Monday, August 15, 2005

Nuclear plants 'to cost UK billions'

Nuclear plants 'to cost UK billions' - Industry sectors - Times Online

Dan Box and Dominic O'Connell

A NEW generation of nuclear power stations could be built in Britain, but only if the UK government is prepared to throw billions of pounds worth of public money into the project, according to a leading economic think tank.

The report by Oxera, published tomorrow, concludes that the potential returns on investment in new nuclear power stations are too small to justify the risks for private companies. Unless the government provides them with huge capital grants or debt guarantees, the eight new nuclear power plants required would not be built by industry.

Britain has 12 nuclear power stations generating about 22% of the country’s electricity; all of them are due to be decommissioned within the next two decades. The government has not committed to replacing them with new nuclear power stations, but many in industry and Whitehall see this as unavoidable if Britain is to hit its targets for reducing carbon-dioxide emissions.

Oxera estimates that replacing the current nuclear power stations will cost about £8.6 billion (€13 billion), from which it thinks that industry could expect a return on its equity of just 11%.

“Our figures do not indicate there would be enough of an incentive for industry to finance a new nuclear programme,” said Derek Holt, director of Oxera.

Recent analysis by the Department of Trade and Industry on the cost of onshore windfarms — another option if Britain is to hit its emissions targets — assumed a required equity return of 18%.

The government could improve the expected rate of return for nuclear investors to about 15%, however, if it offered industry cumulative capital grants of about £1.6 billion, or debt guarantees of more than £3 billion, he said.

This week’s rising oil prices have helped focus attention on Britain’s potential energy crisis, and the role that nuclear power might play.

The price of crude oil rose again in New York on Friday, touching $60 a barrel for a second day, as concerns about rising consumption in the United States increased.

Agbeli Ameko at energy consultant First Enercast Financial, said: “Passing $60 is a very significant moment. We have been bumping around below that level for some time; now we have passed it once, it will not be hard to pass it again.”

Ameko said he believes the price will fall over the summer but that the $60 price would “certainly be a drag” on the wider economy. “We have raised the bar on oil prices,” he said. The price of a barrel has risen 38% since the start of the year.”

Analysts said a high oil price places a “de facto tax” on consumer spending.


Post a Comment

<< Home