The UK may have to shift its energy strategy towards increased use of renewables after another planned nuclear project was shelved on Thursday, leaving a huge shortfall in electricity supply in the next decade.

The Japanese conglomerate Hitachi, which owns the 2.9GW, £16bn ($20.6bn) Wylfa Newydd project in north Wales, indefinitely suspended work on the plant due to the high financial risks involved.

“We’ve made the decision to freeze the project from the economic standpoint as a private company," the company said in a statement.

The UK government had offered to take a 33% equity stake in the project, provide all of the necessary debt financing to complete construction and pay Hitachi £75 for every MWh delivered.

Energy Secretary Greg Clark told Parliament on Thursday morning that this "significant and generous package... goes beyond what any government has been willing to consider in the past".

"Despite this potential investment, and strong support from the government of Japan, Hitachi have reached the view that the project still posed too great a commercial challenge."

He added: "I could not justify a strike price above £75 per MWh for this financing structure, given the declining costs of alternative technologies and the financial support and risk sharing already on offer from the government."

Hitachi said it would write off the ¥200bn ($2.8bn) that its UK subsidiary Horizon Nuclear Power has so far spent on the project, but left the door open to possible future development. “Further time is needed to develop a financial structure for the Horizon Project and the conditions for building and operating the nuclear power stations.”

The subsidiary — which Hitachi bought from previous owners RWE and E.ON for £700m in 2012 — is also suspending development work on a second 2.9GW Hitachi plant at Oldbury, in southwest England.

The news comes less than two months after fellow Japanese conglomerate Toshiba scrapped plans to build its up-to-3.6GW Moorside nuclear plant in northwest England for similar reasons.

Wylfa, Oldbury and Moorside would have provided the UK with 9.4GW of baseload energy, or 15% of its electricity supply, in the mid-2020s.

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This "triple blow" has become a "full-blown crisis", said Shadow Business Secretary, Rebecca Long-Bailey.

Nuclear currently supplies 19.4% of the UK's energy, yet all but one of the country's existing atomic plants are due to come offline by 2030.

The Department for Business, Energy & Industrial Strategy said that officials were now exploring “alternative funding models for future nuclear projects”.

"If new nuclear is to be successful in a more competitive energy market – which I very much believe it can be – it is clear that we need to consider a new approach to financing future projects," said Clark. "We are therefore reviewing the viability of a Regulated Asset Base model and assessing whether it can offer value for money for consumers and taxpayers." He added that he intends to publish this assessment "by the summer at the latest".

“Hitachi's confirmation that no solution has been found for its UK nuclear programme, despite already spending £2bn on it, tells you all you need to know about the economics of nuclear power,” said Doug Parr, chief scientist for Greenpeace UK. “In the meantime, renewable-energy costs, especially offshore wind and solar, have plunged dramatically, while new smart technologies including storage have arrived on the scene. A clever move now would be for the government to accept that the nuclear bet didn’t pay off, stop holding back renewables and have an urgent rethink about the future of UK energy.”

Industry association RenewableUK has called for the government to reverse its policy to not allow onshore wind projects to apply for subsidies under its Contracts for Difference scheme.

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“We have a pipeline of shovel-ready onshore wind projects that can provide cheap power to consumers and help close the gap on our carbon targets and it’s time [the] government allowed onshore wind compete on a level-playing field, including letting projects compete for Contracts for Difference," said RenewableUK’s deputy chief executive Emma Pinchbeck.

“If ever there was a good time for ministers to reconsider the benefits of onshore wind, it’s now.”

Clark himself pointed out that the cost of renewables is falling fast, while the cost of nuclear power is rising.

"The cost of renewable technologies such as offshore wind has fallen dramatically, to the point where they now require very little public subsidy and will soon require none," he said. "We have also seen a strengthening in the pipeline of projects coming forward, meaning that renewable energy may now not just be cheap, but also readily available.

"Whilst this is good news for consumers as we strive to reduce carbon emissions at the lowest cost, this positive trend has not been true when it comes to new nuclear. Across the world, a combination of factors including tighter safety regulations, have seen the cost of most new nuclear projects increase, as the cost of alternatives has fallen and the cost of construction has risen. This has made the challenge of attracting private finance into projects more difficult than ever, with investors favouring other technologies that are less capital-intensive upfront, quicker to build, and less exposed to cost overruns."

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The government now has a decision to make. Does it continue to pursue new nuclear and perhaps take on more risk itself, or even build its own nuclear plants, or will it pivot towards more renewables, or even carbon capture and storage, a largely unproven technology with high costs?

"There is little justification for spending our money on this outdated [nuclear] technology when even the government now acknowledges that renewables are cheaper, quicker to build and cleaner," said Parr.

This article has been updated to include the speech to Parliament by Greg Clark