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The future of nuclear: Will reactor problems drive up prices?

Big news for the future of nuclear has emerged over the past couple of weeks. And it could have quite a fundamental impact on the future of energy in the UK and internationally. The future of nuclear energy in the United States was called into question last week when Westinghouse, an American nuclear reactor maker which is part owned by Japan’s Toshiba was forced to declare bankruptcy. The bankruptcy of an American giant could have global consequences and could threaten other projects, not least in Cumbria, where Toshiba is planning to build ‘the biggest nuclear plant in Europe’. Meanwhile, construction work on Britain’s first new nuclear reactor in a generation, Hinkley Point C, got underway last week, but this project has also been affected by a series of delays and stoppages. Currently under construction in France, the Flamanville reactor uses the same model as Hinkley Point C but it is more than three times over budget and years behind schedule. With Hinkley Point, the government has paid a high price to try and meet its emissions targets. To secure investment in the project, the last coalition government agreed to pay £92.5 per megawatt hour (Mwh) of electricity generated at the site for the first 35 years of the plant’s life. This is nearly four times the price put forward when Hinkley was first proposed to the government. Today, it is nearly double the cost of wholesale electricity. And this is at a time when prices for gas, wind and solar generation are all falling. Over reliance on nuclear energy could cost British businesses, particularly with bad deals like the one made on Hinkley Point. It also risks reducing British businesses’ competitiveness on the world stage. Of course, nuclear energy has other advantages as well. Currently, it is the only reliable way of producing large amounts of low-carbon energy. The Intergovernmental Panel on Climate Change said that deep cuts in international carbon emissions “will require more intensive use” of nuclear alongside renewable energy. There are other problems with nuclear over renewables. The costs associated with clearing up nuclear fuel are high. Indeed, the government had to pay out £100m to two American firms after it “fudged” the tendering process on a decommissioning process. Industry analysts suggest that the problems over contracting are indicative of broader problems with decommissioning nuclear plants in the UK. These extra costs will ultimately be passed onto customers at some point, again pushing up prices. And of course, concerns about safety are always present when it comes to nuclear.

What role should nuclear play

With concerns about the costs and safety of nuclear energy it may seem more sensible to move away from nuclear. But nations that have moved away from nuclear have had a tough time meeting cost and logistical challenges associated with meeting carbon-reduction commitments. Germany announced plans to scrap all of its nuclear plants in the wake of the Fukushima disaster, and moved more towards renewable generation like wind and solar. Germany also relies on spillover generation from France and other neighbouring countries to support its energy system when renewables generation is low (when the sun doesn’t shine and the wind doesn’t blow). The UK isn’t plugged into the European grid in this way and so can’t rely on having energy security. Nuclear generation will play an important role in the UK’s energy mix and is important if the country wants to keep the lights on in the future. The UK should keep using nuclear during the very long transition to a completely renewable system. But it should take all steps to make sure the costs of nuclear are manageable for British businesses.

Published by Utility Helpline on (modified )