Nuclear energy verdict: Costly, slow and very high maintenance

By Giles Parkinson on 4 November 2013

The story we published on Friday comparing the costs of new nuclear, now that they have been defined by contract signed by the UK Government for the construction of the $24 billion Hinkley C facility – with clean energy alternatives such as wind and solar, certainly generated a lot of interest, and comment.

Since then, we have received an analysis from Deutsche Bank, which makes some other observations about the cost of nuclear, the comparisons with gas, the price of abatement, and the cost of upkeep for France’s existing fleet.

The first point made by Deutsche is that this deal underlines the fact that nuclear is not cheap, but really, really expensive – a point that should not be forgotten in Australia, where there is still a push for nuclear in some quarters despite the abundant alternatives (in particular solar) that are not available to the UK.

As we have noted in the other article, the £92.50/MWh strike price is nearly double the current average cost of generation in the UK. Deutsche takes issue with the UK government’s claim that the contract is “competitive with other large-scale clean energy and with gas’.  It notes that this contract would only be cheaper than gas generation if the crude oil price (to which UK gas is linked) averages more than $150 barrel in real terms over the next 40 years. This, says Deutsche Bank, is around 3 times the average oil price over the last 40 years, and a 50 per cent premium to the average oil price over the last 5 years.

“Such comparisons do not show that this nuclear contract will be more expensive than gas generation (in 40 years), since conditions in the future may be very different from those of the past,” the Deutsche analysts write. “ However it does demonstrate that signing the proposed nuclear contract would commit the UK to buying electricity which would be expensive by historic standards.” It later describes the 35 year contract as “a poor trade for reducing risk.”