NUCLEAR power stations are economically viable without government guarantee or subsidy, the chief executive of British Energy claimed yesterday.

The head of the company that supplies a fifth of Britain’s electricity said that the cost of replacing ageing nuclear generators was highly competitive compared with funding new gas powered stations, lean coal stations and other technologies, including some sources of renewable power.

Bill Coley, a 40-year veteran of the nuclear industry, said: “I don’t believe that nuclear power requires any subsidy to make it viable in the market place. There are great examples of new nuclear plant in place in other countries at very competitive prices.”

Mr Coley’s comments follow speculation that the Prime Minister is to rule out financial incentives for new nuclear power plants when he announces the Government’s new energy strategy next month.

According to internal Whitehall studies, which have been discussed with the Treasury, soaring gas prices and the rising cost of tradeable carbon permits will make the construction, operation and decommissioning of nuclear plants commercially attractive.

Previously it has been argued that new nuclear stations would require huge subsidies, an argument that appeared to be supported by the financial collapse of British Energy four years ago, when wholesale power prices plunged.

Mr Coley, who joined British Energy 15 months ago, also appeared to rule out indirect market subsidies for nuclear power yesterday. He said many studies had demonstrated that nuclear power stations could be built at present for about £30 per megawatt hour, with a breakeven level of £20 per megawatt hour.

“Price is not the barrier, the biggest barriers here are the time it takes to get permits and planning,” Mr Coley said.

However, Mr Coley and Steven Billingham, British Energy’s finance director, believe that the current merchant generator environment — in which standalone power stations sell their output to the highest bidder through a mixture of short and long-term contracts — is unsuitable for nuclear power, which has relatively high fixed costs and cannot be switched on and off to take advantage of peak prices.

One option under discussion in the industry is that new nuclear power stations would require substantial “off-take agreements” either with large energy retailers, such as British Gas, or major industry groups, such as the chemical or paper-making industries.

British Energy receives an average realised price of £32 per megawatt hour but has sold three quarters of this year’s output at £43 per megawatt hour.

Since British Energy was restructured, the Government has the right to take 65 per cent of the generator’s free cashflow — £105 million in the year to 2006. The company is also prevented from building new nuclear power stations until 2010.

However, Mr Coley hopes that the Government will find a role for British Energy if it decides to build new nuclear power stations.

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