British Energy seeks partners for new wave of nuclear power plants

Hardcore greens may wring their hands. But the nuclear lobby believes the numbers add up

In an announcement calculated to turn hardened greens bright red with rage, British Energy called yesterday for partners to join forces with the company to bid for a new generation of nuclear power stations.

Its chief executive Bill Coley is not being fussy. The offer, he says, is open to fellow energy groups, construction companies, even businesses with a rapacious demand for electricity and an interest in investing in capacity.

With an increasing realisation among policymakers that cutting carbon emissions is essential, Mr Coley believes his time has come. He says that even with the emissions that activity such as building nuclear plants and mining uranium produces, nuclear power accounts for just 5 grams of carbon dioxide per kilowatt of electricity generated, comparable to wind power. By contrast, gas generates 400 grams and coal 900 grams.

It came as the company, once a financial disaster zone, showed that money could be made from nuclear power generation. Pre-tax profits for the nine months to 1 January almost doubled to £626m, from £347m during the nine months to 1 January 2006, on turnover of £2.1bn (£1.7bn).

Of course, British Energy has previously been bailed out by the Government and this time benefited greatly from high electricity prices (the price it achieved was £40.80 per mega watt hour, up 41 per cent).

Deep within the results statement, it had to concede that it may not be able to justify keeping the troubled Hinkley Point (returning in March) and Hunterston (return again delayed until April) power plants open beyond 2011 due to cracking at the boilers which means they will come back on line at only 70 per cent of capacity.

So with an increasingly cantankerous suite of ageing power plants to deal with, British Energy needs the Government to approve new construction when it announces the results of its energy review in the spring.

Making a bold announcement at least helped divert attention away from its issues with its creaking plants. But even so, Mr Coley was talking a good game.

Part of the problem with nuclear power - indeed, part of the problem with any major project of any kind in the UK - remains the tortuous approval process, requiring strategic government approval, safety approval and planning approval.

Sizewell B, Britain's only pressurised water reactor, was bogged down in inquiries for years and earlier plants faced similar issues.

The Government has promised action to streamline the process and it will have to if it is to persuade private capital to commit because delays and complications before work can get under way can add hundreds of millions to the cost of building a new plant.

Mr Coley says this cannot be allowed to happen in future. But he points out that one advantage enjoyed by British Energy is that it has a bank of existing sites which are suitable for the building of new power plants (usually next to old ones).

And he argues that because the company has made efforts to build relationships with the locals - and provides jobs to significant numbers of them - there tends to be far less hostility than building a plant on a greenfield site.

"There is no question that there is an extended permit and planning process and all of those in the industry have said that this is one of the issues that has to be addressed, not just for new nuclear but other energy, so people can have certainty before committing capital," he says.

But, Mr Coley adds, if this could be resolved then new plants could be built within as little as five years and, all being well, the first could be on line by 2018.

This being Britain, of course, that may be just a tad optimistic.

But once built, Mr Coley says, British Energy will be able to rely on the experiences of other generators in other countries to help with any difficulties from thereon in, something that has not been available to Britain's previous generation of nuclear plants. The first two generations of British nuclear stations were gas-cooled, when most of the world was building water-cooled reactors. This meant that advice and help when it came to dealing with operational and technical difficulties was all but impossible to find.

Next time, if the DTI approves new plants, British Energy and its competitors will base the designs on those used for other nuclear stations already operating around the world. All these factors combined should make new plants economically viable. And it is not only British Energy that thinks so. France's nuclear generator, EDF Energy, agrees and wants to join the party.

Lakis Athanasiou, analyst at Collins Stewart, says that any consideration of the economics of nuclear is, at the moment, distorted by the glut of gas in the UK because of new pipelines and a mild winter.

This has kept energy prices in Britain down, but that is unlikely to last. Given their recent behaviour, it is no surprise that the Russians have been mooting Opec-style structures to keep gas prices high, but elements in Norway are not averse either.

And anyway, he points out, with tough new EU environmental rules due to come in in 2015, many UK power plants will be forced to close. That leaves a desperate need for new capacity.

Mr Athanasiou thinks plants funded by the private sector can be made economically viable but argues that the Government should still have a role in dealing with nuclear waste.

Waste also concerns environmentalists such as Friends of the Earth. A spokesman yesterday dismissed the arguments of British Energy, saying it did not take into account the "hidden costs" of nuclear energy, particularly that of dealing with waste.

FoE also points to its own study, which criticises nuclear power on economic grounds. It says: "The UK does not have a good history of building nuclear reactors to time and cost. The last time Britain built a series of nuclear power plants, the Advanced Gas-cooled Reactors (AGRs), each was slightly different to the last. They took an average of nearly 13 years from start of construction to first power. Cost over-runs and delays have also dogged other nuclear investments."

In saying this, the environmental movement is voicing the fears and concerns of many Britons, and many Labour MPs who got their start in politics in the anti-nuclear movement and view the prospect of a new generation of plants with horror.

But alternative energy (such as wind power) is still expensive and often has vocal opponents of its own. And, with lurid and frightening predictions over what will happen to the planet if we fail to act to curtail carbon emissions, the likes of Mr Coley will continue to argue that nuclear has a vital role to play.

Hardcore environmentalists may wring their hands and call for a move to zero economic growth, even a return to a more pastoral existence. But Mr Coley and his French competitors believe the numbers add up and analysts like Mr Athanasiou agree (albeit with some important qualifications). Putting up with their product might be unpalatable, but it is the pragmatic choice, a price that has to be paid to keep the glaciers from melting any more.