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New nuclear is a lose-lose situation for Britain

David Cameron’s government has got their new nuclear power stations - but at what cost? Tim Ireland/PA

The first new nuclear power station in Britain in nearly 20 years is to be built, an announcement that comes only two and a half years after the disaster at Fukushima focused the world’s attention the drawbacks of nuclear power. At a first glance it looks like the nuclear industry is back in business in Europe.

The deal between French energy giant EDF, which operates Britain’s existing nuclear power plants, and the planned Hinkley Point C plant in Somerset, and the British government was pitched as a win-win situation for everybody. The consumers are assured of their electricity supply, the government invests in jobs and bolsters a “cutting-edge” low carbon technology that will help Britain hit it’s CO2 emissions targets, and EDF secures a profit margin of 10%.

The deal guarantees EDF a price of £92.50 (about €110) per megawatt hour (MWh) for 35 years from the time the plant starts generating, inflation linked to the consumer price index. The UK government, in its overflowing generosity, has also agreed to underwrite 65% of the £16 billion cost of building the plant.

But looking at the numbers more closely reveals a different picture. A picture, in fact, that is entirely the opposite. The deal is a confession in public, a statement of failure of a technology that was never and probably will never be built and operated at competitive cost.

This becomes clear when comparing nuclear power with other options that society has at its disposal to replace fossil fuel energy, tackle climate change, and foster energy independence.

In Germany, Energiewende, or energy transition, a grand project to de-carbonise energy generation, had already begun in 2000 when a feed-in-tariff scheme was introduced to help ease renewable energy sources such as wind and solar into the market. Back then, the total share of electricity generated from renewable energy was about 6.5%, with about 4% accounted for by hydroelectric power. That has increased to almost 25% in 2013, with solar, onshore wind and biomass power contributing the most.

By installing a lot of capacity and therefore scaling the learning curve quickly, Germany has made big advances in cost reduction. The idea of a “learning curve” comes from business production and innovation research. It holds - and this can be empirically proven by examining the falling costs of technology in the past - that a new technology’s production cost falls by 20-40% with each doubling of the cumulative produced capacity, assuming a 70-80% learning rate. So new technologies coming to the market initially benefit from a greater decline in costs as doubling the capacity comes more quickly with a small installed base. Mature technologies, like nuclear which is over 60 years old, have already plateaued, making further cost reduction much more difficult.

In Germany, the current feed-in-tariffs of 2013 for different energy technologies are derived from the levelised cost of energy. That is, it incorporates the capital cost of building power plants or turbines, the discounted rate, and the running costs of continuous operation, fuel, and maintenance.

Through intensive early investment in promising new technologies, the current level of feed-in-tariff for onshore wind is £70-80/MWh, and for solar power is between £85/MWh for open area and £120/MWh for roof-top panels, guaranteed to recoup their capital in 20 years without any inflation-adjustment.

The nuclear “strike price” for Hinkley Point C included in the UK Energy Bill’s Contracts for Difference - essentially comparable to Germany’s feed-in-tariffs - is around £90/MWh, inflation-adjusted and guaranteed for 35 years. In order to make these figures directly comparable we need to make assumptions on what inflation will be over the next 45 years (including ten years to build and come on-stream), and calculate what costs are recouped over 20 years, as the German feed-in-tariffs were designed to do. Assuming an inflation rate of only 2% per year (an average rate since the financial crisis, but historically low), this works out as £290/MWh (calculations, publication forthcoming, provided by Carsten Pfeifer and Björn Pieprzyk from the German Renewable Energy Federation BEE (Bundesverband Erneuerbare Energie).

We might allow that wind and solar power varies with conditions, and that they require either energy storage systems or flexible conventional power station capacity as a back-up. But even taking this into account, the current subsidies in Britain through Contracts for Difference, at £105-155/MWh for biomass, £100/MWh for onshore wind, £155/MWh for offshore wind, and £125/MWh for large solar power installations guaranteed for 15 years, it is very clear that the economies of nuclear power make no sense at all.

And of course the huge build costs - £16 billion - are at the moment merely theoretical. Areva, the French firm who will build the Hinkley Point plant, is currently building a similar plant at Olkiluoto in Finland, where costs have risen by 60% during construction, from £2.7 to £5.5 billion.

Other big infrastructure projects worldwide - and particularly in Britain - show that final project costs are never close to those calculated initially. And what will the cost be to taxpayers of the future to deal with the waste generated by another generation of nuclear plants, in addition to the costs of those of the last 50 years? It is probably another bottomless pit.

Costs for renewables, on the other hand, are expected to drop further - the world-wide boom in investing in these technologies has just begun. And, in contrast to uranium, the “fuel” for wind and solar power is locally sourced and abundant in Britain, driving towards a more energy secure and independent country - the real win-win situation for everybody.

Matthias Reeg writes for The Conversation in a personal capacity, and his views do not represent those of his institution.

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