Archive for the ‘Environment’ Category

Hitachi pullout leaves UK nuclear plans in tatters

Hitachi said Thursday that it is scrapping its nuclear projects in the U.K. — dealing a devastating blow to Britain’s energy policy.

The Japanese company has been developing the $28 billion Wylfa Newydd nuclear plant in north Wales and has a second site at Oldbury in South Gloucestershire, England. But it said that failure to strike agreement over funding with the U.K. government would bring those projects to an end.

It comes two months after Toshiba announced its withdrawal from the NuGen nuclear project in Cumbria. That leaves only three of the planned six new nuclear power plants in Britain unaffected. Only one — Hinkley Point C — is under construction, although that project is beset by cost overruns and delays.

“This triple blow has escalated into a full-blown crisis,” said Labour Shadow Business Secretary Rebecca Long-Bailey.

“The economics of the energy market have changed significantly” — Greg Clark, U.K. business secretary

The pullouts undermine U.K. plans to build new nuclear power stations to replace aging plants reaching the end of their lifespan in the coming years. They also add to the chorus of criticism that supporting nuclear power makes no economic sense as the cost of renewable power plummets. The U.K. has been a vocal nuclear advocate at a time when other countries are shying away from the technology.

Greg Clark, the U.K.’s secretary of state for business, energy and industrial strategy, on Thursday explained to parliament where the negotiations had run into trouble. He said the government had offered to take a one-third equity stake in the project, offered a guaranteed price of no more than £75 per megawatt hour and had considered providing all of the required debt financing. However, Hitachi still balked at the terms.

“Despite the best efforts of everyone involved the parties have not been able to reach an agreement to the satisfaction of all concerned,” Hitachi said in its statement. “As a result, Hitachi has decided to suspend the project at this time.”

The company added that “further time is needed to develop a financial structure … and the conditions for building and operating the nuclear power stations.”

Hitachi will take a 300 billion yen ($2.8 billion) hit from the project freeze.

Sticking with the atom

Clark insisted that “nuclear has an important role to play in the future energy mix.” The government said Thursday it is “reviewing alternative funding models for future nuclear projects and will update on these findings in summer 2019” when the government plans to outline its approach to new nuclear in a white paper.

“If new nuclear is to be successful in a more competitive energy market, it’s clear that we need to consider a new approach to financing future projects,” Clark told MPs.

But the pro-nuclear argument is increasingly difficult to make thanks to the falling costs of renewables, storage and other clean energy solutions. According to the government, the cost of offshore wind halved over the last two years to £57.50 per MWh, and further cost decreases are expected.

France’s EDF negotiated a guaranteed fixed price for electricity from Hinkley Point C of £92.50 per MWh, adding to the controversy around the £20 billion project.

Clark said that the “positive trend” of falling renewables costs “has not been true when it comes to new nuclear” and instead costs of constructing nuclear plants have increased due to tighter safety regulation and other factors.

U.K. Business Secretary Greg Clark | Christopher Furlong/Getty Images

In 2017, renewables overtook coal and gas as the main source of electricity production in the U.K., rising to a record 29.3 percent, according to government statistics. Nuclear made up a 21 percent share, and gas 42 percent.

“The economics of the energy market have changed significantly,” Clark said. That’s raising questions about whether backing costly and risky nuclear energy is the way forward.

“They’re incredibly expensive, and they’re quite risky to build,” said Jonathan Marshall, head of analysis at the U.K.-based Energy & Climate Intelligence Unit. That’s why companies such as Hitachi are “pushing for the government to take a bigger stake” to reduce borrowing from banks or capital markets, and therefore lower borrowing costs, he added.

The latest setbacks are spooking the industry.

Tom Greatrex, chief executive of the Nuclear Industry Association and former Labour MP, called the news “disappointing, and very concerning.” He warned that the “urgent need for further new nuclear capacity in the U.K. should not be underestimated, with all but one of the U.K.’s nuclear power plants due to come offline by 2030.”

The government said the developments don’t raise energy security concerns, although the departure of the two Japanese companies leaves China in a leading position to develop the U.K.’s new nuclear builds.

Europe’s nuclear industry association Foratom is closely watching developments in the U.K., which has long been a vocal member of the bloc’s pro-nuclear camp.

The turmoil in the UK.’s nuclear plans are also being tied to the Brexit debate, as officials warn that politicians and civil servants simply don’t have the capacity to handle the crisis of quitting the EU along with planning the U.K.’s clean energy future.

“Hitachi’s decision —  the result of a civil service that is distracted by Brexit, a complete lack of political leadership and global investor nervousness — leaves that [nuclear] strategy in tatters,” said Andrew Adonis, a Labour member of the House of Lords and former chair of the National Infrastructure Commission, on Saturday.

Europe’s nuclear industry association Foratom is closely watching developments in the U.K., which has long been a vocal member of the bloc’s pro-nuclear camp. The lobby is keen to push the message that nuclear power will have to play an important role in the EU’s energy mix if it’s to cut greenhouse gas emissions to net zero and align its climate goals with the Paris Agreement by 2050. It’s also calling on governments to rethink financing support and investment strategies to attract investors and reduce capital costs for nuclear projects.

“Currently, from an investor’s perspective, the unsustainable design of the electricity market in the European Union and a severe lack of a predictable investment framework have a negative impact on new investments in nuclear capacity, which we can also observe in the case of the Wylfa project,” Foratom said earlier this week.

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