The ebbs and flows of UK power investment

Share |

18 October 2012, Electricity, Nuclear, Solar, Wind

oilandgasobserver archive

There are several key signals that foreign investors are perhaps questioning the attractiveness of involvement in the UK energy market. Firstly, the ongoing equivocation of the China Guangdong Nuclear Power Group and China's State Nuclear Power Technology Corp - potential Chinese investors in the Horizon project - in fact led to them opting out of their respective international consortia. The Horizon project, which is being sold by RWE and E.ON, represents two new nuclear reactors comprising a total of 6GW of new generation capacity for the UK.

Russia's state nuclear operator Rosatom was also rumored to have registered interest in the Horizon bid. Although 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. This wide-ranging interest makes it all the more important to secure Rosatom's involvement in the UK.

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

These demonstrations of investor uncertainty should be of concern to the UK government. In addition to comments like the one made by Galan in his speech regarding regulatory issues that need to be addressed (including electricity market reform) in order to create a favorable 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 decarbonization target and expressed fears over the potential damage that could 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 - Siemens, Alstom UK, Mitsubishi Power Systems, Areva, Doosan, Gamesa, and Vestas - which represent future investment in new nuclear, renewables, and gas generation. The fact that such a range of companies feels threatened by the opacity of future energy policy should hopefully inspire more transparency in the UK government's upcoming Energy Bill.

Source: MarketLine

More Electricity Commentary

More Nuclear, Solar, Wind Commentary

Recent commentary