The nuclear crash

A month ago, I argued that the Conservatives were a safer bet when it comes to getting more nuclear power stations in the UK. One of my arguments was that the Conservative back benches are more favourable than the front benches meaning the pressure would be on a Conservative government to push more towards nuclear as compared to a Labour government, which may be hindered by the back benches and especially any potential coalition partners (no-one other than the Ulster Unionists like the Tories so there's no worry about coalition partners with a Conservative Hung Parliament).

Mark Field, MP for the Cities of London and Westminster, validates my point by writing a neat article arguing for stronger support for nuclear power.

A lot of what he said we've been saying for ages of course, but there were a few interestings things. One point was how nuclear proponents in Britain are not attacking the opposition head on with their doom-mongering and falsehoods, but rather trying to sidestep their issues by arguing the situation with global warming and energy security is so dire we have no choice but to accept these negatives.

Another point, which got me thinking, was the factors that led to the halt in nuclear construction in the 1980s. It is easy to always blame an overburdeonsome regulatory framework, one which imposed unecessary and unproductive red tape on the industry, on this dry spell. That is of course a major factor, but there are other issues of the time, namely the oil shock, and the 1980s high interest rates.

Mark correctly points out that the oil shock caused a dramatic reduction in energy consumption. Lower than expected demand is not good for nuclear. Similarly, high interest rates affect nuclear economics far more dramatically than fossil fuels.

This is because of the difference between CAPEX, capital expenditure, and OPEX, operating expenditure. In the context of power stations, CAPEX would be the cost of building the facility in the first place, while OPEX is the cost of running the facility, including the cost of the fuel.

Comparing fossil fuels and nuclear, one thing becomes abundently clear: fossil fuels are OPEX intensive, while nuclear is CAPEX intensive. Fossil fuels need a constant supply of fuel to keep the plant going, so they have the burdeon of this constant expense throughout their life. Nuclear fuel on the other hand is only a tiny proportion of the overall cost. The energy density of uranium is so great that a few tonnes of uranium will keep a reactor going for a year. However, a nuclear reactor, with all its sophistication (anyone can burn some coal, but making uranium go critical on water is not a job for the sloppy) and its need for containment structures and the like, entails comparatively higher construction costs.

This is to nuclear's disadvantage. It's better to be OPEX intensive than CAPEX intensive. The neat thing about being OPEX intensive is that you spend your money as you are making money. Sure the incessent cost of the fuel must be a pain, but at least your generating power - and revenue - as you buy. If you're CAPEX intensive, all your money is paid up front and you have to hope your forecasts were correct because you are dependent on many years of production to earn back the money.

The drop in consumption after the oil shock is a problem for a CAPEX intensive energy source since there is less demand for its energy without a corresponding drop in investment. For a fossil fuel power station running on reduced power because of a lower than forecast market demand, at least they have the consolation of not having to pay as much for fuel, reducing OPEX. And naturally, since those fat loans are going to be used to cover CAPEX rather than OPEX, it goes without saying that the high interest rates of the 1980s were not kind to nuclear prospects.

So that's another couple of reasons to add to the grand list of factors bringing about the nuclear crash.
  • The oil shock reducing energy demand.
  • High interest rates.
  • High regulatory burgeon.
  • Three Mile Island and Chernobyl.
  • CND smears.

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