Your browser is not supported. Please update it.

20 April 2022

Small Modular Nuclear by 2029 solves nobody’s problems

British engineering behemoth Rolls Royce has said that its small modular nuclear reactors (SMRs) could be up and running by 2029. This will not be soon enough to tackle the west’s twin crises of climate change and energy security, but simply hopes to provide the nuclear industry with a last chance to provide affordable power in the future energy mix.

Speaking this week, the chairman the Rolls Royce-led consortium’s SMR project Paul Stein, said that the reactor’s regulatory process “has been kicked off, and will likely be complete in the middle of 2024.” He added that negotiations had already started with the UK government for an initial commercial scale project with “power on grid by 2029.”

In the buildup to regulatory approval, Rolls Royce will start manufacturing the SMR parts that won’t be subject to change before licensing. The company is aiming to have installed up to 10 SMRs by 2035.

The British government initially awarded the company with £210 million of funding to develop the country’s first SMR, with Rolls Royce holding an 80% stake in the special purpose vehicle created for the venture.

This also comes in the immediate wake of the UK’s new Energy Security Strategy, which outlined a 16 GW expansion in the country’s nuclear generation, as well as another 8 GW of capacity to replace the eight units set to be retired between now and 2035.

But with projected cost of electricity at the hugely delayed Hinkley Point C sitting 75% higher than the UK average, and with the proposals like the 3.2 GW Sizewell C project likely to follow the same fate, there is huge concern that the UK’s plan to address consumers rising electricity bills will do just the opposite.

SMRs, such as those being developed by a Rolls-Royce consortium in the UK, aim to adapt nuclear to modern day markets. Through a standardized, modular approach, each of the 10 plants that Rolls Royce hopes to build in the UK by 2035 will have a capacity of just 440 MW at a capital cost of around £1.8 billion – 12 times cheaper than Sizewell C. The construction phase has been estimated to take just 500 days, with man hour requirements cut by over 40% due to dedicated offsite module manufacture.

The 440 MW size isn’t to be sniffed at – it will still be able to power a city with a population of nearly one million, and the 7 GW that the aggregated 16 plants could bring to the UK’s electricity mix would equate to nearly 20% of current demand, along with substantial heat production. These sites are also expected to be on the ground of retired nuclear sites – occupying the footprint of just ten football pitches – where security infrastructure and planning permissions are already in place.

The only project-specific elements of each SMR are related to site geology and geography, which are largely accounted for by the use of a foundation slab with a seismic bearing pad to prevent damage from seismic or thermal loading. Support from the UK government in alleviating speedbumps in UK regulations and supply chain has led manufacturers to expect operational power stations to be built as early as 2029.

At a reduced size, the first of these projects is likely to have a levelized cost of electricity (LCOE) generated at under £75 per MWh, falling below £65 per MWh due to economies of scale after the installation of the fifth unit. In the medium term, the consortium, which consists of partners including National Nuclear Laboratory and building company Laing O’Rourke, is aiming for a sub-£60 per MWh LCOE.

Rolls Royce’s SMRs will use similar processes to those at Sizewell B – using a triple-loop pressurized water reactor (PWR). It is slightly different to other SMRs being developed in the global market in that rather than focusing on new nuclear technology, it will “productize” a nuclear power station – with emphasis on the “station.” This entails producing a single design which can be produced repeatedly with only minor modification – imagine a high-tech Lego set for nuclear power. This would effectively design out costs and risks associated with traditional project-based approaches. With each component small enough to be standardized, modules can be mass-produced at a factory before being transported and assembled on site.

Compatibility with renewables is another point that SMR developers are keen to promote. At times of sufficient wind or solar electricity, their energy would be used to make hydrogen or synthetic aviation fuel.

For the UK, investment in Rolls Royce is sentimental. It hopes to revive of the ‘Best-of-British-Heritage’ for Rolls Royce, which was founded in 1904, with aero-engineer Henry Royce chumming it up with carmaker Charles Rolls. Having played an instrumental role in WWII, the company sits alongside Fish and Chips in British pedigree.

But the company is struggling. While Rolls Royce’s expertise in turbine technology allowed it to hold a position at the top of the tree in power systems and aviation on an international scale, with climate pressure rising, the outlook of both technologies is uncertain at best. The company’s stock price has fallen by nearly 80% since its peak in 2014, with most of the dip coming before Covid-19 crushed its aviation business.

Rolls Royce claims that it will put 6,000 to work within five years, if the government continues to support its SMR proposition, with as many as 40,000 more to follow in subsequent years.

It also speaks to a post-Brexit export opportunity, both for technology and for the electricity produced. Rolls Royce has anticipated that the global SMR market will reach £250 billion in coming decades, and with the UK hoping to lead the energy transition, there will be a vast export market for any low carbon technology as other countries play catch up. The consortium has signed agreements with the US company Exelon Generation and the Czech power company CEZ to consider the reactors. Rolls Royce has also previously stated that 90% of an individual Rolls-Royce SMR power plant will be built in factory conditions and 80% of its content can be delivered by a UK supply chain.

But whether nuclear can provide the solution to Rolls Royce’s terminal decline is another question. Rolls Royce has enough challenges – its core business of aircraft engines is on a 15 year lurch into hydrogen powered craft, via a detour into SAF sustainable fuels, so it does not have money to waste keeping a new cash hungry nuclear plan upright on its own – it is right to seek outside investors, and it says that it will continue to seek more investment – we would bet from US sources – but we think it would be better from European, Korean or Japanese sources and to go public as soon as it can.

The company is in competition with over 70 competitors who are also aiming to pioneer the SMR space, including America’s NuScale and Russia’s Rosatom, which anticipate their commercial SMRs could come online from 2025 – ahead of Rolls Royce’s timeframe. GE Hitachi Nuclear Energy has also recently entered a licensing process with the Nuclear Regulatory Commission in the US for its BWRX-300 SMR design. Starting with a safety analysis, this is currently leading the race to cross the licensing milestone. According to the IAEA, four SMRs are currently under construction in Argentina, China, and Russia.

Rolls Royce must also compete with the plummeting costs of renewable energy and battery storage. At £65 per MWh, SMRs will almost certainly be the expensive option, chosen solely due to their reliability in providing 24/7 electricity. But margins will be tight and bringing in enough profit to drive share prices back up to their historic highs seems unlikely.

The 7 GW scale of Rolls Royce’s UK plans could theoretically generate annual revenues from electricity sales in excess of £3.6 billion, before expanding into other markets. Obviously, this would be divided up between other stakeholders, or even sold on to developers, but with forecast internal rate of returns of between 8% and 18%, the consortium could benefit to the tune of nearly £6 billion.

SMRs must also compete with the ease of deployment seen within the renewable energy sector. While a two-year lead time is significantly better than what we’re used to in the nuclear sector, it is still quicker to develop a wind or solar farm of the same size. If we’re going to have to wait until 2029 to see the first generation SMRs, renewables will have an even wider competitive advantage.

SMRs will have no role in achieving the sharp cuts in emissions needed by the UK, nor any other country, by 2030. Nor will it help wean countries off Russian oil and gas or reduce electricity bills.

Nuclear’s share in the world’s electricity production fell from 17.5% in 1996 to 10.1% in 2020. It’s only hope for revival – through SMRs or not – is a result of government inaction in building out renewable energy capacity and the factories required to build renewable technologies at scale.

SMRs provide a hedge for governments racing to decarbonize their energy supply in the instance that they’ve left their renewable energy expansion too late. Kept alive by subsidies, the future of nuclear will depend on the depths of taxpayer pockets.