Friday, December 30, 2005

Britain's nuclear power industry should act its age - Analysis - Times Online

Britain's nuclear power industry should act its age - Analysis - Times Online

Business View by Vince Cable
THIS year has brought two energy-related issues to the centre of the political stage: global warming and security of energy supplies.
The political response, so far, makes a nonsense of the usual ideological labels. We have a paradoxical position in which a Labour government is baited by industrialists for failing to “plan” energy supplies. It cheekily replies, defending liberalised energy markets, with homilies about supply and demand that could have been lifted from Milton Friedman.
The serious issue is how best to deal with the challenge of climate change. On one side are the economical liberals, who believe that price signals, consumer choice, commercial risk-taking and decentralised decision-making are the best mechanisms to shape a lowcarbon future. It is a case improbably but effectively made by Greenpeace and its allies, including my own party.
On the other hand, there are those who have great faith in national, state, central planning guided by wise, strategic politicians. Nuclear power has emerged as an answer to their prayers, providing predictable quantities of apparently carbon-free energy using tried and tested technology and minimum foreign involvement. Adherents of this view now seem to include the CBI and the Prime Minister. David Cameron’s views are unclear. Yet it is surely absurd to take up philosophical positions on the basis of technologies, per se. For politicians to be “pro” or “anti” nuclear makes no more sense than to be “for” and “against” silicon chips or aeroplanes. The issue is about the relative risks and costs.
Risk in relation to nuclear power concerns the tiny probability of catastrophic events and perceived risk may, indeed, be overstated in the public mind. Costs, on the other hand, invariably are understated.
Forty years ago Fred Lee, one of the architects of Harold Wilson’s “white hot heat of the technological revolution”, promised in Parliament of Britain’s advanced gas-cooled reactor programme: “We have hit the jackpot . . . we have the greatest breakthrough of all time.”
But the first plant would take 17 years to build, be 50 per cent over budget and 20 per cent below specification. The last nuclear plant to be built in the UK, Sizewell B, generated power at the current equivalent of 6p per kilowatt hour. That is above the current wholesale price that causes such alarm and is three times the level seen two years ago. Moreover, the taxpayer recently wrote off £50 billion of decommissioning liabilities for the industry.
When the Government’s chief scientist and others urge British politicians to show courage and vision over nuclear, taxpayers and shareholders and customers need to hold on to their wallets.
There is, however, some common ground. Man-made climate change and the probability of long-term environmental damage — albeit with big uncertainties — call for a major shift from trend behaviour. Given the magnitude of the threats and risks, it seems sensible, indeed essential, to set tough objectives for reducing carbon emissions and for Britain, as a responsible member of the international community, to meet its share.
The liberal approach is to tilt the playing field towards low-carbon fuels, through carbon taxation or use of traded permits, and to let new technologies compete to meet demand. There is much scope for reducing energy demand through price incentives and setting standards to promote conservation and efficiency without prejudging which fuel mix will emerge to meet it.
There are good arguments for a liberalised energy market supporting temporary protection for infant industry. There is a case in favour of mechanisms — from research funding to the Renewable Energy Obligation — designed to ensure that the various new approaches receive sufficient but not excessive support.
Yet it is hard to sustain the argument that infant industry arguments still apply to the industrial equivalent of 40-year-olds in nappies. If the nuclear industry becomes fully potty-trained and no longer demands subsidies or guarantees or that taxpayers pay for safe waste disposal and decommissioning, then it merits a fresh look. But not before. Apart from some intensive industrial lobbying, nothing has happened to change the conclusion of the Government’s 2002 Energy Review that the long-term waste disposal problem is “unsolved”.
Underlying the demand for government patronage to deliver the expensive certainties of nuclear power is scepticism about the capacity of markets and competition to deal with big, long-term challenges. But the pessimism is groundless. The oil and gas industry regularly undertakes massive, complex deepwater exploration projects spanning decades. Commercial foresters do the same. Financial markets trade 50-year securities. Re-insurance markets already factor-in the risk of climate change.
In the power-generating sector itself, innovative, and very efficient, new approaches are emerging, using local distributed sources that could make the traditional, centralised model obsolete.
Dogma about new nuclear power is unhelpful, for and against. But the current, unwholesome alliance of big government conservatism and a powerful industry lobby campaigning to have its business underwritten by taxpayers should make us thoroughly alarmed.
Vincent Cable is MP for Twickenham and Liberal Democrat Shadow Chancellor


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