New nuclear – strategic imperative or costly excess?

A swathe of new funding for nuclear in the UK has provided much needed respite for the sector that currently faces fierce criticism for the high strike price agreed for Hinkley, trepidation at the UK’s withdrawal from the crucial Euratom agreement due to Brexit, embarrassment over the difficulty of keeping the Moorside nuclear project in the pipeline – which Kepco has just agreed to take over from Toshiba – and scepticism that new Small Modular Reactors (SMRs) really are as cheap and feasible as manufacturers claim.

Yet it is SMRs that are the lucky recipients of £56 new funding announced by Business Secretary Greg Clark. More confusingly, analysis by the planning consultancy Atkins, commissioned by BEIS, concluded that the energy from SMRs is likely to cost more initially than large nuclear – not reassuring considering eye wateringly high strike price of Hinkley Point C at £92.50MWh for thirty years. The silver lining for BEIS is that the analysis suggested costs could come down quickly thanks to shorter build times, although the authors admit there is “a great deal of uncertainty with regards to the economics of both SMRs and the counterfactual technologies.”

Clark also announced £86 million for the UK Atomic Energy Authority to establish a centre for nuclear fusion research that will have “global significance”. Alongside this a scoping report was released outlining potential sites for large new nuclear power stations like Hinkley Point C.

Nuclear Power in the UK produced roughly a fifth of the total electricity produced in the UK last year, and successive Governments expect it to play a key role in delivering a future low carbon energy system. However, there was a lapse in nuclear power station production and the last nuclear station built in the UK was Sizewell B in 1995. With a large number of nuclear power stations due to come offline in the very near future – of the current eight only four will still be in operation by 2024 – and the extremely long build times of new nuclear, it’s crunch time for the Government to lend full support to the industry for a new nuclear fleet.

So, let’s examine the drivers behind this new support for SMRs, a relatively new technology, that former Chancellor George Osborne was a proponent of. SMRs are miniature nuclear power plants with a capacity of less than 300MW and proponents argue they could provide an alternative to large plants. These can be installed in residential or industrial areas to provide electricity and power local heat networks. Advocates also argue that if enough are built in the same factory, the costs per unit can be driven down resulting in a lower price per unit of energy.

Unsurprisingly Rolls Royce – the maker of nuclear reactors for submarines – are one of the biggest proponents of the technology and has recently published a number of emotively titled reports supporting SMRs including UK SMR: A National Endeavour and Small Modular Reactors – once in a lifetime opportunity. For Rolls Royce there is also an element of competition, with China investing heavily in the technology and poised to become the market leaders in any future SMR market. The Government might quietly also raise a geopolitical rationale for SMR investment.

The major challenge for Government is, through the lens of a security of supply argument, how do they convincingly make the case for low carbon – albeit radioactive – nuclear energy when Government figures published in December show that year on year renewables have risen by five percent of the total generation to make up 30% of the overall mix. Nuclear on the other hand has decreased as a proportion of the mix over the last year by 0.4%. With a number of large scale renewable projects coming online in the coming years what could this figure rise to?

One thing is for certain. As the share of renewable generation increases coupled with the prevalence of greater storage and microgeneration, as well as record low prices for renewable energy, the argument that nuclear is required for security of supply will become ever more tenuous and face ever greater scrutiny from an increasingly engaged public.