Generation, Nuclear, Analysis

What is the future of the Moorside nuclear power plant and what does the cancellation of the project tell us about the prospects of the UK’s wider nuclear programme?

Nuclear has been at the heart of the coastal Cumbrian economy since the mid-1950s, when the UK opened the world’s first civil nuclear power station at Calder Hall.

This means disappointment about the announcement by Toshiba earlier this month that it is pulling the plug on its plans for a new plant at Moorside was felt especially acutely in this part of the world.

“Thrown under a bus” was how coastal Cumbrian MP John Woodcock described the way his constituents had been treated.

So what is the future of Moorside and what does the cancellation of this project tell us about the prospects of the UK’s wider nuclear programme?

Toshiba had been working since 2011 on plans to build a new nuclear power station at Moorside, immediately to the north of the now decommissioned plant at Sellafield.

However, Toshiba was nearly pulled into bankruptcy last year by the failure of its US-based nuclear arm Westinghouse. Following this corporate near-death experience, Toshiba’s board decided to exit the nuclear business.

But finding a buyer for NuGen proved problematic. Kepco, the South Korean nationalised utility that has recently opened a new nuclear plant in Saudi Arabia, was stripped of its preferred bidder status after negotiations with Toshiba and the UK ­government stalled over financing.

Failure of government?

Woodcock was clear about where the blame lay: the government’s failure to consider taking a stake in Moorside, such as that being discussed with Horizon, the backer of plans for a similar large plant at Wylfa on the island of Anglesey in Wales.

Tim Yeo, former chair of the energy and climate change select committee, agrees with Woodcock that the government’s decision not to take a stake in Moorside was a blow for the project. He adds that Kepco “clearly lost patience”.

“It’s a kick in the teeth for the Koreans and pretty discouraging that a deal available to somebody else is not available to them. You can hardly blame them if they want to fold up their tents and go away.

“It’s not surprising as they’ve been waiting around for months with no news. [It’s] a very serious setback for the survival of the UK nuclear energy industry. I like to think that something can be salvaged, but it’s hard to be optimistic.”

Justin Bowden, national secretary of the GMB union, argues that taking a stake would have paid off in terms of lower long-term borrowing costs. He says: “It’s amazing for what is in government terms a small amount of cash can shave off a huge amount of cash and provides a lot more certainty.”

But Tom Edwards, a senior ­consultant at Cornwall Insight, is less convinced that the government should carry the can for the Moorside project’s demise. He says: ­“Moorside is more to do with the problems that Toshiba had specifically and [it] wanting to get out.”

Why cancellation matters

The cancellation of Moorside is clearly a hammer blow to the west Cumbrian economy, where the nuclear industry is the main source of secure, well-paid jobs.

But Moorside’s cancellation matters for the UK’s efforts to decarbonise its energy generation system while maintaining ­security of supply.

The 3GW plant would have supplied the equivalent of 7 per cent of the UK’s electri­city demand, which leaves a large gap to be filled.

Richard Howard, head of research at Aurora Energy, says: “When you add all the numbers on the carbon side, it’s not impossible to have a very high renewable and low nuclear scenario, but it makes life a lot easier to have two or three new nukes rather than one.

“Something else needs to come in and fill the gap, otherwise you don’t get to those very low levels of carbon.”

The site is one of a handful designated in the national policy statement for a large nuclear site.

Added to that, unlike many other sites around the UK, the nuclear industry enjoys the support of the local population in Moorside, thanks to the industry’s long history in the area. And the area contains a reservoir of nuclear industry-related skills.

The GMB has suggested the site should be used as the location for a small modular project. Bowden says: “The longer this goes on, the greater risk you lose skills and wider expertise that would be so valuable in a nuclear power station.

“You don’t want to lose the knowledge that exists on the site and you have the connection to the grid, which is all still there from Sellafield.”

Yeo, who now chairs the industry-­supported think-tank the New Nuclear Watch Institute, says: “It would make a lot of sense given the amount of expertise there is in that part of the world.”

Game not over

The cancellation of Moorside doesn’t mean the game is over for large nuclear projects in the UK.

Horizon, the Hitachi subsidiary that is developing Wylfa, has submitted its development consent order for the project to the Planning Inspectorate, which it hopes to see approved by the end of next year.

And according to industry sources, ­Horizon is expected to have concluded its financing negotiations with the government by next spring. One says: “With the limited bandwidth that the UK government has at the moment for big infrastructure, it means there can be more focus on Wylfa.”

Meanwhile, at Bradwell in Essex, Chinese nuclear developer CGN is plugging away with securing approval for its reactor technology.The Generic Design Assessment process is expected to take another three to four years.

And at Sizewell, EDF is seeking to show that it can deliver a new plant much more cheaply, partly by deploying the regulated asset base (RAB) model that has been used to finance the Thames Tideway Tunnel. This provides investors with returns while the project is being built.

The French utility revealed at a recent Parliamentary briefing that using the RAB model, combined with savings that could be delivered through a more efficient ­supply chain, would cut the level of strike price that the company requires to £65/MWh – substantially lower than the controversial £97.50/MWh agreed for Hinkley Point C.

“We need to have in place an answer for potential buyers about the form of financial model,” says an industry source.

RAB model potential

The RAB model could be a “positive and sustainable financial framework for new nuclear” says a nuclear source. “It has a lot of potential but we need further clarity about how it will work.”

The government has told the industry that it may need to draw up primary legislation before the RAB can be rolled out in the more complex nuclear environment.

The Department for Business, Energy and Industrial Strategy (BEIS) is understood to have a 40-strong team working on RAB; it is expected to report within the next few months.

But the clock is ticking. Keeping costs to the minimum at Sizewell would depend on ensuring a seamless transition for shifting the civil engineering and construction teams working at Hinkley across to the Suffolk coast. This gives about three years for EDF to raise the finance for Sizewell.

Dr Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit, questions whether the nuclear industry should be offered such special treatment.

“Competition is working outside the nuclear sector but the nuclear industry always wants more.

“With RAB it’s tricky to keep an eye on where the money is going,” he says, expressing concerns about the risks he says are inherent with such a complicated financing mechanism.

“You have a regulator trying to keep up with an army of consultants who know the system inside out.”

Nevertheless, Yeo says some kind of special task force may be needed to get the project off the ground: “If it’s going to work, it needs a lead from central government.

“The fear is that this issue has less attention than it needs because all the energy in Whitehall is being sucked out by Brexit.”

Howard agrees: “If the government wants it to happen, it has to get more involved.”

Ensuring security of supply should concentrate minds, concludes Bowden: “Nobody is going to be interested in financing if the lights go out.”