Thursday, December 01, 2005

Nuclear power is good - in Finland

Telegraph | Opinion | Nuclear power is good - in Finland

By Malcolm Moore
(Filed: 30/11/2005)

The island of Olkiluoto in the Gulf of Bothnia, off the west coast of Finland, is famous for two things. It has a medieval castle, which was once a base for pirates, and it is also home to the first nuclear power station to be built since the disaster at Chernobyl.

The Finns no longer want to rely on gas from neighbouring Russia to heat their 1.5 million saunas, and are laying the foundations for the world's most powerful plant. They have a neat and well-thought-out plan. Local paper makers and chemical manufacturers, which are desperate for a constant stream of electricity, will pick up the �2 billion bill. They will then take all the juice the plant produces when it is finished in four years' time. The nuclear waste will be kept on the island, where there is a 100m-deep repository. The locals are delighted by the idea, and underbid another town for the contract to bury the bright yellow barrels.

By contrast, our nuclear policy is a mess. Tony Blair has finally warmed to an atomic future, but nowadays there are no electricity companies that want those glowing green sticks anywhere near them. It is not the waste they are worried about - there are lots of snazzy new reactors that produce only a tenth of the radioactive gunk that comes out of the present generation. The experts say they will cost far less to clean up than the �50 billion bill the Government is faced with. Their fear is that building nuclear power stations could be severely hazardous to their financial health.

On Olkiluoto, the numbers are easy to crunch. The buyers have paid for their electricity up front. Over here, the sums are impossible to work out. Since we have a free market for electricity, the price wobbles precariously. In the past year, the price has gone up a third, but there is no guarantee it will not fall back.

It is true that the cost of building a nuclear plant has fallen substantially. A typical station now costs �1.5 billion, but, as the pro-nuclear lobby points out, there are efficiencies of scale. Discounts can be haggled for a bulk purchase. Using the existing sites for the new stations will bring savings on the wires connecting them up.

However, only a foolhardy investor would borrow that much money up front, with no possibility of a return while the station is being built. Construction can take up to 15 years. Planning applications have to be made even if current sites are used, and there is every chance of a problem with the builders. No one, after all, has built a nuclear power station since Sizewell B was finished 10 years ago, and British contractors are very good at delivering large projects late and over-budget.

Then there is the rather large risk that the station will not be profitable. Even the nuke-fanciers admit there are only certain situations in which nuclear power is more economical than gas. We are in the middle of one right now. The gas price has spiked during the current cold snap to an all-time record. At the moment, Britain's 14 nuclear power stations are coining it, and British Energy, their operator, has come back from the brink of collapse to turn a profit. Things change, however, and there is every likelihood that today's shortage of gas will turn into tomorrow's glut. Two years of high gas prices is not a sufficient signal for a 50-year investment in a new nuclear fleet.

Indeed, the high gas prices have prompted a wave of investment to fill the gap. There is an imminent pipeline from Norway that will deliver six billion cubic feet of gas every year - or roughly the same volume that Norway burns each year. That will drive the price down. So will the enormous tankers that have started to arrive at the mouth of the Thames to disgorge more gas from Algeria, Qatar and Egypt.

The argument that nuclear power is more secure than gas is also overstated. The unstable parts of the world that contain our gas supply are usually not all unstable at the same time. Besides which, they need our money as much as we need their gas.

The market has made up its mind. Several companies are building new gas plants. These are a third of the price of a nuclear station, and take only two years to build. Wind farms are also sprouting up. The whole of Scotland is scheduled for blanket coverage. These windmills are cheap to erect, and win staggering incentives from poorly designed government initiatives.

Those incentives filled the sails (and pockets) of the wind-power industry, and it may be that Mr Blair decides to do the same for nuclear power. After all, atomic energy represents a genuine way of reducing our emissions of carbon dioxide.

Wind power will never produce enough energy to allow us to shut down the gas stations and hit the Government's target of a 60 per cent drop in greenhouse gases by 2050. Tackling transport emissions could do the trick, but ministers might decide that building nuclear power stations in faraway bits of Scotland is more politically amenable.

One quick way of fiddling the market to attract investment in new plants would be to reward nuclear operators with the same incentives that renewables attract. This would double the price they can get for their electricity. A warning, though: power companies fear nothing more than meddling MPs. Ever since the market was liberalised, it has been poked and prodded by the dead hand of the DTI. Each meddling served only to create more uncertainty and risk.

Some power companies are still smarting that Stephen Byers rescinded the ban on new gas stations, just two years after Peter Mandelson put it in place. They had made plans for other stations and saw their competitors given an unfair break.

Building nuclear power stations is a long-term investment, and if the Government really believes we need them, the first step is to make a clear and well-articulated policy. The next step is to leave the market alone to solve the problems by itself. It might well come to love nuclear as much as the islanders of Olkiluoto.


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