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Last Updated: Wednesday, 23 November 2005, 14:58 GMT
Nuclear power's cost conundrum
By Ben Richardson
BBC News business reporter

Protestor's sign showing the nuclear symbol
The nuclear question will dominate UK headlines over the next year
Despite all the arguments surrounding nuclear power, there is one topic upon which supporters and critics agree - it is extremely difficult to put an exact price on how much it will all cost.

Critics argue that costs are being hidden as the industry looks to woo the public with a promise of cheaper, safer and greener electricity.

Power firms, meanwhile, are reticent about putting their names to figures as the regulatory and business environment keeps changing, and they are aware that any jump in costs would reflect badly on them.

Even academics are having a tricky time crunching the numbers and coming up with a flat rate of comparison that would allow nuclear power to be judged solely on its economic merits.

US view

Ernest Moniz is a professor at the Massachusetts Institute of Technology (MIT) and co-authored a report called the Future of Nuclear Power.

Written in 2003, the paper helped to set US energy policy and Professor Moniz says there is no reason why the core findings about price would need to be changed for today's market.

According to the report, electricity generated by a nuclear plant in 2003 was significantly more expensive - about 60% more pricey - than power from traditional gas and coal-driven plants.

The Sellafield nuclear plant in Cumbria
Nuclear firms want to be seen as a key part of future power policy

However - and this is a big however - there are number of additional factors that need to be taken into account.

Since the report was written, the prices of both gas and coal have surged, making power from those two sources far more expensive.

Carbon taxes - taxes put on forms of power generation that produce greenhouse gases - also need to be taken into account.

The amount of time needed to construct a nuclear plant is also a factor - the shorter the better - as is the financing put in place to pay for large building costs - the cheaper the better.

Better value?

The upshot of all this tweaking is that in today's market the gap between the cost of nuclear power and traditional gas and coal-generated electricity has narrowed, if not disappeared.

The main way of measuring the cost of output is calculating the price of a kilowatt hour (kWh) of electricity.

German police guarding a train of nuclear waste
Dealing with nuclear waste is an international headache

In a recent and controversial report, the Royal Academy of Engineering (RAE) estimated that nuclear plants generated power at a cost of 2.26 pence per kWh (including building and other capital costs).

This compared with gas-fired power stations at a kilowatt hour cost of 3.64 pence, and coal stations at 3.33 pence.

However, critics of the report say the RAE has underestimated the capital costs associated with nuclear; they argue that the RAE's figures therefore do not provide a true comparison between nuclear and gas or coal.

Bargain basement

Environmental groups dismiss most of the cost figures as too low, claiming that the nuclear industry has consistently run over budget on construction and failed to give accurate decommissioning costs.

Friends of the Earth reckons that UK taxpayers are facing a bill of more than 50bn to clean up the nuclear material that has already been created.

Demonstrators protesting against the transportation of nuclear waste
The topic of nuclear power provokes strong emotions and opposition

"Adding to that cost would be financial madness, and divert resources that would be better spent on energy efficiency and renewables," it argues.

According to the New Economics Foundation, a think-tank based in London, the industry-estimated costs of shutting down nuclear power plants and dealing with nuclear waste are only half of what they should be.

On top of that, critics claim that power companies are only likely to get the financing they need to build nuclear plants if they are given government guarantees about the price at which they can sell their power.

In other words, the UK would have to fence off part of its power industry to shoehorn in nuclear plants and ensure their survival.

Stance shift

Over the next year the debate over nuclear fuel is set to dominate headlines as the government reviews its energy policy.

It has neither ruled out nor ruled in building new nuclear plants to replace those that are due to stop production over the next 15 years.

The problem facing decision makers, the experts say, is that the only way to accurately work out how much nuclear power really costs is to build plants, and a lot of them.

And that is not a question of economics, but of policy.


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