UK nuclear policy U-turn

1 August 2006

Will the UK invest in a new series of nuclear power stations? The energy review published in July was assumed in some quarters to be a foregone conclusion, especially after prime minister Tony Blair told more than one interviewer that he was convinced nuclear was necessary, and said he had seen ‘preliminary conclusions’ to that effect. But the review as published provided more of an amber than a green light to new nuclear build. Some important barriers were addressed, but it was clear that others would be locked in the consultation process for some time to come. And, crucially for some observers, there were no proposals to support the cost of carbon; a measure that would have supported both nuclear and renewables.

WARMING TO NUCLEAR

“This is the first time any government has put environment at the heart of energy policy,” Patricia Hewitt, the UK’s then secretary of state for trade and industry, said at the launch of the Labour government’s previous white paper on energy in 2003. The result of consultations with over 6000 groups and individuals, the document was a significant shift in UK energy policy. The change was signalled in its title: Our Energy Future – Creating a Low Carbon Economy. That white paper put response to climate change as the first of the three challenges that must be met by the UK’s energy policy, based on recommendations made by the Royal Commission on Environmental Pollution two years earlier that the UK should reduce its CO2 emissions by at least 60% by 2050.

The white paper set a target of 10% renewables by 2010 and an “aspiration” to produce 20% by 2020. The most common estimate then was that the UK would bring on line enough renewables to fill 7.5% of electricity demand with renewables by 2010: that estimate has not changed.

The Renewables Obligation – the UK’s main support mechanism for renewables – was designed to bring forward the lowest cost renewables (which turned out to be onshore wind, small hydro and landfill gas) as fast as possible. It was successful as far as planning restrictions allowed, but times have changed and it has been widely criticised for not providing enough support for wave and tidal power and offshore wind, which are at an earlier stage of development. In response, the new review proposes a ‘banded’ obligation that will give additional support to such technologies: that proposal will be the subject of a consultation later this year. But the ultimate target for renewables remains unchanged at 20% by the time the renewables obligation ends in 2027.

Alongside renewables, the 2003 white paper relied heavily on better energy efficiency to meet its goals. It was warmly welcomed by the sustainability lobby and viewed with scepticism by observers who think that energy efficiency seldom saves as much as it appears to. So far, that scepticism appears to have been justified. Various policy instruments – some, such as the climate change levy targeted at industry, in place before the white paper – have indeed improved energy efficiency in everything from new building stock to domestic appliances. But – especially in the domestic arena – these have been outweighed by an increase in energy use. The result, combined with a switch to coal due to high gas prices, has been rising carbon emissions.

Nevertheless, energy efficiency is still “the starting point” for reducing the UK’s carbon emissions, the new review says, and it proposes to strengthen existing policy instruments and support a double shift in the UK’s generation sector: it will promote more small scale local generation, and it will push the country’s utilities to change from electricity suppliers to ‘energy supply companies’, offering heat and light to customers.

Ambitions for renewables notwithstanding, the absence in the centre of the 2003 white paper was generation. The UK at that time had overcapacity generally put at around 20%, and generation was almost a loss-making industry, but it was clear even then that the situation would change markedly. Over the next 20 years nuclear capacity in the shape of the UK’s older stations will shut down, leaving Sizewell B as the only operating plant, and this will remove some 15% of the UK’s current capacity. The UK’s coal generation – still a major part of its capacity – is also set to shrink in the next few years as the European Union’s (EU’s) large combustion plant directive comes into effect and takes some coal plants out of operation.



Will Sizewell B remain as the last nuclear reactor to be built in the UK?


The new energy review states: “Over the next two decades it is likely that we will need around 25GWe of new electricity generation capacity, as power stations – principally coal and nuclear plants – reach the end of their lives and close.” This is around a third of the UK’s existing capacity.

The government has been adamant that choice of generation mix was entirely a matter for the market. “Some people argue that the UK government should specify the mix of fuel sources in electricity generation, allocating a proportion to gas, a proportion to coal and so on. We have considered this proposition carefully and have dismissed it,” the white paper said.

Some observers warned that this would allow the UK to become too reliant on gas – which, without new nuclear or coal capacity, could end up providing up to 70% of the country’s fuel, at a time when domestic supplies form the North Sea were beginning to decline. In 2003 the government was relaxed about the prospect, and recent high gas prices have not completely deterred UK utilities from investing in new gas-fired generation. Two new gas-fired stations have been announced in recent months as the UK’s reserve capacity has fallen towards winter margins. But the experience of the last few years, which saw not only huge gas price rises but also an extremely volatile market, appear to have convinced the government of the importance of diversity in electricity fuels. As the new review says: “New nuclear stations would yield economic benefits in terms of carbon reduction and security of supply.” What is more, it has recognised that if it does not subsidise diversity, at the very least it must counterbalance the fast-build, quick return gas option that will always be the result if utilities are forced to plan over the short term. That means the government must provide certainty in the investment path for longer lead-time capacity – and remove the barriers to investment.

In 2003, Patricia Hewitt said: “We want to put the emphasis on energy efficiency and renewables. If we had done what some people wanted and set up a new programme of nuclear build it would have destroyed the incentive for efficiency.” This year, the new review says: “New nuclear power stations would make a significant investment in meeting our energy policy goals,” adding that replacing existing capacity would reduce carbon emissions by 8MtC and gas consumption by 13% by 2030, compared to replacing those plants with gas turbines.

SMOOTHING THE INVESTMENT PATH

“It will be for the private sector to initiate, fund, construct and operate new nuclear plants and cover the full cost of decommissioning and their full share of long-term waste management costs,” the review says. The government’s role is to “address potential barriers to new build.”

Planning

Perhaps the biggest hurdle is the planning system, and this has been almost equally obstructive for all large scale development in the UK. It has been particularly damaging for the renewables industry: the planning process for high voltage transmission lines vital to connect proposed major wind farms could take up to ten years, judging by the time taken for the last transmission line brought into operation. A three-year planning inquiry was one of the major delays in the construction of the UK’s last nuclear station, Sizewell B, but the slow processes also affected, for example, a new terminal at London’s Heathrow airport. The government is already working on a reform of the planning system that should speed up the processing of such projects, and on this it has the enthusiastic support of the opposition Conservative party.

The reform should restrict the scope of planning inquiries for such strategic projects to local issues, allowing the inquiry to rule out discussion of broader issues that would be decided elsewhere. A long discussion of the merits of nuclear power was one factor that kept the Sizewell B inquiry running for so long. This is one area where the new energy review aims for swift progress. As the basis for a new policy framework to be formalised in a white paper around the end of the year it sets out a strategic national position on nuclear power, called a ‘statement of need’ (see Panel below), that will mean planning inquiries will no longer focus on the need for nuclear power. The discussion on the ‘statement of need’ starts immediately, and interested parties would be well advised to make their response immediately, as the consultation closes on 31 October – before parliament returns from its summer break.

Along with the statement of need the government will start work on ‘justification’. This arises from the EU’s Basic Safety Standards Directive and requires that new uses of ionising radiation be justified in advance, by assessing whether economic, social or other benefits outweigh any health detriment that may be caused.

Once in place, the justification should also allow the terms of a planning inquiry to be limited, as it will be able to disallow further discussion of high level questions such as ‘is nuclear power safe’. The Department of Trade and Industry is the so-called ‘justifying authority’ for the UK and the review says it will carry out a ‘wide public consultation’ with statutory consultees and the public through a ‘justification liaison group’ in 2006 and 2007. Secondary legislation will be required once the justification decision is taken. The review also says the government will assess potential candidate designs as part of the justification process.

Nuclear plant siting is the third strand of the government’s policy to smooth the planning process. The review proposes a strategic assessment to establish criteria for identifying the most suitable sites for new nuclear stations, and indicate how potential sites meet those criteria. The strategic siting assessment will begin in 2007 and it, too, will involve extensive public consultation. But once the assessment has been made, “planning inquiries should not reassess the question of whether there are alternative sites for a new nuclear plant, and whether the proposed site is a viable site.”

Design

When Sizewell B was licensed it was a well-understood design in the USA and elsewhere. But for UK purposes it underwent extensive design changes, which were being rewritten right up to and during the planning inquiry. At that time it was assumed the plant would be the first in a series but even if it had been, the changes would have added considerably to the cost and uncertainties of the build. Certainty in the design on which they will have to deliver is one of the major items on any nuclear wish list.

The review addresses this with an “enhancement” to the regulatory strategy of the Health and Safety Executive (HSE), which oversees nuclear safety through its Nuclear Installations Inspectorate (NII), in the form of a multi-stage design authorisation. This would allow the NII to carry out an assessment of the safety case of a new reactor design at a relatively early stage, following up at a later stage with site-specific assessments as part of the site licensing procedure. The NII should process applications and issue design authorisations before planning inquiries begin. The change should improve “clarity and transparency” for the public and industry, the review says and, importantly, it is backed up by similar staged approvals from the Environment Agency (EA) and Scottish Environment Protection Agency. These agencies are responsible for regulating nuclear discharges and the EA has proposed a preliminary statement on the “authorisability” of candidate designs alongside the NII’s early approvals.

These changes should indeed offer more certainty to candidate designers, but the work required to implement them should not be underestimated. Investment is required to allow the multi-stage design authorisation process to be developed and to allow the NII – which has had difficulty recruiting suitable staff for several years – to expand to take on the additional work.

Waste management

The UK’s nuclear waste management strategy has been in disarray since plans to develop long-term storage were halted more than ten years ago, and the operators’ spent fuel strategies diverged following the breakup of the Central Electricity Generating Board. But the government has promised to resolve the waste issue before a new nuclear series goes ahead and a solution is equally important to potential operators who will want some surety on what they will be expected to fund, given that the private sector would pay “its full share of the costs” according to the review.

The government’s solution has been the Committee on Radioactive Waste Management (CoRWM), established in 2003 with a short-term remit to carry out public consultations on the options for waste management. To no-one’s surprise CoRWM’s interim recommendations proposed interim storage and ultimately a deep geological repository and its final recommendations were due at the end of July, at which point its work will be ended. Then the government will have to translate that recommendation into a ‘resolution’ that will satisfy both the public and the potential new operators.

A NEW BUILD PROGRAMME?

Has the government done enough to allow the private sector to build new nuclear stations in the UK? Westinghouse said it was “now confident that utilities will come forward,” while British Energy’s Bill Coley said it would “help remove uncertainty and encourage investment.” The government has not provided any guarantee on a carbon price that would support nuclear as a low-carbon generator. But it has argued for a strengthened carbon trading regime and some might say that with so much else on the ‘to do’ list, and several long consultation periods in prospect, the carbon question can safely be left for a later date.

The battles over need, economics, safety and siting that took so long at the Sizewell B inquiry will still have to be fought for a new series of reactors. The government consultation process is not fast, and the fact that the battles are being fought at the strategic level that could permit or deny a fleet of reactors instead of a single plant will make them all the more intense. Expect loud public debate throughout 2006 and 2007 as the consultations take place. The review has set in motion many of the changes that will be necessary to make a new nuclear fleet a practical option, but there is a long way to go before those changes are in place.


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