The Economics of Nuclear Energy - British Energy History

The Economics of Nuclear Energy – British Energy History

I thought it would be good to have a look at the economics of nuclear power by having a look at the history of ‘British Energy’. If you want a general overview have a look at New Nuclear: The Economics Say No¹.

When the Central Electricity Board was privatised in the 1990s, it was obvious that there would be no takers for the whole nuclear fleet – in particular the ageing Magnox reactors. Therefore, the older Magnox reactors were kept in public ownership and the AGRs and the single PR (Sizewell) were put up for privatisation.

The privatisation was almost derailed before it begun when it as revealed that

it had been losing between £50 million and £550 million per year during the previous five years. This revelation sparked the British government to put up £230 million toward British Energy’s decommissioning fund, as well as slash its debt back to £700 million from £1.5 billion²

The sale of British Energy raised £2.1 billion which was less than it cost to build Sizewell B (£2,648 million – 40% over the original estimate⁴) which was only one of the eight nuclear plants sold. However, it did have to take on the liability for the waste and decommissioning that had accrued before privatisation which was estimated at £5.6 billion.

In 2002 British Energy reported a £493 million pound pre-tax loss (although it continued to pay shareholders dividends)⁵ – basically it was insolvent. The government had to step in with a £410 loan since

unplanned closures of British Energys nuclear power stations would have had safety implications and put electricity supplies at risk.³

The Department of Energy and Climate Change (DECC) then helped restructure British Energy and agreed that the taxpayer should take on Â£5.1billion of the companies liabilities for waste and decommissioning. DECC also paid Â£29.1million to advisors along with Â£2.5million of administration costs. The restructuring also resulted in British Energy’s creditor agreeing to cancel some of the debts. The main creditor being British Nuclear Fuels
which is owned by the British Government.

Although it was never officially described as such, British Energy was renationalised.

In September 2008 British Energy was sold to EDF⁶ which is owned by the French government. In effect, it has not been denationalised but passed over from the UK to the French state. EDF itself currently has debts of nearly â‚¬40billion (Â£32billion)⁷

It would be too simplistic to say that these are ‘costs’ to the British (and French) taxpayers. It could be argued that if British Energy was allowed to collapse it would have resulted in massive price increases in electricity. However, this expenditure should be compared to what would have happened if the UK had not gone down the nuclear path and instead had invested in energy efficiency and alternative technologies such as combined heat and power (CHP).

Despite the massive amount of money spent on research and development⁸ the UK still does not have developed a nuclear industry – we intend to buy it in from France or Japan and the tax-payer now has a liability of over £70million for clearing up nuclear waste⁹

This is not just a UK problem but that of the nuclear industry as a whole. As Forbes said in 1986¹⁰:

The failure of the U.S. nuclear power program ranks as the largest managerial disaster in business history, a disaster on a monumental scale â€¦ only the blind, or the biased, can now think that the money has been well spent. It is a defeat for the U.S. consumer and for the competitiveness of U.S. industry, for the utilities that undertook the program and for the private enterprise system that made it possible.

To quote Einstein