Britain’s energy firms will struggle to secure investment for the UK’s nuclear new build programme following the Fukushima disaster in Japan, a leading city investor warned last week.
Investment ‘not economic’
Speaking at the Nuclear Industry Forum conference in London, banking giant Citi Investment Research managing director Peter Atherton said such investment was “not economic” for institutional investors.
He said the government should instead take on the risks if it wants to pursue its pro-nuclear policy.
“I can’t imagine it will make a return for investors,” he said. “[Fukushima has] reminded investors that nuclear is a unique business.”
“[Fukushima has] reminded investors that nuclear is a unique business”
Citi Investment Research managing director Peter Atherton
The government is committed to building new nuclear power stations and is trying to help investors by introducing its carbon floor price and guaranteeing revenue through the upcoming electricity market reforms (EMR).
But Atherton doubted that this would ensure the new nuclear build programme is carried out.
“The EMR just transfers revenue risk to the consumer and does nothing for construction risk,” he said. He said that government should insulate investors from some of the construction risk, and added that nuclear power stations’ profits during operation can be rapidly wiped out if construction overruns.
Improving certainty is the challenge
Energy firm and new nuclear developer EdF acknowledged that the biggest challenge to the nuclear new build programme is at the construction stage. “It’s a huge challenge to improve levels of productivity and certainty,” EdF nuclear new build managing director Humphrey Cadoux-Hudson told the conference.
Cadoux-Hudson told NCE last year that while EdF does not seek subsidies to offset the huge cost of the build programme, it is keen to a “level playing field” in the energy market, along the lines of the EMR reforms (NCE 18 March 2010.)
University of Oxford professor of energy policy Dieter Helm told the conference that the new plants should be able to tap into government-backed capital and should be treated as a regulatory asset base in a similar way to the water industry.
“Interest rates are between 10% and 15% in the private market and 5% using public funds,” said Helms.