U.K. Lawmakers See Need for Plan B if Nuclear Boom Fails

The U.K. government, planning to close almost all nuclear power stations within 10 years, needs a “plan B” in case new reactors aren’t built on time, according to a cross-party panel of lawmakers.

With all except one nuclear plant due to shut by 2023, failure to build the planned 16 gigawatts of new capacity by 2025 will jeopardize legally binding emission targets, the Energy and Climate Change Committee said today in a report. It said lessons should be learned from reactor delays in Europe.

“The government seems to be crossing its fingers that private companies will deliver a fleet of new nuclear power stations on time and on budget,” said Tim Yeo, a member of the ruling Conservative Party who leads the committee. “Ministers need to urgently come up with a contingency plan in case the nuclear industry does not deliver.”

Lawmakers are weighing new energy laws designed to spur 110 billion pounds ($165 billion) of investment in generators and grids by 2020. The draft includes support for low-carbon projects such as nuclear and renewables, and plants that capture emissions. The experience of France and Finland, where new reactors have overshot budgets and schedules, has fueled the debate.

Britain is determined to build new nuclear to support new jobs and boost low-carbon electricity, U.K. Energy Minister John Hayes said today. “We’re focused on bringing forward this investment, but also getting the best deal for the consumer,” he said.

Blackouts Possible

The government’s alternative to expanding atomic energy would be “a huge step-change” in the priority given to energy efficiency and renewables, Yeo said by phone. “Given that the government is struggling even to meet its existing commitments in those two areas, that plan B is scarcely plausible.”

Power failures are possible before the end of this decade without a better strategy to build the reactors, David King, the former government’s chief scientific adviser, said last year. Iberdrola SA (IBE) Chairman Ignacio Galan also said last month that Britain risks blackouts this decade unless it details proposed capacity auctions soon. The auctions are aimed at driving development of gas-fed plants.

Utility Positions

While Electricite de France SA, Hitachi Ltd. (6501), Iberdrola and GDF Suez (GSZ) SA plan a combined 16 gigawatts of power stations in the U.K., EDF is the only company making progress with its proposals. Centrica Plc (CNA), EON SE and RWE AG (RWE) have withdrawn from British nuclear projects.

The government is in talks with EDF to agree on a price for power from a planned new nuclear plant at Hinkley Point in southwest England. The utility is seeking a so-called strike price of 95 pounds to 99.50 pounds a megawatt-hour, or about twice the current wholesale market rate, a person with knowledge of the negotiations said last week.

“The consequence of not having a plan B means that the government’s negotiating position vis-a-vis EDF is very weak,” Yeo said. It may be easier for the government to compromise by awarding longer contracts rather than by agreeing to pay higher prices, he said.

EDF is seeking to lock in prices for 40 years under the program, known as contracts for difference. The deal will be fair and balanced for U.K. consumers and investors alike, EDF said today in a separate statement.

Unlocking Funds

“Agreeing this contract is the key to attracting investors and to unlock funding for this project which will give the U.K. the secure, low carbon energy it needs for the future,” EDF said in statement. “The government can act now to deliver nuclear in time to avoid the need for a back-up plan.” A planning decision at Hinkley Point is due from government by March 19, EDF said.

In France, EDF has seen costs for its new Flamanville plant more than double to 8.5 billion euros ($11 billion). That project, under construction since 2007 and due for completion in 2016, is using an Areva SA (AREVA) reactor, the same model as proposed in the U.K. It was originally intended for completion last year.

EDF’s Hinkley Point cost estimates given to the U.K. government already include lessons learned from construction at Flamanville, EDF said today.

In Finland, Teollisuuden Voima Oyj is targeting 2016 to complete its Olkiluoto-3 reactor, about seven years behind its original schedule. The company is also using the Areva model.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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