Is nuclear in trouble?

At first glance, the outlook for the UK nuclear energy industry is the best it has been during this century. The government has set ambitious targets for investment in new reactors. There is now wide acceptance of nuclear’s role as an essential part of the global response to the threat of irreversible climate change. Despite the growth of renewables, it is clear that the clean energy transition cannot be completed by 2050 without expanding nuclear capacity.

World rekindles love for nuclear 

This optimism extends beyond the UK. In the last 18 months, concerns about energy security have spread across Europe and further afield. Countries that until recently were content to depend heavily on imported gas and oil are reappraising the role that nuclear could play in their energy mix as a secure zero-carbon electricity generation technology. Its comparative price stability is an additional attraction.

Even the European Commission, whose attitude towards nuclear energy has historically veered between scepticism and outright hostility, now agrees – albeit grudgingly – that it poses no threat to human health or the environment.

Ambition alone is not enough

Against this favourable background, what can go wrong? The answer, in the UK at least, is several things. First, the economic outlook has deteriorated significantly since the target of 24GW of new nuclear capacity by 2050 was first set. Higher inflation, rising interest rates, increased government debt and slower growth all spell trouble for an economy already weakened by Brexit.

Second, the list of capital projects demanding money from the taxpayer includes HS2, an upgraded electricity grid, a cleaned-up water industry, battery charging infrastructure for electric vehicles, and the repair or replacement of crumbling hospitals and schools.

Sizewell C is yet another cash-hungry project, the only difference being that it needs more cash than most of the others. With a general election due next year, there’s a high risk that difficult spending choices will be kicked into the long grass. Even a short delay in confirming the availability and method for funding the rollout of new nuclear reactors will be damaging for the industry’s future.

A plan is only as good as its implementation

Last July, the House of Commons Science, Innovation and Technology Select Committee’s report ‘Delivering nuclear power’ called for the government to “publish a clear delivery plan, a Nuclear Strategic Plan, for its nuclear project pipeline, backed up by detailed figures of projected energy production from nuclear for the years leading up to 2050.”

This plan should “be developed in collaboration with and engaging the confidence of the whole sector” and “include interim targets for nuclear energy production in 2035, 2040 and 2045”. Publishing a plan does not by itself guarantee that the new-build programme will be delivered on time, but it would provide much-needed reassurance about the government’s intentions.

The creation of a UK-wide supply chain that can support a revived nuclear industry, along with a workforce with the skills to construct and maintain a dozen or more new reactors in the next quarter century, would contribute hugely to economic growth and strengthen the UK’s competitive position. However, it will only happen if industry is convinced that the plan will actually be implemented.

Long-term vision and collaboration are critical

Trade union recognition of the employment benefits of nuclear energy has helped to preserve broad bipartisan political support. Now is, therefore, the perfect time for Claire Coutinho, newly promoted Energy and Net Zero Secretary of State, to invite Shadow Energy Secretary Ed Miliband to join her in preparing the Nuclear Strategic Plan.

This unusual move is needed because the consequences of investment decisions in the nuclear industry are felt for more than half a century after they are made. Eliminating the danger of sudden policy reversals, and creating certainty that the commitment to investment in additional nuclear energy capacity will outlast a change of government, would boost confidence.

Fears about whether the UK’s nuclear ambitions will ever be realised would be allayed if details of exactly how the Regulated Asset Base funding method will work are published

Big challenges for small reactors

Another area of doubt and possible delay flagged by the Select Committee is the government’s support for small and advanced modular reactors (SMRs). So far, the Rolls-Royce-led consortium has received more than £200m of public money for research and development, plus £280m of private investment.

The government has subsequently announced a competition in which other vendors’ technology would be assessed. This could lead to the benefit of the public investment already made being squandered. Uncertainty about the government’s intentions will result in a policy risk premium being added to future costs. This is especially true when all spending commitments are under scrutiny.

This would be very frustrating because the global market for SMRs is big enough for more than one company to succeed, and Rolls-Royce is a credible competitor in the race to deliver a fully functioning SMR. Success would restore pride in the UK nuclear industry and make it easier to attract talented young recruits.

Will new nuclear happen?

Fears about whether the UK’s nuclear ambitions will ever be realised would be allayed if details of exactly how the Regulated Asset Base funding method will work are published. The aim of bringing private investors in to fund large new nuclear plants is laudable, but the achievement of this goal will not have been accelerated by the unexpected and sudden change of the Energy Secretary.

It is also regrettable that direct public funding of nuclear infrastructure appears to have been ruled out. Government can always borrow more cheaply than private businesses, and any loans could be made repayable once new reactors come on-stream and revenue starts to flow.

It will be a tragedy for the nuclear industry if current economic and political challenges scare ministers into deferring difficult decisions until after the election. Prime Minister Sunak has nothing to lose by showing bold leadership on this issue. There is unlikely to be a better opportunity to do so for many years to come.

By Tim Yeo, Chairman of the New Nuclear Watch Institute

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