Monday, September 26, 2005

U.K. Favors `Clean' Fossil Fuel Over Nuclear Power, Morley Says U.K.

Sept. 26 (Bloomberg) -- The U.K., Europe's third-largest power market, should turn to technologies that remove carbon dioxide from fossil fuels rather than nuclear generation, Environment Minister Elliot Morley said.

Nuclear reactors cost as much as 2 billion pounds ($3.8 billion) to build, Morley said. So-called ``clean'' coal and gas, being developed by BP Plc and Royal Dutch Shell Plc, may be a cheaper way of reducing emissions blamed for global warming.

``You do have to look at costs and benefits,'' Morley, 53, said in an interview in London. ``Nuclear plants are expensive and if you're looking at the energy mix, then at the moment I think you'll probably get more value from investment in clean coal.''

Aging nuclear and coal-fired stations that generate 40 percent of Britain's power will be closed in the next decade, and the government has to decide how to replace them. Prime Minister Tony Blair said April 28 the government has no plans to build a new generation of nuclear plants and is encouraging alternative sources of carbon-free electricity to curb greenhouse gases.

Morley's department will publish a review of energy policy by year-end that may include tax breaks for companies developing so- called carbon capture and storage technologies including BP, Europe's biggest oil company, and Royal Dutch Shell, the second- biggest. Chancellor of the Exchequer Gordon Brown said in March he would ``examine the potential'' for incentives.

``Nuclear may have a role down the line,'' Morley said in the interview Sept. 7. ``Modern nuclear plants are much less complex than older ones, but the problems with nuclear energy are not really resolved yet.''

Low Emissions

Carbon capture technology uses chemical reactions with steam, oxygen, and carbon monoxide at extreme heat to separate carbon dioxide from fossil fuels such as coal or gas, producing a power source with few or no carbon emissions. Carbon dioxide is responsible for pushing up the earth's temperature, according to the U.S. National Academy of Sciences.

BP, Royal Dutch and ConocoPhillips, the third-largest U.S. oil company, are jointly developing a $600 million project in the North Sea to separate methane natural gas into hydrogen and carbon dioxide. The hydrogen would fuel a carbon-free power plant operated by Scottish & Southern Energy Plc in Northeast Scotland, BP spokesman David Nichols said in an interview.

The U.S. government and nine companies, including American Electric Power Co. and BHP Billiton, the world's largest mining company, are jointly building a $870 million clean-coal plant. The location has yet to be decided.

Kyoto Targets

The technology may help U.K. efforts to cut carbon emissions to 80 percent of 1990 levels by 2010 and to 40 percent by 2050, targets that go beyond international commitments under the 1997 Kyoto Protocol. Britain's carbon emissions have risen in the past three years.

In a 2003 consultative paper, the government set a target of raising the share of renewable energy sources such as wind, solar and hydro electricity to 10 percent of total supply by 2010 and to 20 percent by 2020.

Eighteen of Britain's 23 nuclear reactors, some of them as old as 60 years, are due to be taken out of service by 2015. The government report said concerns about the cost of building new plants and safely storing nuclear waste make replacing them an ``unattractive'' option.

At stake are potential contracts for companies including General Electric, Munich-based Siemens AG, Areva SA of France and British Nuclear Fuels Plc's Westinghouse unit, which build the reactors, and Essen, Germany-based RWE AG and Dusseldorf-based E.ON AG, which operate the plants.

Government Aid?

Setting-up costs for nuclear reactors are three times those of gas-fired plants, so government guarantees would be needed to persuade utilities to put up money that may take decades to recover, according to nuclear policy analysts including Malcolm Gristom at Chatham House, a London-based research group.

Blair has refused to rule out the possibility that some new nuclear plants will be needed to meet energy requirements in the U.K., which uses 340,000 gigawatt hours a year, the third highest in Europe after Germany and France.

Companies such as E.On say nuclear energy is no more expensive than alternatives, providing costs aren't driven up by excessive regulation.

``We think there's actually quite a strong case to argue for nuclear power from an economic point of view,'' said Simon Skillings, head of head of strategy and regulation at E.On U.K., a unit of Europe's largest publicly traded utility.

Demand for clean-coal plants may increase in countries such as India and China, both reliant on coal to fuel their surging economic growth.

China is now the world's largest energy user after the U.S. On Sept. 5, the European Union agreed to give the nation a coal- fired plant that emits small amounts of carbon dioxide so Chinese engineers can copy it when they build their own power stations.


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