Britain looks to China to fuel nuclear renaissance

Christopher Furlong/GETTY IMAGES - Heysham Nuclear Power Station in Heysham, United Kingdom. Chinese state power corporations are backing leading consortiums vying to roll out new British nuclear plants.

LONDON — A government campaign to usher in the next generation of nuclear power in Britain hit a major snag when German companies, scared off by the crisis last year at Japan’s Fukushima plant, pulled out of plans to build new reactors here. But another investor with deeper pockets has stepped in: China.

Chinese state corporations are backing consortiums that are vying to build nuclear plants here in a deal that pits the security interests of Washington’s closest ally against the commercial considerations of a country desperately seeking to modernize its aging energy grid. The possible entry of China as Britain’s nuclear benefactor is being seen here and across the region as a test case not only for the viability of nuclear energy in a post-Fukushima world, but also for how far fiscally strapped European governments will go in their quest for cash.

(CARL DE SOUZA/AFP/GETTY IMAGES) - A protester holds a Campaign for Nuclear Disarmament banner near No. 10 Downing Street in London on March 20, 2011. Britain, a country with dwindling North Sea gas reserves, remains one of the few major Western nations still eyeing a massive rollout of new nuclear plants.

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The bid marks the largest and most controversial of China’s recent investments in Britain — which range from the revered Savile Row tailors Gieves & Hawkes to a stake in the Thames Water utility company — and would add to a string of Western world investments by Beijing that also includes the pending takeover of Nexen, a Canadian oil firm with operations in the Gulf of Mexico.

To the dismay of critics who fear the implications of Chinese influence over the energy sector — and particularly over nuclear power generation — the British government has generally blessed the notion of China’s involvement. As one Energy Department official here put it, London is sending a signal to Beijing that Britain “is open for business.”

“Problem is, I don’t see anyone else but the Chinese rushing to invest in this area right now,” said Nick Butler, a former energy sector adviser at No. 10 Downing St. and a critic of the deal. “They are the only ones with the money. If you know of anyone else, please send them to the government.”

The pending deal underscores how differently the United States and Europe view China. European countries do not entirely share the U.S. perception of Beijing as a strategic competitor but instead increasingly see a financial patron, with Chinese investments in a key port in troubled Greece and a power company in hard-hit Portugal illustrating its role as banker and investor where others fear to tread.

At the same time, the future of Britain’s next-generation plants could potentially become a bellwether for the willingness of Western governments to continue embracing nearly zero-emission nuclear power as part of their efforts to reduce greenhouse gases — or whether what was once billed as a “nuclear renaissance” fails to truly take off.

“As an industrialized power with a strong climate objective, the U.K. should commit to exploring a portfolio of options, including nuclear, and to open competition, including China’s participation,” said Nicholas Stern, a climate change expert at the London School of Economics and an honorary adviser to the China Investment Corp., the official name of its sovereign wealth fund.

Moving ‘up the ladder’

Since the disaster-triggered crisis at Fukushima, Germany has vowed to abandon its nuclear plants within 11 years while Japan is weighing a similar move. Last month, the U.S. Nuclear Regulatory Commission temporarily froze 19 new requests for reactor licenses while it undergoes a court-ordered review of its environmental guidelines for nuclear waste disposal. Meanwhile, the U.S. nuclear industry is facing major challenges from cheaper energy alternatives, including a boom in shale gas.

But Britain, a country with dwindling North Sea gas reserves, remains one of the few major Western nations still considering a massive rollout of new nuclear plants. At the same time, Britain maintains some of the world’s most open policies on foreign investment. Together, that has given China’s state nuclear power companies — now in the midst of building 26 reactors at home — an opportunity to muscle in on the global market, which had long been dominated by European, American and Japanese companies.

“As China slows down, its companies are looking more and more to developed economies for growth,” said Thilo Hanemann, research director at New York-based Rhodium Group, an economic research firm that monitors Chinese investments. “One of their motives is to gain access to technology and human talent, an exposure to global management techniques. They are trying to move up the ladder.”

Over the next decade, eight of Britain’s nine plants will be decommissioned, with plans to replace them, and possibly increase their numbers, still seen here as key to meeting London’s pledged targets to cut carbon emissions. Two of the first four new reactors were set to be built by the German consortium Horizon, and two others by a group led by French power giant EDF.

But with the Germans phasing out nuclear power and the French-backed group under financial strain, industry insiders here say Britain has dwindling options to meet the Conservative-led government’s pledge of building new plants without throwing in billions of pounds’ worth of state subsidies.

Security concern

In what appears to be a move designed to assuage political concerns, Chinese state nuclear companies are seeking to partner with French giant Areva or Japanese rival Toshiba’s U.S.-based Westinghouse to buy out Horizon’s rights in Britain. Negotiations are continuing over the structure of a deal, with the role of the Chinese state companies under intense discussion. Besides offering financial backing, the Chinese companies could potentially become involved in construction and operational aspects of the plants, according to sources familiar with the talks.

The Financial Times reported Monday that EDF is also reportedly in talks to partner with the Chinese to build reactors in Britain.

Talk is rampant here that the Chinese companies may be forced to ultimately accept deals giving them no more than 50 percent ownership stakes in the new plants. But a British Energy Department official, speaking on the condition of anonymity because of the sensitivity of the issue, said that the government would not seek to limit a potential Chinese stake and that it would treat China “as we would any potential investor.”

The public response in Britain has been relatively muted. Nevertheless, criticism is starting to emerge from an unusual pairing of liberal anti-nuclear groups and staunch conservatives who question whether Britain is offering China a strategic foothold here that could become a significant security concern if tensions with Beijing were ever to rise.

“This is part of a worrying and incremental growth in what I call ‘China correctness,’ or not wanting to unduly upset the Chinese for want of investment,” said Mark Pritchard, a Conservative member of the House of Commons. He added, “Do we really want a Chinese communist state-backed company behind a U.K. power station? You have to wonder whether this is wise.”

Julie Tate in Washington and Karla Adam in London contributed to this report.

 
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