Consultant Assessment of SMP Economic Case

In November 1996, British Nuclear Fuels plc. (BNFL) submitted an application for the commissioning and operation of the Sellafield MOX Plant (SMP) at Sellafield, Cumbria, to the UK Environment Agency (EA). A public consultation was organised between February and April 1997 by the Environment Agency as part of the licensing procedure. More than a hundred responses were registered.

According to EA, "several respondents raised the concern that BNFL had not provided an economic case for operating the fuel production plant in its application". According to the EA, this "highlighted" the "need for an in-depth assessment of BNFL's business case for the MOX plant". The EA appointed the PA Consulting Group to perform an assessment, which is open to public consultation at the EA and at affected local authorities until 16 March 1998.

The EA requested the consultant "to assess independently the potential economic and commercial benefits, if any, which are likely to follow from the operation of the SMP". Only one paragraph in the 36-page long PA report concerns exclusively the non operation case for the SMP. PA states that BNFL would lose £50-60 million if the plant were not operated, and would earn £240-300 million if the plant were in operation. PA claims to have used "a series of restrictive assumptions about volumes and duration of production". One of them is that the investment of the installation is to be considered sunk cost. However, no information is given on the advancement of the construction work or on whether or not the entire expenses are thought to be spent already.

The Reference Case considers the operation of the SMP, based on very different engagements on behalf of utilities: there are contracts, letters of intent, production capacity reservations, or mere intentions. According to PA, the large majority of the plutonium required for MOX fuel production is already on site at Sellafield. Taking into account the 53.5 tonnes of separated plutonium at Sellafield as of 31 March 1997, this means that PA estimates a minimum of 700 - 1,000 tonne production for SMP, which corresponds to roughly twice to three times the total quantity of MOX that has been produced to date - world-wide.

PA regards these sales volumes as "secure estimates". Indeed, no analysis is carried out of the plutonium policies in the countries which are most affected. Since no MOX will be used in the UK, BNFL plans to export MOX to those countries which might want to use but do not produce this fuel, namely Japan, Germany and Switzerland. PA states that France, Japan, Germany, Switzerland, Belgium and the UK "view plutonium as a valuable source of energy when recycled, and view such recycling as a valuable part of plutonium management." In each of these countries, there is much debate affecting the development of MOX fuel use. No comments are given on the facts that:

• in Japan, no reactor is licensed to use MOX and the national plutonium policy is in total disarray;

• in Germany, only seven reactors out of twelve licensed use MOX and the industry has a long term agreement with COGEMA for MOX fuel production;

• in Switzerland, only two reactors use MOX;

• in Sweden, which is not even mentioned, no reactor has a MOX license.

The economic case for SMP remains to be proven.

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