Ratings agency assesses UK market impact of new build

14 December 2005

A new generation of nuclear generation could significantly affect the future structure of the UK's generation sector, according to a new report from ratings agency Standard & Poor’s (S&P).

The report, UK security of supply fears spark renewed interest in nuclear energy, highlights a number of concerns that may stem from a major new nuclear programme. The potential for increased regulation, more political interference in the energy market structure, and the role of nuclear power in a competitive power market are key areas of concern, said S&P, which could alter the market structure. "We expect that investment in nuclear power will rely on the long-term sustainability of high electricity prices in the UK energy market," said credit analyst Paul Lund, adding: “If new construction of nuclear power is to become a reality in the UK, we have significant concerns over the future structure of the generating industry."

The agency warns that the biggest uncertainty facing the long-term economic viability of nuclear generation is the waste issue.

The liberalised power market in operation in the UK may also deter private investment, according the report, saying: "Ultimately, investor-owned utilities will not get involved in investing in any form of infrastructure unless risk-adjusted returns on capital meet internally set hurdles. This becomes even more of an issue where the investment is exposed to a fully competitive wholesale power market, particularly where predictability is an issue."

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