IN THE bowels of British Energy’s new Livingston headquarters last weekend, an emergency board meeting took place which decided the fate of Mike Alexander, the nuclear power firm’s chief executive.
Officially, Alexander had "decided to seek new challenges elsewhere" - a curious move from a man who had just completed the biggest financial restructuring in Britain’s corporate history - a deal that embroiled the Treasury, the European Union and a
string of banks and creditors in a complex bureaucratic muddle. Unofficially, sources close to the group claim that Alexander simply didn’t have the skills to run British Energy’s nuclear fleet to the standards the firm now demands.
While this may seem a fairly benign reason for a leadership coup, British Energy’s ability to generate nuclear power with supreme efficiency is now of greater importance than it has ever been before.
No matter who wins the forthcoming general election, the prospect of the UK building new nuclear power stations will be back on the agenda within a matter of months. Inside the corridors of power, the question is not if we should build new nuclear plants, but how long the politicians can hold off before informing the public of an inevitable reality. The real debate is no longer one that separates the pro and anti-nuclear lobbies, but one that divides the realists from the fanatics.
Fears of the lights going out as the UK’s oil and gas reserves become depleted are forcing the government’s hand. But concerns about global warming are urging the debate further in favour of nuclear plants - which emit no greenhouse gases into the atmosphere at any stage in their life cycle.
Assuming new plants are built, there is only really one company with the expertise to run them - British Energy. Having tested the faith of both the government and the general public in its recent travails, Coley will have to develop an impeccable safety and performance record at British Energy’s eight existing plants to make this idea palatable.
"The reality is that whatever the history or whatever doubts historically people had of nuclear power, it generates more than 20% of the UK’s electricity - and something more like 40% of Scotland’s electricity," one energy expert said last week.
"If we simply proceed to wish away nuclear power, over the next 10 or 15 years, then you would have to replace that with new gas stations. That would leave us 70% dependent on gas by 2020, with 90% of that gas imported. Then, if you replace nuclear energy with more fossil fuel plants you simply make our emissions problems worse."
Under the current nuclear phase-out plans, the UK will have only one nuclear station remaining in 15 years’ time - Sizewell B Nuclear’s share of the national grid’s supply would fall from about 23% at the moment to nearer 4%.
While wind farms are popping up all over the country, they still account for only 1% of the energy we generate. Even if most of the country was to become swathed in turbines, wind energy would struggle to fill the gap left behind by the dying nuclear plants.
A model exists within Whitehall for the ideal structure of the power market. That shows nuclear power accounting for up to 35% of the UK’s generation requirements, renewables up to 20% and gas and coal plants making up the remainder. If the nuclear portion of that target is to be met, a vast new-build programme will be required.
Although no one is likely to talk openly about nuclear expansion until the election is over, moves are already under way to soften public opinion on building new nuclear power stations. Last week, a report from the cross-party Commons Scottish Affairs Committee pointed to nuclear’s "proven track record" and suggested that while it may be the most controversial option, it could also be the best one.
Prime Minister Tony Blair has recently reiterated that the 2003 Energy White Paper prepared by his former energy minister, Brian Wilson, "left the door open" to new nuclear plants. Blair has also claimed that he fought "long and hard to make sure the nuclear option was not closed off". Energy minister Mike O’Brien has also made positive noises about building new nuclear plants, tempered by cautions on the economics of such a project.
Conservative leader Michael Howard, who can see Dungeness power station from the bedroom window of his constituency home in Kent, is more cagey. He has said a Conservative government would have to consider the nuclear issue once it was in office. But his shadow energy minister Laurence Robertson has been actively voicing pro-nuclear views in the chamber itself and in various debates around Westminster.
Environmentalists including Professor James Lovelock are also beginning to speak out in favour of nuclear power, insisting that the dangers of global warming and the damage that would be done were we to rely more heavily on fossil fuels is greater than any threat posed by nuclear reactors. Lobby groups including the CBI are calling for the nuclear issue to be addressed.
Whitehall sources say this is all part of a strategy gradually to make the public warm to the concept of new nuclear reactors. "The government has done a very good job on this so far," said one insider. "By focusing on energy efficiency gains and renewables in this first phase, and then looking at how well or badly we are doing in terms of carbon dioxide emissions, we can hopefully take the public with us on the nuclear debate."
Of course, the biggest problem faced in swaying the public is the question of nuclear waste. There is still no definitive way of disposing with spent nuclear fuel. Most of the UK’s nuclear waste is lying in underwater storage tanks on the sites of our nuclear power plants, awaiting a longer-term solution.
Scotland’s First Minister, Jack McConnell, whose influence in this debate would be limited anyway, has recently said that he could not sanction a nuclear building programme until the waste issue was resolved. He’s not alone in this view.
But the new nuclear plants being built in China, Canada and 26 other countries in the world are substantially more efficient than the existing generators in the UK. Over their 40 to 60-year lifetime, a new fleet of UK nuclear reactors would only increase the existing waste pile by about 10%.
Given that a solution to the waste problem needs to be found anyway, it is no longer being considered as a sufficient disincentive to build new plants. Companies such as AMEC are also developing new technologies to aid disposal - including modifications of a product called Geomelt, which is being used to vitrify liquid toxic waste at some of the biggest military bases in the US.
Progress is being made, but with the major nuclear switch-off programme kicking in just seven years from now, it seems unlikely that a decision on the role of nuclear power in the future can wait until the final solution to the waste problem is known. "We don’t have time for this to turn it into a long-running planning debate like Heathrow Terminal 5," said one industry source.
Assuming the electorate can be satisfied that the nuclear option is the best way forward, the next major problem lies in how new nuclear plants would be financed. Nuclear plants cost less to run than conventional power stations, but the up-front capital cost is enormous.
After having its fingers burnt with both British Energy and its state-owned sister company BNFL, the Treasury has made it clear behind closed doors that there will be no more handouts for nuclear power.
British Energy, having been on the brink of going under just three years ago, is not in a position to go out and borrow a few billion pounds - and the financiers it has spoken to want guarantees about the prices it would get for its electricity over the 40 to 60 years of a nuclear plant’s life. At the moment there is no liquidity in the wholesale energy markets for contracts that extend beyond 12 months.
These are serious concerns - British Energy’s problems were caused largely by a slump in wholesale power prices, brought about by energy regulator Ofgem’s moves to stimulate competition in the energy market. At £16 per megawatt hour, British Energy was viable, but when prices slipped to £12 per megawatt hour, it almost went bust.
PricewaterhouseCoopers, which acted as an adviser on a nuclear plant built in Finland recently, using entirely private cash, has been working on models of how private money could be used to finance a UK nuclear building programme. It is understood that other consultancies are also working up hypothetical finance proposals.
Within government, plans are afoot to find fiscal incentives that would make financing nuclear plants attractive to the private sector.
As part of this, it is looking at restructuring the entire wholesale power market. That would effectively see three markets created - one for nuclear, one for renewables and one for fossil fuels. Tax breaks could then be targeted more specifically at different types of energy to tip the balance between the different breeds of generation towards the government model.
Regardless of how the new plants are financed, British Energy is in prime position to run such a fleet. Other utilities could decide to jump into the market, but the likes of ScottishPower and Scottish & Southern Energy are focusing their attentions on renewables. In any case, all the skills required to run nuclear plants rest with British Energy.
Under the terms of its rescue deal, British Energy is barred from running any more nuclear plants until 2010. But there is nothing stopping it from working towards building new reactors.
If British Energy is to have a viable business in 15 years’ time, it needs new power stations to run. Were BE to slip up at any stage along the way, this would be placed in jeopardy - leaving the UK’s entire future nuclear policy at risk.
Perhaps the decision to replace Alexander with Coley, the battle-hardened executive with a long track-record in America’s nuclear power industry, was influenced by more than just the British Energy board.
The full article contains 1749 words and appears in Scotland On Sunday newspaper.
