Select Committee on Trade and Industry Appendices to the Minutes of Evidence


APPENDIX 29

Memorandum by BNFL

Nuclear energy must continue to play a significant role in the UK's baseload electricity generation. Without nuclear's contribution, this country cannot have a continued, secure, diverse and environmentally-friendly energy supply that helps sustainable development

1.   Given the imminent dependence of the UK on energy imports, how can the UK maintain a secure energy supply? What mix of fuels would maximise security?

    —  Energy mix must be balanced, diverse, reliable and stable. It must help sustainable development

    —  Nuclear energy provides a secure and reliable supply of energy that can contribute to sustainable development

    —  It is a key component of our existing baseload electricity generation

    —  It must continue to be part of the fuel mix

    —  But decisions need to be taken soon on replacement nuclear power stations to avoid serious long-term consequences for security of supply

  With energy demand projected to rise steadily over the next few decades and an increasingly large proportion of supply expected to come from imported oil and gas, maintaining the security of supplies has to be an essential component of UK energy policy. Security can be achieved, provided there is:

    —  sufficient diversity of supply

    —  reliability throughout the supply chain

    —  low vulnerability to fluctuations in price

    —  low susceptibility to disruptions in supply (networks and infrastructure)

    —  ready availability of quality base-load supplies.

  The objective, therefore, must be to maintain an energy mix that can address these criteria in a balanced way over the long-term, whilst keeping a firm focus on safety, cost effectiveness and environmental impact. Supply security is a key factor in a sustainable energy strategy.

  To achieve this, BNFL recommends that the Government actively encourage substantial development and deployment of both nuclear and renewable energy supplies. Nuclear energy can make an effective contribution to the sustainability of energy supplies and, in doing so, can help to ensure supply security.

  Operational stocks of nuclear material at various production stages in EU facilities, from raw uranium feedstock through to finished fuel, are sufficient to provide for several years' electricity production, which makes nuclear generation much more robust than other generation forms in the event of disruptions to supply.

  Although uranium is imported it is purchased from diverse sources in regions that are economically and politically stable. Currently, over half of global uranium mining is done in Australia and Canada.

  The nuclear fuel component of total generating costs is relatively low, at around 20 per cent or less, making nuclear generation significantly less exposed to volatility in fuel costs compared with other generation technologies. Nuclear stations are also able to deliver very high energy density, when both generating capacity and land requirements are taken into account, and are able to provide the grid with reliable baseload generation.

  As far as fuel mix is concerned, an even distribution between major sources of energy supply is the best way to maximise security, taking account of both domestic and imported supplies. Three or more major independent sources, each with around 20-30 per cent of supply, should be the goal. In addition there must be adequate capacity margins available to help reduce impact in the event of disruption to any of those supply sources.

  If decisions are not taken soon on replacement nuclear power stations the security of supply benefits of nuclear power will no longer be available, as existing stations reach the end of their operating lives. Nuclear's share of electricity generation is set to decline sharply in the next 20 years (from 23 per cent share of electricity generation to 5 per cent), based on current plans for power station decommissioning and if there is no replacement build. In view of the considerable reduction in capacity this represents and since nuclear power provides significant baseload generation of electricity, a failure to take decisions on replacement build would have serious long-term consequences. It is essential for the current nuclear capacity to be actively replaced so that nuclear power can continue its significant contribution to UK energy policy objectives, as part of a balanced energy mix. If nuclear energy is to maintain its secure contribution to the UK's electricity supplies then continued availability of existing licensed sites and the associated transmission infrastructure is an important consideration.

2.   Is there a conflict between achieving security of supply and environmental policy? What is the role for renewable and Combined Heat and Power schemes?

    —  Nuclear energy meets security of supply objectives and helps to reduce the impact of climate change

    —  Other energy sources cannot reconcile these objectives in the same way

    —  A well-balanced energy mix is the answer, that includes nuclear energy

    —  Nuclear waste is being safely stored

  There is no inherent conflict between the objectives of security of supply and environmental policy since nuclear energy already demonstrates that it is possible to fulfil both at the same time. Although it is clear that not every component of energy supply will be able to reconcile these objectives in the same way as nuclear energy, nevertheless the aim should be for a sensible overall balance within the energy mix, as already outlined in the answer to the Question 1. Renewables, for instance, must be included in the mix since they will help to meet emission reduction objectives but it should be recognised that they will be more expensive, less flexible and insufficient in meeting demand capacity. In the short to medium term they are unlikely to be able to make a major contribution in terms of security of supply and will not in any case be able to replace the substantial emissions avoidance capability of nuclear generation.

  Nuclear waste is being safely stored. Interim safe stores already exist and are demonstrable evidence that wastes associated with nuclear power can be cost-effectively and safely managed whilst the disposal issues are resolved.

3.   What scope is there for further energy conservation?

    —  More can be done to encourage conservation

    —  But conservation is only one of a number of measures required to tackle energy policy objectives

  All industrial and domestic users of energy have a responsibility to use available energy resources wisely and effectively. It is true that more can be done to encourage and achieve energy savings but conservation on its own will not be sufficient to address the issues presented by security of supply or climate change mitigation. Conservation policies and measures will need to be pursued but they should be considered as part of a wider package, including those energy options that are able to address security of supply concerns in a meaningful way.

4.   What impact would any changes have on industrial competitiveness and on efforts to tackle fuel poverty?

    —  The Government must be committed to tackling security of supply

    —  Over-reliance on gas imports would have a negative impact on competitiveness and so could ultimately affect fuel poverty

  It is not possible to comment on the extent of any impact without knowing the scope of any proposed measures. However, if security of supply in the context of UK energy policy is to be taken seriously, as it should be, then the Government must not shy away from implementing necessary means to help achieve it. This should centre on the principle of positive incentivisation that rewards achievement of goals rather than penalising failure or shortcomings. This will encourage positive attitudes and participation. Actions to deal with industrial competitiveness and fuel poverty must be taken within the policy framework, not outside it.

  Industrial competitiveness could be adversely affected if the UK became overly dependent on gas imports from unstable countries, as a consequence of price swings and rising costs. Failure to address this would have considerable negative impact on UK industry, particularly on those sectors that are energy-intensive, and on domestic consumers, exacerbating the situation on fuel poverty.

5.   Is any change of Government policy necessary? How could/should Government influence commercial decisions in order to achieve a secure and diverse supply of energy?

    —  Doing nothing will mean the end of nuclear power generation in the UK

    —  Yet the UK needs nuclear energy to help ensure security and diversity of supply and to contribute to a sustainable energy strategy

    —  Suggested policy improvements to give nuclear a level playing field:

      —   Modify existing climate change mechanisms, such as the Climate Change Levy, to take account of the fact that nuclear generation makes virtually no contribution to greenhouse gas emissions

      —  Improve planning and regulatory approval processes

      —  Look at long-term electricity supply contracts. This is required for all fuel types

      —  Decide policy for radioactive waste management

      —  Encourage provision for nuclear education, training and R&D

    —  New modular passive designs for nuclear reactors will be competitive and can be brought to market commercially if these policy changes are made

  Government policy measures are needed to deal effectively with security of supply concerns and to ensure sound management of any associated risks. Primary amongst these is a need to keep energy options open, with corrective steps taken where necessary if inequitable conditions prevail amongst energy providers. BNFL wants to see the nuclear energy option retained and recommends a number of key measures for the Government to take on board in order to ensure that nuclear power can make a continuing contribution to secure and diverse energy supplies as well to sustainable development.

  Investors and industry alike need certainty in respect of planning, construction, operational and regulatory approvals. A climate of assurance must be in place if major important infrastructure projects, such as replacement nuclear power stations, are to be delivered and if investor confidence is to be promoted. This is particularly true in respect of the nuclear industry, which has long lead times and long pay-back periods. Government must therefore take the initiative, actively create the right framework for replacement reactor build and be prepared to take prompt decisions in order to make progress.

  Government also needs to take a longer-term view of the energy supply situation. For instance it should review how long-term electricity supply contracts can be put in place, in order to ensure future provision of reliable baseload electricity generation. It should also recognise that delivery of long-term solutions requires market conditions that do not undergo radical change and therefore it should ensure that policy is shaped to ensure stability.

  The issue of internalisation of external costs associated with energy production needs to be taken into consideration in order to achieve harmonised conditions for all producers. Currently nuclear generators include the costs of waste management, disposal and decommissioning in their cost base and hence in the prices charged to customers. This is not the case for other producers, for example fossil fuel generators, where costs are not reflected. In addition to levelling the playing field such harmonisation will ultimately guide consumer choice towards those sources which are cost effective and climate-friendly.

  At the same time unfair discrimination should be corrected. One example is the Climate Change Levy, which currently does not allow nuclear generation any benefit, despite the fact that it produces virtually no greenhouse gas emissions.

  Government also needs to determine a comprehensive radioactive waste management policy which recognises that today safe waste management is an operational reality, that long-term storage is a viable option and that waste from historic operations has to be dealt with on a commercial basis. This will give confidence to the public and to customers that nuclear energy is an acceptable and realistic option for the UK's energy supplies.

  Instituting these improvements in the policy framework will inject more balance and help to maintain diversity of choice in available energy sources, whilst still leaving purchase decisions to generators in line with market considerations.

  These points are explained in more detail in BNFL's submission to the Performance and Innovation Unit's review of UK energy policy. A copy of the submission is attached for reference.

29 October 2001


 
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