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UK's nuclear future fades as Hitachi exit follows Toshiba

11th January 2019

By: Bloomberg

  

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Britain’s plan for a nuclear revival was thrown into disarray after the second Japanese company in as many months seemed to pull the plug on a new plant.

The UK government has put atomic energy at the heart of its effort to attract 100-billion pounds ($130-billion) of investment to upgrade its aging reactors it needs to keep the lights on. The technology has been seen as a key part in the future power mix, complementing the rising share of renewable energy.

Japanese conglomerate Hitachi will halt work on the Wylfa project and take a one-time charge as negotiations with the British government over funding stalled, the Nikkei newspaper reported. After Toshiba Corp.’s withdrawal from its Moorside plant in November, it leaves the nation with just Electricite de France SA’s Hinkley Point project underway and that’s been mired in controversy because of delays and the cost to the UK consumer.

“With all new nuclear builds it’s very expensive,” Deepa Venkateswaran, an analyst at Sanford C Bernstein in London, said by phone. “The UK has come under criticism for the high strike price it struck with EDF and there’s a lot of pressure” to get costs lower and Hitachi probably could not achieve the financial support it needed, she said.

Nuclear power has been a mainstay of the British energy mix for decades. But for that to remain, EDF’s fleet of eight plants would need to be replaced with a new generation of stations.

While some European nations, including Germany, decided to exit the technology after the Fukushima disaster in 2011, the UK pushed ahead with plans for new reactors. Nuclear is seen as a more climate friendly alternative to the coal stations that will be completely phased out by the middle of the next decade.

“The UK politicians will still press ahead with nuclear and thus will now have to offer more attractive conditions to the developers to make sure we build enough atomic capacity to replace aging reactors in a timely manner,” said Elchin Mammadov, a utility analyst at Bloomberg Intelligence in London.

Before the Nikkei report that Hitachi was pulling out, Japanese Prime Minister Shinzo Abe said the project was of “strategic importance” for both nations but wasn’t discussed when he met his UK counterpart Theresa May in London on Thursday. May said at a joint press conference that it would be “a commercial decision” for Hitachi.

The UK Department of Business, Energy and Industrial Strategy said “negotiations with Hitachi on agreeing a deal that provides value for money for consumers and taxpayers on the Wylfa project are ongoing.”

Hitachi, which will book a loss of between 200-billion yen and 300-billion yen ($2.8-billion) after freezing assets of its British nuclear business, said in response to questions from Bloomberg News that it’s reviewing the project and it hasn’t made a final decision.

The Nikkei report said the company’s board will make a decision next week and cited an unidentified executive saying the project isn’t being abandoned entirely and could be restarted in the future.

Toshiba said in November it planned to liquidate NuGeneration, its UK nuclear power developer, after failing to find a partner or a buyer for the Moorside project.

As the UK is running out of nuclear options, other technologies stand to benefit.

“We see offshore wind as increasingly viable,” said John Musk, utilities analyst at RBC Europe. Natural gas power will probably provide a significant amount of the baseload power not met by renewables.

Edited by Bloomberg

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