Brief No.6, 06 Jan 2021. Giorgio Locatelli, Tristano Sainati, Benito Mignacca.
Nuclear Small Modular Reactors (SMRs) can play a role in UK decarbonisation, providing low-carbon electricity and heat. SMR investments are more affordable and less risky, therefore attracting a wider range of potential investors. The UK government needs to develop a consistent strategy to support UK SMRs.
- Compared to large nuclear reactors, Small Modular Reactors (SMRs) could be cheaper, easier to finance and a less risky investment.
- However, our research suggests that novelty, construction cost risk, regulations, and long term economic uncertainty can be key barriers for SMR construction.
- We recommend the UK government develop short to medium term policy and regulation to support the development, licensing and construction of the first SMRs with substantial investment. A long-term policy should support market mechanisms to build and operate a fleet of standardised SMRs in the UK.
The Government has indicated their commitment to nuclear energy in their ten point plan for a green industrial revolution and subsequent Energy White Paper. This has been supported by an announcement in the 2020 spending review of investment of £525 million for nuclear energy projects, including SMRs.
It is important the UK Government clarifies its strategy for future deployment of SMRs, which will largely determine if the UK will be an importer or exporter of SMRs. Supporting domestic reactor vendors now could gain the UK a ‘first mover advantage’, an essential aspect to gain shares of the SMR market globally.
What are SMRs
SMRs are a “newer generation reactors designed to generate electric power typically up to 300 MW whose components and systems can be shop fabricated and then transported as modules to the sites for installation as demand arises” (IAEA, 2020). SMRs are a family of technologies and design philosophies. SMRs include water cooled reactors, which account for the vast majority of reactors in operation and require relatively little technological development. Other technologies (e.g. molten salt) have technical advantages, but far less construction and operating experience.
The case for SMRs
SMRs are designed to be small and standardised so that they can be largely manufactured in factories, reducing exposure to external factors such as the weather (Mignacca and Locatelli, 2020). Their smaller size means the investment required for an SMR is a correspondingly small, and construction time is shorter, allowing for earlier revenues which increase investor confidence. Lower financial cost and risk make investments in nuclear more sustainable and more able to attract private investors.
Barriers to SMR deployment
We identified the main elements hindering SMR construction by collecting opinions from around 100 nuclear experts (Mignacca et al., 2020).
- Financing of the first unit(s): The lack of a “first unit” and the lack of a supply chain create a higher perceived investment risk.
- Economics: Today the electricity market considers only generation costs, disregarding backup, balancing and storage costs, penalising plant that can “produce electricity on demands” like nuclear power plants.
- Technological readiness: The lack of a first unit, technology readiness and supply chain availability are barriers related to SMR technological readiness (and in a certain extent to SMR financing).
- Licensing and regulatory constraints, lack of political support: These are barriers related to SMR policy and regulation readiness. Political support in developing specific SMR licensing processes could be a solution to overcome these barriers and lower perceived investment risk by investors.
- Public acceptance: Public acceptability of nuclear power may be improved with SMRs because of better security, less environmental impact, proliferation resistance, passive safety system and massive deployment. However SMRs can also be perceived as “novel and therefore more risky”.
Many countries are interested in building SMRs, however most of them are not keen to buy an SMR that has not been already successfully built elsewhere because it is perceived as a risky investment. Many reactor vendors are supported by their respective Governments. Our research indicates that to support SMR deployment the UK government needs to develop a long-term energy policy for nuclear energy aiming at the construction of a fleet of identical SMRs, with a standard supply chain involved in the construction, operation and decommissioning. We recommend the following actions:
- Pick a winner. The UK government needs to select and support a specific design for the UK. This design will need financial backing during the design, licensing and construction of first units.
- Invest in the design. It could take about £1 billion from the conceptual reactor design to pass the Generic Design Assessment step of regulation. It is extremely unlikely that such money can be entirely raised in the market. A share of this money needs to come from the UK government.
- Invest in the “British” supply chain. To design and build a nuclear reactor requires a network of organisations: manufacturers, regulators, service providers, universities, etc. These companies need to invest to build capacity, including training people. They need UK government support.
- Support the construction of the first unit(s). First unit(s) are perceived as risky investments and are needed to “prove the design”. The UK government should financially support the first unit(s).
- Take a programme perspective, not a project one. The advantages of SMRs won’t be realised at a single unit scale. SMRs need to be conceived as a programme, both for the UK needs and exports. The UK government should develop partnerships at international level for building SMRs.
- Take a life cycle perspective. The UK government needs to understand how it is possible to both create value and distribute value for SMRs across the entire life-cycle, which could span a century.
About the authors
Giorgio Locatelli is a Professor of Project Management and expert on energy megaprojects in the School of Civil Engineering, University of Leeds. He was a member of the BEIS 2018 Expert Finance Working Group.
Tristano Sainati is an expert of financing and contracting in infrastructures, also based in Civil Engineering at Leeds.
Benito Mignacca is a PhD candidate working with Professor Locatelli on energy megaprojects.
To cite this policy brief, please reference: Locatelli et al. (2021) Developing UK strategy for nuclear SMRs. Brief 6, Policy Leeds, University of Leeds. https://doi.org/10.5518/100/60