UK state should invest in nuclear, says report

01 November 2017

The UK government should take a "significant stake" in new nuclear power plant projects, according to the Final Report of the Industrial Strategy Commission published today. The country urgently needs to replace its existing nuclear generating capacity because, of the existing fleet amounting to 8.9 GWe of capacity, all but 1.2 GWe will need to be retired by 2030, it adds.

A joint initiative between academics at Manchester and Sheffield universities, the commission said the new strategy should be driven by the long-term needs of the UK, which include decarbonising the economy, improving infrastructure, boosting export capacity and unlocking long-term investment.

Prime Minister Theresa May gave priority to an industrial strategy when she formed a government following last year's referendum vote in favour of the UK exiting the European Union. She put a green paper out for consultation in January and a white paper is expected from the Department for Business, Energy and Industrial Strategy before the end of the year. The independent commission was set up following the government's publication of the green paper.

The report says: "Since 2008, it has been the policy of the UK government, through successive administrations, to support a programme of nuclear new build, to be financed and operated by the private sector. Currently plans exist to build up to 16 GWe of new nuclear capacity, including the 3.2 GWe at Hinkley Point C, at a total capital cost of at least GBP60 billion ($80 billion). This programme is an ideal case study of the way energy policy and industrial policy have been connected in the past, and should be connected better in the future.

"The stipulation that the nuclear new build programme should not receive direct government funding or subsidies has greatly reduced the government's degree of leverage over the programme. Yet the government remains financially exposed through loan guarantees, and through contract-for-difference agreements. It indirectly guarantees very long-term revenue flows through commitments to the price consumers and industry will pay for electricity."

Most of the developers and all the technology vendors involved are based overseas, the report notes, and although the projects will involve large contracts with UK suppliers, the scope for developing UK supply chains for the highest value elements is "seriously weakened by this fact", and by the fact that the capital funding is sourced wholly from overseas organisations too, including some with substantial shareholdings by overseas governments. The selection of different technologies by different owners for the different sites means that each will need to develop its own supply chain independently, it adds.

The commission recommends that the government takes a large stake in future nuclear new build projects, and should develop the supply chains for the UK nuclear industry to ensure that UK business is able to supply a higher proportion of the highest value components of new nuclear build.

"The UK has managed to reduce its carbon emissions significantly, but we have now largely banked the easy carbon savings obtained by switching from coal generation to gas. The largest contribution to our low-carbon energy supply comes from nuclear, where problems lie ahead. Nuclear generating capacity currently supplying about 17% of our electricity comes from the ageing Advanced Gas-cooled Reactor (AGR) fleet, which will have been taken out of service by 2030, emphasising the urgency of the delayed nuclear new build programme," it adds.

The existing state of energy infrastructure is not adequate, it notes, citing energy economist Dieter Helm, who writes: "The energy sector is not in good shape. It is not fit for the purposes of a major industrial economy, and especially for one doing Brexit ... The years of investment neglect are being played out just when all the coal is closing, the existing nuclear fleet is aging, existing gas power stations have taken a severe bath, and new nuclear is getting later and later."

The report also says that a 100% low-carbon electricity system will need to rely on some combination of renewables, nuclear, and gas with carbon capture and storage. The problem of the intermittency of renewables will need to be overcome, it says, with some combination of new energy storage technologies and better demand management.

The need to ramp up investment in research development and deployment in energy may be a particularly important example here, it says.

"The existing poles of R&D are in London, the East and South East, yet the natural locations for new clusters in offshore wind power, new nuclear, and carbon capture and storage are all likely to fall in Humberside and East Yorkshire, in Somerset and Cumbria," it adds.

The report calls on May to establish an industrial strategy unit at the Treasury to ensure that all other departments developed policies consistent with the government's long-term blueprint. It also says that a new body - an Office for Strategic Economic Management - should be created to monitor and measure the success of the industrial strategy.

Researched and written
by World Nuclear News

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