fixed unit price simulation for disposal of spent fuel ... - Greenpeace UK

Research Report
Levelised costs of £1.90/MWh may seem small but can have a significant impact on the economic
viability of nuclear power, especially when wholesale power prices are only marginally
above generating costs. For example the European Commission concluded that a sustained
power price fall of just £8.56/MWh from 2000 to 2002 was sufficient to trigger the financial
collapse of the UK national nuclear electricity utility firm British Energy in July 2002. 15
It is important that levelised costs are presented transparently on a level playing field. Private
sector energy companies are preparing to make large capital investments in new coal, gas,
nuclear and renewable electricity generating assets over the next decade. Decisions on what
nuclear power stations may be built in the future will be taken by commercial energy utility
companies, who must convince their private sector shareholders. In practice this means that
City analysts and pension fund managers will have a big say in whether nuclear build actually
goes ahead, as these tend to be the largest institutional investors in the energy sector. Levelised
costs (£/WMh) are an important discriminating factor for City analysts to make informed
comparisons between the costs of different low-carbon electricity generation technologies.
In the investment community there is a great deal of market interest comparing the
levelised cost of nuclear waste disposal for nuclear power stations with that of carbon capture
and storage (CCS) for fossil-fueled power stations. The levelised cost of CCS vs FUP may
well decide whether energy utilities choose to invest in either coal or nuclear power stations
as low-carbon generation technologies. (A carbon floor price is also important but this will
not differentiate between FUP and CCS because both have zero carbon emissions).
3.6 Investment Model Not Suitable for Nuclear Waste Disposal
The government has proposed that energy utilities adopt what amounts to a 160-year endowment
mortgage scheme to pay for their spent fuel nuclear waste disposal liabilities. Nuclear
operators must make regular small payments into an investment fund (about £4.7m/y for an
EPR) which is assumed to grow earning compound interest. The arrangement is very similar
to an endowment mortgage, where the endowment fund only accumulates enough to pay-off a
home loan at the very end of the investment period. The major advantage of the scheme is that
levelised spent fuel disposal costs are effectively reduced by a factor of 5 from £1.90/MWh to
£0.35/MWh (for an EPR). The total value of the small payments (£279m for an EPR) is about
5 times less than the actual cost of spent fuel disposal (£1,530m for an EPR).
15
Commission of the European Communities. Commission Decision of the 22 IX 2004 on the
State Aid Which the United Kingdom is Planning to Implement for British Energy plc. Brussels,
22 IX 2004, c(2004) 3474 final. See Page 4 @ Para 14.
Jackson Consulting 33