Energy company Centrica has abandoned its plans for building new nuclear reactors in the UK, blaming rising costs and construction delays.

The move is a blow to the government's aspirations to build the most ambitious fleet of new reactors in Europe, and comes on the day MPs severely criticised the management of nuclear waste at Sellafield and after Cumbria county council rejected proposals for a deep burial site to permanently dispose of the waste.

Centrica will forfeit its 20% option on four new nuclear plants planned by EDF in Somerset and Suffolk, writing down £200m in the process. EDF, owned by the French state, has been in talks with the state-owned China Guangdong Nuclear Power Corporation, which may pick up Centrica's option.

Centrica's exit means no major UK company remains involved in plans for new nuclear reactors in the UK, but Centrica retains its 20% stake in eight existing nuclear power stations.

Sam Laidlaw, chief executive of Centrica, said: "We believe that nuclear generation has a valuable role to play in a balanced UK energy mix. However, since our initial investment [in 2008], the anticipated project costs in new nuclear have increased and the construction timetable has extended by a number of years." In particular, Laidlaw blamed the very large 1.6GW units planned for Hinkley Point in Somerset for making the project more expensive, and design modifications imposed after the Fukushima disaster for adding to delays.

EDF is building a reactor at Flamanville in north-west France, but it is years late and its cost has ballooned from about €3bn to over €8bn. The company had pledged to make its final investment decision on the Hinkley reactors by the end of 2012, but failed to do so. It is currently negotiating with the government over the price that will be guaranteed for electricity from the plant.

EDF said it understood that the profile and scale of the investment in new nuclear plants did not meet Centrica's shareholders' expectations but said momentum behind the "shovel-ready" Hinkley Point project remained strong. EDF chief executive Vincent de Rivaz said: "EDF Energy is working with the government to agree a price for the electricity at Hinkley which will be fair and balanced for UK consumers and investors. This [agreement] is now, more than ever, the key to attracting investors and giving the UK the secure, low-carbon energy it needs for the future."

Centrica's pull-out follows that of other major energy companies operating in the UK, with E.ON and RWE exiting its Horizon joint venture in 2012 and SSE in 2011.

New nuclear reactors are vital to the government's plans to replace the UK's ageing reactors and dirty coal-fired power stations with low-carbon energy. A spokesman for the Department of Energy and Climate Change (Decc) denied Centrica's withdrawal reflected badly on the government: "The decision reflects the company's investment priorities and is not a reflection on UK government policy. The recent purchase of Horizon Nuclear Power by Hitachi is clear evidence of the attractiveness of the new nuclear market in the UK. We are determined to make the UK a leading global destination for investment in new nuclear, which will play a key role in our future energy mix."

Tom Burke, at thinktank E3G and a former special adviser to three Conservative environment secretaries, said: "The really important question now is what does Centrica know that DECC does not? MPs will decide on Thursday whether the imminent decision on the agreed price for Hinkley Point's electricity should be referred to the Public Accounts Committee, which today condemned Sellafield's handling of nuclear waste as a bad deal for taxpayers. That referral would provide a welcome opportunity test whether Hinkley is a good deal for taxpayers."

Greenpeace's Doug Parr said: "The Centrica pull-out has exposed a very troubled UK energy strategy. This government's relentless focus on new nuclear has lost us years of investment in truly green energy and we now need a plan B to deliver a clean, safe energy system – one that doesn't depend on deluded estimates of how much nuclear will get built. The longer the government chases its nuclear dream, the more the UK loses out on the jobs and economic benefits that viable, affordable green energy will bring."

Laidlaw said Centrica would now invest in developing new gas production in the UK, Norway and North America and pursue renewable energy projects including a big windfarm off the Suffolk coast called Race Bank. The company's nuclear investment in 2008 was funded by a £2.2bn rights issue, but with Monday's pull-out, it will give £500m back to shareholders via a share repurchase programme. Laidlaw defended this move, at a time of soaring consumer energy bills, saying the company has invested £11bn in the UK in the past five years, during which shareholders had received £1bn in dividends.

Analysts at Deutsche Bank said: "The decision to give cash back to shareholders rather than invest in new nuclear will be an embarrassment for the coalition government." But George Borovas, head of international nuclear projects at law firm Pillsbury, said: "Centrica's exit underscores the challenges that new build projects will continue to face in the UK as well as globally. However, new investors will quickly move to take Centrica's position and the government's hard work to attract foreign investment will probably pay off in this case."

New nuclear power plans around the world

China: After an 18-month delay following the Fukushima disaster, China is pressing ahead again with the world's most ambitious programme of new nuclear reactors. It began construction on four new plants between October and December 2012 and altogether hosts almost half of the world's 60 or so reactors under construction. Most of the major companies selling reactor designs, such as France's Areva and the USA's Westinghouse, are building their most advanced designs in China.

Russia: There are 10 new reactors being built in Russia, which – like China – is a possible source of investment in the UK's new-build plans.

India: There are seven new reactors under construction in India, with Russian and French companies most active. Japan is unable to participate because it does not export nuclear equipment to countries that have not signed the nuclear non-proliferation treaty.

South Korea: Three new reactors are under construction in South Korea, which has won a reputation for excellent operational performance. It also won the contract in 2009 to build four new reactors in the United Arab Emirates, ahead of French rival Areva. Work in the UAE began in 2012.

USA: The explosion of cheap shale gas has deeply damaged the economic case for new nuclear plants in the US. Between 2007 and 2009, 28 applications for new reactors were filed, the first in 30 years. All but four have been cancelled or delayed although two construction licences were granted in 2012. American law forbids foreign-controlled ownership of nuclear facilities, barring major investment from abroad.

European Union: France, Finland and Slovakia are the only European Union countries building new nuclear plants, but all the plants are delayed and over budget. The Slovakian reactors are being built with the backing of Italian energy giant Enel.

Source: World Nuclear Report, and Guardian research