Britain sets out plans for nuclear future

LONDON Tue Mar 26, 2013 7:10pm GMT

A woman walks her dog near EDF Energy's Hinkley Point B nuclear power station in Bridgwater, southwest England December 13, 2012. REUTERS/Suzanne Plunkett

A woman walks her dog near EDF Energy's Hinkley Point B nuclear power station in Bridgwater, southwest England December 13, 2012.

Credit: Reuters/Suzanne Plunkett

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LONDON (Reuters) - Britain spelled out its aims for nuclear power on Tuesday, committing funds to a sector it expects to create 40,000 jobs while lowering the country's carbon emissions and its reliance on costly energy imports.

This month's late blast of winter cold has exposed Britain's reliance on imported natural gas, triggering wholesale price spikes and concerns that stored supplies could run dry.

In its long-term Nuclear Industrial Strategy the government sets out the opportunities it sees for economic growth and job creation in the industry.

Britain's plans to build up to 16 gigawatts of new nuclear power capacity could create 40,000 new jobs, the report said.

Opportunities span research and development, construction, waste management, decommissioning, operation and maintenance.

The government also committed more than 40 million pounds for research and development.

"We have some of the finest workers, research facilities and academics in the world. But we need to sharpen those competitive advantages to become a top table nuclear nation," said Vince Cable, secretary of state for business, innovation and skills.

While Germany and others have turned away from nuclear in the wake of Japan's Fukushima disaster in 2011, Britain remains intent of building new atomic capacity.

EDF won planning approval last week to build Britain's first new nuclear power station in almost 20 years but warned the project would only move forward if the French company and the British government can agree a guaranteed minimum "strike" price for the power produced.

EDF wants to build two reactors but at an estimated cost of some 14 billion pounds it wants assurances that it can recoup its investment with a government guarantee to support energy prices.

British companies could be awarded between 44 and 64 percent of the construction work, a report by consultancy Oxford Economics said on Tuesday.

STRIKE PRICE

EDF wants a strike price of at least 100 pounds per megawatt-hour (MWh) while the government would prefer a price around 80 pounds, according to industry sources and analysts.

Chancellor George Osborne told a panel of parliamentarians on Tuesday that both sides aimed to reach a deal.

"Obviously we have a hard commercial bargain between EDF and the government about the right strike price and so on. But I think both EDF and the British government want to see the project go ahead on the right terms for both of us," Osborne said.

Japan's Hitachi also has plans to build in Britain, which needs to replace ageing coal-fired and nuclear sites and meet environmental targets in 2020 and beyond.

Two ageing coal-fired power plants were mothballed this month, part of a series of closures that will strip Britain of around 20 percent of its power capacity by 2020.

Energy regulator Ofgem has warned that Britain faces a challenge to keep the lights on as plants close. It has forecast spare generating capacity will shrink to just 4 percent by 2015/16 from 14 percent last year.

Details to be worked out with EDF over the strike price include how long it would last, how to deal with future regulatory changes, and whether a strike price would be indexed to inflation.

"You will have a lower or higher (strike price) based on who takes the construction risk," said Roland Vetter, head of research at CF Partners.

British government ministers have also spoken of the need to avoid using taxpayers to underwrite cost overruns. EDF's Flamanville reactor in France is running four years behind schedule and costs have more than doubled.

EDF could expect revenues of about 88 billion pounds from its two planned 1,600-megawatt reactors in Britain based on a strike price of 100 pounds per MWh over 35 years and other assumptions, CF Partners' Vetter estimated.

The government hopes the two new reactors, to be built at Hinkley Point C in southwest England, will come online in the first half of the 2020s.

(Additional reporting by Henning Gloystein and William Schomberg; editing by Jason Neely)

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