Bishop Hill Cameron's great white elephant
Aug 12, 2015 Energy: nuclear 
Nuclear power is in the news at the moment. The Japanese have switched on a nuclear power plant for the first time since Fukishima, as the authorities realise the full cost of their knee-jerk reaction to the tsunami. Here in the UK, there is a growing concern over the cost of Hinkley Point, a project that increasingly resembles a fiscal black hole.
However, less commented upon have been a few apparently small developments in the nuclear market that may make for a better future for the industry.
Firstly, a US developer of small modular nuclear reactors has given regulators the heads-up that it will submit its first designs next year, ahead of possible deployment in 2023. An array of competitors are working on similar timescales and, encouragingly, regulators seem to be responding constructively too, aiming to have the new rulebook in place in time to keep the commercial operators moving forward.
Meanwhile (if somewhat less credibly), Revkin is looking at a claim that we could have nuclear fusion on stream in a decade.
If all goes to plan it is quite conceivable that Hinkley C could be a white elephant before it is even completed.
Reader Comments (57)
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There, that's better.
Mike Jackson
Thanks. In practice, you can go to the UK government website and pick up the annual report of the NDA (the UK Nuclear Decommissioning Authority)
https://www.gov.uk/government/publications/nda-annual-report-and-accounts-2014-to-2015
This includes an actuarial estimate of total UK liabilities at some £70billion (discounted), or £118billion (undiscounted). This is not "theoretical".
Like you, I'm not sitting here, worrying about a nuclear accident (although the issue of proliferation doesn't fill me with a warm fuzzy feeling). But that wasn't my point.
Like other visitors here, I would prefer energy supply to be provided by private enterprise. Oil, coal and gas supply seem to work just fine. But not nuclear power - the NDA has given £70bilion reasons why nuclear sits in the public sector. And the risk of uncapped liabilities gives an unquantifiable number of further reasons why it can never escape from the public sector.
Like other visitors here, I am no great fan of being forced to subsidise lame duck industries. The title of this post refers to a great white elephant. Others commenters reserve harsh words for some white elephants (the whirly birly ones), although some seem to suddenly change their tune when it comes other white elephants (the ones contained in large pressure vessels and behind radiation screens - just like the diagram at the top of the page). Trying to be consistent in my preferences: my point is that we don't need either variety of white elephant.
Jordan - sounds like there is quite a chunk of the "theoretical" in those numbers?:
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Emphasis of Matter – Nuclear Provisions
Without qualifying my opinion, I draw attention to the disclosures made in notes 3 and 27 to the
financial statements concerning the uncertainties inherent in the nuclear decommissioning provision.
As set out in these notes, given the very long timescales involved and the complexity of the plants and
materials being handled, a considerable degree of uncertainty remains over the value of the liability for
decommissioning nuclear sites designated by the Secretary of State. Significant changes to the
liability could occur as a result of subsequent information and events which are different from the
current assumptions adopted by the Authority.
p63
//
not banned yet
It is a fairly standard form of statement of uncertainty in forward-looking actuarial statements. You would have the same type of reservation in a capital valuation of your pension savings. It would be fair to conclude that your future pension provision has a degree of uncertainty. It is NOT fair to conclude that your pension savings are theoretical. If you have beneficial interest in the underlying investments, they are tangible.
And the same is true of nuclear liabilities. Public money is pouring into this business every day. We know the reasons why and the practical realities of why the money needs to be spent. So it is absolutely not correct to describe the liabilities as theoretical.
If there is a liability, it has to be deducted from the net worth of "UK plc" and it has the potential to affect our national creditworthiness. This is not a theoretical matter.
You do raise another question: what is the amount of the liability before we could reasonably conclude that the nuclear industry doesn't benefit from public subsidy? £60bn? £50bn? Lower? Higher? And wherever you pitch this number, how could we complain about the same being available for government policy on unreliables?
Jordan - leaving the security of pensions aside, my point is that whIch is made in the report, namely that the liability valuation stands on a theoretical framework which in turn relies on assumptions. At some point I might read the specific notes to see if an implied range of uncertainty can be deduced. I am not concluding that the liabilities are entirely theoretical, but simply that there is a potentially significant element of theory in their valuation. Your earlier comment asserted that the liability valuations are not theoretical. You seem to be an informed commentator - do you have a view on how your quoted liability valuations are derived and whether or not they are reasonable?
The current liability of Sellafield alone is 70 billion (and they've stopped counting now) so any estimate for total decommissioning must be somewhat higher hence Jordan is spot on with his concerns. Without substantially more government support we will soon have no significant nuclear power at all - a situation quite at odds with Decc's single-minded ambition to run all our heating and transport off the electricity grid.
It's worth noting that anti-nuclear Greens and political parties (eg Liberals & SNP) base their objections primarily on overall cost, secondly on disposal and thirdly on proliferation risks. These issues are generally just ignored or hand-waved away by the pro-nuclear camp. If these difficult questions are answered I don't believe there is any significant opposition to nuclear power anywhere except on the very lunatic fringe. Burning up the stored plutonium as fuel would be a good start but the old Mox plant was an abject failure so proposing a new one is not an obvious solution. The Moltex designer used these 3 concerns as his main design driver, which is how it should be.
While I have seen and heard mild rumblings about a government agency restarting a fission programme there is massive inertia within the Tory party, who seem (Murdo Fraser excepted) to still believe - against all available evidence - that their Thatcherite electricity privatisation has been simply marvellous and will somehow still manage to come up trumps.
not banned yet
You need to consider the valuation of any asset or liability. How are shares valued? How is an Oil Major valued? How is your house valued? Your pension?
Estimates or nuclear liabilities do not somehow uniquely stand on a theoretical framework and assumptions. They are relevant to the net book value of UK plc - the same underlying business principles apply.