MEP Forum discusses economics of nuclear energy

The latest meeting of the MEP Forum for the Future of Nuclear Energy took place on 18 May 2006, in Strasbourg, under the chairmanship of MEP Terry Wynn (UK, PSE). On the agenda was a discussion about the economics of nuclear energy. The two guest speakers who addressed attendees were Stephen Thomas from the University of Greenwich and Prof. Alfred Voss from Stuttgart University. Each presented his own, differing, views on the competitiveness of nuclear energy.

Stephen Thomas spoke first and began by stressing that the economics of nuclear energy are controversial because forecasts are usually overly optimistic and made by people with a vested interest in nuclear energy. In addition, the record of such forecasts is generally quite poor as there is very little data on actual construction and operation costs. Thomas added that nuclear power is capital intensive and that in a competitive market situation the cost of capital is very high. As a result, the liberalisation of the electricity market is a bad thing for the nuclear industry. In his view, more than just political support is needed for a nuclear revival to really take place; plant owners need guarantees that commercial and technical risks will not impact upon them negatively. In conclusion, Stephen Thomas argued that some costs, like the cost of waste disposal and decommissioning, can only be guessed at because there has always been a distinct lack of experience in this area. Furthermore, Thomas said that the nuclear sector is facing a skills shortage that will prove to be a considerable obstacle to the further development of nuclear power.

Prof. Voss then took the floor. He gave a comparative analysis of the electricity generation costs of different energy options. For nuclear power, it is the construction costs that are the largest cost contributor. However, he added that from a cost perspective generating electricity from nuclear is more competitive than that generated from gas, lignite, and hard coal - and much more competitive than wind power.

Prof. Voss stressed that investors in the power generation sector face three types of risks in a liberalised market: electricity price and volume risks, fuel price risks and political and regulatory uncertainties due to market interventions such as subsidies, taxes, safety regulations or emissions controls. Taking into account the profit return on investment that can be had and the internal rate of the return on investment, Prof. Voss concluded that investments in nuclear energy sector are profitable and that nuclear energy can indeed be competitive in a liberalised market.

After the presentations the floor was open to questions and comments from MEP’s. Many questions focused on the issue of decommissioning and the cost of waste disposal. Many MEP’s wondered how Member States will ensure that the money set aside for this purpose will actually be made available and will be adequate. They also questioned who should pay for disposal and whether it would require public funding.

The issue of lack of investment in nuclear was raised and a question about the invisibility of the nuclear renaissance was also asked. MEPs were also interested in the availability of uranium and about whether knowledge and expertise in the nuclear sector was being slowly eroded. In answer to some of these questions, Stephen Thomas said that a monopoly situation would be the best scenario for nuclear investors because consumers would then pay for everything. With regard to uranium availability, he acknowledged that there are enough supplies to meet current levels of nuclear energy production for a long time to come, but added that current levels could not help to curb the effects of global warming. To tackle this issue adequately, according to Thomas, new breeder reactor technology would be needed, which would raise concerns with regards to the problem of proliferation.

Prof. Voss responded differently to these questions. He said that in the figures he presented the costs of decommissioning and waste management were included and that in many countries a part of the electricity bill that consumers pay goes to a special fund for decommissioning and waste management. He further argued that there is no noticeable nuclear revival because investors fear political and regulatory instability. Investments in other energy technologies occur because they are subsidised.

Terry Wynn thanked the speakers for provoking a lively and informative debate.

Another MEP Forum debate is planned for September.

For more information on this file, contact Stella Brozek: stella.brozek@foratom.org