With one short sentence uttered in 1965, Fred Lee, then Britain’s minister for power, encapsulated the government’s hopes of providing the country with cheap and abundant electricity: “I am quite sure we have hit the jackpot this time.” Lee was announcing plans to build Britain’s first advanced gas-cooled reactors. Today, these reactors are the principal property – asset would be the wrong word – of the struggling British Energy.
Lee’s words should ring in the ears of Brian Wilson, who now occupies his post. The gambling metaphor was apposite. There was to be no jackpot. The correct analogy was the punter who, unable to leave the table, must always put down more money in the vain hope of recovering some of what has already been lost. That is what Mr Wilson must now do and he has no option but to agree.
Britain’s lost investment in the telecommunications, media and technology boom pale into insignificance beside the money wasted on the country’s idiosyncratic and mismanaged nuclear power programme. For 25 years after Lee’s announcement, the right decision would have been to write off everything that had already been spent and terminate the nuclear programme. Britain must now keep these stations functioning because it would be more expensive still to shut the reactors down.
British nuclear reactors are of three main types. Magnox reactors, built in the first wave of postwar enthusiasm for nuclear power, are operated by British Nuclear Fuels Limited, a government-owned company. The government has for long aspired to sell BNFL but a combination of elderly nuclear reactors and an uneconomic plant for reprocessing nuclear waste has never seemed appealing to investors.
There are seven AGRs built under the programme Lee announced. And one plant at Sizewell on England’s east coast is based on US technology. British Energy owns the seven AGRs and Sizewell B.
The first AGR was at Dungeness in Kent, with a planned completion date in 1970. The construction contract was awarded to Atomic Power Construction, a specially organised consortium of British engineers and contractors. The reactor was based on a small prototype built by the Atomic Energy Authority. Lee did not disclose – perhaps he did not know – that nothing more than a sketch of the plant design existed. The tendering process had in effect been rigged in favour of the APC – the specifications had been changed at a late stage so that only a British proposal could easily meet them.
The design quickly ran into technical problems. In 1969, the consortium fell apart. The Central Electricity Generating Board took over project management, exacted penalty payments and appointed new sub- contractors. Things never got much better. Dungeness B came into service in 1987, 22 years after construction began. Even then it was several more years before it produced its rated output.
This did not prevent four other AGR stations being commissioned between 1967 and 1969, to two modified designs. These also ran massively behind schedule and incurred overruns of several times the budgeted cost. The only bright spot was that since the growth of demand had been greatly over- estimated, British electricity consumers did not need the electricity these stations would have produced. But they had to pay for them anyway.
Expenditure on nuclear power stations, including interest during construction, exceeded £50bn. But in 1996 British Energy was floated for £1.5bn. The sale package consisted of the seven AGRs and Sizewell B, which had itself cost £3bn to construct. After recent market declines, the market capitalisation of British Energy is now below £100m. This is the biggest write-off in the history of capitalism, dwarfing the $54bn that Time Warner lost on the acquisition of AOL.
But there is more to come. British Energy is struggling because – even with all its capital costs sunk – electricity prices in a competitive market are not high enough to cover the day-to- day operating costs of the AGRs. Attempts to disguise the problem by rigging the wholesale electricity market or organising a sweetheart deal with government-owned BNFL have come to nothing.
If ministers are to make better decisions on these technical issues they must have access to multiple sources of expertise. Arrogance and secrecy are thematic in every account of nuclear decisions. Edward Plowden, who as chairman of the Atomic Energy Authority and doyen of Whitehall committees bears more responsibility for British nuclear policy than anyone else, proposed in 1976 that the electricity industry should be reorganised to speak to ministers with “a single voice”. Plowden was completely wrong on this, as on most things. The problem was that the industry did speak with a single voice and what that voice said was rarely true.
Privatisation and decentralisation did lead to more efficiency and more honesty. British Energy managed its activities better than the monolithic CEGB, as the smaller and livelier South of Scotland Electricity Board had done in the days of nationalisation. Parliamentary and public inquiries were systematically misled over decades about the costs and potential of nuclear power. But to put such misinformation in a stock exchange prospectus left those responsible open to civil litigation and even criminal penalties. Plans to build new nuclear stations were killed by privatisation and the existing nuclear plant was withdrawn from the sales that were made in 1990-91.
In the face of this dismal story, some humility from government would be appropriate. The notion that government can turn British scientific expertise into business success is a continuing, and costly, illusion. It is foolish for Britain to imagine it can take a lead in reducing greenhouse gas emissions when its record of developing alternative commercial technologies is so poor. The nuclear lobby already looks to worries about climate change as yet another means of picking the pockets of the British taxpayer. The British government must face up to past errors. To learn from mistakes – and there is much to learn – you must begin by acknowledging them.