WHY NUCLEAR-POWER FAILED THE MARKET TEST IN THE UK

The Conservative Party's manifesto for the general election of May 1987 contained two pledges of relevance to the UK electricity supply industry (ESI). These were to privatize the industry; and to continue to support the development of civil nuclear power in the private sector. As anticipated by some independent commentators, in the event these objectives proved incompatible. The costs of nuclear power have long been a vexed issue and UK nuclear costs have been higher than those in many other countries. While most of the UK ESI has now been privatized, nuclear generation remains in the public sector. This article seeks to explore the reasons for this fundamental and politically embarrassing policy reversal, a rarity under three successive Conservative administrations since 1979. It would be incorrect to argue that private ownership and nuclear power are inherently incompatible. Rather the specific - competitive - form of privatization proposed for the UK failed to provide sufficient guarantees for the London capital market. Thus, at least in this specific case, nuclear power failed the market test. The implications of this for the UK nuclear industry have been profound. As a result, the UK case has wider international lessons as the pressures for privatization, liberalization and greater cost transparency bear down upon electric utilities in other countries.