EDF, E.ON Face Nuclear Hurdle From U.K. Government (Update4)
May 12, 2010, 2:01 PM EDT(Updates with appointment of Huhne in 13th paragraph.)
By Alex Morales and Catherine Airlie
May 12 (Bloomberg) -- E.ON AG, Electricite de France SA and Centrica Plc may find it harder to build new nuclear reactors in the U.K. because of a division on energy policy between Conservatives and Liberal Democrats in the coalition government.
The Conservatives are in favor of new nuclear plants, while the Liberal Democrats oppose them. A document outlining their coalition agreement permits the division to remain, with the Liberals abstaining on nuclear votes. The two parties agreed yesterday to combine forces to command a majority in Parliament, ending 13 years of rule under the Labour Party.
“It’s almost impossible to see how we can meet our long- term climate goals without a strong nuclear component,” said Ian Parrett, energy analyst at the consultant Inenco. “If there’s a delay on nuclear power because of disagreement, then that gives us longer-term worries as to whether we’ll have enough generating capacity.”
British utilities are preparing to shut as much as 30 percent of their power-station capacity within the next decade as old nuclear and coal plants reach the end of their life in service. Energy regulator Ofgem has said about 200 billion pounds ($299 billion) of investment is needed over the next decade to replace aging infrastructure and cut emissions.
‘Urgent Issue’
“What is certain is you need to plan now for new nuclear power stations five to 10 years down the line,” said Andrew Raingold, deputy director of the Aldersgate Group, a coalition of businesses, organizations and individuals including United Utilities Group Plc and the Renewable Energy Association. “It’s quite an urgent issue.”
The Conservative Party, which won the most seats in last week’s election, said in its manifesto that it would “promote” nuclear power while avoiding public subsidies. The Liberal Democrats said they would “reject” a new generation of nuclear power stations on the grounds that there are cheaper ways to cut carbon emissions.
“We have agreed a process that will allow the Liberal Democrats to maintain their opposition to nuclear power while permitting the government to bring forward the national planning statement for ratification by Parliament so that new nuclear construction becomes possible,” the parties said in their coalition agreement.
The agreement would allow a Liberal Democrat spokesman to speak out against the measure, while the party’s lawmakers would abstain in any vote, the document said. That may allow the Conservatives to join with Labour Party lawmakers in opposition to push forward nuclear power.
Industry Reaction
Vincent de Rivaz, chief executive of EDF Energy, said he would “look forward to working with the new administration and other interested parties to make new nuclear a reality.”
In a statement, EDF said the pact makes it possible for the coalition to bring forward legislation needed to spur reactor construction.
“We’re reassured by what we’ve heard today, that new nuclear will be taken forward,” said John McNamara, a spokesman for the Nuclear Industry Association, which represent 200 companies including EDF. “Effectively what has been announced is new nuclear build is still a priority.”
Any delay on pushing forward with new nuclear could hurt the industry, said Peter Atherton, a London-based analyst for Citigroup Inc. “The obvious possible losers would be EDF and Centrica, which may now find it much harder to gain support for their new nuclear build ambitions,” he said.
Climate Secretary
Chris Huhne, a Liberal Democrat, will become environment and climate change secretary, the prime minister’s office said in an e-mailed statement today.
With the two parties in agreement on policies including setting up a green investment bank and reforming energy markets, decisions on nuclear power may not be a priority for Huhne, according to Ben Caldecott, head of policy at Climate Change Capital in London. Because of support from the opposition Labour Party, any vote would still be likely to pass, he said.
“If it’s down to a free vote and there is a bill, it’ll probably pass because there is a Tory and Labour consensus that we need to build new nuclear power stations in order to achieve our carbon reduction commitments,” Caldecott said today in a telephone interview. “But as Chris Huhne is going to become secretary of state for energy and climate change, it might not be first thing on his list of things to do.”
Labour Position
The outgoing Labour government of Gordon Brown, who resigned as prime minister yesterday, took steps to encourage nuclear power. It auctioned land suitable for new plants to the U.K. units of German utilities RWE AG and E.ON. Former Energy and Climate Change Secretary Ed Miliband repeatedly said that nuclear power would remain an important part of the U.K.’s electricity mix.
“There’s a question of would Chris Huhne’s heart really be in it, and where does it fit in with other bills that need to be put forward, such as establishing a green investment bank, pursuing energy market reform and introducing a carbon floor price,” Caldecott said. “I can imagine him prioritizing those things above new-build nuclear.”
The coalition also agreed to set a floor price for carbon and to persuade the European Union to expand its auctions of emissions permits. It will oppose new coal-fired power plants that aren’t equipped to capture carbon emissions and will encourage marine energy. The parties agree on establishing feed- in tariffs for electricity while maintaining the existing renewable obligation, according to their joint document.
The two parties also agreed to set up a so-called smart grid and install meters in homes that help consumers lower their energy use and monitor costs. They said they would seek to increase the U.K.’s renewable energy target, subject to advice from the Climate Change Committee, which advises the government on carbon-cutting policy.
The new government would scrap plans for a third runway at London’s Heathrow Airport and expand high-speed rail links. It also would refuse new runways for Gatwick and Stansted airports.
--Editors: Reed Landberg, Randall Hackley
To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net; Catherine Airlie at cairlie@bloomberg.net.
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.
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