Tidal Current Energy

42 S. Green and D. Kennedy
not. Rather, it was to assess whether there is merit in keeping nuclear new build
as one among a range of options for meeting energy policy objectives.
The analysis was economic rather than financial and it would ultimately be
for the private sector to conduct financial analysis as part of project due diligence
and to bring forward projects accordingly. The aim of the analysis was
therefore to determine whether there is potential benefit to the UK in keeping
the door open for such projects. The cost–benefit analysis should be seen as an
input to the development of policy in the context of the public consultation on
nuclear new build which ran from May to October 2007.
2.2 . UK cost–benefit analysis
Costs and benefits were accounted for as fully as possible. The analysis considered
resource costs associated with nuclear plant relative to alternatives of gas-fired
generation and other technologies. It included valuation of environmental benefits
(there are carbon emission reductions to be gained from adding nuclear rather
than gas-fired capacity) and security of supply benefits (nuclear power is subject
to lower probabilities of fuel supply interruption than gas-fired generation).
A range of nuclear costs based on studies, market data and projects under
development/implementation was considered. Alternative assumptions on
nuclear generation costs were considered in the context of different scenarios for
gas and carbon prices. The analysis highlighted considerable uncertainty surrounding
the economic appraisal of possible nuclear investments. This stemmed
from various sources, including uncertainty with regard to nuclear construction
costs and gas prices.
2.3 . Nuclear generation costs
Central case assumptions on costs of nuclear new build generation are given in
Table 3.1 . The central case cost of new nuclear power generation was assumed
to be around £38 per megawatt hour . The main cost drivers were construction
and financing costs, giving an assumed capital cost of £25 per megawatt
hour ; this was significantly higher than the capital cost for the project currently
under implementation to add a new nuclear plant in Finland. Other categories
of cost were small in comparison: fuel costs around £4 per megawatt hour , and
operation and maintenance costs roughly £8 per megawatt hour . Back-end costs
(decommissioning and waste recycling), while potentially of a large order of
magnitude, far into the future need only a relatively small annual contribution
(equivalent to around £1 per megawatt hour) to a fund which grows over time
to the required amount.
The central gas price scenario modelled a world where the current market
situation prevails and the gas price remains linked to the oil price. Whereas the
gas price has been around 20 pence per therm1 on average over the last decade,
the average price in 2006 was 43 pence per therm . Going forward the assumed
1 therm � 10 6 Btu and 1 Btu � 1055 J.