The existing UK energy “strategy” appears to have suffered a terminal blow with the disappearance of two major new build projects. First the Japanese company Toshiba decided to shut down its operation NuGen after failing to find a buyer. This was recently followed by the decision of Hitachi to put on hold their programme to build a nuclear power plant in Wylfa, Anglesey.

The scale of these projects are significant inasmuch as they potentially would supply 10-12% of the UKs electricity, but beyond that would have supported the local economies of remote locations in Cumbria and North Wales. The Hitachi plant was suggested to have created over 8,000 construction jobs and thereafter some 1,000 jobs associated with the plant operation.

For those who oppose, in principle, nuclear energy this may have been a moment of quiet, or may be not so quiet, celebration and a validation of the long held belief that nuclear energy is just too expensive, dangerous and does not have a role to play in the UK energy mix. There will be many who point, correctly, to the rise in solar and wind and will feel comfortable that all is in hand and the UK can well do without nuclear energy and that the loss of the Japanese investment is no bad thing.

In terms of the UK energy system, things are moving so quickly that it is easy to be disorientated and there is often confusion between energy and electricity. It should not be forgotten that if the UK is to arrive at the proposed 80% reduction in CO2 emissions, that its energy policy (such as it is) is designed to achieve, there is a need to decarbonise heat production and electrify transport. The combined impact of these will be to at least double the amount of electricity required.

Those who rightly trumpet renewables will be aware that the intermittency of wind and solar requires either backup generation from gas power stations or large scale storage. The former will not deliver low carbon electricity and the partial use of the capital investment of a gas plant makes the real cost of wind and solar higher. Energy storage is the eventual solution, but achieving grid scale storage still remains to be realised and will not be as simple as exploiting second life batteries from the wave of electric vehicles that are predicted.

The change that the UK energy system still has to navigate is of a scale beyond which readymade solutions exist, a complexity that exceeds that which can be achieved by the optimisation driven by the market and is likely to be at a cost which necessarily takes the system beyond the current price of electricity. The present Government approach approximates to “leave it to the markets” and it is pretty clear this is falling short. There is a need for “market corrections” or subsidies.

The road to the new, low carbon, sustainable, energy system is unclear – there is no obvious single path. To reduce the high risk, large scale nuclear will still be required.

It is noticeable that the Hitachi investment has not been cancelled, but is on hold. Unlike Toshiba, who were affected by the US fortunes of the Westinghouse AP1000 reactor, Hitachi is not at immediate financial risk. Building reactors in the UK is expensive. The UK’s approval system, the Generic Design Assessment, often requires changes to design which come at a cost. The cost of a first-of-a-kind UK nuclear reactor is even more expensive; witness the Hinkley Point C EPR reactor which will cost >£20billion. Hitachi is seeking some risk sharing. The Chancellor of the Exchequer, Philip Hammond observed: “They retain the site and we hope that the work that we're doing on a possible alternative financing model may yet allow the project to go ahead", suggesting that there remains a strong desire to tweak the conditions to make the investment happen.

The EDF Hinkley Point C is itself a project not without risk. Perhaps the fact that there is now a reactor of very similar design operational in China and the collaboration with China General Nuclear, CGN, (who co-built the plant in China) downgrades some of that risk. However, it would be amazing if there were no project delays. From this perspective CGNs plan to develop their own UK version of their HP1000 offers other options for the UK energy system.

The final twist is the UK Government’s dalliance with small modular nuclear reactors, SMRs. Recognising that the financial investment in large scale power stations has proved anywhere from challenging to impossible, smaller reactors are cheaper and hence offer a more investable proposition. Curiously then, in a national competition, BEIS down-selected a series of reactors which are unlikely to come up with solutions which will successfully produce energy anytime soon.  There is a second chance to get things right, with the proposition from Rolls-Royce to reinvigorate their small(ish) modular reactor of 400MW. This could provide further assurance if the Hitachi investment cannot be restarted.

SMRs are appealing, but there is no guarantee that they can produce electricity at the price of even large nuclear reactors, never mind any other source. It is likely that to be cost effective, their waste heat will need to be exploited. Academics in the Birmingham Centre for Energy Storage have developed solutions that would allow the integration of energy storage with an SMR which could transform the SMR into a commercially attractive proposition.

In the uncertain times we face, spread betting is probably the best option. Being sensible, this will require some money to be put into nuclear energy.

Professor Martin Freer, Head of Physics and Astronomy and Director of the Birmingham Energy Institute (BEI), University of Birmingham.