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The role of nuclear power in the UKHow can we continue to get affordable nuclear power into the energy mix?

1The role of nuclear power in the UK

How can we continue to get affordable nuclear power into the energy mix?

This article was produced for the Institution of Civil Engineers as part of their Themed Issue for Small Modular Reactors, found here.

The global and UK drive for a low-carbon environment, as well as a secure and affordable energy supply has encouraged nuclear power to play a core role in the UK energy mix: the UK landscape today houses eight large nuclear plants (15 reactors) ‘generating about 21% of [UK] electricity.’ (http://www.world-nuclear.org/information-library, 2016). By 2030, ‘two-thirds of our electricity generation capacity will have retired, and the UK needs to replace it with low carbon and reliable power for the future to improve its energy security and meet its commitments on carbon emissions targets.’ (www.niauk.org, 2016) With 50% cumulative growth in nuclear capacity forecast between 2014 and 2035 (in comparison to coal at 10%, oil at 20% and gas at 44%) still leaving nuclear with only a 5% share of global capacity in 2035, there is considerable scope for nuclear in the long term (www.bp.com, 2016)

Some of the potential obstacles to building new nuclear have led to a consideration of small modular reactors (SMRs) to ensure the continued success of nuclear power as a secure and cost-effective energy supply — and indeed as a part of the nuclear solution to the energy trilemma. Nuclear power must be affordable and safe; however, at present, the UK industry is faced with cost obstacles as a result of:

► Construction complexities

► Significant investment required

► UK workforce challenges

Thus, to continue to get affordable nuclear power into the energy mix, a robust execution strategy, relationship with suppliers and local partners, and social awareness is required.

Construction complexitiesConstruction complexities and nuclear safety protocols dominate the challenge to deliver on time, to cost, quality and regulatory requirements. A future blueprint for civil nuclear power will simplify construction and enable a swifter build time for nuclear power, and steps are being taken to inject advanced manufacturing methods and construction techniques into an otherwise traditional approach to construction. A reduction in on-site work through increased modularisation encourages improved learning rates; issues from work leveling for construction compounds are mitigated through open-top and parallel construction; pre-construction and building information modelling, supplemented by robust site construction management support systems, helps improve work efficiency. Indeed, ‘modularisation enables an increased level of factory production, where cost reductions of up to 20% can be achieved for work moved to a factory from site, in addition to increased labor productivity in a clean, controlled factory environment.’

(WJ Zhang, (2014)

South Korea is testament to this, having experienced ‘sustained construction cost reductions throughout its nuclear power experience’ (www.world-nuclear.org, 2016). ‘Nuclear overnight capital costs in the Organisation for Economic Co-operation and Development countries ranged from US$ 1556/kW for Advanced Power Reactor (APR)-1400 in South Korea through US$3009 for Advanced Boiling Water Reactor in Japan, US$3382/kW for Generation III+ in US, to US$3860 for European Pressurised Reactor at Flamanville, with world median US$4100/kW’ (www.world-nuclear.org, 2016). Thus, large nuclear reactors (LNRs) have the potential to optimise their offering to the UK energy mix through more efficient construction times and lower costs to build.

2 The role of nuclear power in the UK

SMRs as a nuclear solutionGiven the fundamental fixed costs of reactors, namely the Generic Design Assessment, site licensing and design model requirements (i.e., a large scale control system), an astute engineering approach is required and SMRs appear to have acknowledged the construction and economic lessons learned from LNRs: the characteristics of this new wave of reactors include increased modularisation, a reduced construction schedule and increased siting options.

While the lower power output of individual SMR units (under 300MW for an SMR compared with the approximately 1600MW EPR) necessitates considerations around co-siting of multiple reactors to achieve comparable power output to LNRs, SMRs also have the potential to provide energy in inland and more remote locations, as well as potential for district heating, and thus can complement the existing nuclear solution in the UK energy mix.

While LNRs are technically more mature, SMRs still require additional research and development to make them an economically viable alternative — with the caveat that further R&D creates a complex case to argue, in that it can be seen as both a help and a hindrance to making more economic sense. Indeed, as SMRs are unproven the same steep learning curve is required, combined with the regulatory requirements of each design change and complex mapping of the impacts and cost estimating for contractors if the client does not have an integrated cost model and design (BIM).

However, nuclear energy, in both its LNR and SMR form, can be a complementary part of the energy trilemma solution, if the lessons on construction complexities and skills gaps are learned when re-energizing and producing new nuclear fleets.

Significant investmentWhile poorly defined project objectives, structure and responsibilities are a common cold symptom for the construction world, the nuclear industry’s frequent inability to bridge the gap between supply and demand for capital highlights the financial dependencies of major infrastructure projects. From a new build perspective, finance ability is often not even an initial consideration, causing delayed commissioning dates to accommodate escalating costs and political buy-in.

There is also an international lens of complication to the financing of new nuclear, given the dual reluctance for investors to invest in long-term construction projects with no immediate return, as well as a significant reliance on foreign investment — the latter of which can often create complex joint venture partnerships, in turn creating difficulty to design a nuclear deal that all government and industry parties consider acceptable.

Hesitation toward investing during construction in nuclear given the risks has meant that key stakeholders must optimise and promote efficient project structuring to attract capital efficiently and in a risk-aware manner. Broadening out from traditional new build, industry can also start developing alternative designs for the future with international agreement on a preferred design set. By minimizing the variety of reactor designs being built, financing challenges can be mitigated. Equally, as nuclear is not the only option the UK also needs to pursue alternatives, such as temporary plants and interconnectors, to bridge the energy gap and have a diverse source of supply, as well as exploring other facets of the nuclear life cycle such as life extension and decommissioning.

UK workforce challengesAs they look to adapt to the new energy world, utilities are facing a dual problem of an experienced yet aging workforce and changing talent requirements. Nearly ‘60% of the global utility industry workforce is over 40 years of age, with many expected to retire in the next 10 to 15 years’, and the nuclear industry is no different (www.ey.com/publication, May 2014). The loss or invalidity of skills due to the construction hiatus of new nuclear power stations in UK since 1995, long lead-time for training operational staff, and that industry and supply chain has served existing generation, reprocessing and other parts of the industry for over half a century, could hinder the UK’s capacity to deliver current projects accurately and punctually and prepare for future work. Indeed, developing talent was identified as a gap in the global supply chain by 75% of worldwide nuclear leaders (www.nuclearenergyinsider.com, 2016).

There is thus a need to shift the skill set requirements to both capitalise on the economic activity infrastructure brings, and also to consider advanced techniques — the latter of which has already been socialised for the transition of coal industry workers to solar (Harvard Business Review; www.hbr.org, 2016). Government is taking action to ‘ensure we have the right people

with the right skills to deliver the ambitious pipeline of £411 billion of planned public and private investment to 2020 and beyond’ through offering training schemes and apprenticeships (National Infrastructure Plan for Skills’, HM Treasury; www.gov.uk, 2016).

Industry has also recognised that whilst the UK has some supply chain strength, there is a gap in the ability to build new reactors in the UK and in the ability to supply some of the components, like the larger forgings, in a new plant. Acknowledging the importance of high-quality training to operate new build plants, industry has partnered with Government to create the National College for Nuclear to offer high-tech specialist training in both virtual and physical education facilities (Department for Business, Innovation & Skills; www.gov.uk/government/news, 2016). The value of the industry element of the partnership, led by EDF Energy and Sellafield Ltd, is in the curriculum itself: the college aims to utilise industry partners and develop its own employer-led curriculum and accreditation, with the partner organisations involved driving up standards of training for the nuclear sector and developing clear, specialised nuclear engineering pathways between school and university (www.itv.com.news, 2015).This combination of UK supplier knowledge, partnered with international experience and capability, has the potential to mitigate UK workforce challenges.

3The role of nuclear power in the UK

Summary

Looking at energy policy strategy from a macro level, there is a real need to take action now given that seven out of the UK’s eight current operational nuclear power station sites are due to be closed by 2030, in addition to the consistent move away from Combined Cycle Gas Turbines due to carbon reduction targets. ‘If we want power to be available at the moment we need it, we must be absolutely sure we can draw on a substantial amount of base-load zero carbon generation … to enable the wider energy revolution’ (https://www.linkedin.com/pulse/what-energy-infrastructure-does-uk-need-power-our-economy-chris-lewis, 2016).

The changing face of national, British and European government as a result of Brexit creates the possibility that UK energy strategy will not crystallise in time, given the 10–15 year development and construction build time required, thus posing an energy supply risk. Now that Hinkley has been approved and EDF has signed the deal to go ahead, it will be vitally important to develop a sound plan and stick to the time scales to deliver the energy the UK needs: Hinkley will become the litmus test for new nuclear build.

As Duncan Hawthorne, CEO of Horizon Nuclear Power, states ‘if you're in the nuclear business, you're in a political business’ (www.world-nuclear-news.org, 2016). Therefore, industry and government must align to drive a culture of innovation and agility to flex to changing circumstances and environment, mitigate construction complexity challenges, keep conversations open to improve economic efficiency, and acquire the right talent and skill sets to operate the next generation power plants and safeguard the environmental and energy needs of the country.

The UK has led the nuclear world before, and can lead again if effective, efficient and enthusiastic solutions are identified and established. September 2016 will be remembered as the month when the UK's first new nuclear power station in a generation was given the go ahead — let there not be such a time lapse until the UK gets to announce its next nuclear new build project.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organisation cannot accept responsibility for loss to any person relying on this article.

4 The role of nuclear power in the UK

References

Contacts

► ‘Nuclear Power in the United Kingdom’, World Nuclear Association, http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/united-kingdom.aspx, accessed 30.11.16

► Government needs to make a quick decision on Hinkley, says NIA, Nuclear Industry Association, https://www.niauk.org/media-centre/press-releases/government-needs-make-quick-decision-hinkley-says-nia/ NIA HPC messaging, accessed 30.08.16

► ‘BP Energy Outlook 2016 Edition’, BP, https://www.bp.com/content/dam/bp/pdf/energy-economics/energy-outlook-2016/bp-energy-outlook-2016.pdf, accessed 11.11.16

► WJ Zhang, (2014). Construction experience from modular nuclear power plants

► ‘The Economics of Nuclear Power’, World Nuclear Association, http://www.world-nuclear.org/information- library/economic-aspects/economics-of-nuclear-power.aspx, accessed 12.08.16

► ‘The Economics of Nuclear Power’, World Nuclear Association, http://www.world-nuclear.org/information-library/economic-aspects/economics-of-nuclear-power.aspx, accessed 12.08.16

► ‘Talent at the table: index of women in power and utilities’, EY, http://www.ey.com/Publication/vwLUAssets/EY-Talent_at_the_table:_index_of_women_in_power_and_utilities/$File/EY-Women-in-P&U-May2014.pdf, accessed 14.08.16

► ‘Is there a gap in the US Nuclear Supply Chain?’, Nuclear Energy Insider, http://www.nuclearenergyinsider.com/nuclear-supply-chain-conference/, accessed: 15.12.16

Meera Kotak Senior Strategy Consultant, Energy Advisory Ernst & Young LLP

+44 7500 786 468 [email protected]

Miranda Kirschel Senior Manager, Energy Advisory Ernst & Young LLP

+44 20 7951 0537 [email protected]

Chris Lewis Partner, Energy Advisory Ernst & Young LLP

+44 20 7951 5085 [email protected]

► ‘What if all U.S. coal workers were retrained to work in solar’, Harvard Business Review, https://hbr.org/2016/08/what-if-all-u-s-coal-workers-were-retrained-to-work solar?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_- alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date, accessed 12.10.16

► ‘National Infrastructure Plan for Skills’, HM Treasury, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/464354/NIP_for_skills_final_web.pdf, accessed 30.08.16

► ‘Hancock: New Nuclear College will equip local young people with the right skills for the job’, Department for Business, Innovation & Skills, https://www.gov.uk/government/news/hancock-new-nuclear-college-will-equip-local-young-people- with-the-right-skills-for-the-job, accessed 06.05.16

► ‘New national nuclear college plans revealed’, ITV, http://www.itv.com/news/border/2015-03-20/new-national-nuclear-college-plans-revealed, accessed: 06.05.15

► What energy infrastructure does the UK need to power our economy in 2025, LinkedIn, https://www.linkedin.com/pulse/what-energy-infrastructure-does-uk-need-power-our-economy-chris-lewis?trk=prof-post, accessed 20.09.16

► UK new nuclear developers pay tribute to EDF, World Nuclear News, http://www.world-nuclear-news.org/NN-UK-new-nuclear-developers-pay-tribute-to-EDF-19091601.html, accessed 20.09.16

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