Hitachi has scrapped plans to build a nuclear power station in Wales, becoming the second firm in two months to abandon a major nuclear project and triggering “a full-blown crisis” for the UK energy’s strategy.
The £16bn Wylfa plant on Anglesey was meant to be the next in a line of new nuclear plants behind Hinkley Point C but the Japanese conglomerate failed to reach a deal with the UK government.
A Hitachi board meeting pulled the plug on mounting costs on Thursday, and the company said it would take a 300bn yen (£2.14bn) hit from axing Wylfa.
The move was a “significant blow” to the UK’s future energy supply plans, the Confederation of British Industry said.
Unions expressed dismay over the cancellation, which will involve around 300 job losses at Hitachi’s UK subsidiary, Horizon Nuclear Power, and around a thousand more in the supply chain. It will also mean thousands of anticipated construction jobs do not materialise.
A second Hitachi plant at Oldbury in Gloucestershire will be shelved too.
Duncan Hawthorne, CEO of Horizon Nuclear Power, said that the company had been unable to reach a deal in talks with London and Tokyo and was therefore suspending Wylfa and Oldbury.
“I am very sorry to say that despite the best efforts of everyone involved we’ve not been able to reach an agreement to the satisfaction of all concerned.”
The collapse of the power stations and the Moorside project that Toshiba scrapped in November means the government has a huge hole to fill in the late 2020s and early 2030s.
Together the three plants would have supplied 15% of electricity demand.
Questions will be raised over whether ministers should redouble their efforts to make the numbers work for nuclear, or pivot to a new strategy that hugely expands the build-out of renewables.
Business secretary Greg Clark said the government had offered the company a “generous and significant” package of support. That included providing a debt facility for the project, taking a one third stake and a guaranteed price of power of up to £75 per megawatt hour for 35 years.
While much lower than the £92.50 awarded to EDF Energy for Hinkley Point C it is still much higher than the £57.50 for some windfarms in the early 2020s, a price that is expected to fall even lower in government auctions later this year.
Clark told MPs that renewables had been getting cheaper in the past five years while nuclear had become more expensive because of safety measures. “The challenge of financing new nuclear is one of falling costs and greater abundance of alternative technologies, so that it is being outcompeted,” he said.
However, Clark said he was still committed to new nuclear and would be publishing details of a new approach to financing in the summer.
The nuclear industry insisted it still had a key role to play. “The urgent need for further new nuclear capacity in the UK should not be underestimated, with all but one of the UK’s nuclear power plant due to come offline by 2030,” said Tom Greatrex, chief executive of the Nuclear Industry Association.
Hinkley’s developer, EDF Energy, said its own projects – which include plans for a site at Sizewell in Suffolk – were making good progress and showed “nuclear has a strong future in the UK.”
Rebecca Long-Bailey, shadow business secretary, said: “Just two months ago, the government’s lack of clarity over funding for new nuclear led Toshiba to withdraw from Moorside. That was a blow to the UK’s energy security, its decarbonisation goals, and the economy of Cumbria.
“But with Hitachi’s decision to withdraw from the Wylfa nuclear power plant, this triple blow has escalated into a full-blown crisis.”
Labour said that Theresa May had questions to answer over whether she had raised the issue during meetings last week with the Japanese prime minister, Shinzo Abe. The Japanese side has said she did not.
Greenpeace said it believed Clarks’s comments marked a shift in government realising that renewables rather than nuclear were the future.
“The government’s thinking seems to have finally caught up with reality. If the UK’s ageing energy policy is at last opened up to scrutiny, we must ensure that the main question is not how best to make the taxpayer cough up for new nuclear,” said Dr Doug Parr, chief scientist for Greenpeace UK.
RenewableUK, the green energy trade body, said it had a “pipeline of shovel-ready” onshore windfarms that could help fill the gap left by failed nuclear plans. The government has blocked onshore wind power projects from competing for subsidies.
The Liberal Democrats said it was time for the UK to prioritise renewables, batteries and imports over nuclear.
Hitachi still owns the Wylfa site on Anglesey, and said it would continue to talk with the UK government about new nuclear projects.