Will the UK Govt Take a £20bn Equity Stake in Sizewell?

  • Will the UK Government take an Equity Stake in Sizewell C?
  • DOE Grants $30M to Five US Firms for Advanced Nuclear Reactor Designs
  • Canada Outlines Next Steps for Progress on Small Modular Reactor Technology

Will UK Govt Take a £20bn Equity Stake in Sizewell?

Talks with EDF could lead to energy customers to be charged for construction costs as the Sizewell reactors are being built

(NucNet) The UK government has reignited a contentious debate over over the country’s nuclear energy ambitions by agreeing to restart talks with EDF over plans to build a reactor at Sizewell C in Suffolk.

Money-futures_thumb.jpgFor years successive conservative governments have lived in a fantasy world that hugely expensive nuclear power stations can be completely financed by the private sector with zero public support including rate guarantees.

That dream state came to rude awakening with the decision to build the Hinkely Point C nuclear project (twin EDF 1650 MW EPRs) financed by a combination of a guaranteed sky high rate for electricity (£95/MWh) and a 33% equity stake by Chinese state owned enterprises.

It should not have come as a surprise to anyone that as a result Hitachi walked away from the Wylfa and Oldbury projects, a total of four 1350 MW ABWRs, when the government tried to go down market by offering the Japanese firm a “strike price” that was 20% lower than what it awarded EDF.

Sizewell C is the only nuclear new-build project in the UK that has prospects for going ahead. Three projects – Wylfa, Moorside and Oldbury – have either been cancelled or shelved, largely because of financing problems, while Bradwell remains in the early stages. Two EPR units under construction at Hinkley Point C are the only commercial nuclear plants being built in the UK.

NucNet UK Nuclear 20201208

UK Nuclear New Build – December 2020. Image: NucNet

As a result of these and other policy hiccups, the government appears to be coming to it senses with talks that could lead to the government taking a direct financial stake in the project, and to use the new RAB financial model that would make the public liable for costs as they occur. How much of an equity stake depends in part on whether the project’s Chinese investors stick around. The Chinese government is not happy with UK PM Boris Johnson’s actions on an unrelated telecommunications tender.

The decision to restart formal negotiations with EDF follows a hiatus in talks that have been shadowed by concerns over cost, and the involvement of China General Nuclear Power (CGN), which owns 20% of the project.

The formal negotiations over the £20bn nuclear plant will hinge on whether the French state-owned EDF can prove it has learned cost saving lessons from its Hinkley Point nuclear project in Somerset, and that a successor plant would offer the public value for money.

If the government inks a deal for Sizewell with EDF, the French state-owned nuclear energy conglomerate may be offered a multi-billion-pound deal that allows it to charge energy customers for the cost of construction while it builds the reactor. Critics have come down hard on this aspect of the financial plan saying it puts rate payers on the hook for any delays or cost overruns.

Ed Miliband, Labor’s shadow business secretary, accused the government of “kicking big decisions into touch” and failing to offer a “definitive statement today one way or the other on financing, costs or an overall plan.”  In other words, he doesn’t trust the government’s numbers or the process for getting to them. Then again, throwing shade on the opposition party’s financial plans is part of Miliband’s job description.

The RAB model encourages investment in major infrastructure projects by delivering reliable returns, at a reduced rate, before a plant is operational. This tempers the need for large-scale, long-term borrowing at high interest rates, which significantly increases the cost of power once the power station is commissioned and in revenue service.

The RAB approach is widely used internationally and has attracted investors for the construction of UK infrastructure projects including the Thames Tideway Tunnel and the Heathrow Terminal 5. What is lost sight of in all the sound and fury of the financial debate is that Sizewell C, if built, will spend the next 80 years providing CO2 emission free electricity to a big chunk of the UK demand for electrical power.

Is the UK Nuclear New Build ” still vital” to the Nation?

The decision to restart talks is also expected to reopen a debate over whether nuclear energy can offer good value for money, and whether the UK needs new nuclear reactors to help meet a steep rise in demand for low-carbon electricity to power a boom in electric vehicles, induction heaters, and heat pumps. A basic principles that is sometimes lost sight of, from the perspective of climate change, it makes no sense to ramp up investments in electrification, especially in the transportation sector, if the power comes from fossil fuels.

The government of PM Boris Johnson, which is currently overwhelmed at this time by the country’s COVID19 crisis, for which Johnson’s mismanagement is mostly to blame, says that Sizewell is indeed “a vital next step” in the UK’s efforts to secure new no carbon emission electricity as older nuclear reactors prepare to shut down. The government said in a recent white paper that “an appropriate financing model” would help cut costs and unlock major benefits for the UK economy.

The government said it is also planning to back a new generation of small modular nuclear reactors (SMRs) which can be built at a lower cost based on designs capable of being assembled in factories.

The government is offering £215m in funding which is to be cost shared with industry cover design costs for SMRs that can be built in factories rather than “stick built” on site. Also, the government said that in 2021 it would accept applications by SMR vendors for the generic design assessment, which is the safety review carried out by the Office of Nuclear Regulation to license new reactors to be built in the UK. To help bring advanced nuclear technologies to the market, the government will also invest an additional £40m in developing the regulatory frameworks and supporting UK’s supply chain.

The UK Nuclear Industry Association said the government’s decision to enter advanced negotiations with EDF on Sizewell C is “very good news for our environment and our economy.”

Chief executive Tom Greatrex also said Sizewell is “a vital next step towards the net zero power mix we need for the future.”

Is the UK Government Doing Enough to Advance its Nuclear New Build?

In a nutshell, the answer to the question of whether the UK government is back on track to replace its aging fleet of nuclear reactors and keep the lights on after the North Sea oil and gas runs out is mostly a an ambiguous “not yet.”

There are two huge challenges facing the UK government. The first is the role of China in the UK nuclear new build, and the second is the role of current fossil fuel interests who see plans for new nuclear reactors in the UK as a threat to their long term profitability.

China – Chinese state owner enterprises have committed to a 33% equity stake the Hinkley Point C project in return for a promise to be allowed to build one and perhaps as many as three 1000 MWe PWR type reactors at the Bradwell site. These same firms are also committed, in principle, but have not yet written checks, for a 20% equity stake in the Sizewell C project. In return, China is expected to be allowed to build one or more of its reactors at the Bradwell site.

The Hualong One, which is the Chinese domestic design, based on a a Framatome design of the reactors at China’s Daya Bay power station, has all but completed (step 4) the rigorous and expensive General Design Assessment (GDA) process run by the UK Office of Nuclear Regulation.

The problems for the UK in its relations with China, and for the equity investments in nuclear projects, are two fold.

First, China is seriously annoyed that Chinese telecommunications firm Huawei was kicked out of the bidding for the 5G wireless network in the UK over allegations of “security concerns,” but mostly as a result of pressure from the U.S. According to experts that this blog has talked to, the security concerns are legitimate.

Second, the Financial Times reported on 12/11/20 that China has realized it is overextended globally in terms of its global financial commitments for the Belt & Road program and may never recoup a lot of the money it has loaned for various third world infrastructure projects. Some reports have also indicated that domestic economic issues are playing a role in decisions about the future of the program.

While it does not face any deadbeat debtors in the UK, the global economic downturn, caused by the COVID19 crisis, which began in China, has harshly limited the ability of countries that have borrowed heavily from China to repay the loans.

It is probably too late for China to pull out of Hinkley Point, and thus jeopardize the right to build at Bradwell, but Sizewell may or may not be also in the mix. China could potentially pull out of Sizewell and still claim the right to build at Bradwell, but the UK government might not be in a charitable mood if that happens.

Fossil Fuels – Separately, an ongoing challenge to Sizaewell and other nuclear projects in the UK is that oil and gas interests in the UK are undoubtedly doing whatever they can to delay the commitment of government support for new nuclear projects and thus to postpone the inevitable replacement of their fuels with uranium fuel reactors.  Oil and gas interests with resources still to be tapped in the North Sea won’t go quietly in this debate.

Domestic Supply Chains will Create Jobs and Build Support for New Nuclear 

This position of fossil fuel interests in the UK mirrors what is happening with India which has come up against its domestic coal miners as it tries to move ahead with its nuclear new build.

India has to some extent overcome some of the opposition by fossil interests by committing to an indigenous design of a 700 MW PHWR which does not require a reactor pressure vessel (RPV) build by offshore vendors.

All of the major components, and supply chain employment, are of domestic origin which means the tens of thousands of jobs that will be created building 10 of the units in the first wave, and another 7 units in the second, will be Indian workers. This combination of an ‘India first’ emphasis on parts and people is showing results.

Earlier this month India’s Atomic Energy Regulatory Board (AERB) approved first concrete for first two of four planned new 700 MW PHWRs at the Gorakhpur site in Haryana. The AERB also announced two new sites for the new PHWRS at the Kaiga nuclear power station in Karnataka. Elsewhere, another seven units are under construction including two 1000 MW Russian VVER at Kudankulam in Tamil Nadu. By 2032 Indian has a realistic chance of having 15 new nuclear power stations completed representing about 23 GWe.

Separately, Rolls Royce, a UK based defense firm that has built the small reactors that power the UK nuclear navy, is promoting a design of a 440 MW PWR and proposes to build 16 of them.

Taken together, all 16 units would be about equivalent to the Wylfa and Oldbury projects (2.7 GWe each). If successful, it will take 10-15 years for the “fleet” to be built assuming the design is successful and financing for it can be secured by the vendor and its customers.

Like the situation in India, all of the UK domestic supply chain and employment for the Rolls Royce SMRs will be based in the UK. The RPV for the design is small enough that a UK firm, Sheffield Forgemasters, could fabricate them. Significantly, when Westinghouse was still planning to build three 1150 MW AP1000s at Moorside, the firm took an equity stake in Sheffield to firm up its supply chain for the new build.

Sadly for Westinghouse, Toshiba pulled the rug out on Moorside ending for now its ambitions to gain a piece of the market in the UK. A recent exploratory move by Westinghouse, partnered with US construction giant Bechtel, to restart Moorside came with no equity funding to back it.

DOE Grants $30 Million to Five Firms for Advanced Reactor Designs

The US Department of Energy (DOE) Office of Nuclear Energy (NE) has selected five teams to receive $30 million in initial funding for risk reduction projects under its Advanced Reactor Demonstration Program (ARDP). All five of the selected designs have the potential to support vendor ambitions for export sales.

The risk reduction program is one of three development and demonstration elements under the ADRP . The plan is to design and develop safe and affordable reactor technologies that can be licensed and built in the US as well as for export over the next 10 to 14 years.


Risk Reduction for Future Demonstration Projects

The goal of the Risk Reduction program is to design and develop safe and affordable reactor technologies that can be licensed and deployed over the next 10 to 14 years. DOE has selected these five U.S.-based teams to receive cost shared Risk Reduction funding:

  • Hermes Reduced-Scale Test Reactor – Kairos Power, LLC (Alameda, CA) will design, construct, and operate its Hermes reduced-scale test reactor. Hermes is intended to lead to the development of Kairos Power’s commercial-scale KP-FHR (Kairos Power Fluoride Salt-Cooled High Temperature Reactor), a novel advanced nuclear reactor technology that leverages Tri-structural ISOtropic particle fuel (TRISO) fuel in pebble form combined with a low-pressure fluoride salt coolant. The firm projects the 140 MWe reactor might be be ready for commercial operation by 2026. Total award value over seven years: $629 million (DOE share is $303 million)
  • eVinci Microreactor – Westinghouse Electric Company, LLC (Cranberry Township, PA) will advance the design of a heat pipe-cooled microreactor to support a nuclear demonstration unit by 2024. The goal is to have a commercial design by 2030.  The project will serve to reduce technical risks associated with the moderator canister design, improve the ability to manufacture heat pipe wicks, and develop an economically viable refueling process and licensing approach. Westinghouse is reported to be working with LANL, INL, and Texas A&M University to design and fabricate the necessary components to develop a demonstration unit of the micro-reactor. Total award value over seven years: $9.3 million (DOE share is $7.4 million)
  • BWXT Advanced Nuclear Reactor (BANR) – BWXT Advanced Technologies, LLC (Lynchburg, VA) will develop a commercially-viable transportable 50 MW (thermal) microreactor based on an HTGR design focused on using TRISO fuel particles to achieve higher uranium loading and an improved core design using a silicon carbide (SiC) matrix. The BWXT design is aimed at off-grid applications and remote areas. Total award value over seven years: $106.6 million.  (DOE share is $85.3 million)
  • Holtec SMR-160 Reactor – Holtec Government Services, LLC (Camden, NJ) is receiving funding for early-stage design, engineering, and licensing activities to accelerate the development of Holtec’s light water-cooled SMR-160 (small modular reactor).  Holtec is partnering with several industry counterparts, including Mitsubishi Electric Power Products and is also reported to have a collaboration agreement with the INL.  Holtec, which is decommissioning the Oyster Creek nuclear plant, is said to plan to use the site host the first commercial prototype. Total award value over seven years: $147.5 million (DOE share is $116 million)
  • Molten Chloride Reactor Experiment – Southern Company Services, Inc. (Birmingham, AL) will lead a project to design, construct, and operate the Molten Chloride Reactor Experiment (MCRE) – the world’s first critical fast-spectrum salt reactor relevant to TerraPower’s Molten Chloride Fast Reactor. Total award value over seven years: $113 million (DOE share is $90.4 million)

“All of these projects will put the US on an accelerated timeline to domestically and globally deploy advanced nuclear reactors that will enhance safety and be affordable to construct and operate,” Secretary of Energy Dan Brouillette said.

“Taking leadership in advanced technology is so important to the country’s future because nuclear energy plays such a key role in our clean energy strategy.”

DOE expects to invest about $600 million over the next seven years in ARDP, which aims to help domestic private industry demonstrate advanced nuclear reactors in the USA.

Update on ARDP Funded Projects

Two projects led by TerraPower and X-energy were selected in October to receive $160 million in initial funding for under its Demonstration projects pathway to develop and construct two advanced nuclear reactors that can be operational within seven years.

Recently, Energy Northwest, which is a partner with the two firms for design and licensing efforts, told a business trade newspaper the plants would be located at the Columbia Generating station, which it owns and operates, near Richland, WA.

The source of Energy Northwest’s confidence that the reactors will be located at a site in Washington is a statement on October 13, 2020, by US Secretary of Energy Dan Brouillette.

Brouillette said the locations of the two demonstration plants have still to be finalized, but added that “a place like Washington state” was likely. Energy Northwest. Energy Northwest CEO Brad Sawatzke said in response such reactors are a “promising future component” of the company’s resource portfolio.

“Under the partnership agreement Energy Northwest will assist with the licensing of the [X-energy] design, and – if the design is determined to be a viable option for development in Washington – Energy Northwest expects to own and operate the plant,” Energy Northwest said.

ADRP’s third pathway, Advanced reactor concepts 2020, will support innovative and diverse designs with potential to commercialize in the mid-2030s.

ARDP will also leverage the National Reactor Innovation Center (NRIC) at Idaho National Laboratory to test and assess these technologies.

“These projects show the importance of continuous innovation in advanced reactors and NRIC looks forward to working with each of the companies on successful demonstrations,” said Ashley Finan, Director of the NRIC.

ARDP is designed to help domestic private industry demonstrate advanced nuclear reactors in the United States. DOE expects to invest approximately $600 million over seven years with industry partners providing at least 20 percent in matching funds.

Canada Outlines Next Steps for Progress on Small Modular Reactor Technology

maple leafSmall modular reactors (SMRs) represent a promising new non-emitting technology that has the potential to produce reliable electricity in Canada, supporting the  country’s transition to net-zero emissions by 2050.

Canada’s Minister of Natural Resources, Seamus O’Regan, released a national SMR Action Plan, which responds to the 53 recommendations identified in Canada’s SMR Roadmap that was launched in November 2018. In Canada 109 businesses and organizations have signed on to support the SMR plan.

Canada’s SMR Action Plan seeks to advance the safe and responsible development and deployment of SMRs through a pan-Canadian approach in partnership with provincial and territorial governments, Indigenous peoples, organized labor, utilities, industry, innovators, academia and civil society.

Seamus O’Regan, Canada’s Minister of Natural Resources said:

“Canada’s SMR Action Plan is the pan-Canadian result of the collective efforts of governments, Indigenous partners, labour, industry and civil society. Canada can be a world leader in this promising, innovative, zero-emissions energy technology, and this is our plan to position ourselves in an emerging global market.”

“Building on Canada’s nuclear expertise, we are working collaboratively with provincial and territorial leaders to develop SMRs to meet emissions targets while creating economic opportunities for Canadians post-pandemic.”

“This is a long-term play,” O’Regan said.

“We are really looking at SMRs, utilized and deployed, between the years 2030 and 2050, but you’ve got to lay the groundwork for that now.”

He said governments and companies in the United States, China, United Kingdom, France and South Korea are all researching and developing mini-nuclear reactors.

“They are making those steps now, this is a very competitive space now, and if we don’t move on it now then we lose out,” O’Regan said.

The government believes there’s an opportunity to deploy SMRs in remote locations, including in the territories, where diesel generators continue to be a major part of the electricity mix and a large source of emissions in the region.

The Action Plan responds to all 53 recommendations in Canada’s SMR Roadmap and also includes voluntary actions that go beyond the SMR Roadmap recommendations. The four thematic pillars which emerged through the Roadmap process continue to guide our actions:

  • Pillar 1: Demonstration and Deployment, including risk sharing
  • Pillar 2: Policy, Legislation, and Regulation, including nuclear liability, security and waste management
  • Pillar 3: Capacity, Engagement, and Public Confidence, with an emphasis on Indigenous engagement
  • Pillar 4: International Partnerships and Markets, including international enabling frameworks

The action plan enshrines nuclear energy to reduce emissions and transition the country’s electricity mix away from carbon-based energy, but it will face some opposition from the Green Party and the Bloc Quebecois, which favor energy sources such as wind and solar power.

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