The ebbs and flows of UK power investment

The arrivals and departures of foreign investor interest in the UK’s nuclear industry are starting to resemble St Pancras International on a Friday evening. Three comings-and-goings are of note.

Firstly, the equivocation of the potential Chinese investors in the Horizon project (China Guangdong Nuclear Power Group and China's State Nuclear Power Technology Corp), who proved hesitant to the point of opting out of their respective international consortia. The Horizon project, being sold by RWE and E.ON, represents two new nuclear reactors comprising a total of 6 GW of new generation capacity for the United Kingdom. 

Secondly, the Russian state nuclear operator Rosatom was also rumoured to have registered interest in the Horizon bid. Altough it was not present among the final bids on September, 28, it has nevertheless stated that it is still considering investing in nuclear in the UK, either in Horizon or by taking a stake in EDF’s share of the Lake Acquisitions project, which includes a new nuclear station at Hinkley Point in Somerset. Rosatom’s interest is pan-European, as it is currently a bidder in a contract to expand the Temelin Czech nuclear power plant along with Westinghouse.

Lastly, there is also uncertainty surrounding NuGen, the nuclear company owned by Iberdrola and GDF SUEZ, which plans to build up to 3.6 GW of new capacity in the north west of England.  While there are rumours of Iberdrola’s intentions to withdraw from the NuGen partnership, the Iberdrola chairman Ignacio Galán confirmed last week at the Scottish Low Carbon Investment Conference the company’s commitment to the UK and investing in electric power transmission and onshore and offshore renewable energy. The nature of the conference may have precluded him from explicitly referencing the company’s commitment to NuGen, however his speech will no doubt allay the NuGen withdrawal rumours. 

These demonstrations of investor uncertainty should be of concern to the government. In addition to comments like the one made by Mr Galan in his speech regarding regulatory issues that needed to be addressed (including the electricity market reform) in order to create a favourable investment atmosphere for investors, two letters were sent to the Secretary of State for Energy and Climate Change, Ed Davey. The letters called for a clear 2030 decarbonisation target and expressed fears over the potential damage that would be done to the UK’s reputation as a country with low political risk if a long-term, stable policy framework is not put in place. 

One of the letters is from a group of seven key players in the UK energy industry, including Siemens, Alstom UK, Mitsubishi Power Systems, Areva, Doosan, Gamesa and Vestas, which represent future investment in new nuclear, renewables and gas generation. That such a range of companies feel threatened by the opacity of future energy policy should hopefully inspire more transparency in the UK government’s upcoming Energy Bill. 

Written by Yasmin Valji

Analyst, Datamonitor Energy & Utilities

Follow Yasmin on twitter: @YasminV_DMEN

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