Powerful arguments

Plans for several new nuclear facilities are currently in the works in the United Kingdom. But according to a recent study, the British government will have to reform the country's electricity market and make investment in nuclear power attractive if the plans are going to become reality.

The report published this week by British auditing and consulting company KPMG, which detailed the nuclear industry's ability to secure private investments, was commissioned by German utility giant RWE power.

RWE is set to partner with fellow utility E.ON to build new nuclear power stations in the United Kingdom.

Since nuclear energy does not emit carbon dioxide, the study argued it should be placed on a level playing field with low-emissions, renewable energy sources, such as wind and solar power, and play a key role in the British government's climate goals.

Over the next 10 years, Britain aims to cut greenhouse gas emissions to 34 percent below 1990 levels.

"In order to meet those targets, our view is that they will almost certainly need nuclear power," Jamie Carstairs, KPMG director in corporate finance and one of the report's authors, told Deutsche Welle.

A sound investment?

The report encouraged the government to adopt more consistent policies to reward low-carbon energies - including the establishment of a single market for low-emissions sources of electricity or several markets for different energy technologies.

"We think that under the current framework, it's unlikely that we will get a large amount of investment in new nuclear generation in the UK," Carstairs said, adding that the electricity market should reward low-carbon generation.

Unlike other technologies, pumping money into nuclear power ventures requires patience on the part of private investors. According to the report, it can take three decades or longer to cover project costs.

"Establishing confidence, if not certainty against this backdrop is likely to be critical to the investment decision," the study read.

Pushing for policy reform

A spokesman for Britain's Department of Energy and Climate Change (DECC) told Deutsche Welle that the government is well aware of the need for changes in the electricity market to "deliver security of supply and investment in low-carbon energy."

But the UK's leadership has stopped short of offering public subsidies to support nuclear power projects - as it does with some forms of renewable energy.

"The government is committed to removing any unnecessary obstacles and allowing the construction of new nuclear power stations to contribute to our energy security and climate change goals - provided that they receive no public subsidy," the DECC spokesman said, echoing remarks made by the Secretary of State for Energy and Climate Change Chris Huhne during a parliamentary debate at the beginning of July.

But the UK government was pursuing a reform of the carbon floor price that would reward companies that invest in nuclear and renewable energy technologies, the spokesman said.

"The challenge will be to ensure that these measures work together to deliver a coherent framework to give confidence to investors," he said.

KPMG's report welcomed the carbon floor price but said research indicated that the measure was considered "insufficient" to boost investment in nuclear projects.

'Slippery slope'

Critics have said simply covering the initial investment in nuclear energy ventures would require a very high carbon price - and could weaken efforts to build a green economy:

"Spending is going to be skewed away from the clean energy solutions that we need to be funding," Ben Ayliffe, senior climate campaigner for Greenpeace UK, told Deutsche Welle.

KPMG's study acknowledged that nuclear projects often exceed initial budget projections and fall behind schedule. But Ayliff said the mammoth uncertainties over nuclear waste disposal must also be accounted for.

"The bottom line is that the economics of new nuclear, despite the rhetoric of the industry, are as bad as they've ever been," he said.

Investment in nuclear energy doesn't make economic sense, he added, calling a carbon floor price a "slippery slope" that could well lead to other measures that support the nuclear power industry to the detriment of green power sources.

"The historic support for nuclear power has been astronomical in this country, and the industry just hasn't matured," he said. "They can't stand on their own two feet."

According to the DECC, British energy minister Chris Huhne is scheduled to address the government's reform priorities in parliament next week as part of the annual statement on energy.

Author: Amanda Price

Editor: Sean Sinico