Today nuclear power generates approximately 20% of the UK’s electricity supply. At the peak in 1997, 27% of the UK's electricity was generated from nuclear power. All but one of the nuclear stations currently operating are due to go offline by 2030 driving the need for the UK to invest in new generating capacity.
While six new nuclear plants are being progressed, difficulties remain in securing the private investors needed to fund the construction within a strike price low enough to be attractive to the government. The 3.2GW Hinkley Point C plant is the only project currently under construction and is now over one year into the build phase.
The case for nuclear power is largely made on its ability to provide a base load, low carbon, electricity supply, unaffected by the intermittency issue associated with wind and solar. There is an increasing challenge for nuclear technologies to be competitive, with the 2017 CFD auctions seeing off-shore wind reduce costs by 50%.
The government does however appear to be softening its stance by indicating the possibility of state financial support to get the nuclear new build programme back on track in 2018. Small Modular Reactors are being considered for government support however 2017 only provided a scaled back version of the hoped for funding.
The UK's fleet of 11 Magnox reactors were the world’s first commercial nuclear power stations. The earliest, Calder Hall, came online in 1956 while Wylfa which became operational in 1971 was the last Magnox to generate electricity when it was switched off on 30 December 2015 ending 44 years of operation at the site.
The UK has generated electricity with three different types of nuclear reactor, nine Magnox power stations, 7 Advanced Gas Cooled Reactors (AGR’s) built between 1965 and 1988 and Sizewell B the UK’s first Pressurised Water Reactor (PWR) whose construction began in 1988 with the plant generating electricity in 1995.
Nuclear Electric was formed in 1990 as part of the privatisation process of the UK Electricity Supply Industry. In 1996, it was amalgamated into a new company, British Energy, consisting of the UK's eight most advanced nuclear plants, seven AGR’s and one PWR. The remaining Magnox reactors remained in public ownership as Magnox Electric. British Energy was the UK's largest electricity generation company by volume, before being bought for approximately £12 billion in 2009 by EDF Energy (a subsidiary of Électricité de France (EDF)).
The 12 first-generation Magnox plants, with 26 reactors, had all been retired by the end of 2016. The U.K.’s seven second-generation Advanced Gas-cooled Reactor nuclear stations, are also coming near to the end of their design lives.
In 2005 the Nuclear Decommissioning Authority (NDA) was created to take strategic responsibility for decommissioning the UK’s nuclear legacy at the Magnox sites and is currently spending over £3 billion per year on the decommissioning programmes.
Today, the UK civil nuclear energy industry employs more than 65,000 people, and covers the full life cycle including:
In 2017, the United Kingdom operated 15 reactors across eight sites with a combined capacity of 8.9 gigawatts. The average age of the U.K. fleet stands at 34 years. EDF Energy is planning to extend the lifetimes of all the AGRs including a 7-year extension to 2023 for Hinkley Point B and Hunterston B, a 5-year extension to 2024 for Heysham-1 and Hartlepool and a 10-year extension to 2030 for Dungeness, Heysham-2 and Torness. The newest reactor, Sizewell-B, has a design life up to 2035 although the potential for a 20 year life extension has been indicated by EDF.
Nuclear generation rose 2 per cent from 70 TWh to 72 TWh in 2016 due to fewer planned and unplanned outages, with a load factor at 78.4 per cent, some 3.3 percentage points higher than in 2015, and the highest since 80.1 per cent was achieved in 1998. Generally, nuclear efficiency has remained between 38 and 40 per cent over the last decade, with a rise of 0.9 percentage points from 2015 to 40 per cent in 2016.
The current energy policy of the UK is set out in the 2007 Energy White Paper and Low Carbon Transition Plan of 2009. In July 2011, the Government released the National Policy Statement for Nuclear Power Generation and in March 2013 the Nuclear industrial strategy.
The policy documents indicated that it is in the public interest to give the private sector the option of investing in new nuclear power stations, earmarking eight sites for possible development. The eight sites considered are current or past nuclear power plant sites in England or Wales, and one new site, Moorside, adjacent to the fuel-chain facilities at Sellafield. The Scottish government is opposed to new-build indicating that it would not allow replacement of the Torness and Hunterston plants once they are shut down.
More recently there have been mixed signals from the government regarding their support for nuclear energy although publication of an Industrial Strategy white paper towards the end of 2017, stated the nuclear sector is "integral to increasing productivity and driving growth" in the UK. A raft of policy documents issued in December 2017 included a sector deal for the industry focused on how, working with the government, substantial cost reductions can be achieved across new build and decommissioning programmes, and the issue of reports outlining proposals for the development of small modular reactors.
The Nuclear Industry Council’s proposed sector plan, sets out a goal of reducing new build nuclear costs by 30 per cent. The quid pro quo from the NIC is that the government should use its access to low borrowing costs to help underwrite nuclear new build projects, which would in turn deliver a significant reduction in strike prices.
The industry has set out proposals to develop 18 gigawatts (GW) of nuclear generating capacity at 6 sites in the UK. These projects could lead to the creation of around 35,000 jobs at the peak of construction.
The new build sites are:
Three developers are involved across the 6 locations.
EDF made a Final Investment Decision to proceed on the first project Hinkley Point C in July 2016 and following government approval the project is now over one year into its construction programme. The estimated price of construction stands at £19.6 billion, up from the £18bn quoted in 2016 with a target date of 2025 for commissioning the first of the 2 reactors. You can read more about the Hinkley Point C nuclear plant and the latest progress on the project in our Hinkley blog posts.
EDF have indicated that Sizewell C nuclear power station could start construction by 2021 and become operational in 2031, however, this is dependant on NNB being able to raise the required funding for the project. EDF also indicated that the learning curve gained on the Hinkley C project could provide savings of up to 25% providing a budget in the order of £15 billion for the Sizewell C project. This could bring the strike price nearer £70 per megawatt-hour particularly if the government were to agree a new financing model so that developers did not have to bear all the upfront construction cost.
In 2012, RWE npower and E.ON which had formed the joint venture, announced they would be pulling out of developing new nuclear power plants. Horizon was bought by Hitachi for an estimated price of £700 million, announcing it would build two Advanced Boiling Water Reactors (ABWRs) at the Wylfa site. The ABWR received Stage 3 Generic Design Assessment approval by the Office for Nuclear Regulation (ONR) in December 2017.
In April 2017, Horizon Nuclear applied for a site license at the Wylfa location. The Wylfa Newydd project is expected to finalise approvals and make a Final Investment Decision by 2019, although Horizon have made it clear that its continuation in the project will depend on the outcome of negotiations with the Government on a strike price which they hope to have agreed in the first half of 2018. A development consent order (DCO) application for Wylfa Newydd will be submitted early in 2018, with in the order of 18 months expected for planning permission to be granted.
Horizon confirmed that a joint venture of US giant Bechtel, Japanese firm JGC Corporation and Hitachi Nuclear Energy, will deliver the Wylfa Newydd nuclear power station. The developers have put forward proposals to clear the 121 hectares site, prior to receiving planning permission in order to reduce the construction time by about 18 months.
If everything did go according to plan, the first reactor could start up in 2025 although this timeline may be optimistic.
In June 2014, Nugen finalized a new ownership structure with Toshiba-Westinghouse, 60 percent and Engie (GDF Suez), 40 percent. At the start of 2017 the development included the construction of three Westinghouse AP1000 reactors which would make it the largest single new nuclear project in Europe. The U.K. Office of Nuclear Regulation approved the AP1000 reactor design on 30 March 2017. A final investment decision had been expected to be taken by the end of 2018.
After a major financial collapse, Westinghouse filed for Chapter 11 bankruptcy protection in the USA in March 2017. This led to Engie selling its remaining 40 percent to Toshiba-Westinghouse for US$138 million, who were contractually obliged to buy them at the pre-determined price.
The U.K. Government has been actively trying to encourage other investors to become involved at Moorside, with Korea’s KEPCO, a nationally owned utility and reactor vendor, being promoted as the preferred bidder with the potential for a deal to be signed in the first half of 2018. It is unlikely that KEPCO will use Westinghouse’s AP1000 reactors so a new reactor design licensing process for their own technology, which could take 4 years, would be required.
The UK government has committing to invest in the next generation of Small Modular Reactors. They announced a competition to find the best value SMR designs and expressions of interest were received from 33 eligible participants. Officials worked with these participants to understand the technological and commercial viability of SMR’s and their stage of development.
December 2017 announcements indicated that the competition received a much wider spectrum of technologies than expected, complicating the assessment. The findings from the study calculated that the power produced by a mini-pressurised water reactor (PWR) would cost £101/MWh, which is more than the £92.50/MWh strike price agreed last year for Hinkley Point C. The programme has been rebadged with up to £44 million earmarked for research into “advanced” reactors over a number of phases of development.
According to the National Nuclear Laboratory, the global SMR market could provide 65-85 GW by 2035 and is valued at £250 to £400 billion providing opportunities for a UK export business.
The sector must recruit 8,600 people each year to ensure a skilled workforce is maintained. This will require an emphasis on attracting, training and retaining people in the industry.
The developers of the Hinkley Point C project need to manage the financial, technology and construction risks associated with projects of this scale and complexity. Satisfactory progression of the Olkiluoto plant in Finland, Flamanville in France, and the Taishan projects in China will be important to gain confidence in the EPR technology.
2018 is likely to be a pivotal year in securing the private investors needed to fund the construction of the 5 other new nuclear plants within a strike price low enough to be attractive to the government.
The case for nuclear power is becoming more challenging as competing technologies, such as off-shore wind, become more competitive.
The development of Small Modular Reactors is receiving less funding than expected which may slow their deployment.
A2O People produce a regular series of blogs designed to keep people informed about the Construction Industry, the UK Energy Sector, the UK Nuclear Sector, the Hinkley Point C project, and HR / Employment Law issues impacting the Construction sector.
Shane Keaney is a director of A2O People a Recruitment and People Consultancy specialising in the Nuclear and Energy Construction sectors. You can learn more about our Recruitment, Business Advisory and Training services on our website www.a2opeople.co.uk, by emailing us at firstname.lastname@example.org or calling 01278 732073.
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