Friday, August 1, 2008

Nuclear energy: Pressure on government to act as it ponders its options

An EDF bid for British Energy may have been the favourite means to further the government's nuclear ambitions but it is not the only option.

Britain generates just under 20% of its electricity from its existing nuclear power stations but much of that capacity is ageing and will have to be replaced. The government regards new nuclear plants as clean, secure and affordable and argues that it should have an integral role in its plan to reduce Britain's dependence on costly - and increasingly imported - fossil fuels and to cut the country's carbon footprint.

A merger of EDF and British Energy would have brought together two companies with nuclear expertise; one with the ideal UK sites for new nuclear generation because they are already licensed and connected to the national grid; the other with the means and experience to build new plants.

The combination was also likely to have drawn in Britain's Centrica, which is keen to be involved in the nuclear industry and which is thought to have looked at making its own bid for British Energy. That option was ruled out some months ago but Centrica is said to be keen on taking a minority holding in British Energy, after an EDF acquisition.

The French and British nuclear generators may still get together. Yesterday EDF's executives were tied up in the announcement of the company's first-half profits and are unlikely to refocus on British Energy until next week. "It will take a few days for the dust to settle," said a source yesterday.

Both companies have a plan B. Though British Energy is seen as too small to build Britain's next nuclear generation on its own, it has the alternative of working with other companies on a site-by-site basis.

It is unlikely to be short of offers: a number of companies, including Germany's RWE, Spain's Iberdrola and France's Suez have all looked at a possible bid for British Energy and may be willing to take part on a project-by-project basis.

Many in Europe's energy industry are keen to see new nuclear plants built in Britain, not least because it would strengthen the case for its continuation or expansion elsewhere.

EDF's plan B involves building its own portfolio of UK sites. British Energy is not the only organisation with nuclear assets. The Nuclear Decommissioning Authority has the responsibility for decommissioning Britain's Magnox reactors, among other sites, and at least some of these - particularly Wylfa in Anglesey - could be used.

Even if EDF walks away from a bid for British Energy, its negotiations may have set a benchmark against which other energy companies can judge whether to make an offer themselves.

In the meantime, the government is coming under pressure to act directly, rather than maintain its stance as a minority, if powerful, shareholder in British Energy.

The unions in the industry are already pushing for action. Dougie Rooney, national officer at Unite, said yesterday: "The government must force British Energy to make available their sites in order that international consortiums can build the next generation of [nuclear] power stations."

Paul Noon, general secretary of Prospect union, said the government needed to act quickly to ensure that, if it was not going to build new nuclear plants itself, it provided the right framework for the private sector to invest. "We do not have the luxury of time. Failure to act now will result in huge problems over the next 10 years, with the UK reliant on imported gas and oil - a situation that would be an environmental, economic and political disaster."

There are those who argue that nuclear should not be an option at all and that pressing ahead with new nuclear plants would squeeze out renewable capacity. Nathan Argent, head of Greenpeace's nuclear campaign, said: "A push for more nuclear power would scupper the UK renewable energy industry, and, by doing so, cancel out the prospect of creating hundreds of thousands of British green-collar jobs."