Have Eon/RWE killed nuclear power in the UK?

The two large German-owned UK energy suppliers Eon and RWE Npower have announced that they are abandoning their plans to build two new nuclear power stations through their Horizon joint venture. If they are unable to find a buyer for Horizon, it is unlikely that new nuclear power stations will be built at Wylfa, on Anglesey, or Hinkley Point in Gloucestershire. So is this an early warning sign for the end of the Government's plans to revitalise the UK nuclear power sector?

This view is to some extent supported by Npower's chief executive, who is quoted as saying that "the payback is too long compared with conventional and renewable sources of power". However it may be too early to write off nuclear power completely, as both partners in Horizon have German parent companies, and are being forced to close nuclear power stations in their home market and to invest heavily in new conventional sources. Investors in the other six sites earmarked by the UK Government for new nuclear plants may be able to take a longer investment view, even though it is likely to be 2022 before any new power stations come on stream.

Nuclear power is still an important part of the UK energy mix, providing around a quarter of all electricity. On the same day that Horizon announced its withdrawal from building new nuclear power stations, the Government announced that emissions of carbon dioxide, the main gas contributing to global climate change, had fallen to their lowest levels for 40 years in 2011. While there are several factors, including a milder winter and reduction in manufacturing, the largest single factor was that output of nuclear power rose 11% in the year.

So what does all this mean for UK consumers? Firstly, it shows that that the cost of renewable electricity is already competitive with (or lower than) new nuclear power, so creating demand for more green energy will encourage companies to invest in it. But it also shows that the UK still has a long way to go if it wants to limit both carbon dioxide emissions and the use of nuclear power. Although UK renewables output rose by nearly 10% in the year (mainly due to large - often offshore - wind), it is still only a tint fraction of the overall total.

And finally, it should remind us that reducing demand, usually by encouraging greater energy efficiency, is still most important, especially if we are to rely on a greater proportion of renewable energy sources rather than building more giant nuclear power plants. The time lag in building any plants also means that we may have to (again) extend the life of existing plant if we are to avoid the danger of damaging power cuts towards the end of this decade.