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UK Energy Policy In Disarray, Nuclear Strategy ‘Uninvestable’

Britain’s nuclear strategy is “uninvestable” for private clients, who are only likely to put money into new plants if the government shoulders more of the risks involved, Citigroup’s head of European utilities research said on Wednesday.

Nuclear developers plan to build around 16 gigawatts of new nuclear capacity in the UK by 2025 to help meet the UK’s tough climate targets, but the investment environment is “dire,” Peter Atherton told journalists at a briefing in London.

“I don’t think the UK will get the 16 gigawatts they are after by (then),” he said.

“Investors are demanding more of their returns up front in cash rather than dividends, indicating they don’t trust the capital growth of the sector.

“The risk-reward balance for public equity market investors is massively negative and I can’t see a way of making it attractive at all,” Atherton added.

Shares in the European utility sector have fallen about 30 percent since February 2009, according to Citigroup, as EU utilities have been more exposed to commodity price rises than in Asia or the U.S., and, most recently, due to the impact Japan’s nuclear crisis.

Many EU countries decided to rethink their atomic energy policy following Japan’s Fuskushima disaster. Germany decided to shut down its nuclear reactors for good by 2022 and the Czech nuclear expansion could also face delay.


Nuclear power provides two important public benefits: low-carbon power generation and security of supply, Atherton said.

“If the value of new nuclear is essentially in those public goods then the public must have to pay for them.

“If we want (plants) built, the state will have to take on the risks,” he added, saying the government could do this through direct subsidies, taxes or building new plants itself.

UK nuclear power developers face several risks from planning uncertainty, construction costs, power prices (revenue), operating costs, waste and decommissioning.

The UK government wants to reduce the time it takes to get planning permission and is trying to cut power price risk through its electricity market reform. But it still expects developers to shoulder the risks involved in constructing new plants.

“As we stand today, is (new nuclear) an investable option for Centrica, RWE? Simply put, no. The cost of capital based on those risks would be way too high to give you an electricity price which is affordable.

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