Complaint about nuclear subsidies may prevent new reactor builds
Post Date: 24 January 2012
A formal complaint about subsidies for nuclear power has been sent to the European Commission which, if upheld, would make it unlikely that any new nuclear power stations will be built in the EU.
The complaint has been prepared by lawyers for the UK-based Energy Fair group, with several other environmental groups, and may be followed by legal action to reduce or remove subsidies for nuclear power.
One of the largest subsidies listed by the German legal firm BBH, is the cap on liabilities for nuclear accidents which nuclear power developers have negotiated with governments.
Lawyer Dorte Fouquet described EU energy policy as being based on a level playing field for an open market.
"The commission has repeatedly underlined that distortion of the market is to a large extent caused by subsidies to the incumbents in the energy sector," she said.
“Like car drivers, the operators of nuclear plants should be properly insured,” said Gerry Wolff, coordinator of the Energy Fair group which lodged the complaint with the EU's Competition directorate-general.
The group calculates that, if nuclear operators were fully insured against the cost of nuclear disasters like those at Chernobyl and Fukushima, the price of nuclear electricity would rise by at least €0.14 per kWh and perhaps as much as €2.36, depending on assumptions made.
Even with the minimum increase, nuclear electricity would become quite uncompetitive since offshore wind electricity in the UK retails at around €0.14 per kWh.
“Nuclear power is heavily subsidised, and even on the British government’s terms that is wrong,” said Wolff. “They’ve said repeatedly that nuclear power shouldn’t receive any subsidies,” he said.
The UK government denies that it is subsidising nuclear power, but this was contradicted by a report from the Energy and Climate Change Committee last year.
Subsidies for nuclear
The group lists the following subsidies or potential subsidies:
- Tax exemption. Uranium is exempted from the tax on fuels used for the generation of electricity
- Feed-in tariffs with contracts for difference. Although it is a mature technology that should not need subsidies, nuclear power would be eligible for the same system of subsidies as is proposed for renewable sources
- Capacity mechanism. The UK government’s proposals for a ‘capacity mechanism’ as a backstop for the power supply system are not yet finalised. However, there is potential for the proposed mechanism to be used to provide unjustified support for nuclear power
- Emissions Performance Standard. Although nuclear power causes between nine and 25 times more carbon emissions than wind power, it appears that the effect of the proposed new standard would, for the foreseeable future, be to lump them together as if they were equivalent.
Caroline Lucas, Green MP for Brighton Pavilion and leader of the Green Party, said: “The government’s planned Electricity Market Reform is set to rig the energy market in favour of nuclear, with the introduction of a carbon price floor likely to result in huge windfall handouts of around £50m a year to existing nuclear generators.
"Despite persistent denials by ministers, it’s clear that this is a subsidy by another name, which makes a mockery of the coalition pledge not to gift public money to this already established industry.
"If these subsidies are found to be unlawful, I trust the European Commission will take action and prevent the UK’s nuclear plans from seriously undermining the shift towards new green energy."
Advocates of new nuclear power argue that the probability of a catastrophic accident are so remote, and the potential costs of clearing up so massive, that the state should cover some of the cost, since it receives the benefit of the power.
Wolff's analysis, however, is that even at a rate of one accident every 10,000 years, with around 400 nuclear reactors worldwide, an accident like Chernobyl or Fukushima could happen at least every 25 years.
“If you look at the actual record – Three Mile Island, Chernobyl and Fukushima – then even ignoring some near disasters in-between, you are coming to a disaster every 11 years,” he said. “The figures that say the chances are terribly low don’t stack up.”
Although yet to be finalised, the deal on the table in the UK is that the operator would be liable for the first £1bn of the cost from any nuclear accident, with the taxpayer footing the rest of the bill.
The $250 billion clean-up
The cost of the clean-up following the meltdown of three reactors at Fukushima Dai-ichi nuclear power plant is currently estimated at around $250 billion of taxpayers' money.
The dire situation in Japan now reflects the complex consequences of nuclear accidents, where farmers are unable to sell their crops and emergency energy supplies are being brought in at high cost to the economy.
Despite failing to adequately prepare for and respond to the effects of last March's devastating earthquake and tsunami, the management board of Tokyo Electric Power (Tepco), owner of the reactors, remain broadly in place.
The Japanese government is using ¥5 trillion ($64 billion) of taxpayers' money to prevent Tepco from going bankrupt.
Though the ¥5 trillion will pass through Tepco’s hands, the company is not legally obligated to register it as a loan on its balance-sheet or say how it will be repaid, meaning that it is taxpayers, not the shareholders or bondholders, who hold the risk.
Tens of thousands of people have lost their homes, businesses and confidence in their health as a result of the disaster, and many have not been compensated.
The costly alternative
But the alternative policy, of a planned navigation to a post-carbon and post-nuclear nation, can be equally expensive, albeit less catastrophic.
A new internal report from Siemens of the cost of Germany's energy programme after its decision to shut down its nuclear reactors following the Fukushima disaster has produced a figure of at least €1.670 trillion ($2.177 trillion) by 2030.
This is equal to 68% of German GDP in 2010.
The figures were announced by the head of Siemens' energy division, Michael Suess, at the Energiewirtschaft 2012 event organised by the Handelsblatt newspaper in Berlin.
Since the nuclear shutdown there has been a rush to complete construction of 10 GWe of fossil power plants, and short-term reliance on an oil-fuelled plant in Austria in Germany.
In addition, 7.5MW of solar photovoltaics were installed, 3MW of which were in December alone.
Back in Brussels, the DG Competition said it would take 18 months to contemplate Energy Fair's submission and produce a response.