Nuclear industry presses sceptical Huhne over backing new reactors

www.guardian.co.uk
19 May 2010

Centrica and E.ON lobby Liberal Democrat energy secretary to commit government to £30bn nuclear newbuild programme.

Leaders of the nuclear industry have sought urgent meetings with the new energy secretary, Chris Huhne, amid concern that he will not provide the support needed for their £30bn investment programme in a new generation of reactors. Sam Laidlaw, Centrica's chief executive, and Paul Golby, head of E.ON UK, have scheduled talks in the coming days with Huhne, who has strongly indicated that his primary focus is renewable power.

Ian Marchant, boss of Scottish and Southern Energy, said today he had spoken by phone to Huhne this week when the minister outlined his views on the commercial viability of atomic plants. "He was sceptical on the economics of nuclear but made it clear he would allow people to make their own decisions on this and would not stand in their way if they can do it without subsidies," said Marchant, whose company is considering a new reactor in Cumbria but is far less committed to nuclear than either Centrica or E.ON. "I think being sceptical is no bad thing. The worst thing you can have is a situation where the state bends over backWards to [financially] support nuclear. Look where that got us," he added.

The SSE chief executive also confirmed the enthusiasm of Huhne for green energy, saying the minister was very well-informed and supportive of projects, such as the huge Greater Gabbard wind farm off the coast of Suffolk, which will be one of the largest offshore wind farms in the world. "He [Huhne] was well aware of SSE's credentials and he was keen to see us continuing with what we are doing and to ensure there is continuing inward investment in this sector," said Marchant.

Huhne's party, the Liberal Democrats, said in their manifesto that they opposed new nuclear plants but the coalition agreement with the Conservatives involved a new pledge to allow nuclear stations to be built with a proviso that they do not involve public subsidies. Huhne has already followed this up with a commitment to make companies pay for all their clean-up costs after a nuclear accident. Currently, the industry only pays the first £140m, with the government picking up the rest of the bill, which Huhne believes amounts to a public subsidy. Other energy bosses are meeting Charles Hendry next week. The Tory energy minister has been tasked with the nuclear brief and is considered pro-nuclear.

The industry is still claiming publicly that its plans remain on track but one of the Big Six energy suppliers involved in nuclear newbuild admitted: "We need more clarity about what is going to be their [government] approach." Another senior executive of a nuclear company said all "plans are all on hold", while a spokesman for the nuclear joint venture between E.ON and RWE admitted that there were "meaty issues to be discussed" with the government.

The economics of nuclear power have already been hit by low gas prices and a weak pound, which makes it more expensive for UK-based companies such as Centrica to import reactor parts. The government has also promised to introduce a minimum carbon price to help make nuclear economic, which the Liberal Democrats support. But the industry will want it to be at least €50 a tonne, compared with current prices of about €15.

Firms are also concerned that Whitehall cost-cutting could result in the programme to decommission existing reactors, which is funded by the Department of Energy and Climate Change (DECC), being slashed. Clare Spottiswoode, chair of EnergySolutions in the EU, said: "Many potential investors in the UK's nuclear newbuild programme will view how the decommissioning budget is dealt with as an early signal of how committed the new government is to nuclear power."

A DECC spokesman said: "The government's policy and next steps on new nuclear are absolutely clear and explicitly set down in the coalition agreement." The DECC, which was set up only two years ago, and employs about 1,000 staff, also faces big cuts. Greg Clarke, then shadow energy secretary, is said to have told one industry executive that he planned to axe 500 jobs from the department.