The UK government on Tuesday shrugged off nuclear power, saying it would back a major new power station on the North Sea coast northeast of London.
The government said it would invest £700 million ($839 million) for a 50 percent stake in the factory, known as Sizewell C. EDF, the French state-owned company that will build the factory, will own the rest.
The deal displaces a Chinese state-owned company, China General Nuclear, which owned 20 percent of the project. CGN received an undisclosed sum for its share, which reflects the value and represents a commercial return on development work to date, the UK government said.
The deal marks another blow to Britain’s once warm business relationship with China. Britain has attracted Chinese investment for the past two decades, and the agreement to invest in Sizewell C was a centerpiece of a 2015 visit to London by China’s President Xi Jinping with then-UK Prime Minister David Cameron. However, relations deteriorated due to Beijing’s crackdown on Hong Kong and other developments.
The British government is now wary of Chinese involvement in sensitive areas such as nuclear energy and telecommunications, and is concerned that the presence of Chinese companies could lead to security risks.
On Monday, Prime Minister Rishi Sunak underscored this shift by saying the “golden era” in relations with China was over. Britain has been maneuvering for some time to end Chinese involvement in Sizewell C.
The UK government and EDF, which have cut their share from 80 to 50 percent, are also looking to attract investors to the project, which is expected to cost £20 billion or more. A stake held by a company controlled by the Chinese government may have made that task more difficult.
China General Nuclear remains an investor in the UK’s only major nuclear power station under construction, at Hinkley Point in south west England. It also has long-held plans to build a Chinese-designed factory somewhere in Bradwell, not far from London. That proposal, given the shift away from Beijing, now seems highly unlikely.
Britain is now clearly moving in a different direction, but one that may also prove complex. Jeremy Hunt, Britain’s Chancellor of the Exchequer, said in a statement that the government’s decision “represents the biggest step on our journey towards energy independence.”
The government wants to increase the amount of electricity generated from nuclear power and other sources such as wind to reduce dependence on natural gas, now the largest source of energy, whose volatility has driven up electricity prices. However, construction of Sizewell C has not started yet and it will take a decade or more to make a difference.
The government’s plan is to raise capital for the nuclear industry from asset managers and other players in the financial market. To make the investment attractive, the government would allow developers to recover costs from account payers as projects progressed.
The government portrayed Sizewell C as the first of a “pipeline” of new nuclear power plants that would “enable the delivery of clean, safe electricity for decades to come”. According to the government, the plant would provide enough power for about six million households.
However, analysts said Tuesday’s announcement could be just one step on what could be a long and fraught journey. The recent experience of building nuclear power plants in Western Europe has been plagued by long delays and cost overruns. Hinkley Point C, similar to Sizewell C and built by EDF, is years behind schedule.
“Expect serious delays, significant cost overruns and a serious lack of skilled workers,” said Franck Gbaguidi, a senior analyst at Eurasia Group, a political risk firm.
EDF has said it would use that experience and the trained staff at Hinkley Point to reduce costs at Sizewell C. However, Mr Gbaguidi said EDF could struggle as it was “currently overwhelmed with existing and planned projects in France.”
Due to major problems at EDF’s nuclear power plants in France, their power production has fallen at a time when they are needed to deal with the consequences of Russia’s gas cut-off to Europe.
It may help that nuclear energy, long shunned by environmentalists and investors because of the toxic waste it produces and the risk of catastrophic accidents, is experiencing a revival of sorts in Europe. Despite their problems, nuclear power plants are a way to generate large amounts of zero-emission electricity.
Yet the British government is increasingly concerned about sufficient power supply in the future. Britain’s nuclear power plants, which produced about 16 percent of their electricity last year, are being phased out due to age.
