The Debate: As high costs force Centrica to pull out of new projects, can nuclear power ever be profitable?

Tony Lodge

Nuclear power stations can be built and operated without the need for government subsidies. The actual build of nuclear power stations is entirely financed by energy companies – not the government. However, the only way that you can get these companies to invest billions of pounds is by providing them with a level of certainty. Forecasting energy prices for the next 25 years is difficult. But the government is in negotiations to guarantee a fair price to energy companies – not necessarily a subsidy. A look at the numbers shows the business viability: two 1,600-megawatt reactors, operating at 90 per cent efficiency over 50 years, could generate £88bn in revenues at an average market price of £70 per megawatt hour (the government’s median projection price for nuclear power in 2011). This shows that building nuclear energy plants can be a financially viable business without subsidies from the government.

Tony Lodge is a research fellow at the Centre for Policy Studies.

Paul Dorfman

Centrica’s withdrawal from nuclear investment, amid concerns over expected cost over-runs, was expected. There are only two reactors currently being built in Western Europe – in Finland and in France. They both use the reactor technology proposed for the UK. Both are delayed and over budget. Originally, it was estimated that they would each cost €3.3bn (£2.84bn) to build. But costs are now expected to hit €8.5bn. In the UK, complex fiscal mechanisms embedded within the Energy Bill will financially burden the taxpayer. Although the government had promised that there would be no subsidies, cost over-runs for new nuclear projects will be passed on to the taxpayer through an implicit subsidy (if the government agrees to buy nuclear energy at a price that is higher than the market price). Without what is effectively a significant financial subsidy from the state, nuclear projects are simply uneconomic.

Dr Paul Dorfman is founder of the Nuclear Consulting Group.