Britain Charts Way to Wider Nuclear Investment

By STEPHEN CASTLE    --   Published: May 22, 2012 

LONDON — Britain announced plans Tuesday to finance a new generation of nuclear power plants and renewable energy facilities in a move that illustrates divergent energy policies within the European Union as it grapples with the challenge of reconciling economic and environmental objectives.  

While Germany intends to phase out nuclear power and France’s new president, François Hollande, aims to reduce his country’s reliance on it, the British government appears to be moving in the opposite direction with its proposals, aimed at luring investment of £110 billion, or $175 billion, to build new reactors and renewable energy plants.

The 27-member European Union sets climate change targets and co-ordinates efforts to reduce energy dependency, but decisions on energy sources remain with national governments.

Britain’s proposals appear to be drafted to sidestep E.U. restrictions on state aid that might prevent direct subsidies for the construction of new nuclear power plants. Instead the plans, announced in draft legislation by the Department of Energy and Climate Change, would guarantee prices for low-carbon electricity and pay producers for backup supplies when renewable sources like wind power fail to meet demand.

Britain hopes that this guaranteed price, to be paid by businesses and consumers, will secure the financial commitment from energy utilities to construct nuclear reactors and clean-power projects needed to meet European targets and reduce Britain’s reliance on natural gas plants.

Recent developments suggest that could be a tough battle. In March, Britain’s nuclear program suffered a serious setback when two German companies, RWE and E.On, announced that they would not proceed with a £15 billion joint venture in Gloucester. The energy giants balked at the huge capital costs involved, blaming the economic crisis and arguing that the German government’s plan to phase out nuclear power had put additional pressure on their balance sheets.

According to British news reports, Centrica has threatened to pull out of a project to build a new nuclear power plant at Hinkley Point in Somerset in a joint venture with EDF Energy, the British subsidiary of the French giant EDF.

To add to the difficulties, the main architect of Britain’s energy policy, Chris Huhne, quit the government in February to fight charges that he perverted the course of justice over a speeding offense in 2003.

His successor, Edward Davey, said Tuesday that new plans were in the national interest and would support as many as 250,000 jobs.

“By reforming the market, we can ensure security of supply for the long-term, reduce the volatility of energy bills by reducing our reliance on imported gas and oil, and meet our climate change goals by largely decarbonizing the power sector during the 2030s,” Mr. Davey said in a statement.

That formulation hinted at a less ambitious timetable for reducing carbon emissions than that proposed by the British government’s independent advisory body, the Committee on Climate Change.

The proposals have intensified debate over the cost and safety of nuclear power after the Fukushima disaster in Japan and the decisions by Germany and by Switzerland, which is not in the European Union, to phase out nuclear reactors.

During the recent presidential election campaign, Mr. Hollande suggested reducing France’s dependence on nuclear power from around 75 percent to around 50 percent and shutting 24 of France’s 58 reactors by 2025.

Critics attacked Britain’s determination to renew its nuclear capacity. “This proposal has distorted policy in order to try to disguise the massive subsidies nuclear will need, but they remain so huge that the policy will fail anyway,” said Tom Burke, a former environmental campaigner and visiting professor at Imperial and University Colleges, London,

Industry reaction was far from euphoric. In a statement, Volker Beckers, chief executive of RWE Npower, said the investment required would add up to around £8,000 for every household in Britain.

“For Britain to remain an attractive market for investors, energy policy must be given adequate priority and resource across government,” he said.

“I remain concerned by the amount of change being implemented in the energy sector and the time it is taking,” Mr. Beckers added. “I applaud government’s appetite for reform, but pulling so many levers at once in such a complex area risks losing sight of your original objectives. What the energy sector needs now is simplicity and clarity.”

Nuclear power stations currently produce around a third of the electricity and 15 percent of the energy consumed in the European Union, according to the bloc’s executive, the European Commission.

In Britain, 16 reactors in nine nuclear power stations provided around 16 percent of electricity in 2010. But the government says that all but one of the existing nuclear power stations will have to be shut by 2023.

Within the European Union, there are 147 nuclear power reactors, according to unofficial data collated by European officials. A new unit is under construction in Finland and France, and two each in Romania and Slovakia. A further seven have been approved by the national authorities, with five or six planned but not yet approved.

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