ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter

Hitachi reversal points to nuclear sector led by China and Russia

State-backed builders have a huge edge over private rivals as costs soar

A dome is installed over a Hualong One nuclear power unit in Guangxi Zhuang Autonomous Region, China. Russia and China have accounted for the majority of nuclear plants built since 2000.   © Reuters

TOKYO -- Hitachi officially announced Thursday that it is putting its British nuclear project on ice, a decision that will entail about 300 billion yen ($2.8 billion) in losses for the Japanese company.

Japan's goal of exporting nuclear technology is now in tatters, as the Fukushima disaster of 2011 has led to new, expensive safety requirements, making private-sector reactor construction all but unfeasible.

With European operators facing similar challenges, nuclear projects going forward are likely to be dominated by government-backed players, namely in China and Russia, altering the landscape of the industry.

"There is a limit to how Hitachi, a private company, can absorb all the costs," President and CEO Toshiaki Higashihara said at Thursday's press conference announcing the decision.

His remarks were a reaction to British Prime Minister Theresa May's statement last Friday following her meeting with Japanese Prime Minister Shinzo Abe. When asked why the two leaders had not discussed the Horizon nuclear project in Wales in their meeting, she simply said it was a "commercial decision" for Hitachi.

One Hitachi executive called May's comment "disheartening," since the Japanese company had been asking the British government for extra funding for the project.

Hitachi is not alone in the nuclear power industry in its struggles. French peer Areva fell into bankruptcy, and is now known as Framatome following its sale to French public utility EDF. In the U.S., Westinghouse Electric famously went under, and General Electric is expected to retreat from the nuclear business.

Instead, government-led companies, such as those in China and Russia, have taken the global stage. The two countries have won orders for the majority of reactors that have started up around the world since 2000: 33 for China and 15 for Russia.

In Turkey, where Japan's Mitsubishi Heavy Industries recently gave up on a nuclear project, a Russian state company broke ground on a separate project last April. China General Nuclear Power Group is selling a reactor system that it developed based on Westinghouse's technology.

The Chinese and Russian governments provide construction financing and take care of spent fuel disposal, giving their enterprises a clear advantage.

Meanwhile, Japanese competitors are still stuck with a domestic market where new nuclear construction is frozen due to safety concerns. The government's goal of seeking alternative markets abroad now seems at a dead end as well.

One major factor in Hitachi's halting the U.K. project is the spread of renewable energy across Europe. Compared with 2012, when Hitachi began the project, generating electricity from renewables has become substantially cheaper thanks to technological innovations, as well as the economies of scale that accompany wider application of the alternative energy sources.

In the two years leading up to 2017, the successful bidding price to construct offshore wind generators in Britain fell by half. This is in contrast to the ballooning costs for building nuclear plants.

This made it difficult for the government to offer additional funding to the Hitachi project. "Any deal needs to deliver for U.K. consumers and taxpayers," May's spokesman said Thursday, Reuters reported.

"Despite extensive negotiation and hard work by all sides, the government and Hitachi have been unable to reach agreement to proceed at this stage," the spokesman said.

For Hitachi, another miscalculation occurred when its Japanese partners refused to go along with the plan that Hitachi and the British government had agreed on to keep the project alive. The plan was to have costs split among Hitachi, other Japanese corporations, and a British public-private consortium.

Utility giant Tokyo Electric Power Co. balked at putting down any investments, fearing that the Japanese public would not accept such a move by the company that was at the center of the Fukushima disaster.

Nuclear power in itself has fallen out of favor as a funding target. "Companies and funds that wished to invest in Horizon have distanced themselves with the rise of renewable energy," said a Hitachi executive.

But demand for energy is expected to rise, as new technologies such as big data analysis and artificial intelligence consume large amounts of electricity. "When considering stable energy supply, renewable energy alone will not be able to provide cover," warned Higashihara, the Hitachi CEO.

Nikkei staff writers Shinichiro Ibusuki and Kenji Asada in Tokyo contributed to this report.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more