For the workers at Oldbury-on-Severn nuclear power plant, the next new year celebrations could be rather poignant. Just as Britain is planning the rebirth of nuclear power generation, their ageing plant will be closing down, probably on December 31. Oldbury, in Gloucestershire, has been pouring power into the national grid since 1967 and is the latest in a series of closures that has seen Britain’s nuclear generating capacity fall from nearly 40% of the nation’s needs in the 1980s to just 15% now. Most of the slack has been taken up by new gas-fired stations.

Over the next decade, all the remaining nuclear stations will shut down too — with the probable exception of Sizewell B, which could last until 2030.

For the government, that creates some huge dilemmas. How does it keep the lights on? How does it avoid the big jumps in greenhouse gas emissions that go with gas- and coal-fired generation? And who should pay?

This month John Hutton, the secretary of state for business and energy, launched the government’s Nuclear Development Forum, saying: “We are determined to get new nuclear up and running as soon as possible.” He followed that by approving the deal that saw EDF, the French state power firm, take over British Energy in a £12 billion package that puts most of Britain’s reactors in the hands of a company with a commitment to more nukes.

Central to Britain’s nuclear debate is the idea that the best way to secure future energy supplies is to make them as diverse as possible — with nuclear in the mix. The nuclear consultation paper commissioned by Gordon Brown said: “Preventing energy companies from investing in new nuclear power stations would increase the risk of not achieving our long-term climate change and energy security goals.”

Ceri Green of Doosan Babcock, an engineering company involved in constructing all kinds of power generation including coal-fired stations, believes that Brown is right to emphasise the need for diversity in its power sources. What concerns Green is that the government is not due to publish its National Nuclear Policy until 2010 — meaning no new construction will begin until at least 2012. That means no nuclear power stations will come on line until 2018 at the earliest with some time after 2020 being far more likely.

Such delays are frustrating for energy companies too. They believe that the world’s demand for energy will keep pushing coal and gas prices upwards — so nuclear generation will become more lucrative. That is the background to EDF’s purchase of British Energy. The government also wants to avoid any single company dominating the construction of new reactors so it has also been encouraging Eon UK, the German-owned energy company, which has said it wants to build two new nuclear power stations in Britain.

However, Tom Burke, who was a special adviser on environmental issues to the last Conservative government, says the industry is riddled with lousy economics that guarantee it will always need subsidies from the taxpayer. “There are only two honest answers to the question of how much it costs to build a nuclear power station,” he said. “These are ‘I don’t know’ and ‘I’ll tell you when I’ve built it’.”

History suggests Burke could be right. Sizewell B, Britain’s last nuclear power station to enter service, saw costs rise from £1.7 billion to £3.7 billion. What is more, none of the three new designs under consideration for Britain has entered service anywhere in the world, so final costs are hard to calculate. Additionally, the whole industry is being hit by inflation rates well above 10% a year because of the demand for steel. That makes predicting real costs exceptionally difficult.

Fearful that industry may be unwilling to invest in the face of such unpredictable costs, the government has already caved in on its pledge to offer no subsidies to a revived nuclear industry by saying it will put a cap on the cost of nuclear waste disposal, making taxpayers liable for any excess. Sceptics predict this will be the first subsidy of many.

Even if the nation does decide in favour of new nuclear power stations, there will be many problems to resolve. One of the biggest is simply where to put them. The assumption has been that any new power stations would most likely be built close to the old ones, but this might be naive. Why? Because, industry insiders point out, it fails to take account of recent European legislation, including human rights laws. Plus, the European habitats directive obliges countries to carry out environmental impact assessments on existing and all potential alternative sites.

David Cowan, a senior director for planning and the environment at RPS, a consultancy that specialises in the energy industry, points out that all of Britain’s current nuclear power generation sites are either in or very close to environmentally sensitive locations: European sites for nature conservation, national parks or areas of outstanding natural beauty.

“That suggests the government and power industry would have to find suitable new locations which will also have to be acceptable to local people,” he says.

“That could be quite challenging. Britain needs a diverse mixture of energy generation but, if nuclear is going to be part of it, then we need to start the process of site selection soon.”

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