1 February 2013

Update1: New Blows for UK Nuclear Sector

Update 1, 4 February 2013

On 4 February 2013, UK energy company Centrica announced that it would withdraw from any new-build project in the country. In 2009, Centrica took an option for a 20% interest in the construction of new nuclear reactors at Hinkley Point and Sizewell, as well as a 20% share in EDF Energy’s eight operating nuclear units in the UK. Centrica’s CEO Sam Laidlaw complained that “since our initial investment, the anticipated project costs in new nuclear have increased and the construction timetable has extended by a number of years..” Ladlaw explained: “These factors, in particular the lengthening time frame for a return on the capital invested in a project of this scale, have led us to conclude that participation is not right for Centrica and our shareholders." After the withdrawal of German utilities RWE and E.ON, as well as Spanish Iberdrola, French GDF-Suez and Chinese utilities, for the time being, this leaves EDF Energy the sole potential key investor in UK nuclear new build. Reportedly, EDF is negotiating with the Chinese company CGNPC that might be interested in taking over Centrica’s share. Already in December 2012, it had been suggested that Centrica might decide to pull out of nuclear new-build (see Centrica Out? The Twists and Turns of UK Nuclear New Build)

On 30 January 2013, plans were abandoned to investigate the suitability of a region in the North West of England for the construction of the country’s high level waste repository following the rejection by one of the pertinent local authorities. Approval to proceed was required by all three affected local authorities but Allerdale Borough County was withdrawn from the process and the Cumbria county council voted against the proposal. Only Copeland Borough Council had voted to continue in the process. The rejection is particularly serious for the Government’s waste management plans as this was the only one being investigated following a call for communities to volunteer to be assessed for suitability to host the waste disposal site. Previously, in 1997, following a £40 million public inquiry the Government rejected plans for a rock laboratory near the Sellafield site in Cumbria. Responding to the announcement, the responsible Minister, Ed Davey stated: “I am confident that the programme to manage radioactive waste safely will ultimately be successful, and that the decisions made in Cumbria today will not undermine prospects for new nuclear power stations”. Martin Forewood, spokesman of Cumbrians Opposed to a Radioactive Environment (CORE) is less optimistic: “This has effectively stopped the UK’s nuclear waste disposal juggernaut in its tracks and, in a repeat of the rejected NIREX plans of the 1990’s, put back the UK’s waste dumping plans to square one and the responsibility back again at a national level where it belongs.”

However, this was not the only problem for the UK Government on nuclear issues as critics highlighted the lack of access to information in the process for the setting of the vital strike price for nuclear new build. “Transparency over price setting and a clear and auditable process for determining prices is essential where the government is choosing to subsidise technologies that the market would otherwise not invest in. There is an obvious danger that companies will be able to out-negotiate officials and bill-payers will bear the cost,” said Dr Gross, who advised the government on the Energy Bill. French utility EDF and the Government are currently negotiating a guaranteed price (the strike price) for electricity from the proposed nuclear power plant at Hinkley C. Recent reports suggest that this will be around £100/MWh, double the current market price.