Today’s decision (17th June 2010) of the UK government to withdraw its proposed loan of £80m to Sheffield Forgemasters is extraordinary. No other move could have had quite so much effect on the plans for nuclear power. Forgemasters wanted the money to buy a 15,000 tonne press, a necessary piece of equipment to make the pressure vessel at the centre of a power plant. Without the money, it says it will not proceed with its expansion into the nuclear market. The only other company currently making forgings of sufficient size for an international market, Japan Steel Works, has recently tripled its capacity to make 10 pressure vessels a year. But last year 11 new nuclear power stations were begun around the world and the pace is accelerating. 55 reactors were in full planning at the end of 2009 and in the US over 30 licence applications are under active discussion.
Without the new investment by Sheffield Forgemasters, the waiting list for pressure vessels means that EDF’s plan to build at least one nuclear power plant in the UK by 2017 will be unattainable. The waiting list for pressure vessels is too long. Korean and other companies, including two in China, intend to enter the business of making large forgings. But the work necessary to ensure the steel is made to the right quality is bound to take several years. Any failure of the reactor core would be catastrophic and customers will be wary about buying from a company without sufficient experience. Sheffield Forgemasters was one of the small number of businesses around the world that might have increased the speed of rollout of new nuclear. Forgemasters might have been the central company in a nuclear renaissance in the UK.
What is the new government’s logic? Does it really believe that Labour’s proposed Forgemasters loan was a crude attempt to buy votes in Sheffield constituencies at the May election and therefore was commercially unjustified? Or does it think that the loan was incompatible with its stated commitment to making nuclear stand on its financial feet? In either event, with one move it has delayed any UK nuclear construction by at least two or three years.
On the other hand, it may just have hoped that Westinghouse, the maker of the competitor to the Areva EPR power plant, would step up to replace the state loan with private money. Westinghouse owns a stake in Forgemasters and desperately needs an alternative supply of reactor forgings to reduce its dependence on Japan Steel Works. This looks a risky gamble. EDF is furthest ahead with UK plans for new nuclear reactors but is committed to the Areva design for the UK, not the slightly smaller Westinghouse equivalent. The idea that EDF will commit to buying its pressure vessels from Forgemasters if it is principally backed by its main competitor looks unlikely.
Whether one wants nuclear power or not, this decision looks like ill thought through and dangerously destructive to the already weakening confidence in the prospects for construction in the UK. £80m is not a tiny amount, but in the context of the need to spend over £10bn a year for the next generation on new power stations it is small change.