Investment expert agrees on poor economic outlook for nuclear power

“Fundamentally, [Mr] Immelt is right. In the end it’s going to be a combination of gas, wind and solar,” says Samer Salty, chief executive of Zouk Capital, a London private equity investor in clean energy projects..

Because of the vast investment needed and the construction risks involved, it is unlikely that the private sector will be willing to fund new nuclear plants without subsidies and incentives from cash-strapped governments.

Mr Atherton says: “There are few companies in the world that can take a loss of that size [the €2bn Olkiluoto cost overruns] and remain solvent.”

Wind taken out of nuclear power’s sails Ft.com By Pilita Clark, Rebecca Bream and Guy Chazan, 2 Aug 12, It is one thing for a green pressure group to claim nuclear power is too expensive, but quite another when the charge comes from the head of an atomic industry pioneer such as General Electric.

GE built some of the world’s first commercial atomic reactors in the 1950s and has remained an industry leader since its nuclear joint venture with Japan’s Hitachi in 2007.

Some investors say that Jeff Immelt, GE chief executive, was merely stating an inconvenient industry truth when he told the Financial Times at the weekend that nuclear power was “really hard” to defend financially, and most countries were moving to a mix of gas and renewable energy.

Last year, economic forecasts said electricity generated from nuclear plants would be cheaper than, or as cheap as, power produced by natural gas, wind farms or solar panels for years to come.

Some experts have questioned such predictions as market prices for solar panels have plummeted, wind turbine prices have declined and large finds of shale gas have prompted hopes that the low gas prices in the US could spread.

Lengthy construction delays at the Olkiluoto 3 project in Finland and the Flamanville project in France, the first nuclear reactors to be built in Europe for two decades, have pushed up estimates of nuclear reactor costs. The disaster at Fukushima in Japan has further pushed up costs and has led some countries, notably Germany, to abandon nuclear power.

In many developed countries recession has kept demand for energy and power prices lower than expected, making the conditions for nuclear investment less favourable.

Since Fukushima regulators are demanding extra safeguards such as auxiliary power systems be added to plant designs. “There are definitely some design changes post-Fukushima,” says Sam Laidlaw, chief executive of Centrica, the UK energy group looking at building reactors with EDF. But he points to the slow progress of the new European plants as the main reason for changing cost assumptions. Peter Atherton, utilities analyst at Citigroup in London, says the price for a 3.2GW nuclear reactor in the UK was estimated at £4bn in 2008; now it is £7bn, based on the experience of Flamanville and Olkiluoto. “If you have to pay £7bn per reactor, it becomes a real challenge to justify building them – both economically and politically.” The reduction in the price of electricity from renewables – led by the collapse in the cost of solar – will mean that nuclear will need to remain competitive to be deployed widely.”

Mr Atherton says: “There are few companies in the world that can take a loss of that size [the €2bn Olkiluoto cost overruns] and remain solvent.”

With private sector interest cooling and governments scrutinising the costs of building the next generation of reactors more closely, nuclear power has a long way to go before proving Mr Immelt wrong by showing it can compete with gas and renewable energy. http://www.ft.com/intl/cms/s/0/5f849de4-dbf8-11e1-86f8-00144feab49a.html#axzz22RM2BCRO