This week Westinghouse, the nuclear power arm of Toshiba, filed for bankruptcy. Westinghouse was one of the last remaining element of the Westinghouse electricity company, which was founded in 1886 and was a pioneer in the mass roll out of AC electricity, working closely with the infamous Nikola Tesla.
Hardware it supplies, or components made under license via its patents, are used in half of the world’s nuclear power stations. So needless to say, this has sent shockwaves through the industry, as many worry about the fallout that this bankruptcy will have on various nuclear energy projects worldwide, including those in the UK.
In some respects I’m not hugely surprised that Westinghouse has gone under. I noticed they were pulling back from bidding in various nuclear energy projects doing the rounds. They have a relatively thin order book, so that implied they were having trouble raising capital. It seems that issues with American reactors they were building led to costly design changes, which led to losses that threatened the health of the parent company (Toshiba), who’ve thus decided to turn off the life support.
Granted companies do go bust all the time. Solar energy companies have gone bankrupt too after all. However there is a bit of a difference here. Solar power companies, while they receive some subsidies, these are tiny compared to the vast amounts of cash thrown at nuclear energy companies. As I’ve pointed out before Hinkley C is set to receive a subsidy rate of 68% of the cost of every kWh it generates. And at a price tag of £36.8 billion, means its going to cost the equivalent of £11,500 per installed kW, about nine times the current cost of wind power and seven times the current cost of solar.
In short, nuclear energy companies don’t really live in the real world of capitalism. They can screw up on an epic scale and still stay in business. Just look at the train wreck otherwise known as Olkiluoto (8 years late and 3 times over its original budget) or Flammanville (dogged by similar problems). Imagine if a solar power company delivered its product 8 years late and 3 times over budget, would they still be in business? Not likely! Yet Areva now plans to double down on Hinkley C.
Many government have ,for various reasons, decided that nuclear reactors are something they should have. And they are prepared to do what ever it takes and pay whatever it costs to have them. They are also prepared to ignore all logic and sweep whatever obstacles get in their little darling’s way, hence why the Tories have gone from subsidising solar power, to taxing it, as they realise that nuclear is only viable if they kill off the competition.
But while most nuclear energy firms are state owned Quangos, Westinghouse was the closest thing in the industry to a vaguely private firm. Obviously the implication of its bankruptcy is that it is not possible to do nuclear energy without significant government handholding. A subsidy, even the absurd subsidies thrown at Hinkley C, isn’t enough. Governments pretty much needs to bank roll the entire project, tax or centrally plan all possible competitors out of the market and build vast arrays of diesel farms to keep the lights on while we wait for the constantly delayed nuclear plant to be completed. Indeed, one could argue Westinghouse over stretched themselves, building too many plants at once. Implying that the construction rate of nuclear reactors will continue to lag behind the rate at which they get decommissioned.
So while there are some in the anti-nuclear and pro-renewable camp who will be reacting with glee to this news, it does have some bad news for both groups. Certainly, competition with renewables has been part of the problem. Renewable costs are falling, the roll out rate of renewables accelerating, while nuclear’s costs are rising and they are having to run faster to stand still. However, the likely reaction of governments to this is that they will punish renewables for their success and reward nuclear for its failures.
And least we forget, the collapse of Westinghouse is also in part down to the fact it couldn’t compete against fossil fuels. Much of Westinghouse’s business model relied on the assumption that they would be sending the next few decades replacing America’s large network of ageing nuclear plants. However, its now obvious that instead they will be replaced by coal or shale gas fired stations. Which does not bode well for the climate. So its difficult to see a silver lining here.
Certainly thought, this bankruptcy should serve as a wake up call to nuclear energy supporters. They need to accept the limitations of nuclear power. There are things it can do, there are roles it can fulfil, but it has its limits, it is no silver bullet.