U.K. Earmarks $262 Million to Bolster Its Nuclear Power Industry

(Bloomberg) -- The U.K. government earmarked 200 million pounds ($262 million) to smooth the way for the next nuclear power plants just two days after rejected the case for an experimental project that would generate power from the tides.

The Department for Business, Energy and Industrial Strategy said its Nuclear Sector Deal will fund technology and skills needed to maintain the industry that the government is backing to be part of its future energy mix. About 56 million pounds will go to help eight vendors of modular reactors carry out technical studies.

The decision puts further distance between Prime Minister Theresa May’s administration and the possibility of government support for cutting-edge renewable technologies. May’s government has scaled back subsidies for wind and solar, halted onshore wind farms and declined to back Tidal Lagoon Power Ltd.’s proposal for a 1.3 billion pound project to demonstrate its technology.

“Nuclear energy not only fuels our power supply, it fuels local jobs, wages, economic prosperity and drives U.K. innovation,” Energy Secretary Greg Clark said in a statement released by his office in London on Wednesday.

A fusion project in Culham, Oxfordshire, will receive 86 million pounds. About 62 million pounds -- about half from industry -- will go to streamline the supply chain and improve manufacturing techniques.

The government’s decision to back the first new nuclear plant in two decades has been criticized because of its cost. Electricite de France SA will receive 92.50 pounds for every megawatt-hour of power it generates at its Hinkley plant along Britain’s southwest coast -- a third more than the current market price.

Tidal Lagoon wanted a similar payout for its power, but Clark rejected the project on the grounds that over time it would cost much more than a combination of offshore wind and nuclear plants.

Under the deal on Wednesday, the nuclear industry committed to reduce the cost of new-build projects by 30 percent by 2030.

U.K. Earmarks $262 Million to Bolster Its Nuclear Power Industry

The funding illustrates that the government is prepared to throw its weight behind the atomic plants even though Hinkley’s electricity will be more expensive than new wind farms. Earlier this month the U.K. said it was considering whether to take an equity stake in a 20 billion-pound nuclear project in Wales led by Hitachi Ltd., a move that would mark a major step away from private control of energy markets.

After coming under fire for the rate it agreed with EDF, the government wants to help Hitachi shoulder the construction risks before the plant starts producing, thereby reducing the final cost of the plant to taxpayers.

After Hinkley, EDF has plans to build more reactors at Sizewell and Bradwell. The company already thinks it can reduce the cost of the Sizewell project by 20 percent compared to Hinkley by keeping the reactor design as similar as possible but that’s still below the 30 percent target.

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