Huge cost and decades-long payback times of new nuclear power make it difficult to fund during economic crisis, MPs told
Investing billions in new nuclear power stations would have forced a credit-rating downgrade on energy giant RWE, the company’s chief executive has revealed. The head of another big six energy company, E.ON, blamed the abandonment of its nuclear plans on a lack of “financial firepower”.
Tuesday’s developments are the latest to demonstrate that the huge cost and decades-long payback times of new nuclear power stations are making them difficult to fund in the current economic crisis. RWE and E.ON cancelled their joint plan to build new reactors in March, while nuclear giant EDF has delayed work at its site at Hinkley and EDF’s nuclear partner Centrica says the case for nuclear investment is “unproven”.
Volker Beckers, CEO at RWE npower, was questioned on the company’s decision by MPs on the Commons select committee for energy and climate change. Persisting with the Horizon joint venture with E.ON was not an option, he said, adding: “It would have meant a downgrading, and we could not afford to do that.” The company had already suffered one downgrade and was reducing its capital requirements in response.
“Our decision was down to the financial firepower of the company,” said Tony Cocker, CEO of E.ON UK. “Nuclear is an extremely long-term investment.”
Both RWE and E.ON are German-owned and were damaged by the decision of the German government to desert nuclear power, as well as lower recent profit margins in gas- and coal-powered electricity generation.
The companies are seeking to sell the Horizon project, which had aimed to invest about £20bn in nuclear reactors at Wylfa on Anglesey, north Wales, and Oldbury in Gloucestershire. Despite E.ON’s pull-out, Cocker told MPs the UK had the best policy environment for investment in new nuclear power in Europe: “But investors will need greater patience than us.”
Energy minister Charles Hendry was also questioned by MPs on the faltering of the government’s plan to have eight new nuclear power stations built within the next decade. “I remain very positive,” he said. Ministers are currently negotiating with companies over how much energy customers will be charged to pay for investment in new, low-carbon generation, including nuclear and wind power. “We will not sign up for anything we think is bad for bill payers. We believe nuclear should be the lowest-cost, large-scale energy source, and the price will reflect that.”
Hendry told MPs that at least £100bn was needed to build replacements for the many old coal, gas and nuclear plants that will close in the next few years. He said the government’s forthcoming energy bill aimed to ensure energy security, while meeting greenhouse gas emissions and getting the best deal for the consumer. Being exposed to events in other countries, such as the nuclear disaster at Fukushima and the election of nuclear-power-sceptic François Hollande in France, was “inevitable”, said Hendry. “If we want to see nuclear power as part of the energy mix, that’s a challenge we have to take on.”