Nuclear

Toshiba's share price (top) is hit after the company's announcement on nuclear on Wednesday

Toshiba's share price (top) is hit after the company's announcement on nuclear on Wednesday   © Getty Images

Toshiba is just one company in the global nuclear industry, but its current problems are symptomatic of the difficulties facing all the private enterprises in the sector. Civil nuclear power involves huge up-front capital costs, very long pay-back periods and high risks that are compounded by a lack of experience, especially in managing nuclear construction projects after a long period with few new plants. For all those reasons, private investors avoid the sector and prefer to put their money where they see faster and safer returns.

If the UK, Japan and other governments want nuclear power, state money will have to be involved. So, from where we stand now, what can be done? Read more

Electricity pylons seen from Hinkley Point

Electricity pylons seen from Hinkley Point  © Getty Images

The prospect that Toshiba will withdraw from the nuclear power business after its embarrassing and expensive experience with the American company Westinghouse poses a serious problem for the UK’s plans to make new nuclear the core of future energy supply. If those plans are to be delayed, as looks almost certain now, the government will have to come up with an alternative.

Toshiba‘s planned new station at Moorside in Cumbria was to have been the second step in a strategy that, as the last government set out, would have produced some 16GW of nuclear-generated electricity by the mid 2030s. That would have more than replaced the old nuclear plants which are due to retire and would have made a material contribution to Britain’s decarbonisation targets. If Toshiba puts Westinghouse, the company holding the key nuclear expertise, up for sale the question arises as to whether President Donald Trump will support the transfer of US knowledge to a country as such as China. The process could take a long time and until there is a resolution, Moorside cannot move forward. Read more

China is restructuring its domestic coal industry

China is restructuring its domestic coal industry  © Getty Images

What are the implications of China’s announcement last week that it will be spending $360m over the next four years to build up its renewable energy sector? There are many reasons behind the move, from Beijing’s growing concern about the impact of climate change to the political imperative of reducing low level pollution in the smog-ridden cities. The scale of the investment, however, suggests that two closely related policy objectives are driving energy strategy: an effort to create a modernised economy that can provide employment for the Chinese workforce and a determination to limit dependence on imported supplies.

Two weeks ago, in looking ahead to the potential stories of 2017, I suggested that Beijing might set a target of energy independence by 2025. This provoked a range of responses. Some people told me that such a policy was unnecessary since the country can afford to pay whatever is necessary. Others did not believe anything close to self-sufficiency was attainable. Read more

Saudi Deputy Crown Prince Mohammed bin Salman

Saudi Deputy Crown Prince Mohammed bin Salman  © Getty Images

The downbeat mood of the times was confirmed before Christmas by the publication of the Bloomberg Pessimist’s Guide to 2017. The guide lists some of the things that could go badly wrong across the world in 2017. Last year the Guide predicted both Brexit and Donald Trump’s election as US president. This year the possibilities range from the collapse of the Mexican economy after Mr Trump pulls the US out of Nafta to the election of Marine Le Pen as the next president of France. Some of the predictions, such as California’s decision to declare independence from the US (Calexit), to the forced departure of the Saudi Deputy Crown Prince Mohammed bin Salman could be seen as ambivalent outcomes that many would welcome. Pessimism, however, has its limits and so here, are a few notes of hope for the New Year. As ever, I have focused on the core issues of energy but politics are never far away. Some of the possibilities listed seem to me highly likely to occur to one degree or another. Others are long shots – but then Donald Trump was a long shot a year ago. Read more

 

For most of those involved in the energy sector 2016 has been a year to forget. Oil prices have risen a little but despite the Opec deal are still almost 50 per cent down on where they were 2 years ago. Gas and coal prices are also down. Some US coal companies are in a desperate financial position – as are some of the smaller oil and gas businesses who do not have the deep pockets necessary to survive a downturn which is both cyclical and structural. Read more

 

How the proposed Hinkley reactor could look, according to an EDF computer-generated image  © AFP Photo / EDF Energy

The Downing Street review of the Hinkley Point nuclear power project is coming to an end – and a decision will soon have to be made, probably before the end of September. The latest wave of public relations activity from EDF, the company that hopes to build the plant, shows how nervous the company is about the outcome. Given the range of doubts about the costs, the construction risks, the reactor technology and the involvement of the Chinese, that nervousness is well justified. Can EDF come up with an offer that deals with the doubts? If it focuses on substance rather than spin, it is just possible. The choice will be made in Paris. Read more

Theresa May, UK prime minister

Theresa May, UK prime minister  © Getty Images

All new leaders face tests. Do they mean what they say? Will they flinch or give way under pressure? For a prime minister the tests can come from any direction — from the trades unions, from the Kremlin, from political opponents, from dissident backbenchers. Theresa May’s first test as British premier has come from the Chinese in the form of a remarkable article in the Financial Times.

Liu Xiaoming, the Chinese ambassador to the court of St James, does not like the idea that the new UK government should be reconsidering the plan to build a nuclear power station at Hinkley Point in southwest England, and by implication the idea that Chinese companies should own, build, operate and control a further nuclear plant at Bradwell in Essex, in the east of the country.

The article is puzzling. What sort of diplomat negotiates on serious issues through the media? Wouldn’t they normally work discreetly to identify the cause of the problem — if there is one — and then seek to find a quiet solution? Issuing threats is not very diplomatic. Indeed, the article reads as if it had been written by a PR firm instructed to put pressure on ministers. One wonders how Beijing would react if the British ambassador there were to write an article demanding that Hong Kong be allowed to choose its own leaders. Read more

This could be a chance to accelerate projects from lower cost nuclear providers, writes Nick Butler Read more

Greg Clark leaves 10 Downing Street as the new business, energy and industrial strategy secretary

Greg Clark leaves 10 Downing Street as the new business, energy and industrial strategy secretary  © Getty Images

A changing of the guard in an organisation is a good time at which to pause and reconsider every aspect of strategy. The mistakes of the past can be admitted, entrenched but outdated positions can be quietly left behind and altered circumstances accepted. That is what should happen now in the UK in relation to energy policy. Read more

Construction of the EPR at Flamanville, northwest France

Construction of the EPR at Flamanville, northwest France   © Getty Images

The cloud of doubt around EDF’s long-planned new nuclear plant at Hinkley Point in Somerset continues to grow.

The final investment decision has been delayed yet again. The start up date has been put back to 2026 – nine years behind the original schedule. A new contingency, amounting to £2.7bn, has been added to the cost of the project.

Now, in a remarkably frank interview the French energy minister, Segolene Royal has said that the company may have been “carried away” by its enthusiasm for the project and has joined the chorus of internal staff and engineers in warning of the risks to EDF’s finances from going ahead. But although Hinkley inevitably gets all the attention in the British press, EDF’s real problem is to be found in the half constructed plant at Flamanville on the Cotentin Peninsula on the other side of the English Channel. Read more

Executive Vice President in charge of fi

Thomas Piquemal  © Getty Images

Thomas Piquemal, the finance director of EDF has performed a significant public service by resigning and focusing attention on the continuing problems around the UK’s Hinkley Point nuclear project in Somerset.

I cannot remember the last occasion when the CFO of a major company resigned over an issue of policy. The event is certainly rare and can only increase the pressure on the French company’s chairman, Jean-Bernard Lévy.

There are multiple questions behind the resignation. Read more

The engine room at the Flamanville nuclear reactor  © Getty Images

The news that there is to be a further delay to the long-promised Hinkley Point nuclear power station in Somerset should come as no surprise to those who have followed the saga over the last eight years. As the FT report on Monday confirmed, the board of EDF wishes to delay the project for another year . That could easily turn into two years or three or more because it depends on the resolution of the deep problems at Flamanville in France, where a similar reactor is being built, and on the company’s financial health, which is fragile.

The EDF board is right to seek a delay. It is the only rational decision for EDF as a company and in reality for the UK. Whatever the embarrassment involved it is impossible to proceed with a project where the risks and ultimate costs are unknown. The resistance to the project from managers and staff within EDF is very telling. The UK government must accept that Hinkley will not be built for the foreseeable future.

But what comes next ? Read more

The UK plan is uneconomic for owners and consumers, writes Nick Butler Read more

FRANCE-ECONOMY-ENERGY-GAS-OIL

A tunnel at the LNG terminal under construction at Dunkirk, France  © Getty Images

If you think the fall in the oil price is dramatic and disruptive, take a moment to consider the natural gas market. The world’s three main gas markets — in Europe, the US and Asia – may be distinct but the growth of trade in liquefied natural gas which can take it across the world has linked them. The impact of a swing in one market soon spreads across the globe.

According to the excellent analysis from Energy Aspects, prices for LNG in the key north-east Asian market – the supply into Japan and Korea – are down this year by more than 50 per cent to between $7 and 8 per million British thermal units (Btu), even allowing for a slight seasonal ramp up in the fourth quarter. That is almost 70 per cent down from the peak in 2013.

Unfortunately, at the time of that peak many companies got carried away and set in train dozens of new LNG projects worldwide. The complex technology of liquefaction means that each project is expensive – costing at least $5bn and often much more. Of the projects planned dozens have been cancelled, often forcing investors to write off substantial sums. But the bad news is that many are still under construction. Once work has begun, it is very hard for companies to go back on a major investment decision. Read more

TURKEY-G20-SUMMIT-PUTIN-MERKEL

Chancellor Angela Merkel and President Vladimir Putin talk at the G20 summit in Antalya,Turkey, on November 16  © Getty Images

Russia is coming in from the cold. A full-scale reset of the relationship with the international community is well underway. A country that was a pariah state a few weeks ago, isolated by sanctions, is rapidly becoming an essential ally. What does this sudden turn of events mean for the energy business?

The reason for the reset is clear: the enemy of my enemy is my friend. The common enemy is the Islamist militant group Isis. For the Germans and for Chancellor Angela Merkel the destabilisation of Syria has opened up a flood tide of refugees. The warm welcome offered initially in Germany, Sweden and a few other parts of Europe has chilled. Something must be done to stop the flow at source.

For the French and many others across Europe, terrified by last week’s awful events in Paris, the identity of the enemy in Syria and the Middle East has also come into sharp focus. The same is true in Moscow where the downing of a Russian airliner over the Sinai desert has made those in the Kremlin realise that they, too, face a ruthless enemy. When set against the challenge of Isis nothing else matters much. Ukraine and all the other disputes can be assigned to a distant back burner — not solved but not allowed to get worse. It is time to work together. Read more

British Government Signs A Deal For New Nuclear Power Plant

EDF's existing nuclear power plants at Hinkley Point  © Getty Images

The announcement that some form of funding structure for Britain’s nuclear new build at Hinkley Point in Somerset has been agreed must be read with care. UK consumers and taxpayers are not allowed to see the whole agreement — that privilege is restricted to the French and Chinese governments and their state-owned enterprises — but it is clear that this week’s statements do not amount to the final deal. Much remains to be negotiated, with the UK at a considerable disadvantage because of its all too evident desperation to complete a deal.

Much attention has focused on the relationship between the UK and China, on the cyber security risks of allowing the Chinese to own, construct and operate a plant of their own in the UK and on the political consequences of the deal for George Osborne, the chancellor of the exchequer who is now known to the black humorists of Whitehall as the Manchurian Candidate. The other, and potentially more serious, issue is what the announcement and the further delay it implies means for UK energy policy. Read more

Protesters Take To Kayaks To Demonstrate Against Shell's Plans To Drill In Arctic

Protesters approach Shell's Polar Pioneer oil drilling rig in May  © Getty Images

Shell’s decision to abandon exploration in the Arctic is an acknowledgment of reality, although that makes it no more comfortable for those involved. Some $7bn (more, according to some estimates) has been lost in its Chukchi Sea campaign — the unsuccessful Burger J well must be the most expensive ever drilled, anywhere in the world. But, financially, Shell can afford it, and many in the oil company will be relieved that the issue is out of the way.

The exploration effort was a PR disaster for a company that prides itself on its environmental record. The prospect of success, followed by years of conflict over the next steps — the development of permanent facilities for actual production — worried some senior executives more than the prospect of failure. The possibility of facing up to a new US president in the person of Hillary Clinton who is on record as opposing Arctic drilling was hardly welcome for a company that believes itself distinct from companies such as ExxonMobil that take a more challenging line on climate change and other issues. These reputational issues were no doubt very important elements in the decision to pull out. Read more

FRANCE-ENERGY-NUCLEAR-COMPANY-EDF-ELECTRICITY

Construction at EDF's EPR project in Flamanville, France  © Getty Images

Strong and capable energy ministers are rare but the UK government appears to have found one in the person of Andrea Leadsom. Ms Leadsom is nominally the Minister of State in the Department of Energy and Climate Change (ie the number 2) but that is a detail. She is not crippled by self-doubt and initially hesitated for many hours before taking the job. Perhaps energy did not seem important enough. Perhaps number 2 was the wrong number.

Unsurprisingly, however, she has rapidly mastered the brief and appears to be finding that the subject is more interesting and the policy issues more complex and important than she had imagined. The question now is whether she can use her authority to force a better bargain for energy consumers by negotiating a new and improved deal with the owners of the long-planned and much-postponed Hinkley Point nuclear power station. Read more

Political Leaders Meet As Greece Crisis Intensifies

Sigmar Gabriel and Angela Merkel  © Getty Images

Last week’s decision on the future of the German energy policy by Sigmar Gabriel — the economics minister and Angela Merkel’s number two and would-be successor — was complicated and multifaceted. The net result, however, is simple. The German coal industry will survive and coal will remain a major, and probably the largest, fuel source for power generation for another decade and perhaps longer. Read more

JAPAN-PROTEST-NUCLEAR

Protests against the reopening of the Sendai nuclear plant  © Getty Images

Within the next few weeks the Japanese utility Kyushu Electric Power will restart its two nuclear power reactors at Sandei in the Kagoshima prefecture in the far south of the country. Fuel loading is set to begin July and the plants should be onstream again in August. After four years of crisis and much legal and political debate, the Japanese nuclear industry is finally on the way back. The implications for the rest of the energy sector in Asia and across the world are significant.

The two reactors at Sandei have been closed since 2011. From a nuclear fleet of 50 reactors capable of producing some 47 GW of electricity and supplying over 30 per cent of Japan’s daily electricity needs at the beginning of 2011, the sector’s output shrank to zero in the months following the Fukushima disaster. At Fukushima itself six reactors have been closed and are being decommissioned. The rest of Japan’s nuclear fleet stands cold and unused. Gradually, however, the negative mood of 2011 has abated. Now the operators of 24 different reactors across the country have applied for permission to reopen with the full and very active co-operation of the Japanese state and the powerful industrial lobbies such as the Kaidanren and the Keizai DoyukaiRead more