As car crash press conferences go, it wasn’t quite up there with Donald Trump’s impromptu gathering of the White House press corps on Thursday last week. However, for the UK nuclear new-build programme, the chaotic briefing held at Toshiba’s Tokyo headquarters two days earlier will have more momentous consequences.
The Fortune 500 manufacturing conglomerate announced it was delaying the publication of its quarterly earnings figures. The reason for the month-long pause is a $6 billion write-down in the value of the company’s nuclear business after cost overruns on two nuclear power plants it is building in the US.
This is a problem for the UK nuclear industry because Toshiba holds a majority stake in NuGen, which is meant to be delivering the 10.6GW plant at Moorside in Cumbria. Toshiba says it intends to remain involved in the project, but that it is withdrawing from exposure to the project’s construction risk in line with a broader exit from nuclear building work outside Japan.
Toshiba is understood to be keen for its reactor and turbines to be used, effectively becoming a supplier.
Kepco, South Korea’s biggest electrical utility, remains the perceived front runner to take Toshiba’s stake. The company is currently developing a fleet of four nuclear plants in the United Arab Emirates.
Hitachi-backed Horizon’s announcement last week that it was entering into a partnership with US operator Exelon will have calmed nerves about its own project to develop a new nuclear plant at Wylfa on the Isle of Anglesey. A spokesman for Horizon told Utility Week the company’s commitment to the project is undimmed.
However, the construction supply chain is getting twitchy about progress at the site.
“Bringing an experienced operator like Exelon into the project is a good move but this only helps them get through the generic design assessment. If Exelon had a big wad of money to fund construction, then they would be even more attractive,” says a supply chain source.
The uncertainty surrounding the delivery of nuclear new-build appears to be prompting fresh thinking in government about how to support the programme.
The Sunday Times reported that the department for Business, Energy and Industrial Strategy (BEIS) is working up plans for the government to take stakes in future nuclear new-build plants, like Moorside.
Later in the week, the Financial Times reported the government is seeking to achieve a 15-20 per cent discount on the strike price agreements used for future nuclear plants compared with the £92.50 sum agreed for Hinkley C.
Utility Week has also learnt that the National Audit Office is taking a fresh look at the value for money of the Hinkley deal, which will heighten ministers’ sensitivity about ensuring the project can’t be seen to be bumping up electricity bills.
Shadow energy minister Alan Whitehead argues the government must secure a better deal than that achieved on Hinkley to maintain public faith in the UK nuclear programme. He says an input of government cash would provide a “bedrock” of certainty that would give other investors greater confidence about getting involved.
The supply chain source agrees: “Twenty-five per cent of funding would be sufficient to trigger other investment because they know there will be a big chunk of money coming in.”
He estimates that making use of the cheaper borrowing rates on offer to the government would bring the overall cost of construction down by 15 per cent with knock-on impacts on the price of electricity generated at the plants.
“If we are going to meet the carbon reduction commitments, it’s hard not to see government taking a bigger stake,” says Dan Lewis, energy policy adviser to the Institute of Directors.
But he worries about whether the government can afford to stump up the cash.
The deficit may have slipped down the public agenda since the result of last June’s Brexit referendum, but it is still colossal by historical standards, Lewis says: “There are so many calls on government capital for infrastructure projects. We need to have a frugal approach to infrastructure, which means we are going to have say no to some things.”
Mycle Schneider, who has advised a number of European governments on nuclear issues, agrees that the UK nuclear industry can’t rely on the prospect of greater direct public support.
“It’s very clear that the public subsidy would be very limited. We are talking about very large sums of money. This is pie in the sky. If the government comes up with a few billion pounds, it will not be enough to fill the gap.”
Schneider argues that the UK government should be rethinking its approach to the energy mix by refocusing its efforts into encouraging renewable energy projects, which are delivering ever-more generation capacity.
Whitehead argues though that the benefits of putting in money up front would outweigh the costs of the initial investment.
The Treasury is understood to be taking a bearish view of direct support for nuclear new-build. Next month’s Budget will be an opportunity to demonstrate whether it has been won over.