of state for the environment John Gummer killed off the previous underground disposal programme ten years ago. However, there are several pitfalls that could potentially send the waste management programme back to square one once again.

CoRWM’s July 2006 recommendations to the government, which form the basis for the present consultation, were concerned with legacy and committed radioactive waste, not waste arising from new build. But just as it’s clear what the ‘right’ answer to the nuclear consultation is, it’s also clear what the UK government’s position on new build waste is with regards to this consultation. The consultation states: “Scientific consensus and international experience suggests that despite some differences in characteristics, waste and spent fuel from new nuclear power stations would not raise such different technical issues compared with nuclear waste from legacy programmes as to require a different technical solution. It would therefore be technically possible to dispose of this waste in the same facility as the legacy waste.” There is therefore a high chance that the process undertaken to decide on the long-term management of new build waste will be considered inadequate by many parties, perhaps even a potential repository host community.

Secondly, if new build is to go ahead, there should be certainty over how the back end of a new build programme would be funded. There has been a preponderance of industry meetings in the UK in recent months, and this point frequently crops up in new build discussions. For example, speaking at the Adam Smith Institute’s 2nd Annual Nuclear Industry Forum, held in London on 6-7 June, Bill Coley, CEO of British Energy (BE), said that BE would be ready to participate in new build “if government provides certainty for investors,” which includes clarity on decommissioning funding. The same point was made by others at the meeting, including Richard Noble, managing director of the power group at Lehman Brothers, who said that despite the long-term discount effect of back end costs, “these are potentially very significant numbers and there are still considerable uncertainties about them.”

However, assuming new build waste will be disposed of in the same repository as legacy and committed waste, it would be very difficult to accurately estimate the share of the costs resulting from the disposal of new build waste. This might leave any financing arrangements open to the accusation of unfair state subsidy, and possible legal challenge.

Another important consideration is the incorporation of Nirex into the NDA (see NEI July 2007, p42). In October last year – the same month in which the government published its response to CoRWM’s recommendations – Nirex published a paper on its website (based on legal advice from Christopher Katkowski QC and Stephen Tromans) that raised concerns about the legality of the NDA/Nirex merger.

The paper quotes the legal counsel’s advice, which stated: “Any move to subsume Nirex into the NDA would give rise to serious issues as regards the UK’s compliance with international law and [European] community law. Incompatibility with community law in particular would be an issue for the European Court of Justice.” The paper said counsel’s opinion was that the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management requires a clear allocation of responsibilities between the waste owner/producer – the NDA – and the nuclear waste management organisation (NWMO), “because they are bodies involved in different steps of spent fuel and radioactive waste management, and this is only possible with an independent NWMO.”

On 16 November 2006, Chris Murray, the then chief executive of Nirex, ordered the document to be removed from the Nirex website because it was “not consistent with government policy.”

This issue was noted by a report published at the beginning of June by the Science and Technology Committee of the UK’s upper legislature, the House of Lords. A further issue highlighted by the committee concerned the institutional framework for the next phase of the government’s Managing Radioactive Waste Safely (MRWS) programme, proposals for which, the committee claimed, were “incoherent and opaque.” The committee said the government had “watered down” CoRWM’s recommendation to set up an independent body to oversee the MRWS programme, and instead planned to set up an independent advisory body, the ‘new CoRWM’. The UK government should rectify this, the committee argued, by establishing “an independent, statutory body, independent of day-to-day government control and accountable to Parliament, with overall responsibility for implementing the geological disposal programme.”

THE NDA

A key consideration, not only for the waste management programme, but also any possible new build programme is the role of the NDA. The NDA is the owner of sites that are suitable for new reactors; it is responsible for decommissioning and cleanup of the UK’s nuclear industry; it is a producer of waste, as it owns a number of operating nuclear facilities; and it is responsible for delivery of the country’s geological disposal programme.

Although the NDA’s commercial operations generate income, strictly speaking all revenue is paid to the government and the NDA receives all its funding directly from the government. However, the NDA’s website states: “Our budget is a combination of government grant-in-aid and income from our commercial assets” – implying that the government would reduce the NDA’s budget should income from the commercial operations be lower than expected. The NDA’s budget for the 2007/8 financial year is £2.79 billion ($5.62 billion), based on a projected income of £1.37 billion ($2.76 billion).

Since the inception of the NDA, NEI has taken issue with its apparently deliberate blurring of expenditure on its commercial operations with decommissioning activities. Nevertheless, the NDA continues to publish misleading information in this area, stating: “We spend the vast majority of our annual expenditure, £2.47 billion for 2007/8, supporting decommissioning and cleanup activity across our sites.” In fact, £1.106 billion is budgeted for decommissioning and cleanup, and £1.367 billion for operations. The latter figure includes £288 million from electricity generation, and £726 million from reprocessing and transport of nuclear materials, subject to the Thermal Oxide Reprocessing Plant (Thorp) operating.

The role of Thorp

This implies that NDA’s decommissioning activities are somewhat dependent on the operation of Thorp, which was offline since the April 2005 discovery of a leak from a pipe that supplied highly radioactive liquor to an accountancy tank. On 4 July 2007, the plant recommenced shearing operations as part of a “limited campaign”, following which the operators British Nuclear Group Sellafield Ltd will discuss ramping up operations with the NDA.

As far as a possible new build programme is concerned, operation of Thorp no longer sits comfortably alongside the ‘once through’ approach that the UK now seems to favour – ironically at a time when countries such as the USA are warming to nuclear ‘recycling’ technologies. The May 2007 energy white paper states: “The government has concluded that any nuclear power stations that might be built in the UK should proceed on the basis that spent fuel will not be reprocessed and that accordingly waste management plans and financing should proceed on this basis.”

Meanwhile, yet another consultation was launched by the former Department of Trade and Industry, this one concerning the reprocessing contracts with foreign utility customers. Published on 14 June 2007 and closing on 26 July the consultation, titled Advance Allocation: Proposal on how to manage overseas spent nuclear fuel awaiting processing at Sellafield, proposes ‘virtual reprocessing’ in order to fulfil reprocessing contracts. Under the proposals, British plutonium (in the form of MOX fuel), uranium and high-level radioactive waste (HLW) in lieu of reprocessing waste would be sent to foreign utility customers as if their spent fuel had been reprocessed. While the consultation document states that the current policy is to keep Thorp open until the overseas contracts have been fulfilled, should the proposals be accepted, it does leave open the possibility that all or some of the foreign spent fuel awaiting reprocessing at Thorp may not be reprocessed.

NDA and new build

A January 2006 memorandum by the Environment Agency (EA) to Parliament’s Select Committee on Trade and Industry noted: “The primary role of the NDA is to progress the decommissioning and cleanup of the UK’s nuclear liabilities at the sites for which it is responsible. We would not want to see any increased reliance on nuclear power affect the NDA’s focus on this primary purpose.”

It is, however, quite hard to see how new build cannot affect the NDA’s supposed focus on cleanup. The NDA owns a number of sites that are good candidates for new build, and will come under considerable pressure to make those sites available. Even in the unlikely event that it has no role in a new build programme, any back end arrangements for new units (as discussed earlier) will almost certainly impact on NDA activities.

SUITABLE SITES

A discussion paper by Jackson Consulting, titled Siting New Nuclear Power Stations: Availability and Options for Government, accompanying the nuclear consultation concluded that existing nuclear sites would be the most appropriate for new developments, followed by sites on which existing large scale, conventional generators are currently installed, such as Didcot A – a coal- and gas-fired plant in Oxfordshire, southern England. Several nuclear sites in the south of England appear to be strong candidates as potential locations for new nuclear build, the top four being Hinkley Point in Somerset, Sizewell in Suffolk, Bradwell in Essex, and Dungeness in Kent. The NDA owns sites with shutdown Magnox units at all these locations, and BE currently operates reactors at three of these site, as well as owning land at the fourth, Bradwell.

In order to prevent BE from being handed a near monopoly over suitable sites, it is likely that the government will make NDA-owned sites available for new units. In the event that this does not happen, it would be very difficult for other utilities to have any part in new nuclear build without entering into some sort of partnership with BE.

REACTOR DESIGNS

The Health & Safety Executive’s Nuclear Installations Inspectorate (NII) set a deadline of 22 June 2007 for submission of designs to be considered in its new generic design assessment (GDA) process. Four designs were submitted: Westinghouse’s AP1000, Areva’s EPR, GE’s ESBWR, and AECL’s ACR-1000. The NII along with the other nuclear regulators planned to start the first stage of the process (the initial design assessment) in July 2007. This stage should be completed by early 2008, but the work would cease if the government decided not to support new nuclear in the meantime.

Speaking at the Nuclear Industry Forum, NII director Mike Weightman said that, following this initial assessment stage, the NII envisaged being able to proceed with three designs concurrently, though additional resources would be required. The GDA process is expected to take around three and a half years. Following this GDA phase, and perhaps overlapping to some extent, the site licence assessment process will commence. This phase looks at site specific issues and assesses the operator, and is expected to last between six months and a year.

The planning process is discussed in detail in Planning for fission (see link below).

PARTY POLITICS

As noted earlier, prime minister Brown, who took office on 27 June, unequivocally backed new nuclear in his first Prime Minister’s Questions. Although it is too early to say whether he is as enthusiastic on nuclear as his predecessor Tony Blair, it seems that the industry can count on the support of the ruling Labour government.

The next UK general election must take place on or before 3 June 2010, before the GDA process is completed. This next general election, and the run up to it, will ‘make or break’ any new build programme (assuming that the ‘green light’ to new nuclear is given as expected following the present nuclear consultation).

There has been some uncertainty in the media as to the level of support for nuclear from the main opposition party, the Conservatives, since the election of David Cameron as the party’s leader at the end of 2005. A year ago the Conservatives published its interim findings of the Conservative party’s energy review, which stated: “The position on nuclear power is clear: where the government see nuclear power as the first choice, under our framework it would be a last resort.”

However, a spokesman for Alan Duncan, the party’s shadow energy secretary, recently told NEI that Conservative policy on new nuclear is similar to that of the Labour government and that it would essentially be “business as usual” for the nuclear industry should the Conservatives win the next general election. He added that, should the current Labour government still not have provided clarity on a long-term carbon price, a Conservative government would seek to do so. Furthermore, a source close to the party told NEI that the Conservatives will strongly back new nuclear build when its policy groups report later this year.

Other political parties only have a chance of forming a UK government in the event that there is a hung parliament, which is not a very likely scenario under the UK electoral system. The most important minority parties are the Liberal Democrats and the Greens, both of which are strongly antinuclear.

Scotland and Wales

At the moment, the main political spanner in the works for pronuclear aims is that the devolved governments of Wales and Scotland are against new nuclear build and are far from being in favour of a deep repository.

The Scottish minority government formed after an election on 16 May was based on an antinuclear platform, through a cooperation agreement between 47 left-wing Scottish National Party MSPs and two Scottish Green Party MSPs. New nuclear plants would be blocked by this government using the Scottish Parliament’s right to refuse consent for onshore power stations over 50MWe under the Electricity Act 1989. This power was reinforced by the Scottish Parliament in March 2002, when a majority voted for a motion reiterating that Scottish ministers accountable to parliament keep the right to refuse nuclear power stations, now and in the future.

Meanwhile, on 12 June, first minister of the newly elected Welsh coalition government, Rhodri Morgan, told assembly members that Wales did not want new nuclear plants. After saying that any nuclear application would be considered, he added: “But at this moment we see no need, we never have seen a need and we do not envisage any circumstances in which there could be a need for new nuclear generation in Wales.” However, Wales does not have devolved powers under the Electricity Act and is part of Westminster’s proposed planning reforms for major infrastructure projects, which would centralise planning power with an unelected Infrastructure Planning Commission.

The waste management process took a major divergent step when the Scottish government declined to be part of the repository consultation, and stated its support for “near-surface, near-site” waste management. Scottish cabinet secretary for rural affairs and the environment, Richard Lochhead, recognised that dealing with legacy waste is a significant challenge but said: “The Scottish government does not accept that geological disposal is the right way forward. This is a matter of principle for us and I have no doubt that public opinion in Scotland supports our view.” Lochhead felt it was not right to expect a community to host a repository. “This out-of-sight out-of-mind policy should not extend to Scotland,” he said. The Scottish authorities would have a right to refuse any deep repository under planning legislation.

Although the Welsh government decided to take part in the repository consultation (along with the Northern Irish government), Welsh minister for sustainability and rural development, Jane Davidson, said the government did not confirm it would support future implementation of a repository in Wales or the adoption of policies consistent with that.

The Welsh coalition government includes Plaid Cymru; its members have stated opposition to a deep repository and nuclear power.

The upshot of the Scots and Welsh positions is that it looks like England will be the only country in line for new nuclear or a deep repository. Although the future Welsh position is less obvious, it looks certain that any future Scottish government would be, at best, diplomatically equivocal about new nuclear or, more likely, against it, while opposing a deep repository.

FINANCING NEW BUILD

At least in England, the likeliest outcome is that this government and the next will support the option of new nuclear build – so long as the private sector finds the financial means to go ahead.

Financing new build is in itself not an issue, according to Noble. So long as key uncertainties are addressed, then the financing will follow. Or, as Noble told the Nuclear Industry Forum (amongst other nuclear industry meetings he has addressed): “Financing is an output; it’s not an input.”

The government is clearly attempting to resolve the uncertainties that would hinder investment in new nuclear build through the measures discussed above, but Noble said that there remain some key costing uncertainties that have to be addressed. These include: financial arrangements for back end and waste management costs (as mentioned earlier); front end risks associated with the pre-development and construction phases; and catastrophic insurance exposure. He emphasised the last of these, noting: “I’m not quite clear that we’ve fully resolved the catastrophic or disaster scenario where an operator is unable to obtain the required cover or the circumstances in which government would step in if that cover proves to be inadequate.”

Another of the major uncertainties according to the industry and financers is the long-term carbon price. At another recent London meeting, City and Financial’s Nuclear New Build: The Role of the Private Sector on 26-27 June, Sean Gammons, associate director of Nera Consulting, said: “Carbon is crucial to the economics of new build.” As carbon becomes more expensive, nuclear becomes cheaper, he said, and suggested various options for reducing volatility. These included replacing the European Union’s Emissions Trading Scheme (ETS) with a fixed CO₂ excise tax or transforming it into a balancing market with governments acting as buyers of last resort – a ‘cap and collar’ system to keep the carbon price within an agreed range, as well as putting in place long-term international agreements.

Bob Taylor, a board member of E.ON UK said the “total lack of clarity or drivers based on carbon” was not good for investors. He suggested moving away from free allocation to auctions in carbon trading and markets. According to energy industry consultant Andrew Nind of the Finland-based Poyry group, the carbon price needed to make nuclear viable is around €20 per tonne of CO₂, but he said there was no guarantee that it would stay at that level.

Per Lekander, executive director and head of utilities research at UBS, told the conference: “ETS is seriously increasing the volatility of electricity markets and this is not going to go away. It’s a volatile new commodity.” He said ETS was “not sensible but it is here to stay.” Without ETS, he noted, “coal would be a no-brainer.”

At present, potential investors are risking only small sums for project pre-development costs such as reactor design and site studies, Adrian Montague, chairman of BE said. Major investment decisions would only have to be taken around 2012 when initial construction was expected to start. Montague added that industry wants reassurance that potential obstacles will be better understood and manageable by the time investment decisions have to be taken.

It appears that the government wants to provide that reassurance, but whether it is able to – and whether it is able to provide it soon – remains to be seen.