New nuclear will add little to power bills

LONDON (Reuters) - The government expects the cost of handling the waste and decommissioning of a new generation of nuclear reactors to add about one percent to the cost of power produced, a source familiar with government thinking said.

And the amount trickling down to consumers’ bills will be smaller still.

Ministers are expected to give the go-ahead to a new generation of nuclear power stations on Thursday after Prime Minister Gordon Brown pledged last week to “take the difficult decisions on energy security”.

His spokesman said on Monday that nuclear operators would have to set aside funds to cover the full costs of decommissioning plants at the end of their lives as well as the cost of handling radioactive waste.

Like any other cost, that will trickle down to UK electricity bills, but it will be “very small indeed”, the source told Reuters.

“One pound per megawatt hour will probably be a very generous estimate of the knock-on costs,” said the source. “And an estimate of two pounds would be outrageously over the top.”

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The baseload electricity price was 61 pounds per megawatt hour on Tuesday, meaning that the cost of dealing with waste and decommissioning could add between 1.6 and 3.2 percent to the cost of electricity from nuclear at the very highest estimates.

Nuclear energy currently accounts for just one-sixth of the country’s electricity, so any impact on the public’s electricity bills would be smaller still, and tiny compared to the impact of rising gas costs.

Ministers have repeatedly stressed the importance of reducing Britain’s reliance on imported gas, which fluctuates with oil prices and regularly impacts bills.

Last week, German utility RWE said it was putting electricity prices up by an average of 12.7 percent in the UK, after wholesale gas prices rose by around 60 percent in the last year.

Nuclear is also less susceptible to swings in commodity prices than gas, which is used to generate about 40 percent of UK power.

Gas accounts for about three quarters of the cost of electricity generated from it, while uranium represents a mere 5 percent of the total cost of generating nuclear power, so uranium costs can double with little impact.

The first new nuclear plant is expected to break even with electricity at an average price of 37.5 pounds per megawatt hour, falling to 31.2 pounds for the second, according to government figures from the 2006 energy review.

The public has little to fear from variations in the cost of nuclear waste and decommissioning, with the worst case scenario adding only 36 pence per megawatt hour to the breakeven price, said the source -- still well below current baseload price of 61 pounds.

The government is keen to find new sources of CO2-free baseload power to help it meet ambitious climate change goals.

Other carbon-free technologies struggle to compete economically with nuclear, with the cost of waste and decommissioning about one fourteenth of the cost of capturing and storing the CO2 pollution emitted from coal-fired power stations.

The other big cost will be building the nuclear power stations at around 1.6 to 1.7 billion pounds per plant, but British Energy says it has no shortage of firms lining up to form partnerships.