1. Nuclear power: A cheap option? Westminster Keynote Seminar October 19 th 2009, Portcullis House Steve Thomas (stephen.thomas@gre.ac.uk) PSIRU (www.psiru.org), Business Schoolwww.psiru.org University of Greenwich

2. What do nuclear companies care about Construction cost & time & cost of borrowing Repaying fixed construction cost & interest accounts for 70% of the cost of power Reliability. The reliability, how much kWh of power it produces every year, determines how thinly fixed costs can be spread Utilities always assume new plants will be reliable. Not always true Electricity price

3. What don’t companies care about? Fuel. Small part (5%) of generation cost Decommissioning & spent fuel disposal. High cost but so far in the future, costs are discounted away Operations & maintenance. 20% of generation cost Insurance and liability cover. International treaties mean governments bear the risk

4. Construction costs 10 years ago industry forecast cost $1000/kW Cost of 1600MW plant like EPR $1.6bn 2004: Olkiluoto ca $3000/kW 2007-08: US utility estimates ca $5000/kW 2009: Ontario bids $6700/kW, $10000/kW UK government 2008 nuclear White Paper assumed £1250/kW, or $2000/kW In 2008, E.ON, likely builder at Oldbury, said cost 70% higher than government estimate Cost estimates before construction always an under-estimate

5. Cost of borrowing If consumers always pay for errors, risk to banks low so cost of borrowing low - ~5% real If electricity market competitive, extra costs not passed on, they come from profits and could bankrupt the company Investment analysts, credit rating agencies may reduce share price and credit rating of companies that try to build nuclear Government credit guarantees can protect banks so if project fails, taxpayers pay the bill US programme to build 15 nuclear plants needs $120bn loan guarantees (80% cost coverage)

6. Olkiluoto Construction cost: €3bn ($2800/kW) fixed price contract €1.95bn provided by loan at 2.6% interest. Export credit guarantee provided by French (€650m) & Swedish (€110m) governments Plant expected to take 4 yrs to build, but after 4 yrs, nearly 4 yrs from completion Costs now expected to be at least 75% above contract price. Who will pay? Turnkey contract is under dispute in court: TVO suing Areva, Areva countersuing TVO Safety regulator threatening not to license plant if design issues not sorted out

7. What will happen? In 2012-13, E.ON/RWE/EDF will go to government and say without a levy/fixed carbon price and loan guarantees, nuclear cannot be financed Government will not be able to admit 7-8 years of effort wasted and will cave in 2-4 plants built at very high cost by 2025 Government support for energy efficiency & renewables weak for the period up to 2025