3 Case Study: Nuclear Power

``No possible combination of known substances, known forms of machinery, and known forms of force, can be united in a practical machine by which man shall flay long distances through the air.''

Simon Newcomb (1835-1909), astronomer,
head of the U.S. Naval Observatory.

For centuries the generation of power using the principles of nuclear physics was though, even by those at the forefront of science, to be impossible. Taking the words of Albert Einstein (1932)

``there is not the slightest indication that (nuclear energy) will ever be obtainable. It would mean that the atom would have to be shattered at will.''

Despite much scepticism, such thoughts were clearly contradicted with the 1950's heralding the opening of the first commercial nuclear power stations. This created much interest amongst the general public and even greater excitement within the world of science -

``There is little doubt that the most significant event affecting energy is the advent of nuclear power$\ldots$ a few decades hence, energy may be free - just like the unmetered air$\ldots$''

John von Neumann, scientist
and member of the Atomic Energy Commission, 1955.

However, ``a few decades hence'' has seen the rise and, in recent years, fall of nuclear power. The following case study investigates the highly debatable issues surrounding the nuclear power industry as a whole, in addition to raising significant questions regarding the viability and long-term future of such methods of power generation. The science of atomic radiation, atomic change and nuclear fission was developed from 1895 to 1945; however, between 1939-45, as a result of the outbreak of World War II, development was focused on the atomic bomb. Following the end of the war in 1945, research and development was focused to harnessing this energy in a controlled fashion for the production of electricity, in addition to naval propulsion. Since the first commercial nuclear power stations started operation in the 1950s, the nuclear power industry has steadily grown and there are now some 440 commercial nuclear reactors in 31 countries worldwide, supplying over 350,000MWe of total capacity. This translates to 16% of the world's electricity, as base-load power, and the efficiency of such power production is increasing. In addition to reactors found in commercial nuclear power stations, 56 countries operate a total of 284 research reactors, thus providing a source of neutron beams for scientific research and the production of medical and industrial isotopes. The number of nuclear power plants being constructed has slowed considerably in comparison to the development of such power stations during 1970's and 1980's; however, due to advances in both knowledge and technology over this period of time, partly as a result of the larger number of research reactors available, the efficiency of such methods of power production has increased. In 2001, nuclear power generated 2,544billion kWh, an increase in production of 4% (97billion kWh) over the previous year. The increase of 414billion kWh over the past seven years is equal to the output from 60 large new nuclear plants. However, between 1995 and 2001 there was a net increase of only 3.5% in capacity, which equates to two reactors. This improvement in production is due to the increased efficiency and performance of existing plants. Despite nuclear power accounting for approximately 16% of the world's energy production, non-renewable fossil fuels are utilised in order to generate 64% of the world's electricity, as illustrated in figure 1;

Figure 1: World Electricity Generation

In recent years the nuclear power industry in countries across the world has been under increasing scrutiny regarding issues ranging from the potential health risks posed by the waste products produced by the process, to the economic viability of such methods of energy production. The nuclear power industry in the United Kingdom is no exception. There is an ongoing debate regarding the use of nuclear energy to generate electricity and the use of such energy sources remains a contentious issue politically, socially and economically in terms of both ideology and physical facts. Producing electricity utilising any form of primary energy has associated environmental effects which may occur either directly, or indirectly, as a result. One waste product of nuclear power plants is depleted uranium which although it is not classified as a dangerous substance radiologically, it is a potential hazard in large quantities. The most common form of depleted uranium, U-238, is a gamma emitter; therefore, even with trace amounts present, the material is difficult and hence costly to handle. Every year in excess of 50,000 tonnes of depleted uranium is added to the already substantial stockpiles in the USA, Europe and Russia, increasing the world stock, which at present is of the order of 1.2 million tonnes. This substance continues to emit low-level gamma radiation as a result of such depleted uranium having a half-life of 4.5 billion years (the age of the earth). Despite much study and research, the information available regarding the occupational and environmental health effects of nuclear power is very conflicting. As with any subject matter, sources of information concerning nuclear power are written very subjectively with noticeable bias depending on the author's point of view on the issue. As a result of this, the general public form opinions based on `subjective' facts, thus creating a difficult environment within which the nuclear power industry must operate. In addition to this, horrific accidents, such as that which occurred at the Chernobyl nuclear power plant in the Ukraine (former Soviet Union), heighten public awareness about the potentially devastating effects of such methods of power production. The radioactive material released in the explosion at Chernobyl was spread over a very large area of northern Europe by north-westerly winds (as illustrated by the maps shown in figure 2).

Figure 2: Aerial Photos of Nothern Europe

The effects of this accident are still very apparent today; therefore, due it being such a contentious, highly debated issue, the discussion regarding the nuclear power industry has received a very high level of media interest and coverage. This often results in the operations of companies involved in the nuclear power industry being documented by the world's media; therefore, creating a very mixed, and in some cases hostile, view of the industry as a whole. Also, the potential for catastrophic accidents to occur within this field, such as that at Chernobyl, has severely reduced public confidence in nuclear power. Hence the reputation and credibility of the industry has been damaged. From the first, extremely controversial, application of nuclear physics, seen when two atomic bombs were developed and detonated in 1945 during the World War II, to present day with the current political tension regarding the reported stockpiles of nuclear weapons in Iraq, the hostile utilisation of nuclear energy is well documented. Hence, for more than four decades, concern has centred on the possibility that uranium intended for commercial nuclear power might be diverted for use in weapons. Even now with attention being focused on the role of military uranium as a major source of fuel for commercial nuclear power, the association of the nuclear power industry with the production of weapons of mass destruction will remain; further damaging the nuclear power industry. Since 1987, the USA and countries of the former USSR have signed a series of treaties agreeing to reduce their arsenals of nuclear weapons by 80% by 2003. The surplus nuclear material declared by the military, which is commonly highly enriched uranium (HEU), is being converted into fuel for use in commercial nuclear power stations by blending it down with other forms of uranium to produce LEU (Low enriched uranium). The HEU created from weapons stockpiles is displacing some 10,000 tonnes of $U_3O_8$ production from mines each year, and meets only around 15% of world reactor requirements. This process however, requires the transportation of radioactive material, which is slow and hence costly due to the safety regulations that must be met in accordance with legislation laid down by the International Atomic Energy Agency (IAEA), which acts as the ``international inspectorate for the application of nuclear safeguards and verification measures covering civilian nuclear programmes''. Such transportation often results in protest by anti-nuclear campaigners and action groups, particularly when the material crosses international borders; therefore, gaining media coverage and again bringing the contentious debate regarding the viability of the nuclear industry into the public eye. The UK nuclear industry is currently in severe decline. British Energy plc (BE) is the United Kingdom's largest generator, producing one fifth of the country's electricity, with its core business being nuclear generation. At present, BE owns and operates 8 of the 16 nuclear power stations in the UK with a combined capacity of approximately 9,600MW. The remaining 8 are owned and run by BNFE (British Nuclear Fuels Ltd). British Energy was privatised in 1996 and is listed on the London and New York Stock Exchanges. However, since this privatisation, the company and the industry as a whole has been under pressure financially. (Figure 3)

Figure 3: BE key financial data for 1998 to 2002

From figure 3, it can clearly be seen that since 1998, two years after the privatisation of the BE, capital expenditure has increased by approximately 277% from £81million in 1998, with net funds falling from £10million in 1998, to a debt of £859million in 2002. The finances of BNFL are also in a very similar situation. In the past year alone BNFL have estimated that the company's liabilities have risen from £35 billion to £40.5 billion, hence with the nuclear power industry in Britain comprising of BE and BNFL, the industry as a whole is in serious financial trouble. The poor state of the nuclear industry, in terms of both structure and finance, is a result of various factors. However, many of these have evolved as a result of organisational and managerial issues. One cause of the appalling financial performance of BE and BNFL, and hence the whole nuclear industry in Britain, is a gross lack of investment. The construction of Britain's first nuclear reactor to provide electricity was completed and later opened in 1956. Like most of the nuclear reactors built at this time, they had an intended operational life of 20 to 25 years. However, low public opinion and confidence in the nuclear industry has resulted in low profits and therefore little investment over many years. Therefore, the infrastructure has been neglected without forethought regarding the future of the industry. By 2010 all the nuclear plants owned and operated by BNFL will close, with the final closure of Britain's existing nuclear plants expected in 2035. As a result of this poor foresight into developing and modernising the existing nuclear plants, public opinion and confidence in the nuclear industry has decreased further, thus having a negative effect on the finances of the nuclear industry in Britain. In addition to this, in the enthusiastic, early stages of this new and potentially revolutionary technology, the pioneers of nuclear power kept poor records and very little documentation; therefore, when dismantling and decommissioning nuclear plants, engineers have very little information regarding the structure and design. This results in lengthy engineering operations, thus increasing the decommissioning costs of nuclear plants and hence damaging the industry yet further. The City is also extremely sceptical of the nuclear industry, highlighting that a high proportion of BE's cash flows are eaten up by debt interest and decommissioning costs; therefore, BE will find it difficult to continue investing, paying dividends and meeting liabilities without a big change in the trading outlook. The scepticism of the City was strengthened in August 2002, when BE announced the closure of a second reactor at one of its plants. This resulted in the cutting of share prices to an all time low of 63p after having had a peak value of 728p only three years earlier. Such announcements of huge shortfalls in profits, by both BE and BNFL, have resulted in Government intervention in the `privatised' market. In September 2002, the UK government announced that a £650million loan would be given to BE as a temporary measure, in order to prevent the company going into liquidation, which would have resulted in approximately 5,000 job-loses. However, in a privatised market, the financial aid given to a private company by the state is not only somewhat embarrassing for the government, yet also very damaging for the image of the nuclear industry and hence is another indication that nuclear power is not in the short and medium run. In addition to this, despite BNFL having a fund known as the `nuclear liabilities investment portfolio', which is designed to aid the clean-up costs of nuclear power and has a value of approximately £4billion, the huge shortfall is to be funded by the taxpayer; which will decrease confidence amongst investors and the public. As a result of a of poor management and organisational decisions, lack of investment due to poor confidence in the City and amongst the general public, and hence a decaying infrastructure, there are real doubts about the future viability of nuclear power and fuel reprocessing. The implications for the future of the industry are double-edged; however, any government intervention could make the prospect of new stations even less attractive to the public, whatever reassurances are given about the ability of new technology to minimise waste. Whereas the issues such as a warming climate and hence lower power prices in the market may not be predicted, financial, organisational and managerial problems may be foreseen through the analysis of accurate, up to date information regarding both technical and financial performance. Nuclear power is a highly contentious and politically sensitive issue and it is far from clear whether any profits can or will be generated in this industry.