The Sizewell A and B nuclear power stations, operated by Electricite de France SA (EDF), in Sizewell, UK, on Friday, Jan. 26, 2024. Photographer: Chris Ratcliffe/Bloomberg via Getty Images Bloomberg | Bloomberg | Getty Images
The U.K. was the birthplace of commercial nuclear energy, but now generates just a fraction of its power from it — big investments are underway to change that. The country once had more nuclear power stations than the U.S., USSR and France — combined. It was a global producer until 1970 but hasn't completed a new reactor since Sizewell B in 1995. Today, the country takes the crown not for being a leader in atomic energy, but for being the most expensive place in the world to build nuclear projects. Nuclear energy accounted for just 14% of the U.K.'s power supply in 2023, according to the most recent data from the International Energy Agency, trailing its European peers and well behind frontrunner France at 65%. There is ambition to change that and have a quarter of the U.K.'s power come from nuclear by 2050. Nuclear is considered an attractive bet gas it's a low-carbon, constant energy source that can act as a baseload to complement intermittent sources like renewables. "There's a very clear momentum that has been observed," Doreen Abeysundra, founder of consultancy Fresco Cleantech, told CNBC. It's in part due to geopolitical tensions, which pushed energy security and independence onto public agendas. However, the U.K.'s Nuclear Regulatory Taskforce called for urgent reforms after identifying "systemic failures" in the country's nuclear framework. It found that fragmented regulation, flawed legislation and weak incentives led the U.K. to fall behind as a nuclear powerhouse. The government committed to implementing the taskforce's guidance and is expected to present a plan to do so within three months.
Going big – or small
The U.K. is spreading its bets across tried-and-tested large nuclear projects and smaller, next-generation reactors known as small module reactors (SMRs). British company Rolls-Royce has been selected as the country's preferred partner for SMRs, which are effectively containerized nuclear reactors designed to be manufactured in a factory. Many include passive cooling techniques, which supporters argue makes them safer and cheaper. Nuclear has long come under fire by environmentalists due to radioactive waste and disasters like Chernobyl. Indeed, the U.K.'s first commercial plant Windscale became its worst nuclear accident in history when it melted down in 1957.
On October 10, 1957, Windscale became the site of the worst nuclear accident in British history, and the worst in the world until Three Mile Island 22 years later. A facility had been built there to produce plutonium, but when the US successfully designed a nuclear bomb that used tritium, the facility was used to produce it for the UK. However, this required running the reactor at a higher temperature than its design could sustain, and it eventually caught fire. Operators at first worried that e Photo: George Freston | Hulton Archive | Getty Images
Most SMRs use light water reactor technology – think of the planned large-scale nuclear plant Sizewell C, just "shrunk down," said Abeysundra – which is tried and tested. Other designs, known as "advanced" reactors, are more experimental. For example, those that change the cooling solution or solvent, which is typically used in the process of separating and purifying nuclear materials. The U.K.'s first SMR will be at Wylfa, in Wales, though no timeline has been given for its completion. The site will house three SMRs and grow over time. In September, the country signed a deal with the U.S. to enable stronger commercial ties on nuclear power and streamline licensing for firms that want to build on the opposite side of the Atlantic. However, "the first thing is, there is not, at the moment, a single SMR actively producing electricity under four revenues. They will all come at best in the 30s," Ludovico Cappelli, portfolio manager of Listed Infrastructure at Van Lanschot Kempen, told CNBC. While SMRs are a "game changer" thanks to their ability to power individual factories or small towns, their days of commercial operation are too far away, he said. From an investment standpoint, "that is still a bit scary," he added. To secure the large baseloads needed to offset the intermittency of renewables, "we're still looking at big power stations," added Paul Jackson, Invesco's EMEA global market strategist.
Zoom In Icon Arrows pointing outwards Nuclear share of total electricity (2023) IEA
SMRs "probably" do have a role — "they can clearly be more nimble" — but it will take time to roll them out, Jackson said, casting doubt on the U.K.'s ability to be a leader in nuclear, as France and China are already miles ahead. The U.K. government body Great British Energy-Nuclear is set to identify sites for an additional large-scale plant, having already acquired one in Gloucestershire, in the west of England, as well as the site in Wales. "We are reversing a legacy of no new nuclear power being delivered to unlock a golden age of nuclear, securing thousands of good, skilled jobs and billions in investment," a spokesperson for the U.K. government's Department for Energy Security and Net Zero told CNBC. "Sizewell C will deliver clean electricity for the equivalent of six million of today's households for at least six decades, and the UK's first small modular reactors at Wylfa will power the equivalent of three million homes, bringing energy security," they added.
Innovation in funding
The U.K. has a strong legacy to build on. It pioneered fresh funding mechanisms to make large-scale nuclear projects investible so that they are less reliant on direct government funding, such as a Contract for Differences, which was used for Hinkley Point C. The mechanism guarantees a fixed price for the electricity generated over a long period of time in order to de-risk investments in an industry that's known for running over time and budget. Hinkley Point C was initially expected to cost £18 billion (over $24 billion) but the bill has slowly crept up. "That fixes one part of the equation, the price risk," Cappelli said of nuclear investments, but the second risk is construction delays. The Regulated Asset Base (RAB), first used for nuclear at Sizewell C, attempts to reconcile this. Investors get paid from the day they cut a check for a nuclear project, rather than the day it starts operating. Sizewell C is expected to cost £38 billion to build. Private market investors are increasingly interested in next-generation nuclear as a way to offset soaring energy demands from AI, resulting in a host of young companies trying to build out facilities. Perhaps the most famous is Oklo, a U.S. firm that was taken public by a Special Purpose Acquisition Company (SPAC) founded by OpenAI's Sam Altman.
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