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Briefings & Information Submission to DETR consultation: Sellafield Mixed Oxide PlantMay 2001 IntroductionThe Campaign for Nuclear Disarmament (CND) welcomes the opportunity to comment on this fourth round of consultation on the Sellafield MOX Plant. CND's principal objection to the commissioning and operation of SMP has always been, and remains, centred on the proliferation risks inherent in plutonium separation and its re-use in MOX fuel. This concern has been reflected in our responses to the three previous rounds of consultation. Attached as Appendix 1 to this submission is a paper prepared by CND as part of the ongoing discussion on plutonium management within the Plutonium Working Group of the BNFL National Stakeholder Dialogue. The paper summarises the issues raised by plutonium and proliferation. There is no doubt that the major barrier, today, to the proliferation of nuclear weapons is access to fissile material. Plutonium separation through reprocessing and its subsequent incorporation into MOX fuel (from which it can be relatively easily re-separated prior to irradiation of the fuel in a reactor) threatens to put fissile material within the reach of those, be they states or sub-national groups, who might desire it. MOX fuel is thus part of a fuel cycle that poses a threat to international security. Its widespread use would inexorably lead to the growth of a 'plutonium economy' with implications for civil liberties and political culture. The wider implications of decisions about the use of plutonium were recognised by the Environment Agency in its 'Proposed Decision' prior to the 1999 round of consultation: "The Agency has not taken any view on the wider policy issues of plutonium management strategy. The Agency is concerned about these wider policy issues and consider that major developments at Sellafield are national and international matters and that, given the significant political and economic issues, relevant government departments should be involved in considering the Agency's proposed decision" (Environment Agency 1998, Executive Summary). Unfortunately, CND can see no evidence that these wider policy issues have been taken into account. Yet again the current consultation is narrowly focussed on the question of economic benefit whilst the detriments associated with nuclear proliferation, international security, transport and safety issues are ignored. BNFL's Economic and Commercial JustificationEuropean Community law says that it must be clearly demonstrated that the benefits from the introduction of any radiological practice outweigh any detriments to society. In the case of SMP this requires manifest evidence, in the form of real contracts, that there is sufficient demand for the plant’s services. As with previous rounds of consultation this tangible evidence is not available in the consultation documents which provide no serious information about contracts. The paucity of information puts consultees at considerable disadvantage compared to, for example, the THORP consultation where much more detail about the amount and value of that plant's contracts was made available. The lack of information, moreover, suggests that BNFL's economic case for SMP is not as robust as it likes to claim. It should be noted that in no sense can the MOX market be said to be a normal commercial market. MOX fuel is far more expensive than low enriched uranium fuel and no utility that is not locked into reprocessing contracts, often signed 10-20 years ago, would today contemplate using MOX fuel. Evidence to the Trade and Industry Select Committee (TISC) indicated that the price of uranium would need to rise fourfold before MOX might begin to become competitive (TISC 2000, para 200). This is extremely unlikely to happen in the forseeable future given that there are large quantities of ex-military uranium available, more nuclear power stations are due to close in coming years than are due to open and the trend is to burn uranium fuel for longer periods in those that remain. Pressures created by the worldwide deregulation of the electricity industry are also likely to force utilities to seek the cheapest possible fuel for their reactors in an effort to keep costs down. BNFL is right, therefore, to concentrate its economic appraisal on existing customers for reprocessing contracts since there are unlikely to be any others, although this does not stop them from speculating that the market could be far wider (BNFL 2001a, p27). BNFL does not define in detail its 'Reference Case' but it is noticeable that firm contracts have only risen to 9.6% of the Reference Case, up from 6.7% in 1999, whilst the proportion described as 'Forecast' stands at 55.1%, down slightly from 56.6% in 1999 (BNFL 2001a, p9). These figures are hardly indicative of a rush to embrace MOX contracts amongst BNFL's customers. Meanwhile, the amount of the Reference Case business that BNFL has to secure in order to cover future costs of commissioning, operation and decommissioning has, following experience gained during uranium commissioning, risen to 40-50%, up from 30-40% in 1999 (BNFL 2001b, p11). Plutonium commissioning may well lead to further increases in the sales required to cover future costs. Uranium commissioning was allowed because it was reversible and began on the day in June 1999 when permission was granted. It was scheduled to take nine months (TISC 2000, para 69). Almost two years later it is still ongoing and has required a number of engineering modifications and changes to plant operating strategies (BNFL 2001a, p13). These have forced up the sales required to cover future costs, as described above. Plutonium is more difficult to deal with than uranium and its introduction is irreversible, requiring full decommissioning costs. The latter have almost doubled since 1999 from £50m to £92m (BNFL 2001a, p15). It is quite likely, in such a highly automated plant as SMP, that BNFL will have to make further modifications and changes as a result of plutonium commissioning, resulting in the need for even higher sales to cover costs. This could introduce delays and have a knock on effect on the cash flows received by BNFL in the early years and thereby affect the NPV of such cash flows. At the same time the capital costs of SMP have risen from £300m to £462m. These costs are regarded as sunk and CND finds it incredible that they are not to be taken into account when assessing the economic viability of SMP. Such sunk costs were considered in the THORP appraisal for instance. If they were taken into account now, BNFL's new estimates of NPV would actually result in a financial loss of up to £272m and an average loss amounting to £206m. In any case it is not possible, because of lack of information, to judge how realistic BNFL's estimates of NPV are. CND notes, however, that the consultants Cap Gemini Ernst and Young (CGEY), in their initial review of BNFL's economic case, were critical of some of the business assumptions made and the supporting evidence provided for them (BNFL 2001a, p18). This criticism may be well founded; for example, THORP has reprocessed in its seven year life less than 50% of the fuel from its baseload contracts which were supposed to have been dealt with in the ten years to March 2004. The DETR/DH consultation paper, meanwhile, draws attention to an economic assessment commissioned by FoE for the previous round of consultation (DETR/DH 2001, para 7). This appraisal was updated in May 2000 following comments by PA Consulting on the earlier version. Based on the then 'Under Offer or Better' Case of SMP sales at 43.4% of the Reference Case, the authors undertook quantitative risk analysis of the probability distribution of the forecast NPV for SMP. Over 2500 simulations the probability of SMP achieving a negative NPV (at 8% discount rate) came out at 95% with only 5% probability of achieving an NPV break-even or better. This was the situation even though all capital costs were regarded as sunk (Sadnicki et al 2000, para 75). Although the figures have now changed slightly ('Under Offer or Better' Case now stands at 44.9% of the Reference Case) it is difficult to disagree with the authors conclusion that: "The balance of the argument is against economic justification for operating the SMP to manufacture MOX fuels, and Ministers should have very limited confidence in any evidence setting out an economic case for operation" (Sadnicki et al 2000, Executive Summary, para D). BNFL's Second MOX Market ReviewBNFL's Second MOX Market Review, like the first in 1999, is long on rhetoric and short on fact. It constantly states that the market is robust but includes no contract details to back this up. It cites customer support via anonymous comments that could come from ten companies or one (BNFL 20001b, pp4-5) whereas, in the THORP consultation such letters, however much they are actually worth, were published in full. Why the need to keep the source of such comments secret if the support is so robust? More importantly, Japan is the major foreign contractor with THORP and thus the major potential foreign market for MOX fuel, over 60% of the likely Reference Case based on THORP baseload contracts. However, the MDF falsification scandal has cost BNFL dear both in financial terms (at least £108m according to the year 2000 accounts) and in terms of customer support in Japan. Moreover, coming as it did on the back of three serious nuclear accidents in Japan, in each of which the industry practised evasions and cover-ups, it has also helped to severely dent Japanese public confidence in nuclear power. The MDF scandal has already delayed the introduction of MOX use in Japan, originally scheduled for 1999. Following recent statements from the Governors of the local Prefectures where MOX was due to be introduced, and from Japanese and British officials, it seems unlikely that BNFL has any firm contracts with Japanese utilities and will not receive any before 2004 (Nuclear Fuel 2001). Whether such contracts follow can only, at this stage, be described as speculative. The German and Swiss markets possibly offer more promise to BNFL but neither are guaranteed and both countries re-examinations of the need for reprocessing, with Germany scheduled to phase it out by 2005, could well impact on SMP. The Wider Economic Case and other Market Related IssuesBNFL apparently continues to believe that there is a potential for a much wider market for MOX fuel than that considered in the Reference Case. As evidence it cites use of MOX by British Energy, use of MOX from SMP by EDF of France, potential MOX sales to other European Countries and the winning of further reprocessing contracts with follow on MOX fabrication contracts (BNFL 2001b, pp 9-10). Almost all of this is highly speculative and we will deal with them in turn. First, British Energy (BE), which could use MOX in Sizewell 'B', told the House of Lords Select Committee that they were not interested in doing so for straightforward commercial reasons. They were just as forthright in evidence to the TISC, saying that MOX was uneconomic by a factor and that it would require a very substantial rise in the price of uranium for the use of MOX to become attractive (TISC 2000 paras 147-149). BE have also consistently maintained that whilst it might be technically possible for its AGR reactors to use MOX, the cost of converting them would be prohibitive ( Nucleonics Week 2001). Typically BNFL repeat the statement about technical possibility without including the caveat (BNFL 20001b, para 6.8). Second, France has a domestic stockpile of 40t of separated plutonium. It has two MOX fabrication plants that currently meet most of EDF’s requirements. One of these plants, MELOX, currently licensed for 100t pa production can theoretically increase its production to 250t pa. COGEMA (BNFL's equivalent in France) sells MOX fuel to EDF at a very low price, subsidised by the charges it makes to foreign customers (TISC 2000, para 198). Both COGEMA and EDF are state owned and EDF's long term strategy is to equalise plutonium separation and its re-use in reactors. It is unlikely, therefore, that BNFL will be able to penetrate the French market to any great extent. Third, BNFL refer to sales to other European markets which even they admit will be small (BNFL 2001b, p9). One such is the recently announced deal with OKG of Sweden. Whilst hyped by BNFL it should be noted that OKG do not have a license to use MOX and the Swedish Government and Parliament have not previously favoured MOX use. It is debatable, therefore, whether the utility will be licensed to use MOX. Fourthly, it is extremely unlikely that BNFL will win further overseas reprocessing contracts. Reprocessing is a hangover from the days when it was thought plutonium would be needed for fast breeder reactors. But fast breeder programmes have been cancelled worldwide and even Japan, now the only country still enthusiastic about such reactors, estimates it will be at least thirty years before any commercial development. Meanwhile, as mentioned above, Germany is to cease sending fuel for reprocessing in 2005, Switzerland is considering an end to reprocessing, and Japan is building its own plant to come on stream later this decade. The latter has already started to accept fuel from Japanese utilities. Far from contemplating new reprocessing contracts it is known that BNFL's existing customers are trying to renegotiate their current contracts (Independent 2001). The Government's Radioactive Waste Management Advisory Committee recently stated that: "It is liable to be difficult for BNFL to win new THORP contracts in the forseeable future either from UK or overseas customers" (RWMAC 2000, p11). None of the above, therefore, support the concept of a wider MOX market and the ability for BNFL to develop much larger sales volumes. BNFL raise the possibility of future work for SMP in relation to the disposition of the UK's plutonium stockpile in new build reactors, although the economic case does not rely on any business from this (BNFL 2001b, p10). A recent study by two members of RWMAC, writing in an individual capacity, casts doubt on the economic viability of using new build reactors and MOX fuel as a method of dealing with plutonium (Barker & Sadnicki 2001). The authors make a number of recommendations for further investigation and CND endorses their call for the UK government to urgently assess the merits of using SMP as part of a new strategy for plutonium immobilisation rather than to produce MOX fuel. ConclusionsCND believes that the major barrier to the proliferation of nuclear weapons is access to fissile material. Plutonium separation and its re-use in MOX fuel threatens both to put fissile material within reach of those, be they states or sub-national groups, who might desire it and to overwhelm an already stretched and underfunded international safeguards system. CND also believes that the economic case for operation of SMP has not been made and that no tangible evidence has been presented that there is sufficient demand for the plant’s services for the benefits of operating it to outweigh the detriments. CND further contends that the wider security and policy ramifications of a decision to operate SMP have been ignored throughout the consultation process, and that even if an economic case had been made that by itself is far too narrow a basis on which to take a decision. CND urges the Government to consider, as a matter of priority, the merits of using SMP as part of an immobilisation strategy for Britain's growing stockpile of separated civil plutonium. To operate SMP in such a way would enhance international security. To use it to manufacture MOX fuel threatens international security.
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