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Regulation has driven up the price

My Times article:


The real problem with nuclear power is the scale of it. After
decades of cost inflation, driven mostly by regulations to redouble
safety, 1600 megawatt monsters cost so much and take so long to
build that only governments can afford to borrow the money to build
them. Since Britain borrowing £14 billion extra is not really an
option, then we have to find somebody else’s nationalized industry
to do it, and guarantee high returns, as if it were a big PFI


Today’s?? announcement for Hinkley Point in Somerset is likely
to be that we, the British public, are to guarantee for 35 years to
pay nearly twice the current price of electricity to a consortium
largely owned by the French government and a communist Chinese
regime. That is to say, we lock in electricity price rises for
British pensioners and employers while sending dividends to other
governments. Liability, above a certain level, stays with us. And
when the Chinese build nuclear stations in the future, can we be
certain that if, say, the Dalai Lama called on the Queen for tea,
the projects would not suffer from unexpected delays?


They say the European Pressurised Reactors at Hinkley will
generate more electricity with the same amount of fuel and need
less down time for maintenance than previous reactors, so why is
the cost so much higher? I’ll explain.


There is, however, another way: to make nuclear reactors
smaller, cheaper and quicker to build by assembling them in
factories instead of fabricating them on site. That way we could
put the technology back in the private sector and see costs come
tumbling down. Nuclear power is a fabulous technology that could be
solving all our problems – but not in its current big form.


Were it not for carbon policies shutting down coal and gas fired
power stations, and the failure of wind to fill the gap, we would
not touch this deal – but then without carbon alarm, nuclear power
would never have become tolerable to our masters in the green
movement. The worst of it is that the two reactors to be built by
EDF at Hinkley are of a design that is not yet working anywhere.
The two EPRs being built in Europe, at Flamanville in France and
Olkiluoto in Finland are years behind schedule and billions over
budget. True, the two Chinese EPRs at Taishan look like coming in
within five years and on budget, but there’s a good reason that
this might not be the experience in Somerset, whatever the
ambitions of Chinese engineers.


This is because nuclear power in the west has been on a journey
of relentless cost inflation for several decades. As the late great
nuclear physicist Bernard Cohen explained in a book in 1990, the
reason the west stopped building nuclear plants in the 1980s was
not the fear of accidents, leaks or the proliferation of waste; it
was the escalation of costs driven by regulation. Labour costs shot
up as more and more professionals had to be employed signing off
paperwork; and according to one study, during the 1970s alone new
regulatory requirements increased the quantity of steel per
megawatt by 41%, concrete by 27%, piping by 50% and electrical
cable by 36%. As the regulation ratchet tightened, builders added
features to anticipate rule changes that sometimes did not happen.
Tight regulations forced them to lose the habit of on-the-spot
innovation to solve unanticipated problems, which further drove up
costs and delays.


The ratchet has continued to tighten, and today we have very
slightly greater safety at very much increased cost. Nobody doubts
that the EPR is a safe design; after 9/11 it was made even more
aircraft proof, for example. But then nuclear power was always very
safe. Even a bad design, built and managed by a criminally
negligent regime, managed at Chernobyl to kill remarkably few


The plain fact is that per megawatt-hour of power generated,
nuclear power causes fewer deaths than any other way of making
electricity bar none. Coal kills nearly 2,000 times as many people;
bioenergy 50 times; gas 40 times; hydro 15 times; solar five times
and even wind nearly twice as many as nuclear. That’s including
Chernobyl and Fukushima. It is clear that increasing the cost and
the time to build a plant by at least ten times over the past 40
years has merely made a very, very safe system into a very, very,
very safe system.


But that cost escalation has stopped nuclear plants being built,
which has cost lives by making us adopt more dangerous technologies
instead. It has also given nuclear projects time horizons that rule
out private investment, repetition and hence cost-saving
innovation. Centrica pulled out of Hinkley because its build time
expanded to eight years and its cost doubled.


Ken Owen, Commercial Director for EDF at Hinkley was quoted last
week as saying that he is quite happy for British contractors to do
the “muck shifting” but “most of the available contracts could be
beyond UK suppliers which are struggling to meet the complex safety
and quality standards of the nuclear industry”. It need not be this
way. If, instead of building huge reactors from scratch, we were to
manufacture small reactors in factories, then deliver them one
after another by low loader, there is every reason to think the
costs could come tumbling down without compromising safety.
Somebody needs to do for nuclear reactors what Samuel Colt did for
revolvers: mass-produce them with interchangeable parts.


This idea — of small, modular reactors — has been floating
around for some time (and of course is already routine in the world
of submarines). Babcock and Wilcox in the United States is leading
a consortium called mPower that is building two 180-megawatt
reactors at Clinch River. A British consortium called Penultimate
Power, which includes some big engineering names, has similar
ambitions. Its chief executive, Candida Whitmill, argues that
instead of the British digging the holes and making the tea, we
still have great nuclear engineering expertise –though it is
withering fast – and could be rolling reactors off production lines
and delivering them to UK licensed sites where they would start
producing some small amount of power in half the time it will take
to build an EPR.


But even to get a modular reactor certificated would take three
years and cost tens of millions of pounds. The Office of Nuclear
Assessment insists on a fresh certification for each design,
disproportionately hurting small projects.


Scale, as I say, is the problem. In theory size brings scale
economies. But in practice it prevents the repetition that leads
any manufacturer to learn how to cut costs and leads to cautious
and conservative construction lest a mistake bring further costly
delay. If instead you manufactured small reactor modules over and
over again, you would soon bring down the cost. It might take a bit
longer than eight years to install ten modules at Hinkley to equal
one 1600 megawatt EPR, but at least you would be getting some
electricity along the way and all sorts of private investors would
come in, attracted by the shorter time horizon and more modest
scale of each reactor. Small is beautiful.


By Matt Ridley | Tagged:  rational-optimist  the-times