By Gerard Wynn
LONDON, March 14 The benefit of a significant
investment in a flat-lining British economy is likely to trump
cost concerns over plans to build a new nuclear power plant.
The government may announce as early as next week a power
purchase agreement with the French utility EDF,
coinciding with a Budget which will have little to cheer in a
country teetering on the edge of a third recession in six years.
Britain will probably be the first industrialised country to
start building a new nuclear power plant since the Fukushima
disaster two years ago.
Whether the contracted price, expected to be around 9 pence
per kilowatt hour (kWh), is good value for money depends on
factors including: is it in 2013 money or nominal prices; what
is the expected commissioning date; and what is the length of
contract and how will it be indexed to inflation?
In addition, this political decision will also hinge on less
tangible factors including: on the negative side, the liability
for waste disposal and radiation risk; and on the positive side,
an investment in the UK economy, plus the benefit of a baseload,
flexible source of low carbon power.
The cost of energy technologies can be compared according to
economic cost or public support.
Levelised cost is usually measured in dollars per megawatt
hour (MWh) and is a function of discounted lifetime cost and
lifetime power production.
A power purchase agreement of 9 pence per kWh is equivalent
to 90 pounds per MWh, and is assumed to be in 2012 prices.
That would be competitive with the levelised cost of most
technologies, given that Britain has ruled out new coal without
expensive carbon capture and storage (CCS).
Only gas and gas fitted with CCS are more competitive for
new build projects starting construction in 2018, at 85 pounds
and 89 pounds per MWh, according to data from the Department of
Energy and Climate Change (DECC), as published in October last
year in "Electricity Generation Costs". (See Chart 1)
A 90 pounds contract price for nuclear would equal or
undercut the cost of new build projects starting in 2018 for
onshore wind (90 pounds); co-fired coal and biomass (92 pounds);
coal with CCS (111 pounds); offshore wind (113 pounds); biomass
(121 pounds); and solar power (129 pounds), according to the
Gas with CCS may therefore be Britain's most obvious plan B
for zero carbon power without nuclear.
Chart 1: (page 11)
There are two questions about such cost comparisons: what
rival technology is the most sensible benchmark for nuclear
power; and how quickly will the costs of less mature, rival
technologies like offshore wind and CCS fall?
Regarding benchmarking, nuclear is baseload, dispatchable
(but less flexible than gas and coal), low carbon and with low
The best comparisons may be hydropower (now fully exploited
in Britain) and tidal power (untested and probably hugely
expensive), both of which tick all those boxes.
Biomass and fossil fuels with CCS are zero carbon (although
there is a question mark over biomass), dispatchable, baseload
options but they have high marginal (fuel) costs.
Zero carbon and zero marginal cost wind and solar power are
neither baseload nor dispatchable and require grid expansion or
expensive battery technology to reduce their intermittency.
Given all of the above, the best benchmarks may be CCS and
tidal power, both of which are untested, and large-scale
Regarding potential cost reductions, offshore wind is a good
In its 2011 "Renewable energy roadmap" DECC targeted a
reduction in offshore wind power costs by 2020 to 100 pounds per
megawatt hour, still more expensive than a 90 pounds nuclear
Alternatively, the cost of a 90 pounds nuclear power
purchase agreement can be compared with support rates for
renewables, through an existing tradable certificate scheme.
The value of renewable obligation certificates (ROCs) is set
by an administrative buy-out price (40.71 pounds for 2012/13)
plus the amount of redistributed penalty payments for
non-compliance, which adds roughly an extra 5-10 percent, making
for a total ROC value presently of about 42 pounds.
Renewable power generators get a certain number of ROCs per
MWh plus the wholesale power price.
For example, onshore wind gets 0.9 ROCs per megawatt hour,
which works out at around 38 pounds, plus a year-ahead wholesale
power price of about 56 pounds per MWh, adding up to 94 pounds.
Various technologies receive the following, in 2012 pounds
per MWh: co-firing biomass with coal (77 pounds); onshore wind
(94 pounds); hydropower (98 pounds); dedicated biomass burning
(119 pounds); and offshore wind, large-scale solar and
geothermal power all on 140 pounds.
So a nuclear tariff of 90 pounds so far appears competitive
both according to a levelised cost and subsidy comparison with
But there are enough other considerations to allow both
supporters and detractors to claim the economic argument.
Given the scale of capital costs it has to recoup, EDF may
insist on a power purchase contract of more than 30 years.
That is longer than the present ROC scheme contracts (20
years) or its replacement scheme from 2014 (15 years).
But nuclear power plants will last longer than wind farms
and solar panels: EDF anticipates a lifespan of 60 years for its
proposed giant 3.3 gigawatt Hinkley Point C power plant.
And then there are the big, less tangible items: the benefit
to the UK economy, and the waste disposal problem.
Regarding waste disposal, EDF will fully fund the
decommissioning of its site and pay its share towards disposing
of Britain's nuclear waste.
The discounted, estimated clean-up cost at the country's
main nuclear waste site is 37 billion pounds and rising,
according to the National Audit Office.
That does not appear to include the cost of long-term
storage in a geological disposal facility whose site and
therefore costs are still unknown.
Meanwhile, EDF is eager to trumpet a 2 billion pounds
investment in the regional economy over the lifetime of its
proposed project, and 25,000 new jobs over the construction
That might be the clincher for the British government. For
the rest, and in answer to the question in the headline above -
90 pounds per MWh is competitive, but the uncertainty over waste
disposal is a big concern.