Nuclear prospects troubled by Euratom exit and strike price pressure

Post-Hinkley nuclear projects pushed to lower strike prices while Euratom security of supply fears escalate

The government’s plans to quit the Euratom treaty pose a fresh threat to the UK’s increasingly embattled nuclear new build programme, a new report has warned.

The study, issued by the Institute of Mechanical Engineers says that the government’s plans to exit the treaty could imperil fuel supplies, jeopardising energy security as well as threatening plans to build new nuclear reactors and decommissioning activities.

Former energy secretary of state Sir Ed Davey told Utility Week last week that withdrawal from Euratom put the nuclear sector’s security of supply at risk.

The report’s publication coincides with reports this morning that companies building the new generation of nuclear stations have been told that new strike price agreements must offer a lower guaranteed electricity price than the £92.50 per MW hour deal concluded for EDF’s Hinkley C plant.

According to the Financial Times, the government has indicated that it wants the level of future agreements to be 15-20 per cent lower.

In its new report, the IME calls on the government to cushion the blow of Euratom withdrawal by creating a transitional framework for the nuclear industry.

The first plank of the transitional framework would be the creation of a State System of Accountancy and Control (SSAC) framework that would mirror such provision as Euratom.

In addition, the IME calls for the UK Government to create new nuclear cooperation agreements (NCAs) with Euratom and non-EU trading countries prior to leaving Euratom.

In particular, nuclear goods, services and research activities should be part of any new trade deals negotiated with the USA, Canada, Australia, China and South Africa.

The report says that it is “essential” that the UK develops a transitional framework, which mirrors Euratom before the deadline to leave both the EU and Euratom.

The report says that given the UK’s existing NCAs have all been developed and managed by Euratom,  it will not be possible to develop any kind of trade deals with non-EU countries and Euratom for the UK nuclear industry if new agreements are not in place.

Dr Jenifer Baxter, head of energy and environment at IME and lead author of the report, said: “The UK’s departure from Euratom must not be seen as an after-thought to leaving the EU. Without suitable transitional arrangements, the UK runs the risk of not being able to access the markets and skills that enable the construction of new nuclear power plants and existing power stations may also potentially be unable to access fuel.

“With the Article 50 process taking just two years, the UK Government must act quickly to start the process to develop Nuclear Cooperation Agreements to enable international trade, for goods such as nuclear fuels and research. Government must also make sure that the UK will be able to access sector specific skills not currently available in the UK, such as centrifuge technology expertise.

“There needs to be a thorough framework in place to provide assurances on nuclear safety, nuclear proliferation and environmental issues.

“Making these transitional arrangements will be difficult, particularly given the short time-scale, but if done correctly could present the UK with opportunities to speed up the process of developing new nuclear power plants and reprocessing facilities, boost UK nuclear skills as well as open up the UK to more international trade deals.”