UK’s Nuclear Gambit Faces Long Odds Even With Sizewell Approval

The UK’s audacious push to triple nuclear power capacity inched forward with the promise of government funding for the Sizewell C station, but doubts remain about the government’s ability to greenlight enough projects by 2030 to meet that goal.

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(Bloomberg) —

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The UK’s audacious push to triple nuclear power capacity inched forward with the promise of government funding for the Sizewell C station, but doubts remain about the government’s ability to greenlight enough projects by 2030 to meet that goal.

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Considering it took about 10 years for Electricite de France SA’s plant to get this far, the government’s “go big” gambit on nuclear energy — to help wean the nation off Russian fossil fuels and reduce emissions — is seen as a long shot. And those odds may get worse for the successor to Prime Minister Boris Johnson.

“We will get it over the line because it would be madness not to,” Johnson said Thursday outside the nearby Sizewell B power station. “Let’s think about our future, let’s think about our kids and grandchildren.”

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The government wants to deliver eight new nuclear reactors this decade — needing approval at a pace equivalent to one a year. A construction program of this scale hasn’t been achieved on the continent since the French in the 1970s, prompting calls on leaders to find alternative paths for achieving energy independence and legally binding emissions cuts. 

“It will be extremely difficult for the government,” said Asgeir Heimisson, senior associate at Aurora Energy Research Ltd. “Investment would need to occur approximately every three years from 2022, requiring a total of about £180 billion of capital expenditure.”

That’s a challenge for the new prime minister, who will take over in coming days amid a recession spurred by record energy prices and an inflation rate set to hit 14% this winter.

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By 2050, a 24 gigawatt-strong fleet of new reactors is supposed to provide stable backup for offshore wind, the most-advanced renewable technology in Britain. The near-term ambition here is massive, too: reaching 50 gigawatts this decade.

If approvals don’t happen by 2030 and stations aren’t built by the 2040s, new gas plants may have to fill the gap. They are relatively quick to build and can be turned up or down depending on the wind supply. But the Committee on Climate Change advised the government that stations need to be clean from 2035 onward, using carbon capture and storage technology to meet emissions-reduction targets.

The government’s stance toward phasing out oil and gas supplies has softened in recent months. The Jackdaw natural gas field in the North Sea was approved in June, eight months after the regulator blocked the project on environmental concerns.

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To help offset a 25% windfall tax on oil and gas profits, energy companies can make fresh investments in extraction.

Then there’s coal, which may be pulled off the impending-extinction list as a relief for consumers.

The Sizewell project still needs significant backing from private investors before a final investment decision is made. It would follow on from Hinkley Point C, the UK’s first nuclear plant in three decades. Progress at Hinkley is costing more and taking longer to build than planned, stoking concerns about whether the government is right to rely so heavily on the technology.

Financing is the biggest hurdle for new stations, with the price tag for Sizewell being £20 billion ($23 billion) at the start of this year, but materials costs have surged since. An overhaul of the financing mechanism is meant to attract more funds. The regulated asset base, or RAB, model is supposed to encourage private investors and dilute the construction risk shouldered by the developer and taxpayers.

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The government’s £700 million investment is expected to form a 20% stake in the project, with EDF taking another 20%. Greencoat Capital LLC, one of the UK’s biggest managers of renewable-energy funds, is considering investing, founder Richard Nourse said in July. 

Sizewell represents a “glimmer of hope” for the nuclear industry, said Vince Zabielski, partner at Pillsbury Winthrop Shaw Pittman LLC. “The investment shows promise, but the decision is about 10 years late.”

The RAB model is a meaningful step in getting more projects approved, but it won’t open the floodgates of finance just yet, said Luba Kotzeva de Diaz, managing director European energy & renewables at Lazard Ltd.

The 24 gigawatt-target is “not viable if each project happens by negotiation that takes five to 10 years,” she said.



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