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Commercial Question

Atomising nuclear power generation

updated on 13 September 2022


What does the future hold for small reactors in the UK’s nuclear power industry?


“Go nuclear and go large” was the message from former Prime Minister Boris Johnson in a speech at the Sizewell B nuclear power plant this month on the UK’s energy future; although going small may be key to achieving this vision.

Beefing up nuclear power generation in the UK isn’t a new idea. It’s set to form a key part of decarbonising the power system under the government’s Net Zero Strategy, which aims to achieve net-zero carbon emissions by 2050.

However, in the context of today’s geopolitical situation, it’s not surprising that the government’s focus on alternatives to hydrocarbon energy has sharpened. The war in Ukraine and subsequent punitive trade measures have disrupted European gas supplies and are contributing to significantly inflated energy prices that are already putting financial pressure on businesses and consumers.

At present, about 15% of British power is generated at the country’s five operational nuclear plants, a fact which the former prime minister expressed concern over in his speech as being far below the 70% contribution nuclear makes to French power generation. A number of measures to increase the UK’s nuclear capacity have since been put forward. In the former prime minister’s speech, he announced plans to provide a further £700 million towards developing the Sizewell C station and to build at least eight reactors across the country of which some, he specifically declared, will be small modular reactors (SMRs).

What are SMRs?

The International Atomic Energy Agency defines an ‘SMR’ as an advanced reactor that produces electric power up to 300 MWe per unit, which is about one-third of the capacity of standard nuclear power stations. A further key feature is that SMRs can be produced in a factory, and then deployed at sites.

Why are SMRs useful?

Large nuclear power stations are notoriously expensive, complicated, and slow to build. SMRs offer a way to mitigate costs and broaden nuclear power’s scope of application, as well as other potential benefits some of which are set out below:

  • Reduced cost: as SMRs will be manufactured in factories, efficiencies achieved through assembly line production of multiple units should bring reduced costs. By reducing the capital costs of nuclear power, it’s hoped that nuclear power will become commercially and financially feasible in a wider range of applications.
  • Reduced construction time: factory production and simplified designs promise to reduce build time greatly. This promised speed in construction should give rise to further costs savings, an improved ability to meet national energy needs, and financing opportunities that should be attractive to a greater range of lenders thanks to the quicker return on capital on offer.
  • Flexibility: with a smaller footprint and reduced operational inputs, SMRs can be more easily sited and deployed in a wider range of applications, such as to power localised industrial endeavours or provide on-demand supply to fill gaps in renewable power generation.
  • UK commercial interests: as Boris Johnson mentioned in his speech, the UK has gone from having the first civil nuclear reactor and a thriving nuclear industry to having constructed no new nuclear power stations for nearly 30 years. Domestic innovations in SMRs are seen as a way to reinvigorate the UK’s ability to export nuclear power technology around the world.    
  • Safety: it’s argued that simplified designs will be safer and allow certain kinds of accident to be ruled out entirely.

Legal and commercial issues

In contrast to more prescriptive regulatory regimes, regulation of nuclear power in the UK is goal-based, which affords developers flexibility in making their safety cases and may therefore prove favourable towards SMR innovation. Among the factors affecting the speed of the regulatory approval process will be the availability of expertise on SMRs. The Office for Nuclear Regulation has indicated this is in short supply globally, as well as the degree of innovation in SMR designs (ie, the extent to which the regulators will be presented with new design features).

Changes to regulatory constraints on the location of nuclear facilities will be key to unlocking some of the proposed benefits of SMRs in terms of flexibility and breadth of application. If SMRs are to power specific industrial sites or provide heating to neighbourhoods, they’ll need to be sited in locations that wouldn’t be approved for standard nuclear power stations. The regulators (and the public) will need to be sufficiently confident in SMR safety mechanisms to allow them to be sited at such locations. It’s likely that the first SMRs will be constructed on or around existing nuclear sites to avoid any immediate need to deviate from current regulatory practice.

Financing will also be a significant factor in the progress and success of SMR rollout, which will remain expensive in absolute terms, and require substantial investment. Despite the projections of reduced capital costs and a quicker return on investment, lenders will have reservations. For instance, as the costs savings rely in part on the factory production of multiple units, demonstrating a sufficient pipeline of future production will be a key challenge. It’s widely recognised that the government would need to play a role alongside private sector investors in adopting some of the financial risks.   

Benjamin Rodin is a trainee solicitor at White & Case LLP.

“Any views expressed in this publication are strictly those of the authors and should not be attributed in any way to White & Case LLP.”