Were they ever really in it?
Scottish & Southern Energy (LON:SSE) has taken its ball and glove and marched off the field leaving an alliance, called NuGen, with GDF Suez and Iberdrola to build new nuclear reactors in the U.K. The other two investors bought out Scottish & Southern's shares, worth 25% of the project, for an undisclosed price increasing their respective stakes to 50% each.
SSE said would now focus on renewable energy projects and with natural gas plants fueled by North Sea fields to keep the transmission lines humming when the wind doesn't blow. This may be the utility's real comfort zone and some question whether it ever really had its heart in the effort to invest in the nuclear field.
According to a Bloomberg wire service report for Sept 22, Investec analyst Angelos Anastasiou said, "Renewables are their favored area and where they see themselves in the forefront. The nuclear side was always half-hearted."
Cheers from the post-industrial greens
Meanwhile, in Scotland, post-industrial visionary green groups cheered SSE's decision. In widely reported rhetoric, Dan Barlow, a key figure at Scotland's World Wildlife Fund (WWF), said his organization welcomed SSE's abandonment of the nuclear project. And he went further calling on the remaining investors to give up their nuclear plans as well.
The government in Scotland, like Germany, has a delusional vision that it can provide up to 80% of its electricity needs with offshore wind power.
Scotland's energy minister Fergus Ewing echoed the statements of the WWF signaling perhaps a closer than expected relationship between green groups and the government. It raises the question of whether SSE made its decision to pull out based solely on financial risk or whether it was pushed into a retreat.
Ewing claims that the decision by SSE to pull out of a consortium to build a nuclear reactors is a "vindication" of one of the Scottish Government's policies to promote renewable energy.
And push back from realists
Not so fast says Tory finance and energy spokesman Gavin Brown, who accused the Scottish Government of being "blinkered" in its opposition to nuclear power.
"Nuclear power has a vital role to play in Scotland's future energy policies, as it provides stability and security for energy supplies, as well as being low carbon.
Many countries around the world pursue pro-nuclear policies, so it's regrettable and worrying that the SNP is being so blinkered on this."
According to news wire reports, Scottish Labor's finance spokesman, Richard Baker, also called on the SNP to explain how it would reach its renewables target of 80% by 2020.
"We believe there should be mixed energy sources and welcome the drive towards renewables. But there is a role for nuclear power, as part of this mixed approach. The SNP Government needs to show how it will meet the renewables energy target it has set itself."
In other words, prove it.
It's the money honey
Alistair Phillips-Davies, a spokesman for SSE, told financial wire services is was the money, and not politics, that drove the decision.
"We have concluded, that for the time being, our resources are better deployed on business activities and technologies where we have the greatest knowledge and experience."
SSE had put money on the table to get into the nuclear game. With its two partners at NuGen, in 2009 the alliance bought the government approved site for the planned reactors for £70 million ($109 million). At a 25% share, that works out to a commitment of about £18 million or around $27 million. This may sound like a lot of money, but SSE has a market cap of just over £12 billion which makes the site acquisition costs a sneeze on a summer day.
In point of fact, the NuGen alliance only made a down payment of £19.5 million on the site so SSE's actual cash outlay was probably just under £5 million or about $8 million. For a firm with a market cap of over £12 billion, it would be easy to walk away in favor of natural gas plants, and wind, knocking down claims by green groups they swayed the utility to drop its nuclear energy plans.
In short, Scottish & Southern barely had its toe in the nuclear waters and pulled it out after hardly ever getting wet.
SSE's heart is in wind
In the category of putting your money where your mouth is, consider that SSE's real investments have been in renewables all along.
SSE's capital investment spending has been in projects like the £500 million Clyde wind farm (land based)(152 turbines) and the £650 million Greater Gabbard offshore wind farm (planned to be 140 turbines).
Overall, the utility's real money of £1.7 billion has been put into wind and natural gas plants. That's 14% of total market capitalization and represents real money.
The gas plants are a lot faster and cheaper to build than nuclear reactors and the fuel comes right off platforms in the North Sea. The base load power from the gas plants will keep the power lines humming when the wind isn't blowing, or blowing enough, to light Scotland's cities and power its factories.
Is the U.K. serious about nuclear?
Karen Dawson, an energy consultant at PwC, was quoted by Reuters on Sept 23 as saying SSE's announcement means the U.K. government hasn't done enough to lower the risk of building new reactors. The decision comes only a few months after the U.K. government unveiled plans to promote nuclear energy through a policy focus on "low carbon" energy sources.
However, Dawson points out the policy lacks effective means of providing a guaranteed rate of return on the huge capital expenditures required to build new reactors.
Energy Minister Chris Huhe (left) has repeatedly said the government will not offer loan guarantees or other financial incentives to builders of new nuclear power plants. For their part, the major nuclear consortiums have said that what they want is a high price on carbon to drive investments to the nuclear sector.
Another financial analyst, Lakis Athanasiou, at Evolution Securities, told DowJones Newswires September 23 he thinks the SSE move is significant because "it casts a shadow" over the government's ambitious plans to build nearly 20 Gwe of nuclear powered electricity generation by 2025. Athanasiou says given current financial conditions, and Fukushima fed public skepticism about nuclear energy, he thinks the country "will be lucky to get 10 Gwe by 2030."
Not so dour an outlook
That said the plans by the two remaining investors in NuGen are nothing to sneeze at. They include development of 3.6 Gwe of nuclear reactor generating capacity with the first units entering revenue service in 2023. The firms say they will make formal financial commitments to the projects in 2015. The reactors are planned to be built at the Sellafield in West Cumbria.
The two remaining investors in NuGen are not so dour on the prospects for making money with new reactors. In a joint statement, GDF Suez and Iberdrola pronounced themselves "confident" of their direction and said, "there is no reason why the decision by SSE should impact our plans or timetable."
The other nuclear new build consortiums said the decision by SSE would not affect their plans. The German consortium (Horizon Power) composed of RWE and E.ON plan to invest up to £15 billion to build up to 6 Gwe of nuclear powered generating capacity at sites in Wylfa on Angelsey and Oldbury near Bristol. The projects are expected to enter revenue service by 2025.
In a statement the Horizon Power project said SSE's move has nothing to do with them and that their project would proceed as planned. EDF with its partner Centrica also said they remain committed to developing new nuclear reactors.
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The latest edition of the Carnival of Nuclear Energy Blogs is up at Yes Vermont Yankee. 
