Horizon nuclear decision leaves UK ‘hostage to volatile gas prices’

The decision by German utilities RWE and E.ON to pull of out the Horizon nuclear power project in the UK will make the country a “hostage to volatile gas prices for years to come”, according to an engineering trade group.

Wylfa nuclear power plant

Alistair Smith, chairman of the Institution of Mechanical Engineers’ power division, said the decision announced yesterday was “worrying news which will certainly delay a key part of the UK’s nuclear build programme“.

“This means that over the next decade we will be even more reliant on imported, carbon-intensive gas,” he added, and also criticised a long term lack of investment in Britain’s power industry.

“It is a sad indictment of successive governments’ failure to nurture a strong UK power generation industry that a decision made in Berlin can have such a serious impact on British energy policy,” he said.
Charles Hendry
Yesterday UK energy minister Charles Hendry said the decision was not made because of “any doubts about the role of nuclear in UK’s energy future”.à‚ Hendry spoke at an energy event on Tuesday and admitted that, historically, Britain’s energy sector had failed to deliver investment opportunities.

What Hendry missed was on Tuesday was the opening speech ” given by RWE chief executive Volker Beckers, who delivered an attack on the government’s Energy Bill and Electricity Market Reform, which aim to introduce a carbon price floor, long term contracts-for-difference, an emissions performance standard and a capacity mechanism.

He said that “every part of the UK sector seems to be up for reform” and it was suffering from “layer upon layer” of regulation. “The British approach is regulation with a veneer of competition,” he said, adding that “if the Energy Bill is deemed unworkable then the investment potential in the UK will be diminished. There will be better places to invest ” that is the simple truth.”

A ‘simple truth’ that came to pass some 48 hours later. On the sidelines of the same conference, Peter Kiss, sector leader for global power and utilities at consultants KPMG, told PEi that in the UK, the EMR was proving too much of a grey area. “If a country has decided to go for nuclear, the big question is what will be the underlying market mechanism prior to a company making a final financial commitment. It is very important to put the rules on the table, otherwise the private money is just not coming.”

The same argument was put forward by Sara Vaughan, E.ON UK’s director of regulation and energy policy.

The government believes new backers will step into the hole left by RWE and E.ON. There will be many both in the UK and internationally who will have their doubts.

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