Political certainty required for nuclear investment

13 June 2006

An uncertain political climate is the most significant risk associated with developing new nuclear facilities in the UK, says the former head of the energy, mining and utilities project finance advisory group at N M Rothschild.

Keith Palmer, giving evidence before the Commons’ Trade and Industry Select Committee on its inquiry: “Nuclear new build: issues to be addressed,” said that the main financial risk associated with building a new fleet of nuclear power stations is not the capital cost involved in building or even decommissioning such plants but the unwillingness of governments to sign up to long-term commitments over aspects such as carbon emissions regulation.

Palmer’s comments echo those of senior energy company executives giving evidence before the same enquiry.

A sustainable energy policy framework, resistant and robust to future uncertainty created by the volatility of short-term energy markets, is what will be needed to enable investment to take place in the longer-term forms of electricity production, such as nuclear energy, in the push towards a low carbon-emitting world said Paul Golby, chief executive of EON UK, and Vincent de Rivaz head of EdF Energy.

“In the case of nuclear we are talking of potential investment in large-scale plant that has a planned life of at least 40 years, and an investment cycle to match,” said Golby. “Therefore there is a clear responsibility on government to create an emissions control and regulatory environment that takes account of the need for generators to plan against a 40-year investment cycle, not against the 5, 10, or even 20 year scenarios that are being conceived at present as background to the incentives for carbon emission reduction,” added de Rivaz.

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