UK nuclear energy: small reactors could power a generational shift

Given the bad press it has received for decades, the persistence of interest in nuclear energy seems astonishing. Nevertheless, the pressing need for secure, low carbon energy supplies underpins the UK prime minister’s “gung ho” enthusiasm. But nuclear power will only secure a revival if it can overcome its poor record on costs and delays.

Falling renewable costs have made the economics of nuclear power look uglier. Solar can be a fifth cheaper, says Bernstein. But that does not take account of its intermittent availability, which means using storage longer term. Factor that in and nuclear costs about the same as many renewable resources, says the International Energy Agency.

Hefty financing costs can pile up over an extended construction period, making nuclear power expensive. The government should aim both to cut the cost of capital and build plants more quickly.

Pushing the development costs on to investors in return for a guaranteed price of power is politically unpalatable. Intense criticism followed the inflation-linked £92.50 per megawatt hour promised to an EDF-led consortium for building England’s Hinkley Point C project. Long slammed as far too dear, criticism has faded with soaring wholesale electricity prices. They currently sit at £211/MWh.

Instead, the government favours a new model that requires consumers to contribute during the project’s construction phase. But it will be hard to pile more expense on to customers. Chancellor Rishi Sunak is under pressure to review the government’s opposition to the use of state borrowing.

Cutting the power plant’s build time is crucial. A new generation of mini reactors have the potential to more than halve the average construction time of 7.7 years. Called small modular reactors (SMRs), these have parts built in factories, cookie-cutter style and quickly assembled on site.

Rolls-Royce has secured £210mn of UK government backing to pursue its design, which uses existing technology in the form of pressurised water reactors. Other companies pursuing SMRs include France’s EDF and NuScale Power of the US.

Safety, regulatory and planning processes will — justifiably — take time. But SMR technologies could be transformative post-2030, says Jefferies.

Not for the first time has the nuclear industry promised — and later failed to deliver — cheap reactors. But SMRs can at least offer economies of volume, if not of scale. If Boris Johnson wants to place big nuclear energy bets, he had better think small.