Centrica's exit isn't as big a deal as you think

Centrica withdrew from new UK nuclear projects.

Yesterday Centrica announced it would not take a 20 per cent share in the new nuclear power plant planned for Hinkley Point in Somerset. It was the minority partner with EDF, and leaves the France-based utility holding the entire (potentially £6 bn) can.

Centrica pulled out because of uncertainty on cost and schedule. No doubt its decision is a blow for the project to build a 1650 MW EPR pressurised water reactor—for which, by the way, EDF has not made a final investment decision. But there still are lots of reasons to hope that the project will still go ahead.

First, the current adverse market conditions favour nationalised utilities (or vendors) like EDF for nuclear new-build; whether it is Russia in India, Turkey, Belarus or China, or South Korea in the UAE, state-owned developers have the deepest pockets. They need them: unlike gas or coal, nuclear power plants demand most of their costs up front.

And those vendors that are not state-owned but wish to pursue nuclear new-build have had to act like it. In 2011, GE Hitachi proposed being a major investor in a new reactor for Lithuania (although those plans have probably been shot down by a referendum). Its corporate cousin Hitachi has recently come to the UK and is underwriting its pre-construction safety assessment (for now) as the new owner of nuclear new-build venture Horizon, after Germany-based utilities e.on and RWE sold out. They were beset by problems at home: after Fukushima, the German government quickly arranged a phase-out of all nuclear power plants. Over the next decade, their once-profitable assets will have to be written off.

One nuclear new-build vendor who has so far not pledged to take a share of a new-build project is France’s AREVA (79 per cent owned by the French state). However, its role as the principal contractor (with Siemens) for Finland’s Olkiluoto 3 has become tantamount to the same thing. To land the contract for the first non-France EPR, AREVA agreed with client TVO on a fixed-price contract. Subsequent delays and cost overruns have led to litigation with billions at stake.

Second, EDF’s purchase of British Energy in 2008 really only makes sense in the context of the opportunity for new-build. Seven of the eight nuclear power plants it bought at the time were based on obsolete technology whose potential for long-term operation was iffy (although their lifetimes will be extended by seven years in general). Those assets were not worth the £12.5 bn purchase cost. What was worth paying for, according to this idea, was lots of potential for new-build sites. Backing out now would harm the company’s future prospects.

Third, the UK branch of EDF, EDF Energy, has had a good 12 months. Its performance in 2012 was the best for seven years, which means not only cash in the bank but also a hopeful step away from technical faults that have hurt recent performance. Commercial production of the first units of its new 1300 natural gas plant in West Burton, Nottinghamshire started in 2012 and the rest are due to come online later this year. When Centrica joined EDF in new-build, it also put in a 20 per cent stake in EDF Energy’s operating nuclear power fleet. It has not announced plans to pull out of that investment.

The most important development for EDF’s new nuclear ambitions was that its nuclear reactor design was finally approved by the regulator at the end of 2012. Although it will still have to apply for a nuclear construction permit, obtaining design approval has broken the back of one of the biggest sources of nuclear new-build investment risk: the uncertainty caused by regulatory scrutiny. As of right now, the EPR reactor is the only modern nuclear power plant design that can be built in the UK. The Westinghouse AP1000 reactor is next in line; it is waiting for a customer to  finish the review process.

Will Dalrymple is editor of Nuclear Engineering International

Photograph: Getty Images
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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.