Japanese conglomerate Hitachi had planned to build the £20bn Wylfa Newydd nuclear power station in Anglesey, Wales, by the mid-2020s - adding to the growing list of upcoming nuclear facilities in the UK that also includes Hinkley Point C and Sizewell C
Nuclear is a key plank of Britain’s energy future – with the £20bn Wylfa Newydd power station initially expected to go live by the mid-2020s.
But Japanese conglomerate Hitachi, which led development on the proposed plant in Anglesey, Wales, has now suspended work on the project after failing to agree a financing deal with the UK government.
Why are new nuclear plants being built in Britain?
It’s a crushing blow to the nuclear power industry, which claims to provides 21% of the country’s electricity mix and 40% of low-carbon power generation.
And with all but one of the UK’s 15 current nuclear reactors to go offline by 2030, bodies including the Nuclear Industry Association and energy workers’ trade union GMB have called on the government to help industry in developing new nuclear sites.
GMB national secretary Justin Bowden has claimed new nuclear is almost zero-carbon and, because it produces energy 24/7, “is a perfect complement to wind and solar – which everyone knows don’t work all the time”.
There are others in the pipeline, with work underway on Somerset-based Hinkley Point C, Suffolk-based Sizewell C and Bradwell, in Essex.
But the Wylfa Newydd suspension follows announcement in November that its £15bn Moorside nuclear plant in Cumbria has also stalled – with the future of that project looking uncertain after owner Toshiba pulled the plug once it was unable to find a buyer.
The Wylfa Newydd scheme has been led by Hitachi’s UK energy subsidiary Horizon Nuclear Power.
Its proposal comprises two reactors and 2,700 megawatts (MW) of power – enough for five million homes.
Construction was due to start in 2020, with the project tipped to generate 9,000 jobs during the development process and 850 permanent jobs once its 60-year operation life cycle begun.
What is Wylfa Newydd? The story so far
Wylfa Newydd means “new Wylfa” in Welsh – an apt name considering it will be built adjacent to the old Wylfa nuclear plant, which closed down in 2015 after 44 years of operation.
Hitachi submitted an initial design proposal for the reactor in January 2014 for review by the UK’s Environment Agency and the Office for Nuclear Regulation.
By September that year, public consultations on the project had begun and continued through to 2016, with approval for the facility granted by the Planning Inspectorate in June 2018.
Despite policy historically being opposed to direct investment in nuclear power projects, the UK government reportedly pledging the same month it would underwrite billions of pounds in loans – effectively taking a public stake in the project.
US engineering firm Bechtel was appointed to manage construction of the plant in August last year.
It has been involved in more than 150 nuclear power plant projects and under this contract the company had almost 200 employees embedded within Hitachi subsidiary Horizon Nuclear Power.
Horizon Nuclear Power CEO Duncan Hawthorne said at the time: “This world-leading company brings a wealth of nuclear, engineering and construction expertise to complement our growing organisation and will help us.
“Our first power station will be cheaper than what has gone before and after that, with smart financing, supply chain learnings and no need for first time overheads, future project costs will fall further still.”
Hitachi suspends Wylfa Newydd work
Doubts about the future of the project began in December 2018, when Japanese television station TV Asahi reported there were concerns over the project’s feasibility after an apparent rise in construction costs.
Hitachi condemned this information as “rumours and speculation”, although sources told the BBC that talks with the UK government about costs still needed to be concluded before construction could start.
A further wave of speculation suggesting the Hitachi board was on the verge of suspending the project appeared in reports last week, before being confirmed today (17 January) it was pulling the plug on its UK nuclear programme until further notice.
As well as Wylfa Newydd, this also includes a site at Oldbury-on-Severn, in South Gloucestershire, where plans were bring drawn up to generate at least 2,900MW.
Horizon’s Mr Hawthorne said: “We have made very strong progress on all aspects of the project’s development, including the UK design of our tried and tested reactor, supply chain development and especially the building of a very capable organisation of talented and committed people.
“We have been in close discussions with the UK government, in co-operation with the government of Japan, on the financing and associated commercial arrangements for our project for some years now.
“I am very sorry to say that despite the best efforts of everyone involved, we’ve not been able to reach an agreement to the satisfaction of all concerned.
“As a result, we will be suspending the development of the Wylfa Newydd project, as well as work related to Oldbury, until a solution can be found.
“In the meantime, we will take steps to reduce our presence but keep the option to resume development in future.”
Mr Hawthorne said the company would begin consultation with staff about what the decision means for their jobs.
He reiterated the “critical” role nuclear can play in generating secure, low-carbon and affordable energy in Britain.
Mr Hawthorne added: “Wylfa Newydd in Anglesey remains the best site for nuclear development in the UK and we remain committed to keeping channels of communication open with the government and our other key stakeholders regarding future options at both our sites.”
At the World Economic Forum’s annual meeting in Davos, Switzerland, on 24 January, Hitachi’s chairman Hiroaki Nakanishi acknowledged the British government had been supportive in getting the project off the ground.
But he told reporters “nationalisation is the only path” – saying Hitachi only plans to be a “provider” of nuclear projects and not a “utility operator”.
Industry reaction to suspension of Wylfa Newydd
GMB national secretary Mr Bowden believed upgrading the country’s infrastructure would provide energy security and push down costs to both electricity bill payers and taxpayers.
But he now claims the UK is facing “the very real prospect of an energy crisis”.
He said: “As coal is taken out of the equation in the next few years and the existing nuclear fleet reaches the end of its natural life after 50 years, decisions are already long overdue for construction to be completed in time and not leave the country at risk of power cuts or reliant on imported electricity, much of it from unreliable regimes.
“While the government has had its head up its proverbial backside over Brexit, vital matters like guaranteeing the country’s future energy supply appear to have gone by the wayside.”
Mr Bowden urged the government to “step in, pick up the reins and take whatever funding stake and leadership is necessary to ensure Wylfa goes ahead on time”.
He reiterated the union’s calls to replace the Nuclear Decommissioning Authority – which was set up in 2004 to decommission and clean-up the UK’s civil nuclear legacy – with a re-tasked Nuclear Development Agency to oversee new projects and create thousands of jobs.
Tom Greatrex, chief executive of the UK’s Nuclear Industry Association, admitted being disappointed about the Wylfa suspension as he believes it’s a “strong site for vital new nuclear power for the UK”.
He urged the government to work with industry to push the scheme forward to completion.
“Nuclear at Wylfa has local support, and the Horizon project would provide 60 years of reliable, secure, low-carbon power for homes, businesses and public services – with a strike price much below any offshore wind project generating power now and cost-competitive with all low-carbon generation,” Mr Greatrex added.
“It is imperative that new nuclear at this site goes ahead and the barriers to that are removed.”
Matthew Fell, chief UK policy director of employers’ organisation the CBI, said the loss of new nuclear projects could leave the country more heavily dependent on fossil fuels in the long-term – putting Britain’s legally-binding climate change targets at risk.
“As the second cancellation of funding for a new nuclear plant in as many months, it leaves in doubt the UK’s ability to replace its existing nuclear fleet,” he added.
What will the UK government do about Wylfa Newydd?
Business Secretary Greg Clark told Parliament in June that a key focus of the government’s discussions with Hitachi had been about driving down costs and maximising value for consumers and taxpayers.
The Department for Business, Energy and Industrial Strategy (BEIS) said it will continue to engage with the company about Wylfa Newydd’s future, while it is also exploring the viability of adopting the regulated asset base (RAB) funding model for future projects.
This would transfer risk from developers to consumers, but is designed to bring more investors to the table.
Speaking in Parliament today, Mr Clark said the government was willing to take a one-third equity stake in the Wylfa Newydd project, alongside investment from Hitachi, the Japanese government and other strategic partners – while providing all the debt financing to complete construction.
He said: “This is a significant and generous package of potential support that goes beyond what any government has been willing to consider in the past.
“Despite this potential investment, and strong support from the government of Japan, Hitachi have reached the view that the project still posed too great a commercial challenge, particularly given its desire to deconsolidate the project from its balance sheet and the likely level of return on their investment.
“The government continues to believe that nuclear has an important role to play, but critically it must represent good value for the taxpayer and the consumer.
“I believe the package of support that we were prepared to consider was the limit of what could be justified in this instance.
“I was not prepared to ask the taxpayer to take on a larger share of the equity, as that would have meant taxpayers taking on the majority of construction risk and the government becoming the largest shareholder with responsibility for the delivery of a nuclear project.”