UK doubles down on nuclear power plans
London is stepping up its talks with Hitachi over the proposed Wylfa Newydd plant
Nuclear power stations are eye-wateringly expensive to build and court controversy. But the UK government is determined enough to ensure nuclear is part of its future low-carbon energy mix that it is considering investing state funds in a new plant in north Wales to be built by a subsidiary of Japan's Hitachi.
Discussions over the Wylfa Newydd project on the island of Anglesey have become bogged down over recent months by increasing cost estimates and doubts among Hitachi's executives—and the project's potential backers in Japan—over whether the high financial risks make the project viable.
On 4 June, UK energy minister Greg Clark confirmed that detailed talks with Hitachi were now under way and that direct public investment could form part of the deal. Its extent remains to be determined, but is likely to amount to several billion pounds.
According to industry estimates, that total price tag for the plant could now be as much as £20bn ($26.9bn)—double the figure mentioned when the project was first mooted. Horizon Nuclear Power, the Hitachi subsidiary building the plant, has yet to provide a detailed costing.
Hitachi is due to make an investment decision in 2019 on the plan to build two Advanced Boiling Water Reactors (ABWRs), which would generate a total of some 2.9 Gigawatts. The idea is to commence construction in 2020 and produce power by 2025. The project is being built at the same site as a previous nuclear reactor, which closed in 2015.
Change of tack
The direct injection of substantial public funds into nuclear projects has traditionally been anathema to the UK's Conservative government. The proposed change of tack reflects a determination to get an important infrastructure project moving, with little appetite for the project among commercial financial institutions.
Wylfa offers more than just a badly needed new power source at a time when older nuclear plants are reaching the end of their lives, and the country has all but closed its entire coal-fired power capacity. Its construction would also offer employment to more than 8,000 people in a region of high unemployment—and strengthen ties with Japan at a time when the UK is seeking to broaden its international alliances in anticipation of Brexit.
The Wylfa plans have prompted predictable reactions in opposing camps.
Matt Rooney, engineering policy adviser at the UK's Institution of Mechanical Engineers, has said building Wylfa would provide high-skilled engineering jobs and bolster the long-term outlook for the nuclear manufacturing supply chain in the UK. "This is especially important following the decision to leave the European Union, and the potential loss of access to the single market for nuclear good and services," he said.
On the opposing side, Kate Blagojevic, head of energy at environmental group Greenpeace UK, said, "The notion that new nuclear will be good value for money is farcical when it's so much more expensive than cleaner, safer renewable alternatives that are faster to build. The economics are so weak that private investors have refused any involvement and the government is having to bail out this disastrous project before construction has even begun."
Hinkley C comparisons
The last UK nuclear plant to get the go-ahead, the 3.2GW Hinkley C in south-west England, remains mired in controversy over the high cost of its electricity, and the use of European Pressurized Reactors (EPR) being built by EDF—majority owned by the French state—in partnership with China's state-owned General Nuclear Power Group. EPRs have suffered setbacks elsewhere.
The UK government agreed to pay EDF £92.50/megawatt-hour (MWh) for power from Hinkley C, well above current market rates and considerably higher than the likely cost of either renewable or gas-fired power, when that plant is scheduled to become operational in the mid-2020s.
Hitachi's ABWR technology is better established than that for the EPR, with Hitachi saying that problems affecting similar reactors in later life elsewhere in the world would not affect Wylfa’s latest version. Wylfa’s electricity is also set to be cheaper – costing perhaps £15/MWh less than that from Hinkley C, according to some reports.
But that would still hardly be a bargain. According to Ofgem, the UK electricity sector regulator, the average price of day-ahead baseload contracts was under £55/MWh in February this year.
The lower returns on offer may have also contributed to a dearth of private sector investment in such a high-risk project. Against that backdrop, the UK government may have felt it had little choice but to beef up its investment and guarantees to keep Hitachi interested.
The government touted the new phase of talks with Hitachi as a big step forward. But the Japanese company remains circumspect about prospects for Wylfa. "We have not decided anything yet," Hitachi's chief executive told reporters on May 28.
Japanese nuclear manufacturers have been seeking new markets beyond Japan, since the Fukushima nuclear plant meltdown of 2011. Triggered by a tsunami resulting from an earthquake, this caused the shutdown of all the country's nuclear capacity—most of which remains shut—and delayed plans for new nuclear projects.
The Japanese government is keen to provide support for a sector in which its companies have a strong track record, lining up assistance from a number of state-owned institutions. However, one those has apparently already baulked at the risks involved in the Wylfa project. A Development Bank of Japan official reportedly said his institution would be reluctant to invest more than half of the 75 billion yen ($680m) it has been asked to put into Wylfa.
Overseas markets elsewhere have also been creating difficulties for other Japanese nuclear firms. Soaring costs forced Toshiba's former nuclear subsidiary Westinghouse Electric to file for bankruptcy in the US in 2017, and have also jeopardized Mitsubishi Heavy Industries' plans to build four reactors in Turkey.