The Brexit effect on UK nuclear

24 June 2016

EDF Energy, NuGeneration and Horizon Nuclear Power have all stressed their commitment to the UK's nuclear new build program, despite the country's decision to leave the European Union. Nevertheless, the majority vote in favour of 'Brexit' - decided in a national referendum held yesterday - may have implications for investment in new reactors and nuclear research, as well for the UK's future role in meeting climate change targets, industry participants said.

New build

EDF Chief Executive Officer Jean-Bernard Lévy said the UK's decision will have no impact on EDF Energy's strategy to build Hinkley Point C - the first new nuclear power station built in the UK in almost 20 years. Scheduled to begin operating in 2025, the twin-unit UK EPR plant will provide about 7% of the UK's electricity.

"As of today, we believe that this vote has no impact on our strategy, and the strategy for our UK subsidiary [EDF Energy] has not changed. Our business strategy is not linked to Great Britain's political affiliation with the European Union, so we have no reason to change it," Lévy said. "I would just point out that in the last few days, spokespeople on energy issues for the Brexit camp - notably Energy Minister Andrea Leadsom - have on numerous occasions and again in recent days come out in favour of maintaining the decarbonisation policy, of maintaining the nuclear option, and of maintaining the Hinkley Point project. Therefore there are no consequences from this vote today.

"We operate in the markets like any [other] large company, and we made sure that we did not take a position one way or the other. That means that we are in a neutral position vis-à-vis the movements that could occur in the markets," Lévy continued. "Market analysts believe that the pound will drop, but if the currency falls, the economy becomes more competitive. I think we need to adapt to economic conditions and to exchange rates, which can evolve."

Under a deal agreed last October, China General Nuclear will take a 33.5% stake in EDF Energy's £18 billion ($28 billion) project to construct the plant. In addition, the two companies will develop projects to build new plants at Sizewell in Suffolk and Bradwell in Essex, the latter using Chinese reactor technology. EDF's share in the project stands at 66.5%, but the company said it intends to offer other investors stakes in the project. However, it plans to retain at least a 50% stake itself. A final investment decision on the Hinkley project is expected in September.

NuGeneration (NuGen), the UK joint venture between Japan's Toshiba and France's Engie, said its Moorside project remains unaffected by the outcome of the EU referendum. NuGen plans to build a nuclear power plant of up to 3.8 GWe gross capacity at the West Cumbria site using AP1000 nuclear reactor technology provided by Westinghouse Electric Company, a group company of Toshiba.

NuGen said today its shareholders "remain committed to taking forward" Europe's biggest new nuclear power station to produce and sell power to the UK grid. "We firmly believe the case for new nuclear power stations for the UK is compelling, and unchanged as a result of the referendum," the company said.

It added: "New nuclear power stations are vital for the UK's future prosperity, delivering low-carbon, secure and stably-priced electricity for generations to come, while securing our future indigenous energy supplies on UK soil. NuGen will be in a position to provide power to the UK grid in the mid-2020s. In order to deliver the plant on time and on budget, we must secure clarity on policy and ensure the Government does everything it can to deliver investment stability for vital UK infrastructure projects."

Horizon Nuclear Power said it will continue to develop its plans to deploy the UK Advanced Boiling Water Reactor at two sites - Wylfa Newydd, which is on the Isle of Anglesey, and Oldbury-on-Severn, in South Gloucestershire. Established in 2009 and acquired by Hitachi in November 2012, Horizon aims to provide at least 5.4 GWe of new capacity, expecting the first unit at Wylfa to be operating in the first half of the 2020s.

Horizon said today: "Like all businesses we'll need to assess the wider impacts of the [referendum] result, but we will continue to develop our plans. The UK needs secure, affordable, low carbon electricity as much today as it did yesterday and nuclear power is still vital to our energy mix. We're making good progress on all aspects of our work to deliver Wylfa Newydd and the huge benefits it will bring for the local community, Wales and the UK for decades to come."

Horizon announced in May it had appointed a joint venture responsible for construction of its Wylfa Newydd plant. The newly created company, Menter Newydd, is a joint venture of Hitachi Nuclear Energy Europe, Bechtel Management Company and JGC Corporation (UK).

New market conditions

Fiona Reilly, PwC's global head of nuclear capital projects and infrastructure, said the decision to leave the EU "could have a significant impact on our nuclear program".

Reilly said: "Ongoing uncertainty in the market, at least in the short term, could affect access to capital and investor confidence in what is already a limited trading arena. And while the UK government will need to work out political, trading and legal issues, we will also potentially need to renegotiate our involvement in the Euratom Treaty and our 123 Agreement with the US - and this will take time." She added: "It will be vital for the UK government, [the Department of Energy and Climate Change] and nuclear bodies to work together to secure a positive outcome for our energy industry and we are committed to working alongside them as they adapt to these new market conditions."

Tom Greatrex, chief executive of the Nuclear Industry Association, stressed the "significant challenges" the UK and the EU face regardless of the referendum result.

Greatrex said: "The UK's nuclear industry operates globally, with strong and long-standing business connections, both in Europe and further afield. While the implications of the vote to leave the EU, and subsequent negotiations, will be assessed both by the UK government and European Union, we must not lose sight of the fact that we have significant challenges to replace retiring electricity generation plant, to improve our energy security and to reduce carbon emissions, and that has not changed as a result of the referendum.

"The nuclear industry will work with policymakers here and in the EU to ensure the implications and changes arising from the referendum result are properly understood, and to maintain the confidence in low carbon baseload power and high quality decommissioning which is a vital part of the UK's industrial, engineering and scientific footprint."

Jonathan Grant, director, PwC sustainability and climate change, said the outcome of the referendum was "a major setback for the type of collaboration needed to tackle global environmental issues like climate change".

"The UK government has been a champion of climate action at home, within the EU, and in the Paris climate talks. However this leadership is at risk, with many supporters of Brexit also opposed to climate policies such as carbon taxes and efficiency standards. The immediate priority will be to provide reassurance to investors to avoid undermining the low carbon sector," Grant said. "Any further uncertainty will unsettle the carbon market, with the price of EU carbon credits already falling sharply when trading opened this morning."

Research funding

More than 1000 clean-energy exploration jobs may be lost if the UK exits the EU, the head of the country's nuclear research agency has warned.

Professor Steve Cowley, CEO of the UK Atomic Energy Authority, told the BBC he was "very concerned" by the implications Brexit would have on funding research programs. Researchers are afraid, he said, that £55 million in annual European Commission funding would be withdrawn.

The Joint European Torus (JET) investigates the potential of fusion power as a safe, clean, and virtually limitless energy source for future generations. The largest tokamak in the world, it is the only operational fusion experiment capable of producing fusion energy. As a joint venture, JET is collectively used by more than 40 European laboratories.

Cowley said the issue was not simply about the jobs at Culham Science Centre, where JET is based, but the fact the UK could lose the expertise of the staff there. "If we should lose our European funding, the lab would have to shrink to a tiny size and the jobs would go and the expertise would move to other countries […] and we would have lost our edge in a future technology that's very, very important," he told the BBC. "After [Brexit] we will lose our influence, we will lose our capability to argue for it, and eventually the EU will put the experiments in this area of science in other places," he added.

No delay

Following the final count - which showed the Leave campaign had won with 52% of the vote, against the Remain campaign with 48% - David Cameron said he would be stepping down as prime minister by October. The breakdown of votes showed England voted strongly for Brexit, by 53.4% to 46.6%, as did Wales, with Leave getting 52.5% of the vote and Remain 47.5%. Scotland and Northern Ireland both backed staying in the EU. Scotland backed Remain by 62% to 38%, while 55.8% in Northern Ireland voted Remain and 44.2% Leave. The referendum turnout was 71.8%, with more than 30 million people voting

Addressing reporters outside 10 Downing Street this morning, Cameron said he would leave it to his - as yet undecided - successor to invoke Article 50 of the Lisbon Treaty, which has been in force only since late 2009. Article 50 sets out the procedure to be followed if a Member State decides to leave the EU.

Political commentators have said the process to exit the bloc could take two years, but EU leaders said the UK should avoid delay.

European Parliament President Martin Schulz, European Council President Donald Tusk and Dutch Prime Minister Mark Rutte met today in Brussels at the invitation of EU Commission President Jean-Claude Juncker. In a joint statement, they said: "We now expect the United Kingdom government to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty."

Researched and written
by World Nuclear News