Select Committee on Environmental Audit Appendices to the Minutes of Evidence


APPENDIX 25

Memorandum from Dr Jon Gibbins, Senior Lecturer, Mechanical Engineering Dept, Imperial College, London

SUMMARY

  Reference to nuclear liability insurance was apparently removed from the Review draft at a late stage, with an associated change to an inappropriate relative emphasis on nuclear waste disposal as the principal environmental risk associated with new nuclear build:

  Presumed draft action on DTI (quotes from Edwards, New Scientist, 2/3/02 added to published version of second action bullet for 7.78, which was stated to have been changed)

    —  DTI should ensure, using independent evaluation, that the nuclear industry fully internalises its external costs, including risks such as waste cost escalation. (and taking into account?) "the fact that insurance is not available for full third party liability in the event of accidents".

  Published draft actions on DTI relevant to nuclear liability risks (7.78, 7.79)

    —  DTI should ensure, using independent evaluation, that the nuclear industry fully internalises its external costs, including risks such as waste cost escalation.

    —  DTI and DEFRA should stimulate a public debate about nuclear power, and in particular on the trade-offs between nuclear-specific risks and carbon abatement potential.

  This may appear to be a minor change in wording, but it is highly significant if it exempts the DTI from a specific duty to ensure that nuclear liability insurance costs for new plant are evaluated, and instead replaces it by an instruction to "stimulate debate" on a necessarily imprecise "trade-off" between the very different environmental benefits and potential disadvantages of nuclear power.

  Legally required nuclear liability insurance for existing nuclear power plants in the UK is limited to an amount that does not appear to reflect the likely maximum cost of potential incidents, even after proposed increases. Commercial insurance is either available for full liability, or (as seems likely) it is not. In the former case, there would appear to be no reason why new nuclear power plants should not be required to obtain full liability commercial insurance. In the latter case, reasons advanced by the insurers for refusing to accept the risk could be cited against new nuclear build, presumably without any suspicion that insurance underwriters "perceptions about the vulnerability of nuclear power plants to accidents" are biased for ideological reasons.

  It is submitted that the DTI can best contribute to environmental protection and sustainable development by ensuring that the environmental risk costs associated with accidental releases of radioactive materials are evaluated. Because of "the difficulty of quantifying the possible costs of accidents" and the need to obtain the co-operation of the insurance industry, the DTI and other government bodies have an essential role in undertaking realistic and comprehensive liability insurance cost estimates to "ensure . . . that the nuclear industry fully internalises its external costs".

BACKGROUND TO REVIEW CHANGES

  Nuclear energy is an existing large-scale zero-CO2 technology. As such, its perceived costs will affect the evaluation and development of all other low-CO2 alternative technologies.

  The PIU Energy Review appears to support a rigorous evaluation of the external costs and benefits of future nuclear power:

  7.78  As the Government establishes a new framework for encouraging a low carbon economy, it should also aim to ensure that the nuclear industry is treated fairly in relation to the other alternatives. There are two recommendations:

    —  DTI and HM Treasury should ensure that any new nuclear build should benefit from any methods that will be used to value carbon and internalise the externalities of fossil fuel use. In addition, any new investment in existing stations that substantially raised nuclear capacity (and which would reduce carbon emissions) should be considered for similar treatment, subject to independent evaluation of any case made; and

    —  DTI should ensure, using independent evaluation, that the nuclear industry fully internalises its external costs, including risks such as waste cost escalation.

  Both should be signalled early in order to provide incentives for the industry.

  The cost of waste disposal is explicitly mentioned above, but in fact the Review identifies two main environmental risks (and hence presumably associated external costs) associated with nuclear power.

  6.52  Environmental risks. At the moment there is no agreed solution to the very long term management of radioactive waste. DEFRA has recently initiated a review of nuclear waste management with the aim of reaching a public consensus on acceptable ways to deal with existing and unavoidable waste. It is envisaged that this process will take five years. The CSA's review of energy research identified waste-handling as the key priority for publicly-funded R&D in relation to nuclear fission technology.

  6.53  The other main environmental issue associated with nuclear relates to the risk of accidental radioactive releases, rather than routine emissions. Although stringent UK and international regulations mean this risk is very low, the potential consequences of such accidents are very large. Innovations in nuclear design may be able to offer inherently safer designs, which will also produce much less waste. These new designs are not likely to become available for 15 to 20 years.

  The Review as published apparently suggests, however, that the environmental costs of the second risk, that of accidental radioactive releases, are "traded-off" against the "carbon abatement potential" of new nuclear power (see 7.79 below). This is doubly inconsistent. Waste disposal costs are recommended to be "independently evaluated", while accident costs are not, although both are identified by the Review as environmental risks. Also, it is suggested that new nuclear capacity should receive a quantified benefit for the value of the carbon emissions avoided and these should also be "traded-off" against nuclear-specific risks.

  7.79  The focus of public concerns about nuclear power are on the unsolved problem of long-term nuclear waste disposal, and perceptions about the vulnerability of nuclear power plants to accidents and attack. The problem of nuclear waste is mainly an historic one, since new nuclear stations would make only a small addition to the total (there would be a roughly 10 per cent increase in the total stock of waste if all current reactors were replaced by new nuclear capacity). Nevertheless, these concerns overlay all the choices. Any move by Government to advance the use of nuclear power as a means of providing a low carbon and indigenous source of electricity would need to carry widespread public acceptance, which would be more likely if progress could be made in dealing with the problem of waste. It is important that Government should act to resolve the waste issue as soon as possible, learning as necessary from international best practice. Public acceptance, in waste and other areas, would need to be built on an open and transparent public debate.

    —  DTI and DEFRA should stimulate a public debate about nuclear power, and in particular on the trade-offs between nuclear-specific risks and carbon abatement potential. This needs to be part of the wider public debate on energy recommended in Chapter 10.

  The lack of emphasis on the cost of risks associated with nuclear power plant accidents is curious for several reasons. Firstly, the risk which receives the greatest attention throughout the published report, waste disposal, must in any case be addressed and reduced to a much lower level because of the large amount of legacy waste that already exists. (No further discussion on this point seems necessary—eg Michael Meacher, parliamentary answer to Jonathan Sayeed, March 7, 2002 ; Rob Edwards, New Scientist magazine, vol 172 issue 2312, 13/10/2001, page 10).

  The relative unimportance of the waste disposal risk was apparently clearly recognised by the original PIU team, as shown from the wording of a claimed pre-publication draft of the Review executive summary posted on the Greenpeace web site (see below—my underlining). In the published version of the Review this sentence is omitted in the executive summary (below), and although a similar sense is conveyed in section 7.79 (above) its essential irrelevance to the issue of new nuclear build is stated much less clearly.

Greenpeace web site draft:

  31.  The main focus of public concern about nuclear power is on the unsolved problem of long-term nuclear waste disposal, and perceptions about the vulnerability of nuclear power plants to accidents and attack. The problem of nuclear waste exists whether or not there is nuclear new build, and new nuclear stations would make only a small addition to the total (there would be a roughly 10 per cent increase in the total stock of waste if all current reactors were replaced by new nuclear capacity). Nevertheless, these concerns overlay all the choices. Any move by government to advance the use of nuclear power as a means of providing a low carbon and indigenous source of electricity would need to carry widespread public acceptance, which would be more likely if progress could be made in dealing with the problem of waste. Public acceptance would need to be built on an open and transparent public debate.

As published in the Review:

  The main focus of public concern about nuclear power is on the unsolved problem of long-term nuclear waste disposal, coupled with perceptions about the vulnerability of nuclear power plants to accidents and attack. Any move by government to advance the use of nuclear power as a means of providing a low carbon and indigenous source of electricity would need to carry widespread public acceptance, which would be more likely if progress could be made in dealing with the problem of waste.

  Secondly, the way in which the external costs for potential accident risks would obviously be evaluated is through the cost of appropriate liability insurance. The issue of nuclear liability insurance, including estimated costs, has been discussed at length in the United States Congress, where the Price-Anderson Act coincidentally is being considered for renewal. It is inconceivable that members of the PIU team would be unaware of these discussions. Nuclear liability insurance was also mentioned in my written submission to the PIU, and was discussed at public meetings in the consultation process.

  Indeed the issue of nuclear insurance was apparently mentioned in the leaked draft, as described in an article in New Scientist in December 2001 (New Scientist magazine, vol 172 issue 2321, 15/12/2001, page five) with further clarification in March, 2002 following the Review publication:

  Rob Edwards, New Scientist magazine, vol 173 issue 2332, 02/03/2002, page seven

Hidden nuclear costs

  A recommendation that the estimated price of electricity from new nuclear power stations should include the costs of possible accidents was removed from the British government's energy review before it was published.

  Critics claim that the review, chaired by the pro-nuclear energy minister Brian Wilson, was doctored to make it more sympathetic to the nuclear industry. "Someone has tried to squash the insurance issue, and it raises a lot of questions about the review process," says Jon Gibbins of Imperial College London, who has been researching nuclear insurance. The allegation is due to be investigated by the House of Commons Environmental Audit Committee.

  Britain's nuclear operators are currently responsible only for the first £140 million of any damage arising from an accident. If the costs are greater, the government has to foot the bill. In the US, nuclear companies have to pay the first $9 billion of damages.

  A draft of the energy review was leaked to New Scientist (15 December 2001, p five). It argued that new nuclear power stations should be required to "internalise" the cost of covering risks, to take account of "the fact that insurance is not available for full third party liability in the event of accidents".

  But in the final version published last month, insurance against accidents is not mentioned. Instead it says: "The Department of Trade and Industry should ensure, using independent evaluation, that the nuclear industry fully internalises its external costs, including risks such as waste cost escalation."

  Insiders say there is nothing sinister in the change, and that it merely reflects the difficulty of quantifying the possible costs of accidents. The main conclusions and recommendations of the review, which rejected the industry's plans for 10 new nuclear stations, were unchanged.

  Without being able to take responsibility for any of the Rob Edward's comments above other than my own quote, it appears that there has been a significant change in the Review's recommendation for the treatment of the second major nuclear risk, accidental release of radioactive material. I have not had access to the text of the draft, but it appears from the quotes above that the recommended actions by the DTI have been changed significantly:—

  Presumed draft action on DTI (quotes from Edwards added to published version of second action bullet for 7.78, which was stated to have been changed)

    —  DTI should ensure, using independent evaluation, that the nuclear industry fully internalises its external costs, including risks such as waste cost escalation. (and taking into account?) "the fact that insurance is not available for full third party liability in the event of accidents".

  Published draft actions on DTI relevant to nuclear liability risks (7.78, 7.79)

    —  DTI should ensure, using independent evaluation, that the nuclear industry fully internalises its external costs, including risks such as waste cost escalation.

    —  DTI and DEFRA should stimulate a public debate about nuclear power, and in particular on the trade-offs between nuclear-specific risks and carbon abatement potential.

  This may appear to be a minor change in wording, but it is highly significant if it exempts the DTI from a specific duty to ensure that nuclear liability insurance costs for new plant are evaluated, and instead replaces it by an instruction to "stimulate debate" on a necessarily imprecise "trade-off" between the very different environmental benefits and potential disadvantages of nuclear power.

  Legally required nuclear liability insurance for existing nuclear power plants in the UK is limited to an amount that does not appear to reflect the likely maximum cost of potential incidents, even after proposed increases. Commercial insurance is either available for full liability, or (as seems likely) it is not. In the former case, there would appear to be no reason why new nuclear power plants should not be required to obtain full liability commercial insurance. In the latter case, reasons advanced by the insurers for refusing to accept the risk could be cited against new nuclear build, presumably without any suspicion that insurance underwriters "perceptions about the vulnerability of nuclear power plants to accidents" are biased for ideological reasons.

  It is submitted that the DTI can best contribute to environmental protection and sustainable development by ensuring that the environmental risk costs associated with accidental releases of radioactive materials are evaluated. Because of "the difficulty of quantifying the possible costs of accidents" and the need to obtain the co-operation of the insurance industry, the DTI and other government bodies have an essential role in undertaking realistic and comprehensive liability insurance cost estimates to "ensure ... that the nuclear industry fully internalises its external costs".

March 2002



 
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