Our new report (PDF, bit.ly/zGgbHF) describes five major areas of risk – market risk, cost risk, subsidy risk, political risk and construction risk – any one of which provides good reasons for caution.
By the time any new nuclear plant could be built in the UK (2020 or later), the market for its electricity will be disappearing. The tumbling cost of photovoltaics (PV) and the falling costs of other renewables, combined with the likely completion of the European internal market for electricity and the strengthening of the European transmission grid, means that consumers, large and small, will be empowered to generate much of their own electricity 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 other sources, many of which are better suited to the gap-filling role than is nuclear power.
Contrary to the often-repeated claim 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 rising for many years, and will be boosted by the introduction of new safety measures after the Fukushima disaster.
The large subsidies enjoyed by nuclear power are a clear breach of the principle of fair competition. At any stage, some or all of them may be withdrawn – via action by the European Commission or by the European Court of Justice, or via decisions made by politicians.
Energy Fair has already submitted a complaint to the EC about subsidies for nuclear power. State aid which is deemed to be illegal must be repaid. 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.
The Fukushima disaster led to a sharp global shift in public opinion against nuclear power and it led to decisions by politicians to close down nuclear power stations and to accelerate the rollout of alternative sources of power. The next nuclear disaster – and the world has been averaging one such disaster every 11 years – is likely to lead to even more decisive actions by politicians.
The delays and cost overruns in the Olkiluoto and Flamanville nuclear projects are recent examples of nuclear projects where actual build times and actual costs greatly exceed what was estimated at the outset. But the added complexity of new safety systems after Fukushima means that construction risk will be a major hazard for investors for the foreseeable future.
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, they are substantially more effective in cutting emissions of carbon dioxide, 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.
Renewables are growing fast around the world while the number of operating nuclear plants is falling. Renewables are where the commercial opportunities lie.
Gerry Wolff, co-ordinator, Energy Fair
This article first appeared in Utility Week’s print edition of 4 May 2012.
Get Utility Week’s expert news and comment – unique and indispensible – direct to your desk. Sign up for a trial subscription here: http://bit.ly/zzxQxx