1. JN (EIUG) - The Claverton Group, Bath 24 October 2009 1 Jeremy Nicholson Director – Energy Intensive Users Group EIUG The Case for Nuclear Energy

2. JN (EIUG) - The Claverton Group, Bath 24 October 2009 2 jnicholson@eef.org.uk www.eiug.org.uk International Federation of Industrial Energy Consumers Avenue Louise 200, B 1050 Brussels www.ifieceurope.org EIUG

3. JN (EIUG) - The Claverton Group, Bath 24 October 2009 3 Context : c.12 GW oil & coal fired capacity to be retired by 2016 (LCPD) c.7GW nuclear capacity to retire by 2018 (absent AGR life extension) Concern over gas import security (UK c.70% import dependent by 2020) Major investment required in energy supply chain (c.£150bn by 2020) UK committed to at least 34% reduction in ghg emissions by 2018-22 EU renewable target: 15% UK energy by 2020 Implies >30% electricity – mostly wind (intermittency issues) UK aspiration for 40% low carbon electricity by 2020 Political resistance to new coal absent CCS (still at demonstration stage) Key concern to users: need to maintain secure, competitive/affordable baseload capacity EIUG

4. JN (EIUG) - The Claverton Group, Bath 24 October 2009 4 Power Station Closures (1) – Coal / Oil: Source: BERR Energy Markets Outlook – October 2007 EIUG Plant NameFuelCapacity (GW) TilburyCoal1.1 CockenzieCoal1.2 DidcotCoal2.1 FerrybridgeCoal1.0 IronbridgeCoal1.0 KingsnorthCoal / Oil2.0 LittlebrookOil1.2 FawleyOil1.0 GrainOil1.4 Total capacity:12 Plant opted out of EU Large Combustion Plant Directive – to have closed by 2016

5. JN (EIUG) - The Claverton Group, Bath 24 October 2009 5 Power Station Closures (2) – Nuclear: Source: BERR Energy Markets Outlook – October 2007 EIUG Plant NameClosure DateReactor TypeCapacity (GW) Oldbury2008Magnox0.5 Wylfa2010Magnox1.0 Hinkley Point B2011*AGR1.3 Hunterston B2011*AGR1.2 Hartlepool2014*AGR1.2 Heysham 12014*AGR1.2 Dungeness B2018AGR1.1 Total capacity: 7.5 * Estimated – assuming no life extension

6. JN (EIUG) - The Claverton Group, Bath 24 October 2009 6 EIUG Gas Sources – growing import dependency: Source: National Grid TBE 2008 (Base Case) bcm per year Dependent on access arrangements and pre-contracting

7. JN (EIUG) - The Claverton Group, Bath 24 October 2009 7 EIUG Brent Crude Oil 12 months to 18 June 2008 - $/barrel

8. JN (EIUG) - The Claverton Group, Bath 24 October 2009 8 EIUG

9. JN (EIUG) - The Claverton Group, Bath 24 October 2009 9 Gas Storage – not nearly enough: Storage Capacity % Annual Demand Germany19% Italy16% France24% UK4% EU 2513% North America20% Source: International Energy Agency – date unclear (pre 2006) EIUG

10. JN (EIUG) - The Claverton Group, Bath 24 October 2009 10 EIUG Source: National Grid Winter Consultation Report Wind intermittency – the evidence:

11. JN (EIUG) - The Claverton Group, Bath 24 October 2009 11 Nuclear New Build - Economics : Dominated by CAPEX – construction / cost of capital (c.80% PV cost) Low OPEX compared with coal/gas – relatively insensitive to fuel price Back end costs – significance reduced by discounting over c.60 yr life Cost of capital significantly affected by political / planning risk Long construction time – c.5 years for mature design (more for FOAK) High load factor – PWRs typically >90% in operation EIUG

12. JN (EIUG) - The Claverton Group, Bath 24 October 2009 12 What’s the cost? Anti-nuclear sentiment has declined markedly in UK Public opinion broadly pro-nuclear (energy security / climate concerns) France very pro-nuclear, supporting new build Finland supporting new build Sweden reversing nuclear phase out policy Germany set to suspend nuclear phase out following general election Live issue in Italy, Belgium, many east European states New build back on agenda in USA – cross party support EIUG

13. JN (EIUG) - The Claverton Group, Bath 24 October 2009 13 Nuclear New Build - Politics : Anti-nuclear sentiment has declined markedly in UK Public opinion broadly pro-nuclear (energy security / climate concerns) France very pro-nuclear, supporting new build Finland supporting new build Sweden reversing nuclear phase out policy Germany set to suspend nuclear phase out following general election Live issue in Italy, Belgium, many east European states New build back on agenda in USA – cross party support EIUG

14. JN (EIUG) - The Claverton Group, Bath 24 October 2009 14 Nuclear New Build – UK programme : EDF and EON/RWE actively pursuing new build – others may follow Areva EPR and Westinghouse AP1000 designs already in pre-licensing Generic Design Assessment phase likely to be completed by 2011-12 New build certain to be located at existing nuclear sites EDF proposes twin EPRs at Hinckley and Sizewell Claims first EPR could be operational by end of 2017 High interest bidding for land at other sites (Sellafield, Wylfa, Bradwell) General expectation of c.10GW new capacity by 2030 (6 PWRs) Much greater capacity technically possible – dependent on C price EIUG

15. JN (EIUG) - The Claverton Group, Bath 24 October 2009 15 International Experience : EPR: FOAK Oliluoto 3 behind schedule / dispute between contractor and client TVO – likely to be operational 2012 EPR also under construction at Flamanville AP1000: four units already under construction as part of Chinese programme – scheduled to be operational 2013-15 Sheffield Forgemasters building pressure vessels for Westinghouse EIUG

16. JN (EIUG) - The Claverton Group, Bath 24 October 2009 16 What’s the cost? Lessons from Olkiluoto – CAPEX estimates revised upwards UK government estimates £1,630/kW (2005) now ££2,700/kW Likely to be around £4bn for 1650MW EPR in UK Programme for multiple build will help average cost per unit OXERA estimate 11.6% (FOAK) 12.2% (fleet) IRR for EPR OXERA UK power price forecast: £50/MWh, rising to £80/MWh by 2030 JN ‘back of envelope’ best guess for new PWRs: £50-55/MWh (don’t quote me!) Biggest commercial risks: construction overrun / low carbon price / excessive renewable subsidy EIUG

17. JN (EIUG) - The Claverton Group, Bath 24 October 2009 17 ‘Support’ v ‘Subsidy’ : Government and opposition formally opposed to subsidy Industry will pay share of long term waste management costs – government to provide price certainty (premium or subsidy risk?) No direct support akin to Renewable Obligation, CCS levy, etc Gas / Coal increasingly bearing cost of CO 2 emissions (EU ETS) Government obligation in international law on insurance (premium?) No support currently through energy taxation (CCL reform?) Government is considering direct support to supply chain Q: if we are serious about long term decarbonisation of power supplies, should nuclear receive / does it need direct subsidy? EIUG