The UK has no easy way to block China’s ambitions to export nuclear reactor technology to Britain on security grounds, despite growing public anxiety about Chinese involvement in sensitive infrastructure, according to people familiar with the situation. The government’s willingness to permit the state-owned utility, CGN, to participate in the UK’s nuclear power generation programme has raised eyebrows in recent months as Chinese investment has come under hostile scrutiny, both in Europe and the US. In October, an assistant US secretary of state, Christopher Ashley Ford, even warned the UK explicitly against partnering with CGN, saying that Washington had evidence that the business was engaged in taking civilian technology and converting it to military uses. More recently, concerns about the Chinese telecoms company Huawei and cyber security have also prompted calls for the government to back away from closer energy ties. But government policies requiring nuclear projects to be “developer-led”, and interlocking commitments given to Chinese investors by David Cameron’s government in 2014, make it awkward for the government to reverse course. Some observers even think this “quid pro quo” could oblige the government to follow through on Bradwell under a legal principle known as “legitimate expectation”. This says that if large sums are invested on the basis of a government understanding, it can lead to the arrangement morphing into an enforceable contract. They point to the formal security review of the Hinkley deal Theresa May ordered when she took office in 2016. This cleared CGN’s minority holding subject to EDF retaining a majority stake. CGN has been careful to leave open the door to compromise with the government and UK regulatory agencies. The Chinese group has indicated its willingness not to operate the Bradwell facility directly itself, despite being both a utility and the majority investor. It has entered into a partnership with the UK aerospace group Rolls-Royce over the control systems that are the “central nervous system” of a nuclear station. This could see Rolls systems used at Bradwell as a fallback to shore up political support for the scheme. Opposition to the deal ranges from the strategic to the practical. Economist Dieter Helm said he finds it astonishing that an independent nuclear military power should be “complacent about allowing potential enemies into the core of its nuclear technologies”. Some critics also worry about the availability of fuel and spares in what will be a 60-year plant should Britain and China fall out. But others think the security risks are more of perception. Ed Davey, the Liberal Democrat former energy minister who negotiated the Hinkley deal, sees them as less acute than those with telecoms networks. “You can’t physically move the plant, it’s closed off from the outside world and there is an independent regulator who oversees every aspect of operation and has full rights of access,” he said. In this view, security concerns are easily trumped by the benefits of letting Beijing finance development and the need for preserving harmonious trade relations. The bigger risk to CGN’s ambitions may be the UK’s waning appetite for more nuclear reactors, and the lack of competitive tension among developers in seeking new deals. A report last summer from the National Infrastructure Commission warned against “rushing” to support more nuclear stations and suggesting only one more be agreed before 2025, preferring to place bigger bets on renewable energy.
FT 14th Feb 2019 read more »