The collapse of the takeover of British Energy leaves the government with a nuclear sized headache.

British Energy generates one sixth of the UK's electricity but its ageing fleet of reactors urgently needs to be replaced if the UK is to retain a reliable power infrastructure and meet its emissions reductions targets. Most of British Energy's plants were built in the 1960s and 1970s and are close to the end of their lives.Several have suffered a series of serious maintenance problems in recent months. Only one, Sizewell B, will still be operational in 2020.

The sale of the group to a well funded utility like EDF, which is 84% owned by the French state was expected to provide an opportunity to revive the UK's nuclear industry. EDF is the world's most experienced nuclear operator, with 58 reactors generating over 80% of France's electricity, and 38 million customers.

Although EDF appears not to have closed the door on the deal entirely, if it really is dead in the water and can't be resuscitated, the British government will have to come up with a radical new solution to ensure these new plants are built.

Britain is facing a yawning gap in its power generation in a few years' time. By 2015 many of the UK's coal fired power plants will be forced out of service under strict new emissions rules. Facing a cost of around £4 billion per station British Energy lacks the financial muscle to undertake a new build programme on its own. If no alternative buyer can be the company will need to set up a series of partnerships with other groups to develop individual sites.

Other companies, including RWE, which owns NPower, Eon of Germany and Centrica, the owner of British Gas, are interested in new-build nuclear plants in the UK so it remains a viable option. Nevertheless, establishing such a partnership is likely to be a complex and time consuming exercise that could delay the construction of new nuclear stations for years.

The collapse of talks certainly represents a major embarassment for a government which has made much of its support for the rebirth of Britain's nuclear industry. But trying to ensure that the much needed new nuclear plants are built will be upper-most in ministers' minds today.