Britain’s long-term energy policy lay “in tatters” on Thursday after two of the ”big six” energy companies pulled out of multi-billion pound plans to develop new nuclear plants. In a “devastating blow” for the Government’s energy policy, RWE npower and E. ON announced they would end their joint venture to build nuclear power plants in Britain.
Critics claimed the decision meant that the £15 billion plan “Horizon” project, which would develop reactors at Wylfa in North Wales and Oldbury-on-Severn, Glos, was now effectively dead.
But the German-owned companies, which operate fossil fuel and renewable generation in Britain, said they were looking for a new owner for the Horizon Nuclear Power.
The utilities had planned to build up to 6,000 megawatts of new nuclear plants in Britain by 2025 and had been due shortly to announce a reactor design choice for Wylfa, the first new plant.
The decision was made amid the global economic crisis and significant costs of the project, they added.
Unions said the “devastating blow” to the government’s energy plans had thrown ministerial plans to generate adequate power into chaos.
Energy analysts said the Government did not have a Plan B and needed to move fast to attract new funding for the project or the entire policy was in jeopardy.
But environmental groups seized on the news as evidence that nuclear power, which provides just under a fifth of UK electricity supplies, was not a viable option for the country’s future energy mix.
The government admitted the decision was “clearly very disappointing”.
Thursday’s announcement was made in a joint statement issued by the two companies following a “strategic review, separately carried out by both”.
“RWE npower and E. ON UK said today that they would not proceed to develop new nuclear power projects in the United Kingdom through the Horizon joint venture,” it said.
“RWE and E. ON will now focus on finding a new owner for Horizon Nuclear Power.
“Both parties will endeavour to ensure that Horizon’s assets and work on development can be taken up quickly by other potential investors.”
The companies insisted their joint venture company Horizon’s development projects were viable for another investor to develop nuclear sites.
They also confirmed they were committed to investing in energy schemes in the UK.
RWE npower said a strategic review in light of the global economic crisis and the accelerated phase-out of nuclear power in Germany, coupled with significant costs of running the joint venture, had led to the decision.
E. ON said its decision had been made against the backdrop of the group’s wider financial constraints, but said it would be continuing to invest in Britain.
Despite pulling out of new nuclear, E.ON said it would continue to develop its £736 million Humber Gateway offshore wind project and its £120 million biomass plant in Sheffield, and had invested £1 billion in the past year in the UK including in highly efficient gas plants and renewables.
RWE npower said it had invested £1.2 billion in new renewable energy in the UK in the past three years, and more than £1.6 billion in new highly efficient gas-fired power stations.
Volker Beckers, chief executive of RWE npower, said: “We remain convinced that Horizon’s development projects represent excellent sites for new nuclear power stations in the UK, and we would like to express our sincere thanks to the Horizon employees for their hard work in bringing the projects to this stage of development.
“It is because of the strength of support for our development work, particularly on the island of Anglesey, that we continue to believe that nuclear power has an important role to play in the UK’s future energy mix.”
Tony Cocker, chief executive of E. ON UK, added: “E. ON has decided to focus its investment in the UK on other strategic projects that will allow us to deliver earlier benefit for customers and our company, rather than the very long term and large investment new nuclear power calls for.
“Our commitment to the UK remains as strong as ever and as our track record shows, with over £1 billion of investment in the last year alone, we will continue to select the right projects in which to invest.”
Last year, the Government gave the green light to eight sites, including Wylfa and Oldbury, for a new generation of nuclear reactors, which ministers say are needed to reduce UK carbon emissions and keep the lights on.
Unions say the project could be worth as much as £3 billion into the UK supply chain and generate 5,000 jobs for the project on Anglesey.
They added it could also have sustained the Springfields Fuel Plant in central Lancashire for decades and safeguard more than 1,000 jobs, apprenticeships and graduate recruitment.
Gary Smith, of the GMB union, said the “devastating blow” now left the government’s energy strategy “in tatters”.
“It is really bad news in terms of construction jobs and the potential employment that would have been created in the UK manufacturing supply chain,” he said.
“New nuclear is an essential component in keeping the lights on in the UK. We can’t keep extending the lifespan of existing nuclear stations and renewables cannot fill the gap on their own.
“The Government must act, and now. We need an urgent discussion involving Government, the industry and unions about where we go from here.”
Plans for a new generation of nuclear power plants, which the Government believes will form an important part of the UK’s future energy mix as the country attempts to shift to a low-carbon economy, were hit by the Fukushima disaster last year.
The latest withdrawal from nuclear new-build comes after Scottish and Southern Energy announced last year that it was pulling out of the NuGeneration joint venture to build a new plant at a site near Sellafield, West Cumbria.
Germany was among the countries to bring to a close its nuclear power programme after the crisis at the Japanese nuclear power plant, which was caused by the magnitude 9.0 earthquake and subsequent tsunami which hit the country’s coast.
But following a review of the situation in the UK, the Government said it would be pushing ahead with new nuclear plants at a series of existing sites around the country.
And in a bid to make the UK more attractive to investment, ministers are reforming the electricity market to introduce long term contracts that would pay a steady rate of return for energy over the life time of new low-carbon generators.
The reform aims to overcome the high capital cost of building nuclear power plants or offshore wind.
Opponents of nuclear power also point to the two reactors currently being built in France and Finland, which they say are badly delayed and over budget.