State support a fallback option for UK’s mini-nuclear plants rollout

The head of the consortium developing a £30bn fleet of mini nuclear power stations has indicated that it would have to fall back on UK taxpayers to help fund building the first of the new designs if there was not enough interest from investors.

Kwasi Kwarteng, business secretary, confirmed on Tuesday that the government was committing £210m in state funding to a Rolls-Royce-led consortium developing a new generation of small modular reactors (SMRs) as part of a new push into nuclear power to help meet the UK’s net zero target.

The government had previously signalled that it was prepared to sanction up to £2bn of state funding to help kickstart the programme that envisages building at least 16 SMR power stations.

Tom Samson, chief executive of the consortium, told the Financial Times that he had held talks with the government about it potentially “putting in parts of the costs for the first three or four units and then using that as a way to tap private capital”.

Samson declined to comment on the potential size of any further government investment and stressed that although it was an option, the aim was to “go forward at pace with the technology that requires the least government funding”. He added: “It is incumbent on us to take this story to the [capital] markets.”

The first five SMR power plants would cost £2.2bn each, with the price of subsequent units falling to £1.8bn, according to Rolls-Royce. The consortium is looking to build the plants at operational and mothballed nuclear sites in Britain.

The small modular design would allow parts to be built in factories ready for quick assembly at chosen locations, making them much cheaper than traditional large reactors.

One business department official said that the government was likely to support the rollout of small modular reactors but that it was too early to say what precise form this would take: “We could be years off these decisions, which are for future budgets.”

Rolls-Royce has been working on SMR technology since 2015 and secured the initial government backing after raising £195m together with two private investors: US utility Exelon and BNF Resources, an investment vehicle belonging to France’s wealthy Perrodo family.

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Rolls-Royce is also in talks with a potential fourth investor who would commit a further £85m, bringing the total funds available to £490m. 

But Samson admitted that the programme would require longer-term support from ministers. His preferred model is the use of so-called “contracts-for-difference” which have been used to incentivise the development of offshore wind projects.

The government has used CFD auctions to guarantee new wind projects at an agreed price per unit of electricity generated, which the developers can leverage to secure the financing for construction. Households pay a surcharge to help fund CFDs on their energy bills.

“With contracts for differences over the next 12 to 18 months we can secure private capital . . . that will allow us to deploy the initial units,” Samson said.

Some of the UK’s earliest offshore wind projects were guaranteed as much as £150 per megawatt hour generated but developers offered to build schemes for guarantee prices under £40/MWh in the latest contract auction in 2019.

Rolls-Royce estimates that with the support of a CFD the cost of generation for each 470MW power plant would come in at between £50 and £60 per megawatt hour. That equates to about half of the £92.50 that the government guaranteed to pay France’s EDF for power from Hinkley Point C, the 3.2GW full-scale nuclear power plant under construction in Somerset.

But opponents of more nuclear power remain sceptical, arguing that whatever the size of the plant it is still too expensive in comparison to wind and solar.

“The nuclear industry has a long record of overpromising and under delivering. This is just another example,” said Tom Burke, chair of the climate think-tank E3G.


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