Last Thursday, the two giant German electricity utilities E.On and RWE announced that they would abandon their plans for new UK nuclear power plants. This is a major blow for proponents of the technology here in the UK, and creates serious problems for much-heralded ‘third generation’ of UK nuclear power. It is also a big U-turn for the two companies, who had invested considerable resources into the programme.
The specific trigger for the decision was almost certainly the German Government’s decision last summer to accelerate the phase-out of nuclear power in that country. But the problems of new nuclear were becoming more and more obvious even before the Fukishima tragedy that prompted that decision. Nuclear power is often unpopular with electorates. It is harder to spin the truth about decommissioning costs, now that everyone can see that waste from as much as fifty years ago is still very much around and glowing. Perhaps most compellingly to the decision makers, the economics no longer seems to stack up. After 20 years without a meaningful nuclear build programme, the prototypes of new nuclear designs have run hugely over budget as the nuclear supply chain creaks its way into retirement.
Last Thursday’s announcement is the latest twist in what is a rare example of UK energy policy having a meaningful impact on the global situation. The UK is supposed to be in the vanguard of new nuclear development. It is also a test case for the possibility of nuclear development in a deregulated energy market. But with the withdrawal of the German consortium, the UK Government is even more reliant on a single supplier (EDF, 84% owned by the French Government) to actually deliver new nuclear. The pretence of a free market in nuclear power is becoming harder to sustain as EDF uses its monopoly position to wring subsidies and concessions out of the UK taxpayer. For a really excellent summary of these subsidies, some of which are carefully hidden, have a look at the note prepared by some of the UK’s leading energy thinkers, including Jonathan Porritt, here: http://www.jonathonporritt.com/Campaigns/nuclear
In the end these costs may be too much to bear and prompt yet another re-think of UK energy policy. Certainly other countries with nuclear thoughts of their own will be watching carefully.
The fallout from the UK situation is significant for the global energy challenge. From an investment point of view, clarity is improving, but until the overcapacity in cleaner energy is reduced we remain largely on the sidelines of energy generation. WHEB still prefers energy efficiency, which is a winner under any scenario.
You can see the E.On and RWE press release here: http://www.npowermediacentre.com/Press-Releases/RWE-npower-announces-strategic-review-of-Horizon-Nuclear-Power-1137.aspx.
The latest reverberations in Germany itself of its nuclear phase out decision are reported here: http://www.nytimes.com/2012/03/13/world/europe/merkel-offers-defense-of-her-policy-on-energy.html
Lastly, another excellent recent report on nuclear energy was published by The Economist on March 10th, which you can order by contacting the magazine, or see for free online if you are a subscriber.