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In September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 years - Edexcel - A-Level Economics A - Question 7 - 2018 - Paper 1
Question 7
In September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 ... show full transcript
Worked Solution & Example Answer:In September 2016 the government approved the building of an £18 billion nuclear power station, Hinkley Point C, which will supply 7% of UK electricity for up to 60 years - Edexcel - A-Level Economics A - Question 7 - 2018 - Paper 1
Step 1
Evaluate the likely private costs
Answer
Private costs associated with the Hinkley Point C nuclear power station can be categorized into several key areas:
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Land Purchase Costs: The cost of acquiring land for the construction of the power station. This can be significant, especially in populated areas.
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Machinery and Equipment: Investment in specialized machinery for construction and operation, which can be a substantial upfront cost.
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Construction Costs: Labor costs and the actual expenses of building infrastructure, including raw materials needed for construction.
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Security Costs: Given the nature of nuclear power, heightened security measures are necessary to protect the facility from potential threats.
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Labor Costs: Wages paid to employees directly involved in the construction and operation of the station.
By accounting for these various components, we can gain a clearer picture of the substantial initial investment of £18 billion required for the project.
Step 2
Evaluate the likely external costs
Answer
External costs are the unintended negative effects that can impact society and the environment. For Hinkley Point C, the likely external costs include:
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Visual Eyesore: Detrimental effects on the landscape and natural aesthetics, which could impact local tourism and property values.
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Impact on Wildlife: Construction and operation may disrupt local ecosystems and habitats, posing risks to wildlife in the area.
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Air Pollution: Although nuclear power is often regarded as cleaner than fossil fuels, construction activities can still contribute to local air pollution.
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Risk of Contamination: Potential hazards related to radioactive leaks or contamination in the event of an accident, which could have long-term consequences for local communities.
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Increased Traffic Congestion: Construction activities will likely cause increased traffic in the region, further straining local infrastructure.
These external costs highlight the broader implications of constructing a nuclear power facility and should be carefully considered alongside private costs.
Step 3
Use of an externalities diagram
Answer
To illustrate the relationship between private costs and external costs, an externalities diagram can be used. The diagram typically includes:
- The Marginal Private Cost (MPC) curve indicating the costs borne solely by the company.
- The Marginal Social Cost (MSC) curve reflecting the total costs to society, including external costs.
- The Marginal Benefit (MB) curve showing the benefits to consumers from electricity generation.
The intersection of MSC with the demand curve indicates the socially optimal level of output, while the gap between MPC and MSC represents the welfare loss due to external costs. Properly labeling this diagram is crucial for conveying the comprehensive perspective of costs involved in the Hinkley Point C project.