German utilities RWE and E.ON, parent companies of the Horizon joint venture, last week said they would not proceed with key plans to develop two new reactors in the UK. The decision could put the UK’s plans to stake its energy future on nuclear power in disarray.
RWE’s UK power business, RWE npower, and E.ON UK said they reached their decision not to continue with plans to build new reactors at Wylfa in Wales and Oldbury in Gloucestershire after conducting a strategic review, carried out separately by both companies.
“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,” they said in a joint statement.
Among key reasons for their decisions were that the global economic crisis had tamped down capital for major projects. “Nuclear power projects are particularly large scale, with very long lead times and payback periods,” they said.
The accelerated nuclear phase-out in Germany had also significantly diminished profit margins for both companies, they admitted. Costs associated with nuclear shutdowns had trimmed RWE’s earnings by more than €1 billion, and the company has said it planned to divest €7 billion in assets between 2012 and 2013 and start cost-cutting measures totaling about €1 billion through 2014. E.ON—which owns six of the affected German reactors, two which were shut down last March and four others which will be decommissioned over the next decade—in March said it booked a net loss of €2.219 billion in 2011. Lost income from the shutdown of Isar 1 and Unterweser nuclear plants following the Fukushima crisis cost E.ON €2.5 billion alone, the company 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,” Volker Beckers, CEO of RWE npower, said in a statement. Beckers also said that the “strength of support” of Horizon’s development work, particularly on the Island of Anglesey, showed that nuclear power had an “important role to play in the UK’s future energy mix.”
Nuclear power—along with renewables and carbon capture and storage—are cornerstones of the UK’s strategy to cut carbon emissions by 80% by 2050 and ensure its future energy security. Nearly 20% of the UK’s capacity—power now generated by older coal and nuclear plants—will shut down over the next decade. Only one existing nuclear plant will be operational in the UK by 2023, Sizewell B in Suffolk, and the government recently identified eight sites for new nuclear builds, including Wylfa and Oldbury. Construction on reactors at those sites—a total of 16 GW—was expected to begin in 2015.
France’s Électricité de France (EDF), which already operates eight reactors in the UK, has proposed four new reactors at Hinkley Point in Somerset, and plans to have the first one operational in 2019. According to The Guardian, EDF will likely be a potential buyer of Horizon.
The newspaper also pointed out that E.ON and RWE have hiked retail prices in the UK, justified by the need to finance investments in nuclear power.
Sources: POWERnews, E.ON, RWE, The Guardian