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Why the future looks brighter for nuclear power

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Kepco's APR1400 reactors

The prospects for Cumbria’s nuclear sector suddenly look brighter, and not only because Korea’s Kepco is ready to step into Toshiba’s shoes and revive NuGen’s plans for a nuclear power station at Moorside.

We detect a change of attitude by Theresa May’s Government, which has been lukewarm about nuclear from day one, initially pausing the Hinkley Point C project in Somerset before giving the go ahead last autumn.

Energy Minister Richard Harrington set out an overtly pro-nuclear stance when he addressed the Nuclear Industry Association’s annual conference last week.

“We want to build on the momentum created by Hinkley [Point] and we continue to work closely with EDF, CGN, Horizon and NuGen on their proposals for future plants,” he said.

“I also welcome the news that Toshiba has selected a preferred bidder for the NuGen project, and we now look forward to continuing to work with Kepco to discuss their plans.”

This marks a change in rhetoric.

The Chamber was concerned that the Conservative election manifesto made no mention of nuclear power, while emphasising shale gas and renewables.

Likewise the recent Industrial Strategy White Paper talked about the potential for a sector deal for nuclear but made no mention of Moorside or Horizon’s project for a power plant at Wylfa in Wales.

The falling price of renewable energy – in particular offshore wind – and widespread criticism of the index-linked strike price of £92.50 per megawatt hour agreed for electricity from Hinkley Point, appeared to have turned the Government against nuclear energy.

So what’s changed?

Perhaps it’s a realisation that none of the alternatives to large nuclear power plants can, in themselves, meet the UK’s energy needs, as the industry document proposing a Nuclear Sector Deal points out.

Demand for electricity is set to rise as a result of the Government’s plan to phase out the sale of petrol and diesel cars and vans by 2040.

Electric carsNational Grid estimates that demand from electric vehicles could require an extra 18GW of generation by 2030 – at present the UK has around 85GW capacity – and the total capacity required could rise to more than 150GW taking into account increased use of electricity in heat and vehicles.

Wind power can provide only part of the solution. Its intermittent nature – turbines don’t generate electricity when the wind isn’t blowing – means that gas-fired power stations are needed as backup, inflating the true costs.

While innovations in battery technology could improve the viability of offshore wind, National Grid expects there to be only 6GW of battery capacity by 2030.

And hopes that dozens of small modular nuclear reactors (SMRs), which can be erected on small sites near large cities, might offer an alternative to large power stations, have been cast into doubt.

A report from consulting engineers Arup suggests that electricity from SMRs could cost as much as £101 per megawatt hour, making their power even more expensive than Hinkley Point’s.

A government stake in NuGen would ensure Moorside goes ahead.

Hitachi’s Horizon project in Anglesey is likely to be the first test of the Government’s rekindled enthusiasm for large-scale nuclear energy projects.

According to press reports, Hitachi chairman Hiroaki Nakanishi has held talks with Chancellor Philip Hammond in a bid to move it forward.

It is understood that Hitachi wants the UK Government to take an equity stake of about 25% in the plant.

If they agree, ministers are certain to demand a deal that the electricity generated is significantly cheaper than that from Hinkley Point.

This may well be achievable. The Sector Deal document argues that the cost of electricity generated from nuclear can be reduced by up to 30%.

One way to do this would be to adopt one reactor design and roll it out across the UK, so called “fleet deployment”.

Its other main proposal is for the Government to look at different financing models, including taking an equity stake in new build projects.

This would reduce the risk and costs, as governments can borrow more cheaply than the private sector.

The document says: “Each reduction in the cost of capital by 1% on a typical construction project would lead to a reduction of circa 10% in the strike price.”

That view is echoed by the National Audit Office, which published a report this summer critical of the Government’s handling of Hinkley Point.

This argued that, if the state had taken a 25% equity share, then the strike price for electricity from the power station would have been in the range £69.50 to £76 per megawatt hour, rather than £92.50.

Rob JohnstonRob Johnston, Chief Executive of Cumbria Chamber of Commerce, believes this is the key to unlocking the Moorside project in Cumbria.

He said: “We have been calling for the Government to take a stake in Moorside ever since it became clear that Toshiba was in financial difficulties and would no longer be able to deliver it.

“Hinkley Point has shown that, because of the risks involved in building nuclear, the businesses and consumers have to pay a high price for the electricity if the private sector is to fund the entire project.

“A government stake in NuGen would ensure Moorside goes ahead, reduce the cost of the electricity generated and ultimately benefit the public finances.”

He added: “The UK is the world’s fifth biggest economy. We need our energy costs to be competitive. If other countries’ governments are prepared to invest directly in nuclear energy, why shouldn’t we?”

The prospects for Moorside look healthier now Kepco is on board.

The company, in which the South Korean government owns a controlling interest, has agreed in principle to buy Toshiba’s stake in NuGen.

The project had looked in grave doubt after Toshiba announced its intention to pull out while its French partner, ENGIE, exercised an exit clause in its contract.

Toshiba had planned to build three Westinghouse AP1000 reactors at Moorside, next to Sellafield.

Kepco will instead build two of its APR1400 units. This is a proven design but has yet to gain UK regulatory approval. That is likely to mean Moorside will come on stream around 2030 rather than the mid-2020s.

Rob added: “We mustn’t underestimate the impact that Moorside will have, should the project go ahead.

“NuGen were talking about having 6,000 people working on construction at any one time, and 1,000 permanent jobs once the power station is functioning.

“Those figures may change slightly with Kepco’s involvement but we are still talking about a significant infrastructure project that will create supply chain opportunities for many Cumbrian businesses.

“It’s significant that, at Hinkley Point, 64% of the construction by value will come from UK companies, and 36% of the labour force will be recruited locally.

“The Chamber will be working hard to ensure that Cumbrian businesses are ready to seize the opportunities presented by Moorisde.”

There is also movement on plans for an underground repository to house intermediate and high-level nuclear waste.

The Government believes that a repository, or ‘geological disposal facility’ (GDF), provides the safest long-term home for this waste – most of which is stored above ground at Sellafield.

Building it would be a mammoth civil engineering project, potentially the largest in the UK since the Channel Tunnel, creating an underground network of tunnels and storage vaults the size of Carlisle.

When the Government invited communities to volunteer to host a GDF, the only areas to do so were Copeland and Allerdale in Cumbria.

The site will support up to 1,000 jobs, with an additional 1,000 jobs in the supply chain.

The selection process stalled when Cumbria County Council exercised a veto in 2013, before tests could be carried to assess the suitability of the local geology.

Richard Harrington told the Nuclear Industry Association that the search for a site would begin again in the New Year.

The Energy Minister said: “On our current estimates, at the peak of construction, the site will support up to 1,000 jobs, with an additional 1,000 jobs in the supply chain.

“When it’s ready, the facility will sustain around 600 jobs for more than a century, while delivering significant investment and innovation.”

Again, communities will be invited to host the repository only this time it is probable that, in areas with two-tier local government, it will be a decision solely for district councils – county councils will not have a veto.

Realistically, West Cumbria is the only area of the UK likely to volunteer to host a GDF. Local politicians take the view that, as the waste is already at Sellafield, they would rather it was dealt with as safely as possible.

The industry has been calling for action on the issue of waste disposal.

The Sector Deal proposal says: “By 2030, the goal should have been to develop a GDF and to have developed implementation plans for commissioning and operating the facility.

“The lack of clarity in current UK waste management policy is a blocker for many decommissioning projects.”

It also advocates greater use of existing low-level waste repository vaults, and construction of new near-surface waste capacity to complement that at Drigg in West Cumbria. This, it argues, would accelerate decommissioning.

Rob Johnston said: “The issue of waste disposal needs to be resolved and we’re pleased that the Government has grasped the nettle at last.

“Whether West Cumbria is the right place for a GDF remains to be seen.

“We know that some tourism and food businesses are uneasy about the county hosting such a facility, so it’s important that the selection process is rigorous and demonstrates that the geology is suitable.”

The Sector Deal document also outlines the opportunities to exploit Sellafield’s expertise and know-how in nuclear decommissioning.

It says the global decommissioning market could be worth £100bn up to 2035, of which £10bn is the cost of cleaning up the Fukushima Daiichi site in Japan, while at least £50bn will be spent as Germany phases out nuclear power.

Rob added: “This time last year a crisis was unfolding at Toshiba and the prospects for Cumbria’s nuclear industry were very uncertain. This year the prospects look very much brighter.”

© Cumbria Chamber of Commerce

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