The government isn't quite ready to drop its obsession with nuclear | Nils Pratley


There was excellent news within Hitachi’s decision to shelve its plan to build a £16bn nuclear plant at Wylfa in Anglesey. Finally, a government minister may have grasped the basic problem with nuclear power. It is being “out-competed” by alternative technologies, especially wind and solar, the business secretary, Greg Clark, had to concede in the Commons. Exactly. So drop the obsession with nuclear, last century’s answer to our energy needs.

As Clark also said, the package offered to Hitachi was generous. The price of the power, at £75 per megawatt hour, was lower than in EDF’s Hinkley Point C contract, but on this occasion the government would have taken a one-third stake and committed to providing all the debt financing for construction. Adjust for the different financial structure and the package looked very Hinkley-like – in other words, hugely expensive for the poor old bill payer.

Hitachi didn’t bite, but, once again, we have discovered the truth about nuclear: it never gets cheaper. When Hinkley was approved in 2016, we were invited to swallow hard and accept the monstrous costs because the Somerset megaplant would trigger a “resurgence” in nuclear and the next stations would be bargains. It was a triumph of hope over experience.

In the meantime, wind and solar have continued to tumble in price, as the National Infrastructure Commission (NIC), the body charged with injecting some long-term thinking into big national projects, noted last year. Its prescription: “Given the balance of cost and risk, a renewables-based system looks a safer bet at present than constructing multiple new nuclear power plants.”

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There were a few qualifications to that statement. No country has yet built an electricity system with very high levels of variable renewables, so caution would be required. But the NIC was clear about the correct immediate course: award only one more contract for new nuclear before 2025; don’t commission a whole fleet; back renewables to continue becoming cheaper and see what new advantages can be produced by storage, the technology that could change the calculations again.

Clark doesn’t seem ready to go that far. He promised to set out a new approach to funding nuclear projects in the summer. We’ll await the details, but most of the supposedly “clever” financing solutions, such as the “regulated asset base” model, sound like ways to shovel construction risks on to consumers and disguise the fact within their bills. They don’t change the fundamental expense of nuclear.

A better approach is possible. Ministers should read their own infrastructure adviser’s report.

A pall hangs over shopping malls

Analysts at Jefferies produced a handy illustration the other week to what they called “shop-ageddon”. It showed the total return performance (that’s share price plus dividend) of the quoted property stocks in 2018. Here’s a few lowlights. Intu, minus 51.8%; Capital & Regional, minus 49%; and Hammerson, minus 36.3%. You get the drift.

But here’s something that tells the tale of the collapse in retail property prices even more dramatically. The Postings centre in Kirkcaldy, boasting 21 stores and a 299-space car park, has been put up for sale by its pension fund owner with a reserve price of just £1.

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That’s an extreme example of what’s going on, and the Postings is being marketed as an opportunity to redevelop the site, which makes it unusual. All the same, it is very hard to see what is going to improve confidence in this sector in 2019.

There are too many shops in the land and the rise of online shopping is relentless. As the landlords are discovering, their negotiating power is collapsing. High-profile store closure programmes – from the likes of House of Fraser, Marks & Spencer and Debenhams – all turn the screw a little more.

Whistling cheerfully, the owners of mega-malls say their premises will still prosper because they have “destination” appeal. Well, maybe, but the stock market tends to be a decent judge. It doesn’t see many pockets of safety.

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No rush to offload RBS shares

Royal Bank of Scotland – finally – has surplus capital and has announced a plan to buy a portion of the state’s 62.3% shareholding. It’s a reasonable idea. The Treasury clearly wants to reduce its stake and, while it can just sell more shares in the market, this is another way to the same destination.

But it’s an odd time to announce the plan. Brexit has battered the share prices of all big UK banks and the Treasury is always vulnerable to the charge that it is selling its RBS shares too cheaply. Best to wait awhile before pressing go.





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