SSE is right to focus on what it knows – and that means a shift to renewable energy

The surprise in Scottish and Southern Energy’s (SSE) move, expected to be confirmed soon, that it is pulling out of a consortium bidding to build a nuclear power station at Sellafield, Cumbria, was that it was ever in that group at all.

Ian Marchant, SSE’s chief executive, has long been a sceptic of the nuclear industry, not because of its safety record, but as a doubter that its economics make much commercial sense.

Nevertheless, if there was a UK government intention that up to ten new nuclear plants should be built to replace the ageing existing fleet, he took the view that it was a game that SSE should be in to maintain a diverse portfolio of electricity sources – currently hydro, onshore and offshore wind, gas and coal.

Even earlier this year, he was of the view that the disaster which struck the Fukushima plant in Japan after the March earthquake and tidal wave would cause no more than a year’s delay in the UK and European building programme.

That he was saying this then indicates that his apparent change of mind and intention to concentrate on renewables has little to do with the Scottish Government’s hostility to nuclear and devotion to renewable generation.

Mr Marchant’s move is almost certainly motivated by a hard-headed assessment of what strategy makes the best commercial sense for SSE.

Government energy policy around the world is now dominated by the need to focus on low carbon electricity generation. The German government has dropped plans for new nuclear plants and engineering giant Siemens promptly followed that by pulling out of the nuclear sector altogether. This has made investors, already concerned about the enormous clean-up and compensation liabilities that would follow a nuclear accident, even more nervous that there is a political risk attached to nuclear.

Since SSE has absolutely no expertise in nuclear and therefore little to contribute apart from money to building new reactors, why should it be exposed to that risk?

Much better to concentrate on onshore and offshore wind where it has a lot of construction and operational know-how, a capability which is now more attractive to investors who are thinner on the ground than before the financial crisis.

SSE may need that investment for marine energy where it has a developing interest in a potential power source which, dependent on getting the technology right, should not suffer from the unpredictability problems of wind.

And if longer visions of sub-sea connections between Scotland and Norway, which SSE is involved in planning, come good, enabling intermittent Scottish wind power to be stored in Norwegian hydro pump storage capacity, that would give SSE even more of an edge in renewables than it has already.