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Energy: Fossil Fuel Prices

Volume 698: debated on Monday 21 January 2008

asked Her Majesty's Government:

What effect the increasing cost of fossil fuels from areas of political instability and increasing world demand have on the economic viability of nuclear generated power, taking into account future potential decommissioning costs. [HL1147]

Global fossil fuel prices have increased significantly in the last year due to continued strong growth in demand and supply constraints. This will have increased the costs of generating electricity from fossil fuels—oil, gas or coal. Therefore, in relative terms, nuclear’s cost-effectiveness will have improved. In the cost-benefit analysis of nuclear generation we published a table showing the economic welfare balance under different gas and carbon prices and nuclear costs, which included all waste and decommissioning costs. This is available at www.berr.gov.uk/files/file39525.pdf.

We also estimated the impact of different fossil fuel price scenarios on the economics of different types of electricity generating plant. Since fuel costs account for around two-thirds of the cost of gas-fired generation and about 40 per cent of the costs of coal-fired generation, increases in fossil fuel prices have a significant impact on the cost of generation from these sources.