Leader: British nuclear energy and the case for public funding. If ministers want new plants to be built, they will need to back them. The obstacles to the UK’s ambition of building a fleet of new nuclear power plants appear larger by the day. Toshiba’s troubles could stall plans for a plant at Moorside in Cumbria. The £18bn Hinkley Point project has won approval, despite its eye-watering cost, but it too could still fall through if a new French government doubts EDF’s ability to build it, or if China pulls its investment. Moreover, the decision to leave Euratom – a consequence of Theresa May’s approach to Brexit – will create uncertainty for the entire industry. If UK ministers wish to overcome these obstacles, they will need to reconsider their longstanding opposition to public investment in the sector. The UK is in theory an attractive market, since few developed countries are expanding nuclear generation, and approval from the UK regulator serves as a badge of quality. Nonetheless, ministers need to recognise the reality: without government support, private capital markets will not finance projects with enormous upfront capital costs, huge construction risks and very long-term pay-offs. The next test of the UK’s commitment to nuclear expansion will be the plant Hitachi wants to build at Wylfa, in Anglesey. If ministers want this to proceed, they should be open in principle to financing the project directly. This could be done in a way that overcomes at least some of the Treasury’s concerns – for example, by buying a minority stake in the project, which would not count towards public debt and could be sold on once the plant was in operation. Since the government is better able to bear long-term risk and can borrow more cheaply than the private sector, this could cost less than offering guarantees for investors to bear the same risks. The original argument for replacing and expanding the UK’s ageing fleet of nuclear reactors was that it was essential to secure the country’s energy supply and meet its legal commitments to cutting carbon emissions. This argument may now be weaker, given sharp falls in the price of gas and the cost of offshore wind power. Yet nuclear energy is still important to maintaining diversity in the UK’s energy supply. If the government now believes it can meet the UK’s future energy needs by other means, it should explain how it plans to do so. If it is still relying on nuclear expansion to plug the gaps in supply that will open up, it will need to be open to funding it directly.
FT 14th February 2017 read more »
It would appear that the UK government’s nuclear power policy is taking another hit. Tomorrow Toshiba is expected announce that it’s pulling out of the NuGen project, taking 60% of the funding for the 3 reactors planned for Moorside in Cumbria with it. Right on cue, stories have appeared in the press saying that government is thinking about or even ‘under pressure’ to inject huge amounts of taxpayers cash into the project in order to get it built. The same issue is emerging over at the proposed nuclear project in Anglesey. One of these reports says “proposals for public investment [are] being pushed primarily by industry rather than ministers.” Now let’s get this straight: If the UK government takes stake in these projects, it would be expensive. A 25% share in both NuGen and Anglesey could cost over £7 billion — and that’s before taking into account the cost overruns synonymous with nuclear projects. This would still leave over £20bn other investment to find, but is a substantial commitment of public money. So it is worth spending a few moments to consider why direct government funding of these nuclear stations is such an eccentric and ill-conceived idea.
Energydesk 13th Feb 2017 read more »