Consumers may face higher electricity bills to cover the future decommissioning costs of a new generation of nuclear power stations, announced last week.

Britain expects the cost of handling the waste and decommissioning of a new generation of nuclear reactors to add about one percent to the cost of power produced, a source familiar with government thinking said - but critics like Greenpeace say the real costs will be much higher, taking into account the costs of decommissioning plants at the end of their lifespan.

Is nuclear as cheap as well all think it is?

Last week, ministers gave the go-ahead to a new generation of nuclear power stations, after Prime Minister Gordon Brown pledged to "take the difficult decisions on energy security".

His spokesman said on Monday that nuclear operators would have to set aside funds to cover the full costs of decommissioning plants at the end of their lives as well as the cost of handling radioactive waste.

Like any other cost, that will trickle down to electricity bills, but it will be "very small indeed", the source told Reuters.

"One pound per megawatt hour will probably be a very generous estimate of the knock-on costs," said the source. "And an estimate of two pounds would be outrageously over the top."

The baseload electricity price was 61 pounds per megawatt hour on Tuesday, meaning that the cost of dealing with waste and decommissioning could add between 1.6 and 3.2 percent to the cost of electricity from nuclear at the very highest estimates.

Nuclear energy currently accounts for just one-sixth of the country's electricity, so any impact on the public's electricity bills would be smaller still, and tiny compared to the impact of rising gas costs.

Ministers have repeatedly stressed the importance of reducing Britain's reliance on imported gas, which fluctuates with oil prices and regularly impacts bills.

Last week, German utility RWE said it was putting electricity prices up by an average of 12.7 percent, after wholesale gas prices rose by around 60 percent in the last year.

Nuclear is also less susceptible to swings in commodity prices than gas, which is used to generate about 40 percent of power.

Gas accounts for about three quarters of the cost of electricity generated from it, while uranium represents a mere 5 percent of the total cost of generating nuclear power, so uranium costs can double with little impact.

The first new nuclear plant is expected to break even with electricity at an average price of 37.5 pounds per megawatt hour, falling to 31.2 pounds for the second, according to government figures from the 2006 energy review.

The public has little to fear from variations in the cost of nuclear waste and decommissioning, with the worst case scenario adding only 36 pence per megawatt hour to the breakeven price, said the source -- still well below current baseload price of 61 pounds.

The government is keen to find new sources of CO2-free baseload power to help it meet ambitious climate change goals.

Other carbon-free technologies struggle to compete economically with nuclear, with the cost of waste and decommissioning about one fourteenth of the cost of capturing and storing the CO2 pollution emitted from coal-fired power stations.

The other big cost will be building the nuclear power stations at around 1.6 to 1.7 billion pounds per plant, but British Energy says it has no shortage of firms lining up to form partnerships.

It is understood that plans have been agreed for the government to collect a fee from the companies for each unit of electricity used in British homes to build up a fund to meet decommissioning costs.  But according to Greenpeace "these funds will fall well short of the true costs of the clean up and disposal of the waste.  And this doesn't even take into account the costs of transporting and storing the nuclear waste, and the £1 billion cost of compensating whichever lucky community is chosen to host the waste site(s) - all payable by the taxpayer."

Government sources also suggest that any firms offering to build new nuclear reactors will not be asked to pay the full cost of storing the hundreds of thousands of tonnes of highly radioactive waste they produce. Instead, they will be allowed to "rent" space in a giant nuclear waste vault to be built by the government, so avoiding massive construction costs.

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Map of the world's nuclear power stations

The companies have also demanded a government guarantee on a minimum price of carbon over the lifetime of the stations - possibly up to 50 years.

With the cost of carbon high, nuclear energy has an edge over fossil fuels under the nascent EU emissions trading scheme, but were it to collapse the long term viability of nuclear would be threatened.

Yesterday, a spokesman for EDF, the French state-owned company which has offered to build four reactors in Britain, said the company had been in talks with the UK government about guaranteeing a minimum carbon price on the EU emissions trading scheme. This was important, he said, because the price of carbon partly determined the cost of the electricity provided and the guarantee would make it easier to raise money.

It is understood that the government would not be obliged to pay out any money unless the carbon price collapsed.

"It's not a subsidy, or a long term guarantee, but the EU carbon trading scheme does not quite work yet . We can see how it works for the next five years but not after that. We have a 60 year operating life," the spokesman said.

Ministers have consistently said that any new generation of nuclear power stations would be built by the private sector without public subsidies. Instead, nuclear opponents accuse the government of trying to smooth the financial path for prospective nuclear companies.

No nuclear power stations have been built in Britain for nearly 20 years, largely because banks have been unprepared to risk money on an industry that has consistently needed to be rescued from near bankruptcy. The National Audit Office says the government has been left with liabilities of up to £5.1bn since the virtual collapse of nuclear company British Energy, as well as £70bn in existing waste.

A spokesman for the Department for Business, Enterprise and Regulatory Reform said: "If we were to allow a new generation of nuclear stations ... the private sector would have to pay the cost of any clean up and waste during the lifetime of the reactors."

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Sources: http://www.guardian.co.uk/ | http://uk.reuters.com/ | http://www.greenpeace.org.uk/

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