UK energy policy “in tatters” as E.ON and RWE ditch nuclear

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By a Newsnet reporter

Reacting to news that the German utility companies E.ON and RWE npower are to pull out of nuclear power in the UK, SNP Westminster Energy and Climate Change spokesperson Mike Weir MP said the situation demonstrated the fallacy of UK Government’s energy policy.

In a statement released on Thursday, the companies said they had decided not to proceed with their Horizon project, which planned to develop nuclear reactors at Wylfa in North Wales and Oldbury-on-Severn in Gloucestershire.  

Tony Cocker, chief executive of E.ON UK said:  

“Eon 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.”

Despite withdrawing from 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.  The company added that it had invested £1 billion in the past year in the UK including in highly efficient gas plants and renewables.

The decision to pull out of the nuclear investment programme comes after the German government announced plans to phase out nuclear power in the German domestic power market following concerns about the cost and safety of nuclear energy after the Fukushima disaster in Japan.  The German government decision has caused additional costs for the companies, and had raised doubts about their ability to raise sufficient financial backing to develop the Horizon project.

The withdrawal of the two German companies from the UK Government’s nuclear programme 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.

Gary Smith of the GMB union, representing many workers involved in the energy industry, said in a statement that E.on and RWE’s decision left the UK Government’s energy strategy “in tatters”, and added: “We need an urgent discussion involving Government, the industry and unions about where we go from here.

“David Cameron announced a partnership in nuclear with France during a recent visit to Paris. This is nonsense. Britain is going to be a bit player in what is a growing global industry.  It simply isn’t good enough for Government to sit back and hope it’s all going to come good”.

Keith Allott, head of climate change with environmental pressure group WWF-UK, said: “Despite the Government’s efforts to bend over backwards to support the nuclear industry, it is now blindingly clear that the economics just don’t stack up.

“Three major utilities have now pulled out of nuclear plans in the UK, and the only two reactors under construction in Europe are massively over budget and behind schedule. The Government needs to wake up and smell the coffee – if it backed the renewables industry to the hilt instead of flogging the nuclear horse, then the UK could become a world leader in a sector that is already seeing massive growth.”

UK Energy Minister Charles Hendry admitted that the decision was “clearly very disappointing”.

However the UK Energy Minister insisted that “the UK’s new nuclear programme is far more than one consortia” and that “plans from EDF/Centrica and Nugen are on track”.

Despite Mr Hendry’s comments, analysts in the energy sector have expressed doubt about the commitment of the French company EDF and Centrica to the development of nuclear power.  Writing on the BBC website, BBC business editor Robert Peston reports that the companies’ continuing involvement will depend upon the UK Government providing substantial subsidies to help fund the programme.

Mr Peston writes:  “The price of electricity that would be generated from new nuclear plants in the UK is looking more and more expensive.  Which means that it won’t be commercial for Centrica and EDF to provide it … ”  

Mr Peston adds that he does not detect much confidence in the energy companies that the UK Government will provide the extra funding required for them to continue participating in the nuclear energy generation programme.

The news that the UK Government’s energy policy is “in tatters” comes as figures were published showing that the amount of renewable energy generated in Scotland increased by 45% in 2011 over the previous year.  It is estimated that Scotland generated 35% of its energy needs from renewables last year, beating the Scottish Government’s target of 31%.  The figures mean that Scotland now generates 40% of the UK total for renewable energy and is on course to meet the Scottish Government’s ambitious target of 100% of Scotland’s energy needs being met by renewables by 2020.

Mr Weir said:

“Despite the UK government bending over backwards to rig the market in favour of nuclear power the decision by these companies to pull out shows at nuclear power is simply not the answer to our energy needs.

“It is noteworthy that E.on has decided instead to invest heavily in new offshore renewable energy.  That eloquently demonstrates that the future lies in renewable energy to provide a clean green future and true energy security.

“The SNP Scottish Government has led the way by rejecting nuclear and setting a 100 per cent renewable target for Scotland’s own electricity use.  The UK government should now follow this lead and abandon plans for expensive and unsustainable nuclear expansion.

“It would be a massive betrayal if instead they were to throw yet more money at the last companies prepared to pursue nuclear expansion.”