Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Project cancellations put UK’s nuclear future in doubt

After weeks of rumours, 17 January saw Hitachi confirm the suspension of Wylfa Newydd, a major nuclear power plant that it had planned to develop on Anglesey in Wales.

The withdrawal of the 2,900MW project put a further dent in the government’s nuclear energy plans after Toshiba announced in November 2018 its decision to pull the plug on Moorside – a new nuclear power station in Cumbria. The news also makes Hitachi’s planned Oldbury nuclear plant in Gloucestershire increasingly less likely to proceed.

The planned role of nuclear

There are currently eight nuclear power stations operating in the UK, which generate around 21% of the country’s electricity and have a combined capacity of 8.9GW. These were all built in the 1970s and 80s and are due to retire during the 2020s. The only exception is Sizewell B in Suffolk, which was built in 1995 and is due to retire in 2035, though operator EDF Energy wants to extend its life by as much as 20 years beyond that date.

The government had planned to roll out six new nuclear power stations with a total of 18GW capacity to replace these old reactors and provide a low-carbon replacement for the 11GW of coal plants currently on the system, all of which are set to be phased-out by 2025. As a reliable, low-carbon source of power, nuclear forms part of the government’s future energy security strategy and efforts to meet legally-binding climate targets.

The last new UK nuclear project to be approved was EDF’s 3.2GW Hinkley Point C plant in Somerset, with construction underway from 2016. This project is on track and is due to be operational by 2025.

Why projects have been pulled

Hitachi said that it had made the decision to suspend the Wylfa project after a failure to find investors. Hitachi expects to take a ¥300bn (£2.14bn) loss from the cancellation. These financial difficulties make Hitachi’s Oldbury project a lot less likely to go ahead. In November 2018 Toshiba shut down Nugen – its subsidiary company behind the proposed Moorside project – due to growing costs and a failure to attract a buyer for the development firm.

Following Hitachi’s announcement, Business Secretary Greg Clark made a speech in the Commons on 17 January stating that the government had offered to take a one-third stake in the Wylfa project, to provide all of the debt financing required to complete the construction and to provide a Contract for Difference with a strike price expected to be no more than £75/ MWh, but that Hitachi still reached the view that the project posed too great a commercial challenge. Clark also highlighted the falling cost of renewables as a further barrier to attracting private investment in nuclear but added: “the government continues to believe that nuclear has an important role to play”.

Plugging the gap

According to analysis by the Energy and Climate Intelligence Unit (ECIU) Moorside, Wylfa and Oldbury would have generated around 73TWh of power per year, or 15% of current demand. This potential gap in UK electricity supply led to a range of stakeholders calling for alternative strategies to ensure future energy security and low-emissions supply.

Commenting on Clark’s claims that the costs of renewables are falling, the Renewable Energy Association said: “the government must capitalise on the opportunity renewables present by unlocking a route to market and implementing consistent long-term policy.” Similarly, SSE and innogy called for renewables to be given greater support, with SSE CEO Alistair Phillips-Davies questioning whether the government’s current plans to increase the UK’s offshore wind capacity to 30GW by 2030 was ambitious enough and innogy COO Hans Bünting stating that UK energy policy “needs to be re-written in a way that can only support renewables”.

The ECUI found that deploying renewables could fill the gap and would be up to a third cheaper than the cost of energy from nuclear. As well as keeping bills down, the ECIU said renewables would help the UK meet its legally binding climate targets. Similarly, think tank the Green Alliance said on 18 January that renewables, combined with a doubling of interconnector capacity to Europe from 4GW to 8GW, could plug the nuclear gap and save the UK £1bn/ year by 2030 through access to cheaper imported energy.

Hitachi’s announcement also saw a resurgence in calls for the government to change its policy of blocking onshore wind developments from subsidy schemes, which supporters said could hinder a renewables pathway to filling the nuclear gap. Data published by trade body RenewableUK on 18 January revealed that new installations of onshore wind capacity fell by 80% year-on-year in 2018 to the lowest level since 2011, which the organisation attributed to lack of support. Similarly, the SNP’s Alan Brown said the UK government was too focused on nuclear and called for the upcoming Energy White Paper, due “early 2019”, to revaluate its stance on the technology.

A renewables-heavy pathway, combined with flexibility provision, could benefit businesses by creating opportunities to enable greater scope for onsite renewable energy generation, for excess power to be sold to the grid and for providing grid balancing services through altering energy usage to help manage the more intermittent supply.

However, the Nuclear Industry Association highlighted that a high proportion of renewables could bring a less secure system than nuclear and increase gas reliance. Its Chief Executive Tom Greatrex said: “For prolonged periods both this summer, in June, and then again in December, and the early days of January this year, wind produced less than 7.5% of our electricity demand. It is clear that proposing reliance on intermittent and variable sources of low carbon power alone will increase, not reduce, overall emissions.”

The future of UK nuclear

To address issues around funding of new nuclear the government is considering options including a regulated asset base (RAB) model, recommended by the National Audit Office. RAB would see plant owners paid a regulated return on their investment. It has successfully delivered other major infrastructure projects in the UK but a nuclear plant in the US under RAB has run into financial problems due to overspending and project delays.

There are also doubts about the remaining planned nuclear power stations, including Bradwell B in Essex. This is being developed by China General Nuclear Group (CGN), which has led to national security concerns faced by all UK critical national infrastructure projects with Chinese companies involved. It was reported by the Financial Times that, in an effort to alleviate these concerns, CGN was in talks with Rolls-Royce to build equipment for plant.

Even if more major projects are taken off the table, nuclear could still play a future role through small modular reactors, which supporters argue could deliver more flexible nuclear power at lower cost and reduced construction risk. However, most are not expected to be commercial until the 2030s.

Conclusion

The government must now decide whether to continue to push for new nuclear, and therefore find new ways to deliver funding, or opt for a lower-cost but perhaps less reliable renewables-heavy route.