Inside Britain’s plans for a new nuclear age

Before the end of the year, Ed Miliband is expected to announce the next phase of Britain’s nuclear power revival. The energy secretary has inherited decisions on two major programmes that could help bring forward a new nuclear age in the UK — Sizewell C in Suffolk and a fleet of mini nuclear plants around Britain.

In its election manifesto, Labour lent its support to nuclear as playing an important role in the shift towards clean power and improving energy security.

Nuclear advocates point towards its role in providing a “baseload” of steady power to supplement intermittent solar and wind power and reduce the UK’s reliance on gas, the price of which has surged since the start of the war in Ukraine, creating the energy crisis that sent household bills to record levels. Nuclear had dwindled to just under 14 per cent of the UK’s electricity mix last year, and all but one of the existing nuclear power stations are set to be decommissioned by the end of the decade.

Tom Greatrex, chief executive of the Nuclear Industry Association and a former Labour shadow energy minister, said: “Nuclear is the only electricity source that’s clean, always on and British. Nothing else gives you all three.”

Sceptics of ambitions to build out Britain’s nuclear industry point towards the delays and budgeting difficulties that have beset Hinkley Point C as a bad omen for expanding the UK industry.

The plant in Somerset is being developed by EDF, the French state-backed energy group, which owns the majority of the project alongside China General Nuclear, which has a 33.5 per cent stake. It is the only nuclear power station currently under construction in the UK and is set to be capable of powering six million homes.

In 2007 Vincent de Rivaz, then EDF chief executive, said that households would be cooking their Christmas turkeys with electricity supplied by Hinkley by 2017. The project might now be delayed until 2031 and could cost up to £46 billion, after inflation, by the time its two reactors are switched on, almost twice as much as initially planned.

The project has endured several setbacks, not least the Covid pandemic, which caused construction delays. But it has also suffered by virtue of being the first nuclear power station to be built in the UK since 1995.

The developers have called out the 7,000 design changes it was forced to make to its reactors by the Office for Nuclear Regulation to adapt the reactors to UK safety standards, increasing the amount of concrete and steel needed and pushing up costs. The project has also been caught up in wrangling with the Environment Agency and it is still in dispute over how to best deter fish from swimming near the site and getting sucked up into its cooling systems.

The bigger issue is around the financing implications of the delays. Investors in the project do not get paid until Hinkley starts generating electricity, which leaves interest racking up until the project completes. About 60 per cent of the cost to consumers relates to the financing expenses of the project.

There is believed to be a £5 billion funding gap, but CGN’s liability for the project is capped at £6 billion, which leaves the French state on the hook. A fixed, albeit inflation-linked, subsidy of £92.50 per megawatt-hour (in 2012 prices) was agreed when Hinkley was signed off, so any increase in costs falls on shareholders, rather than directly on bill payers.

But the delays are not without potential consequence to consumers. Without Hinkley, gas will have to run longer, leading to higher wholesale market costs, according to Tom Betts, a senior analyst at Aurora Energy Research, the power analytics specialist.

However, he added: “With the Sizewell site, because the government has a stake but also because of the way it’s been financed, consumers are more directly impacted by any cost overruns or delays.”

Sizewell C, which will equal Hinkley’s generation capacity, is owned jointly by EDF and the government. Both are seeking to partially sell down their interests and are in talks with private investors over taking a stake. It is envisioned that the government will retain a stake of about 50 per cent.

In a break from Hinkley, the cost of financing Sizewell C will fall on customer bills once construction starts, a decision designed to share construction risk and a similar model used to finance the upgrade of the electricity grid.

The burden on individual households will be relatively small, Julia Pyke, joint managing director for Sizewell C, insists.

“We have roughly 30 million residential households, this is going to be tiny. This is not going to be the thing which causes people to have energy poverty,” she said.

A final investment decision on the multibillion pound project had been expected by the summer. The hope now is that the project might get the green light before the end of the year, but there is speculation that it may slip into next year.

Pyke has stressed the replication benefits for Sizewell in avoiding the problems endured by Hinkley, which “has had to revive the nuclear industry in the UK”. Hinkley bore the brunt of adapting its safety systems to UK standards, which included a non-computerised set-up to ensure the plant could withstand any sort of cyber attack, she pointed out. “That’s a big additional piece of design … but we’re just copying.”

With those safety tests already carried out, the cost associated with Sizewell’s equipment should be about 25 per cent lower, she said.

Yet no budget has been disclosed. “There’s a correlation between revealing to the supply chain what your contingency is, what your maximal budget is and the spending of that budget,” Pyke said.

However, Sizewell is a new development on a different site that will inevitably bring with it new challenges, Betts points out. “On paper, it makes sense that there will be cost savings, but it’s very, very hard to say that they’ll definitely be realised.”

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Not surprisingly, governments around the world are searching for a quicker and more cost efficient means of developing new nuclear capacity. In the UK, the government is expected to launch a new generation of mini nuclear power plants across the country.

Advocates for small modular reactors say they are quicker to set up because unlike conventional plants, they can be built in a factory, take up the space of one or two football pitches and have a capacity of up to 500 megawatts. The technologies put forward by developers for them are nascent and varied.

The selection process is being run by Great British Nuclear, an arm’s-length body set up under the previous government to drive nuclear deployment. Five ventures, including Rolls-Royce and GE-Hitachi, a joint venture between GE Vernova, the American energy equipment manufacturer, and Hitachi, the Japanese conglomerate, have submitted bids for £20 billion in taxpayer funding.

The plan is to whittle down the list to three or four designs by the end of this month, with the winning bids chosen before the end of the year. It is hoped that the chosen technology providers will take a final investment decision by 2029. The first small modular reactor is not expected to be generating electricity before 2035, not in time to contribute towards Labour’s 2030 net zero goals. Miliband has said the new government will “strive” to keep to the timetable previously set out.

Questions remain around who will finance construction and also operate modular reactors, as well as what stake, if any, the government will retain in the new plants. It is envisioned that once a final investment decision is taken on the first modular reactors, private financing could be sought.

In a break from the previous government, which set a stretching target to almost quadruple nuclear capacity, Labour has not set any benchmarks. Some think this could represent a more pragmatic approach.

“All the analysis tells us we need more nuclear and the industry stands ready to help deliver that. A target without a programme does not achieve very much,” Greatrex said.

A spokeswoman for the Department for Energy Security and Net Zero said: “Investing in clean power is the route to ending the UK’s energy insecurity, tackling the climate crisis and protecting people against price shocks.

“We are reversing a legacy of no new nuclear power being delivered, ensuring the long-term security of the nuclear sector, which will be at the heart of boosting the UK’s energy security while creating thousands of good, skilled jobs.”

Race for space to build reactors

When the winning mini nuclear plant designs are chosen, they will be assigned an operating site by Great British Nuclear. There are eight sites currently approved for nuclear development in the UK, including Wylfa in Anglesey, the Sellafield site in Cumbria and Heysham in Lancashire.

A deal in March with Hitachi brought two sites — Wylfa and Oldbury-on-Severn in Gloucestershire — back under government ownership. Moorside, which is adjacent to the Sellafield facility is also state-owned, which makes all three likely potential sites for the first small modular reactors (SMRs).

Rolls-Royce, which is considered a frontrunner in the selection process, has previously said it has identified four potential parcels of land, including Oldbury and Moorside, as its preferred locations.

However, it is envisioned that for small modular reactors to fully realise the benefits of scale, development on more new sites will be needed.

Looser planning rules are expected to allow these reactors almost anywhere outside built-up areas.

However, the biggest challenge might still be ‘nimbyism’, according to Betts. “With one big nuclear site the risk is contained, but if you start to have lots of these different SMRs dotted around the country you can have opposition in all of these local authorities to having a nuclear site near where you live or within your community,” he said. “I think that the cost of that and the impact of that is maybe currently understated.”