The UK’s Nuclear Energy Opportunity
The adoption of nuclear energy has often faced barriers due to concerns over environmental damage, yet many industry experts identify it as a key source of low-carbon energy that can consistently produce power regardless of weather conditions [1]. Not only is there a pivotal role for nuclear to play in helping countries achieve clean energy targets, but also in moving towards energy self-sufficiency [2].
Nuclear power plants produced approximately 16% of the UK’s energy in 2020, a decline from 25% in the late 1990s [3]. Around the world, the adoption of nuclear energy is starting to change and the need for the UK to ramp up its effort in enhancing the nuclear infrastructure is becoming clear. This is especially true regarding the energy goals that the UK aims to achieve by 2050, as well as the rising oil & gas prices we are facing, partly due to the Russia-Ukraine war.
To effectively ramp up nuclear infrastructure, the UK government must address the key challenge that comes with building power plants – high capital costs (the total cost needed to bring a project to a commercially operable status). The OECD identified that the capital costs amount to 60-70% of the busbar cost, (the average cost per unit of electricity generated at the actual plant, allowing for the recovery of all costs over the lifetime of the plant) [4].
We explore three methods to reduce the cost of plants:
Reduce High Capital Costs
The UK’s more market-driven approach to economic policy, compared to other countries that have more heavily invested in nuclear, has created difficulties in overcoming the steep capital outlay required to build nuclear power plants. The Contracts for Difference (CfD) scheme offered by the government has proved limited in attracting investors for high-value projects like nuclear power plants, as developers receive revenue only after the plant starts generating power [5]. This was cited as a reason for Hitachi’s and Toshiba’s withdrawal from investment in the Wylfa Newydd and Moorside projects [5]. The move toward adopting the RAB (Regulated Asset Base) model in late 2021, where the consumers will have to pay a regulated price (set by Ofgem) as part of their bills during the construction of a power plant, was a positive step in the right direction to partially offset the burden of high capital costs [6].
Source: OECD Nuclear Energy Agency
Improve Construction Practices
Even with a potential reduction in capital costs, there is a need to reduce operational costs as it is often poor construction/project management practices that inflate the cost of building a nuclear power plant [7]. The UK’s Nuclear Industry Association (NIA) reported that the nuclear industry is planning to establish a Risk Assessment Tool that will focus on driving project delivery and efficiency to reduce costs by 30% by 2030 [8]. The report also outlined that the industry is focusing on strengthening:
A) “rigorous pre-construction planning” to ensure that the designs are as advanced and mature as possible
B) “repeating designs” to allow for standardisation and repetition of best practices
C) “transferring skilled labour” to reduce any labour inefficiencies [8]
Source: 2020 edition of the World Nuclear Association's ‘World Nuclear Supply Chain’
Investment in Small Modular Reactors (SMR)
To further enhance the UK’s nuclear power infrastructure, the government has started the approval process for an SMR construction bid submitted by Rolls Royce, which when completed would be able to provide power to 1 million homes – equivalent to the city of Leeds [9]. SMRs as defined by IAEA are the “advanced nuclear reactors” which have small reactor designs when compared to a traditional nuclear reactor [10]. Industry experts argue that although SMRs have the potential to be instrumental in enabling countries to achieve energy self-sufficiency and the Sustainable Development Goals there remain key challenges as to whether that potential can be fulfilled. Despite reduced up-front investment costs, construction time, logistical challenges, and SMRs ability to work in a better-controlled environment when compared to traditional nuclear reactors, the ability to scale up SMRs and achieve a persistent return on investment is still in doubt [11] as only one SMR is currently active globally (in Russia) [10].
Regardless of the clean energy benefits that the production of nuclear energy has to offer the UK, there remain key challenges to overcome. The lack of a long-term sustainable radioactive nuclear waste disposal mechanism must be addressed [12], and the increasing efficiency of renewable energy sources due to advancements in technology [13] calls into doubt the necessity of nuclear energy. There is no silver bullet to achieving clean energy goals, nuclear is a useful tool to be deployed in a wider arsenal as the UK looks to cut carbon emissions, but a tool that cannot be ignored.
Words by Subhiksha Subbaraman
References
[1] – https://www.niauk.org/why-nuclear/
[2] – https://www.iaea.org/sites/default/files/np-sustainable-development.pdf
[3] – https://lordslibrary.parliament.uk/nuclear-power-in-the-uk/
[4] – https://www.oecd-nea.org/jcms/pl_13330/reduction-of-capital-costs-of-nuclear-power-plants
[8] – https://www.world-nuclear-news.org/Articles/UK-outlines-path-to-cost-reduction-in-nuclear-new
[9] – https://www.gov.uk/government/news/uk-backs-new-small-nuclear-technology-with-210-million
[10] – https://www.iaea.org/newscenter/news/what-are-small-modular-reactors-smrs
[11] – Mignacca, B., & Locatelli, G. (2020). “Economics and finance of Small Modular Reactors: A systematic review and research agenda”, Renewable and Sustainable Energy Reviews, 118
[12] – https://www.ft.com/content/2321bfae-839a-468f-b933-d699b6ff6864