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.
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.