Sunk costs laddie, sunk costs

There's an aspect of accountancy (for it is that, not economics) which all too many people manage not to get. Sunk costs I'm talking about.

"In just three years the estimated cost for dealing with our nuclear legacy has risen by over £20bn," said Greenpeace's senior nuclear campaigner, Ben Ayliffe. "It now stands at over £73bn and is spiralling out of control. The NDA admits that they have no idea what the final bill will be.

"They're stuck in a radioactive quagmire and as usual it's the public who will have to carry the can. It beggars belief that Gordon Brown and his nuclear stooges want to build more atomic plants when the plans for cleaning up after our existing reactors are such a drain on this country's coffers."

It's true that the nuclear clean up is proving to be more expensive than we had thought previously. But this has nothing whatsoever to do with the decision to build new nuclear or not. For the nuclear clean up has to happen anyway, whether we build anew or not. The costs are, in the parlance, sunk costs.

Whatever we do now, build nuclear, not do so, build windmills or simply stop using electricty, we've still got to pay that £70, £80, £90 billion come what may. So the fact that those costs are there is an irrelevance to whether we do build new nuclear or not. What we want to know is, what will be the costs of building new nuclear as opposed to our alternatives?

At this point past experience can indeed be used as a guide but it looks like the costs will be a great deal lower than some think:

Tony Free, British Energy's acting head of environment and nuclear liabilities, told Platts: "This will no doubt be used by anti-nuclear groups as an argument against new nuclear. But the great majority of the NDA's GBP73 billion clean-up cost is associated with the legacy facilities at Sellafield and Dounreay. This has nothing to do with the decommissioning of new build power stations which are simpler and less expensive to dismantle.

Now of course he would say that but it's not completely out of order to think that there might be costs associated with inventing civilian nuclear power (as we did) that won't be associated with installing a new generation of it. Which is indeed what seems to be the case being made.

The analysis we should be making therefore is not with the costs of cleaning up things done in the past, but what will be the costs of cleaning up whatever we might build in the future?

Umm, currently the choice seems to be between building new nuclear on sites that are already owned and used as nuclear plants, using a technology we've been playing with for decades, as against spending £100 billion on windmills that only work 30% of the time.

Hmmm...wonder which will be cheaper?

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