Clean and Reliable, But Not so Cheap: Is the Nuclear Renaissance About to Get a Reboot in the UK?

"Nothing that comes after will be able to detract from the importance of this first great step forward."

These are the words of Sir Edwin Plowden, chairman of Britain’s Atomic Energy Authority. Here he is referring not to the UK’s latest foray into nuclear power in October 2014, but rather to the grand opening of Britain’s first atomic plant more than half a century previously, in October 1956. As Her Majesty the Queen pulled the lever that heralded a new atomic age and sent power surging into the national grid, the mood was one of national celebration. Within ten years, observers noted, every new plant would be nuclear.

That optimism has since faded. While nuclear today provides as much as one fifth of Britain’s power, dreams of a carbon free electricity system “too cheap to meter” have always been just beyond the horizon.

This may be about to change. Following approval from the European Commission last week, the UK government has the green light to proceed with a subsidy scheme for Hinkley Point Câ€"Britain’s first new nuclear plant to be built in over two decades. Whether this constitutes a “great step forward” for the nuclear industry in the country remains to be seen. What is clear, however, is that any renaissance will be born less out of excitement than of necessity.

Keeping the lights on

There are at least two main reasons for renewed interest in nuclear power in the UK. The first is simply to keep the lights on.

A total of 16 reactors spread across just nine nuclear plants provide more than 20 per cent of the UK’s electricityâ€"and nearly all of them are set to be retired over the next fifteen years as they reach the end of their operational lives. Together with the closure of coal plants to comply with EU directives, the result will be a loss of more than 20GW of generating capacity by 2025â€"around one quarter of total generating capacity.

To make matters worse, with only narrow “de-rated margins”â€"the safety cushion between electricity demand at its peak and total supply capacityâ€"there isn’t a whole lot of slack in the UK power grid. Despite a suite of energy efficiency measures already being implemented, electricity demand is projected to rise until 2050â€"particularly as transportation, heating and industry run increasingly on electricity rather than fossil fuels. A government analysis suggests that as much as 54 GW of new electricity capacity may be needed by 2025 to meet demand with reasonable safety margin.

Of course, nuclear can’t close this gap alone. At the same time, it will be nearly impossible to close the gap without nuclearâ€"at least not if the UK wants to stick within its carbon budget. Hinkley Point C will generate a remarkable amount of power. At 3.2 GW, this single European Pressurized Reactor (EPR) plant occupying just 1.7 km² of land on the Somerset coast will provide enough electricity to meet 7% of the country’s demand. Producing the same amount of power with onshore wind would require around an area of 1040 km², an area about ten times the size of my hometown of Manchester, and almost as large as greater New York City.

Greening the grid

The second reason for renewed interest in nuclear is climate change. Britain may have come a long way since the Industrial Revolution, but its energy mix hasn’t. In 2013, coal provided nearly 40 per cent of the UK’s electricity, powering electric kettles today just as it did the kilns of the eighteenth century.

The UK plans to reduce emissions 80% by 2050, primarily through promoting renewables (especially wind), carbon capture and storage (CCS), and nuclear power, together with a suite of policy measures in support of energy efficiency. There are also plans to connect the UK to sources of low carbon power in the rest of Europe, including an undersea cable that would allow British homes to be powered by hydropower all the way from Norway.

While some argue the UK can meet its climate targets without nuclear, it is hard to make the numbers add up. Most modelling exercises indicate that it will be much more difficult and costly to decarbonize without nuclear, and nearly impossible without both nuclear and CCS. This is broadly consistent with the recommendations of the IPCC, which indicate that globally, it will prove very difficult to keep warming within reasonable levels without the “full suite of low carbon technologies”, including nuclear. The International Energy Agency (IEA) is more bullish, calling for “major construction” of new nuclear if the world is to meet the two degree target.

Nuclear is perhaps Britain’s best hope of killing coal. With projected savings of 9m tonnes of CO₂ emissions each year, Hinkley Point C will generate an equivalent amount of power to all the UK’s wind and solar combined in 2013. Indeed it is no accident that the two countries with the fastest rates of decarbonization over more than three decadesâ€"France and Swedenâ€"also happen to be countries that have built out a large amount of nuclear capacity.

Breaking the bank?

So far so good. But keeping the lights on while at the same time reducing emissions doesn’t come without a hefty price tag. French energy company EDF puts the project cost at £16 billion, rising to £24.5 billion with inflation. Either way, this is significantly more expensive than similar projects being built in France and Finland. In China, two EPR units are being built for less than half the price.

While the UK government pays nothing upfront, it will end up footing the bill. Hinkley Point C is to receive a guaranteed of £92.50 per MWh for the power it produces for 35 years of the plant’s total 60 year lifecycle. This is almost double the current wholesale price of power, though with prices set to increase significantly as cheaper coal-fired generation is retired, it will likely seem a much better deal by the time Hinkley Point C starts producing power in the mid 2020s.

To be clear, EDF is not getting a blank check. Crucial to seeing the bill through the EU Commission was a deal to limit the profitability of the plant, with 60% of any profits that EDF makes over an agreed-upon threshold (13.5 per cent ROI) set to be returned to the taxpayer. EDF will also bear the full cost of waste management and decommissioning.

Moreover, support for nuclear is part of a broader policy of government support for other low carbon technologies. The UK government guarantees prices paid to renewable energy generators that are equally if not more expensiveâ€" £95 for onshore wind, £120 for large solar PV, and £155 for offshore wind. Secretary for Energy and Climate Change Ed Davey dismissed claims of favoritism: “All low carbon [power] at the moment, whether it’s nuclear, carbon capture and storage, offshore wind etc. is getting support.” 

Renaissance, or road to nowhere?

UK energy policy is built around providing power that is clean, reliable and affordable. Hinkley Point C does well against this scorecard, though there is clearly room for improvement on the cost.

If nothing else, the project is a clear indication that Britain is committed to providing financial support for a low carbon future, and that large energy infrastructure investments are still possible in a country which has not seen any major power plants constructed for decades.

With many obstacles still to overcome before construction begins, it will be a long while before Hinkley Point C gets a royal christening. Whether future plants can be built for cheaperâ€"either because of technology learning or different reactor designsâ€"will go a long way to determining whether this signals the beginning of a renaissance, or a road to nowhere.

Photo Credit: Nuclear Energy in the UK/shutterstock