Kickstarting SMRs: should the UK Government subsidise small reactors?

7 November 2018 (Last Updated July 15th, 2020 21:58)

A report commissioned by the UK Government has recommended that subsidies should be extended to small modular reactor technology to help establish a supply chain and reduce technology costs, as has been done for renewables. Small reactors have the potential to reshape the economics of nuclear power, but are they a good candidate for government support?

Kickstarting SMRs: should the UK Government subsidise small reactors?
The report compiles suggestions designed to enable SMR technologies to enter the UK market by the 2030s. Credit: Courtesy of Nick Youngson, Alpha Stock Images – http://alphastockimages.com/

In January, the UK’s Department of Business, Energy and Industrial Strategy set up an Expert Finance Working Group (EFWG) to advise on the potential for small nuclear technologies in Britain. Its findings were consolidated into ‘Market framework for financing small nuclear, a report that recommends the introduction of subsidies for small modular reactors (SMRs).

“Despite the increase in global activity and interest in small nuclear there remains a market failure in getting technologies and projects to commercial delivery, and in particular in securing sufficient financing for projects from the private sector,” said group chair Fiona Reilly in the preface.

The report compiles suggestions designed to enable SMR technologies to enter the UK market by the 2030s, helping to establish a market chain that would provide jobs while increasing energy security.

“The suggestion, in short, is to provide government funding not only to wind and solar power energy projects but also to consider nuclear power in the form of small modular reactors,” says international technology group and nuclear component manufacturer Schott’s nuclear safety division general manager Thomas Fink. “In doing so, a UK supply chain for this type of reactor could be established, building on the experience gained from larger-scale projects.”

But are SMRs a worthy choice for government subsidies?

What are SMRs?

Small modular reactors bring many benefits their larger relatives lack. The report classifies them as anything from micro-generation projects through to 600MWe reactors, allowing them to be small in size and easily transportable. This opens the possibility of using SMRs on brownfield sites such as retired coal-fired power plants, or as power sources for energy-intensive industries.

It is hoped that they could be produced in a factory setting, reducing the cost of the technology as demand grows. Their modular design also ensures that they are scalable; as power demand grows another module can simply be added to the existing infrastructure.

Smaller reactors have been used for decades within the military, but have never taken off in the broader energy market. “The UK has a great deal of experience with nuclear power, particularly where applications such as submarines are concerned,” says Fink. “This means that, to a certain extent, there is a supply chain there already that could be built upon for this smaller reactor type. SMRs present a very interesting opportunity in this regard as effectively the country would not be starting from scratch.”

In 2016, the UK Government offered £44m in funding for the research and development of a select group of SMR technologies to facilitate advancement.

There have been a number of challenges in their development, however, in particular unclear regulatory frameworks and policy.

“Building a small reactor is not the difficult part,” says Fink. “The difficulty lies in making SMRs producible using standardised procedures to drive down costs, and at the same time ensuring the highest levels of safety.

“Control mechanisms need to be placed inside the vessel itself, close to the reactor core, to enable SMRs to be produced to a small enough scale to be placed onto the back of a truck or a railway carriage, for example. It is not a case of simply scaling down a larger reactor model. The smaller containments mean higher temperatures and higher pressures; therefore you need to install components capable of dealing with this environment. Inorganic materials, such as glass to metal seals for electrical penetration assemblies, are a perfect example, as they are able to withstand the extreme conditions associated with SMRs.”

The UK’s coming energy struggles

The nuclear industry reacted positively to the report’s suggestion, in particular given concerns for the energy system in the UK. “This report confirms small reactors have the real potential to be a financially viable addition to the existing nuclear programme,” the Nuclear Industry Association’s head of policy Peter Haslam said in a statement. “The nuclear industry is central to the government’s Industrial Strategy, and this report builds on the recent announcements for small reactors in the Nuclear Sector Deal.

“Not only could small reactors bring value for money to the consumer, they also have the potential to create a lucrative export market, with a major benefit for British engineering companies and the wider supply chain.”

As coal power plants are taken offline and aged nuclear plants begin to close, the UK will need considerable capacity additions in the 2020s to meet energy demand. SMRs could provide an important source of zero-carbon fuel, without many of the complications of large-scale nuclear projects, such as the plagued Hinkley Point C plant.

“For the UK, there is definitely an issue with the ageing existing nuclear fleet,” says Fink. “This will need to be replaced in the near future, which presents two scenarios. Either to replace the existing fleet with wind and gas power, or to use nuclear technology. There needs to be a balance, and nuclear should have a place within that balance.

“To rule out nuclear power, according to a recent article placed on the WNA [World Nuclear Association] website, would increase the cost of electricity by 15%, at the same time tripling CO2 emissions out to 2030. SMRs could be the ideal model to achieve the balance required – both to meet energy demand and to keep prices relatively stable.”

The report produced by the EFWG offers suggestions to streamline the development of SMRs. These include a number of relatively simple propositions, such as reviewing the Generic Design Assessment process (which ensures that any new nuclear power stations built in the UK meet high standards of safety, security, environmental protection and waste management) in light of changing technologies.

It also includes economic suggestions such as: “The government could also provide funding support mechanisms such as a Contract for Difference, a Power Purchase Agreement or potentially a Regulated Asset Base model.”

A worthy candidate or a waste of money?

SMRs could provide a reliable, zero-carbon source of energy to businesses in the UK. But should this qualify them for subsidies?

Nuclear policy consultant David Lowry told the Guardian in September: “SMRs are either old, discredited designs repackaged when companies see governments prepared to throw taxpayers’ subsidies to support them, or are exotic new technologies, with decades of research needed before they reach commercial maturity.”

This is a contested point, with many believing that given further development they could become economical in little more than a decade. “The report sets out how small reactors can be cost-competitive, and we hope the financial sector will recognise this,” said Haslam. “Small reactors could make a significant contribution to bolstering energy security while tackling climate change, and we hope to see government taking forward the recommendations as soon as possible.”

The cost of SMRs range greatly, with the ten included in the EFWG report requiring between £100m and £2.5bn for development. It has been suggested that part of this variance is due to a misunderstanding of UK nuclear regulatory framework, causing estimates to be inflated.

“In short, the EFWG notes that private finance will not come forward to develop first-of-a-kind small nuclear projects without some government support in helping to remove the barriers to the development,” the report states. “By following the recommendations set out, government would be creating a similar environment to the early days of wind and solar commercial development in the UK by creating a market whereby the small nuclear sector can develop and over time bring in more and more private sector financial involvement to create a sustainable industry and to in turn bring down the costs of energy.”

The solar and wind markets have been able to flourish in the UK, thanks in part to government subsidies. As energy security comes into question, the government together with industry and individuals will have to search for reliable, baseload, clean power alternatives. SMRs could benefit greatly from subsidies, but it is a long-term strategy, and there will still be many hurdles to leap, both technologically and economically.

“The call for concepts in the UK has already begun, with around 60 concepts being submitted over the last two years from around the industry,” says Fink. “We hope that this report will lead to a wider conversation on the potential uses of SMRs for power generation, leading ultimately to their use in conjunction with alternative power sources. Regardless of the outcome, it is vital that safety legislation is placed high on any future agenda where nuclear power is concerned, with a view to the highest levels being implemented in a standardised format.”