The claims

“I believe that nuclear electricity can and should play a part in our energy future provided that new nuclear is built without public subsidy.”

“Nuclear should still be the cheapest low carbon source of electricity”.
Chris Huhne, 13 October 2011

The background

Energy Secretary Chris Huhne, a former opponent of nuclear energy, appears to have undergone a conversion on the road to Dungeness.

In opposition, the Lib Dem minister railed against plans to build a new generation of reactors, but the full extent of his U-turn became clear in a speech to the Royal Society this week.

It’s clear that he now backs new nuclear power stations – but with one important caveat that was enshrined in the coalition agreement.

Revealing the shocking figure that £2bn is spent every year on storing radioactive waste that dates back to the 1950s, Mr Huhne said: “It is precisely because of that post-dated bill from past nuclear mistakes that I reiterate with exceptional feeling ‘without public subsidy’.

One of the key reasons he gave for backing the nuclear industry, despite its disastrous track record, was cost. Mr Huhne said: “Of the three large scale low carbon technologies, the costs estimated by Arup are as follows. Offshore wind is assessed at £130 per megawatt hour, gas with carbon capture at £95 per megawatt hour, and nuclear at £66 per megawatt hour.

“These figures take account of waste and decommissioning costs, so nuclear should still be the cheapest low carbon source of electricity.”

Let’s take these two claims – that new nuclear power stations can be built without public subsidy, and that atomic energy costs half as much as offshore wind power – one by one.

The analysis

When is a subsidy not a subsidy?

According to the World Nuclear Association, there are 432 commercial nuclear reactors in operation now in 30 countries.

Not surprisingly, given the multibillion-pound costs, it’s very difficult to find an example of one that was built without a hefty government subsidy.

Some commentators, like the environmentalist Jonathon Porritt, who used to be the chair of the Sustainable Development Commission, the government’s independent advisor on green industry, believes there are precisely none in existence.

So why is Mr Huhne so confident that Britain can buck the trend and build new nuclear purely out of private sector investment?

A chorus of critics would beg to differ when Mr Huhne states that there is in fact no state subsidy in the pipeline for the nuclear sector.

That’s because the government’s plans, as set out in the electricity market reform white paper, contain what have been described as “hidden subsidies” for nuclear.

The Carbon Price Floor strategy will effectively put an extra carbon tax on fossil fuels, hitting gas-fired power plants at the expense of their low-emission nuclear rivals.

But the move is also expected to raise the price of electricity, something that will hand a windfall to the nuclear sector.

And the government is proposing to tempt investors by offering all low-carbon energy producers long-term contracts with tariffs that will top up payments to companies if the price of electricity is lower than expected.

The anti-nuclear lobby says these plans come on top of existing indirect subsidies, such as the fact that operators would only pay a fraction of the insurance costs in the event of a Fukushima-style disaster, the government being obliged to cover the rest.

Mr Huhne has also specifically not ruled out offering to make the nuclear sector pay a fixed price for the disposal of waste, something designed to appeal to investors, but which carries risks that the taxpayer could lose out in the long run if clean-up costs spiral unexpectedly.

How can Mr Huhne get away with insisting that all this indirect financial assistance does not equate to a de facto subsidy?

In a ministerial statement last year, he said that “no subsidy” meant “no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation”.

He added: “New nuclear power will, for example, benefit from any general measures that are in place or may be introduced as part of wider reform of the electricity market to encourage investment in low-carbon generation.”

The slightly mind-bending logic of this appears to be that if you are indirectly subsidising several different industries at once, you cannot be accused of subsidising one of them in particular.

Some of the most vocal critics of this approach were members of the cross-party Commons energy and climate change committee.

The committee’s chairman, Conservative MP Tim Yeo, said: “The government must be upfront about the support it is giving to nuclear and not hide subsidies in a one-size-fits-all design for long-term energy contracts.

“Ministers believe that new nuclear could play a key role in keep the lights on and meeting our climate change targets – but they don’t want to own up to supporting it.”

The committee’s biggest criticism was that the reforms won’t help other renewables as much as nuclear. The rhetoric about helping all the low-carbon energies was a smokescreen for the real aim of giving the nuclear sector a financial boost, the MPs said.

The report concluded: “The White Paper should address the advantages, risks and challenges of promoting new nuclear generation head-on and honestly; it should not distort the market.”

Is nuclear really cheap?

Those statistics quoted by Mr Huhne in his speech certainly look compelling, but as so often in FactCheckland, the numbers are not as straightforward as they seem.

The Department for Energy and Climate Change (DECC) immediately admitted this key part of the speech contained an error.

The figures did not all stem from research by the consultants Arup. The cost of gas with carbon capture and nuclear come from a study by Parsons Brinckerhoff published in August (here, p17), while only the figure for offshore wind is in the Arup report (p287), which came out in June.

FactCheck asked DECC whether it is appropriate to put figures taken from two different research papers – carried out using different methodologies and assumptions – and put them side-by-side as though they were directly comparable. We did not receive an answer. (See Update below)

More importantly, not all auditors agree that nuclear power is cheaper than other renewables.

A study by Mott MacDonald for the independent government advisory committee on climate change came up with a similar spread of prices but added this important point: “It is clear that pushing deployment can affect the relative costs of technologies…it is possible to find cases where offshore wind, CCS, and nuclear are each lower cost than the other two.” (Here, pXV)

In other words, it is the government itself that effectively chooses which form of energy is most expensive by deciding which kind of technology it wants to push.

The verdict

If it were just a case of environmental groups railing against Mr Huhne (and we’ve only touched on some of the many ways campaigners say the state already favours nuclear over its rivals) we would be content to leave the FactCheck needle in the middle of the dial.

But many authoritative independent voices, most notably the energy and climate change select committee, are of the opinion that Mr Huhne just isn’t being upfront about the reality of nuclear power. It can’t be funded purely by private sector investment without the government tilting the playing field.

As for those figures on the price of the various renewables, until DECC can convince us that they are not comparing apples and oranges, we’re going to leave Mr Huhne’s nuclear aims in the realm of fiction.

By Patrick Worrall

(Update: After this article was published, a spokesman for the Department of Energy and Climate Change said: “The costs presented were based on the same core assumptions (with variations due to technological differences only) and we believe it is appropriate to compare them. While the data collection method used varies between the reports, DECC took care (as part of the commissioning of the work) to ensure that the approach to estimating the costs used by the individual consultants would be comparable with each other. Any differences in the approach taken was deemed appropriate given the different technologies examined.”)