In most countries where there is a competitive electricity industry, it
is clear that nuclear electricity is much more expensive than fossil
electricity and is even more expensive than wind power. For instance, a
detailed pro-nuclear study, The Future of Nuclear Power,
by an
expert group from the Massachusetts Institute of Technology (MIT),
estimates that the cost of electricity generated by a new nuclear power
station in the USA would be US6.7 cents per kilowatt-hour (c/kWh), or
about 9c/kWh Australian. Coal power in eastern Australia costs under
4c/kWh. Wind power in USA costs US4-5c/kWh and in Australia
7.5-8.5c/kWh, depending upon site.

When the UK electricity industry was privatised, the British government
had to impose a fossil fuel levy to subsidise nuclear electricity. By
1998 this subsidy had reached 1.2 billion pounds sterling per year,
equivalent to a subsidy of about 6c/kWh Australian. In addition,
decommissioning of existing British nuclear plants will cost an estimated
70 billion pounds sterling.

The nuclear industry’s solution to these harsh economic realities has
been to produce a series of reports on the economics of a “new
generation” of nuclear power stations that only exists on paper at
present. The latest is the report to ANSTO by leading nuclear industry
figure, John Gittus, claiming that a non-existent nuclear power station,
AP1000, would be competitive with coal power in eastern
Australia.

The Gittus report offers two alternative scenarios. One involves
substantial government subsidies on the capital and operating costs of
the proposed power station. The other involves “no subsidy”,
just a massive government guaranteed, unsecured “insured loan, which
would be repaid to government, together with a retrospective premium, out
of revenues from the station once it began to generate
electricity”.

But, what if the untried nuclear power station proves to be more
expensive to build and operate than the paper study estimates? What if
the earnings from electricity sales prove to be insufficient to repay the
additional costs and the loans? The Gittus report is vague on such
details, suggesting that the government (ie the taxpayer) would share
the risk. If so, this is a subsidy dressed up as a loan.

If this proposal is a good deal for the lender, why is it necessary for
the government to lend anything? Surely, private financial institutions
would be queuing up? Though it’s strange that no private investors have
funded a new nuclear power station in the USA for over a quarter of a century,
despite massive subsidies to the industry.

Peter Fray

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