Could nuclear power help get us to net zero?

The last decade or so has been full of ups and downs, with construction of two EPR pressurised water reactors (PWRs) at Hinkley Point C a prominent example.

Originally announced in 2010 and, according to lead investor EDF, now on course to open in 2026, the project has been the source of financing tensions between the government and its owners. A reflection of those is that while the original estimate was that Hinkley C could produce electricity at £20/MWh, the final ‘strike price’ EDF negotiated is £92.50/MWh (2012 prices and indexed to rise with inflation). And the project is still a year behind schedule.

It is the only one of eight nuclear power station sites originally selected by Westminster to be under construction. In 2018, Toshiba pulled out of a project at Moorside in Cumbria, and two years later Hitachi also formally withdrew from another at Wylfa Newydd on Anglesey. Meanwhile, at least half of the UK’s existing nuclear capacity is set to be decommissioned by 2025.

Of the original eight, only one other project, another EDF-led proposal for two similar reactors at Sizewell C, is seen as ready to move forward in the short-to-medium term. But since late 2021, it has taken at least two important steps forward.

As part of the updated UK net-zero strategy unveiled around COP26, the Johnson government said it would approve a final funding decision on a new UK nuclear energy site before the end of the current Parliament. This was confirmed as Sizewell in late January 2022, when the business and energy secretary, Kwasi Kwarteng, announced £100m funding for the project.

Also this January, Parliament passed the Nuclear Energy Financial Bill. This shifted public funding for nuclear projects from a ‘contracts for difference’ model, where it starts to flow once a plant opens. Instead, a ‘regulated asset base’ (RAB) model will be used where fixed amounts are paid to investors during construction.

The idea behind RAB is that it will help investors manage capital costs from day one, thus encouraging more to get involved, speeding project delivery, and reducing the strike price. The move has the support of both the Conservative and Labour parties.

Meanwhile, progress on Sizewell has not been the only good news for the nuclear industry of late. Another ‘fast-track’ option has also secured political support: small modular reactors (SMRs).

Kwarteng announced £210m in government funding for SMR development in November. This is to be backed by £250m in private investment from a consortium led by experienced reactor builder Rolls-Royce.

As the name suggests, SMRs are factory-built and then transported to and assembled on existing sites or others that can be made suitable without massive civil engineering. The goal is to require foundations that are only 20-30 per cent of those for a Hinkley-like build, with much of the work going into creating an aseismic bearing for safety and so that the reactor does not require design changes.

Another important difference with SMRs is capacity. Hinkley C and Sizewell C are 3,200MWe-capacity projects. The SMRs proposed by Rolls-Royce are in the 220-440MWe range, equivalent to 150 wind turbines or an older coal-fired station.

Rolls-Royce’s SMR concept is based on process innovation. Its SMRs will use existing PWR technology with progressive cost savings achieved through replication. The consortium is then looking to make deployments much more quickly by telescoping a historically linear set of approvals processes for technology, safety, and location into one that conducts all three simultaneously.

The aim is to deploy the first SMR by 2030, with factories then being added to duplicate the process so that future reactors can be added quickly from then on – with costs falling all the time. By contrast, construction at a site that requires bespoke design and engineering can take 10-15 years.

The initial target MWh cost range for SMRs is £50-60/MWh. This falls within a £45-£60/MWh range used in modelling where nuclear was assessed as a contributor to the UK net-zero campaign by the IDLES programme at Imperial College, London.

“Nuclear energy would need to halve in cost to warrant major new builds within a cost-optimal [net-zero] system,” the IDLES report observed.

These look like exciting times for those who see nuclear as intrinsic to decarbonisation and a major potential source of UK jobs and economic growth. But, notwithstanding government and even public support, the industry still faces challenging criticism.

Before addressing the charges being levelled though, did the UK government have any choice but to reinvigorate the civilian nuclear industry?

Polled last October ahead of COP26, 65 per cent of Britons said they thought nuclear energy should play a role in the UK climate-change strategy, according to YouGov, with 34 per cent saying it should have a major role.

On that last point, it needs saying that Johnsonian nuclear boosterism aside, the Conservative government still sees offshore wind as its main net-zero vehicle. It has a MWh cost of £35 and this is continuing to fall. It is also better suited in terms of climate to the UK.

The government’s current plan is to quadruple offshore wind capacity from 10GW in 2019 to 40GW by 2030, which would be enough to meet all of today’s UK household demand.

By comparison, if both Hinkley Point C and Sizewell C were active by 2030 (though Sizewell C would be more a factor in the final 2035 target, given construction time), they would offer 6.4GW in addition to about 1.5-2GW of existing capacity still in service.

This is in the context of UK annual electricity demand that is expected to rise from 300TWh today to 610TWh by 2050.

Nuclear energy’s currently envisioned role is therefore secondary when it comes to the closer 2035 net-zero goal, although proponents say that in going from low to zero carbon that role will be vitally important.

There is the issue of ‘baseline’. What happens if Great Britain becomes quite literally stuck in the doldrums and both offshore and onshore wind are generating electricity far below capacity? How do you guarantee continuity of supply?

Allied to that, there are growing concerns about energy security, particularly given today’s mushrooming prices. For the UK, these are more down to issues with the energy interconnect with France than the geopolitical machinations of Russia’s President Putin, but they have shot up the agenda. Securing nationally controlled generation capacity matters.

Then, what about the forecasts? The UK is looking to end the sale of petrol and diesel cars and vans by 2030 and have all vehicles zero-emission by 2035. These ambitions will require vastly more from the National Grid, but are, arguably, an easier part of the demand curve to predict – we have a good idea what the population will be by both those target dates and already have incentives that can mitigate consumption (e.g. congestion charging).

However, the continuing digital trends in the broader economy are harder to quantify. Rolls-Royce believes data-centre operators could become major customers in and of themselves, but then there will be huge increases in domestic and commercial demand for electricity, particularly for heating.

Taken together, these are some of the main arguments for making nuclear – and, for that matter, other emerging technologies such as hydrogen – part of the mix. They suggest that the answer to the energy source question for a low-carbon world is “all of the above”.

‘You’re not attempting to build a power station in a field, in challenging weather conditions, in a stick build. You’re taking almost all of the risk out of the process by modularising it as much as possible.’

But these arguments do not convince everyone. For some, they extract too high a price.

Nuclear energy has long faced criticisms over safety and the disposal of radioactive waste. Today, though, the most vocal are about deployment cost and, alongside that, fears that investment in nuclear will divert it from more cost-efficient alternatives.

The industry’s chequered cost history is what largely lies behind the Rolls-Royce SMR proposal. Its reactor is based around the re-use of existing PWR technology and this was submitted to the government for Generic Design Assessment in November. As of January, it has also launched a competition to identify a site for its first factory. Process innovation over technology innovation equals cost-down.

“The most important thing here is that 90 per cent of the commodity is built in a factory environment and largely assembled in a factory environment,” explains Alastair Evans, government and corporate affairs director for SMR at Rolls-Royce.

“You’re not attempting to build a power station in a field, in challenging weather conditions, in a stick build. You’re taking almost all of the risk out of the process by modularising it as much as possible. Yes, there have so often been cost overruns and project delays, but you attack those and that’s how we get down to those sort of £50-60 numbers.”

Similarly, the government’s thinking behind the move to the RAB model is predicted to result in savings of a minimum of £30bn on a nuclear project against the cost of construction and the electricity subsequently generated over a 60-year lifespan, potentially rising to £80bn.

“But I’ve heard that before,” counters veteran campaigner Tom Burke and chair of the E3G think tank. “Time and again, we’re dealing with an industry that, for as long as I can remember, has overpromised and under-delivered. When I look at them, I see an industry where costs have been going up, not down – and all the other sources are going down.

“I’m also sceptical about the ‘baseline’ argument. That’s about understanding the grid and how you manage it as much as anything else. And there are so many much smarter ideas you can bring to the baseline argument now than even 10 years ago.”

Burke’s group is also particularly active at the moment over proposals in the EU. These would see both nuclear and gas defined within its taxonomy of ‘sustainable’ technologies within a proposed Delegated Act to prevent investment ‘greenwashing’. Here, E3G does not simply see the taxonomy as incorrect but as likely to draw investment away from other technologies.

Given his five decades as one of the nuclear industry’s highest-profile opponents, Burke’s views draw a phlegmatic response from within it. But the cost bugbear will not go away. Antony Froggatt, a senior research fellow at Chatham House and a co-author of the ‘World Nuclear Industry Status Report’, says: “About 80 per cent of the heavy lifting is done by renewables. That is what, across the board, people are thinking.

“Now that wasn’t the case five years ago, and the reason behind that is that the costs of nuclear have at best plateaued but, in most cases, expected costs have risen. Renewables over the same five years have fallen by orders of magnitude.”

The issue with this argument is that it can, in many ways, only be resolved by doing – or at least by giving nuclear a push. This at least seems to be the way the UK is trending both with its move to RAB and by funding Rolls-Royce’s SMR development towards a First Of A Kind power station.

And the consortium behind it believes there is also potential outside the UK, in the Netherlands, Poland and the Czech Republic, and as far away as Australia (with civilian nuclear power now back on its agenda following its decision to adopt nuclear submarines as part of the Aukus alliance with Britain and the US).

Nor is Rolls-Royce alone is seeing SMR as potentially resolving nuclear’s cost issues while also providing low-carbon replacements for coal-fired stations. Bill Gates is backing one of two ventures that has just received similar viability funding in the US from the Biden Administration. TerraPower is seeking to build a $4bn power station in a mining town in Wyoming. However, unlike Rolls-Royce, it is hoping to also deploy a novel reactor design using liquid sodium as the cooling agent rather than water (the technology aims to reduce the risk of a Fukushima-like explosion).

With plans like those, the UK’s renewed government push on reactor construction and design, and the EU’s taxonomy, it does look like nuclear has the wind in its sails for now. But its critics will continue to keep a very close watch on where its numbers are carried. At the same time, how electricity demand evolves in a low-carbon world remains as unpredictable – yet probably as influential – as any part of a traditional weather forecast.