Eighth Report - Delivering nuclear power

We conclude that it is reasonable for EDF to seek life extensions to extend their contribution to the grid if, and only if, the Office for Nuclear Regulation’s judgement is that they can be safely operational as is currently the case.

The new Nuclear Strategic Plan, that we recommend, must spell out how the current reactor fleet, through life extensions, will contribute to the Government’s ambition of 24 GW from nuclear by 2050.

Gigawatt-scale nuclear power stations use a known and well understood technology that can deliver dependable low carbon baseload electricity to the grid. Nuclear power is therefore an important option and could be used to produce a domestic supply of baseload power to the UK as part of the low carbon energy mix required to achieve the Government’s goals of increasing energy security and achieving net zero by 2050. However, the question of energy security must engage with the questions of sourcing of fuel and the risks of having a concentration of generating capacity in very large plants, which could be susceptible to outages as a result of technical problems or as a target for malign actors. The Government’s aim to bring up to 24 gigawatts of nuclear-powered electricity to the grid by 2050 is commensurate with its net zero ambitions but currently lacks a comprehensive plan to achieve it. We welcome the Government’s intention of “building a project pipeline” of nuclear projects but agree with industry that the details of this pipeline must be published by Government, if investments in new nuclear are to proceed in time.

Setting a notably stretching target requires a credible pathway towards its delivery. The Government should publish a clear delivery plan, a Nuclear Strategic Plan, for its nuclear project pipeline, backed up by detailed figures of projected energy production from nuclear for the years leading up to 2050, and be developed in collaboration with and engaging the confidence of the whole sector. This Nuclear Strategic Plan should include interim targets for nuclear energy production in 2035, 2040 and 2045.

In his previous role as industry advisor to Great British Nuclear, Simon Bowen produced a report proposing what function and form Great British Nuclear should take. This report was delivered to the Government in September 2022.

The Government should publish the report and recommendations submitted by Simon Bowen, industrial adviser to Great British Nuclear, and his team on the purpose of Great British Nuclear, alongside the Government response to this report.

The 2050 target for nuclear of 24 GW needs a plan to achieve it, which must include clarity on the bodies and institutions that will deliver it. After asking the Department to provide more clarity on what legislation will be required to ensure that Great British Nuclear can operate as intended, we are pleased to see that the Government has tabled amendments to the Energy Bill 2022–23 to include this legislation. Having said this, there are still some points of ambiguity over exactly how Great 100 Delivering nuclear power British Nuclear will function and what activities it will carry out beyond running a small modular reactor competition. We expected further clarity to given in the Government’s launch of GBN in July 2023, but the announcement only included details of the SMR competition and the allocation of funds that had already been announced.

In response to this Report, the Government should set out additional detail on how Government will intersect with Great British Nuclear, including details of Great British Nuclear’s exact remit and funding model, and the formal split of responsibilities with the Department for Energy Security and Net Zero. To aid this, the Government should publish the required secondary legislation that will support the creation of Great British Nuclear. Within this detail, the Government should clearly define what the role for Great British Nuclear will be on supporting new nuclear projects beyond the initial small modular reactors competition, including in relation to gigawatt size projects beyond Sizewell C and deployment of advanced modular reactors when technologically ready.

In its July 2023 announcement on Great British Nuclear, the Government said that it would use the small modular reactor technology selection process (SMR TSP) to identify those reactor companies best able to reach a project Final Investment Decision (FID) by the end of 2029. The FID would include funding to support site access and site-specific design. Therefore, some of the more time-consuming aspects of building new nuclear projects, namely site-specific regulation and relevant licencing, would not begin for any successful SMR design until after 2029. This new timeline would go beyond the dates that many of the SMR developers have proposed is possible for SMR reactors to supply energy to the grid, namely the early 2030s.

The Government should take steps to advance the ability for FIDs to be taken before 2029 and provide a detailed timeline of when it expects the winner or winners of GBN’s SMR technology selection process to begin commercially supplying electricity to the UK.

Gigawatt-scale nuclear power plants require UK experience—of the supply chain, regulatory processes and the wider energy sector—to deliver projects efficiently. However, the UK may benefit in the future from multiple operators of small and advanced, nuclear power technologies as they have the potential to provide market competition, collaboration opportunities and prevent a groupthink mentality.

The Government should provide sufficient resources to nuclear regulators, to support potential new operators of small and advanced modular reactor technologies to enter the UK energy market. (Paragraph 64) Delivering nuclear power 101

The Government should provide clarity on how it plans to achieve its 24 gigawatt aim, and the expected timeline for these. This should include details of: a) the target mix of reactor technologies, including the desired number of future gigawatt scale reactors, that the Government will support; and b) a detailed timeline for when new projects are expected to be completed.

An essential requirement will be to resolve of the questions of whether a standardised fleet of nuclear power plants, using serial versions of the same reactor technology, has the potential to benefit the UK as new knowledge and resources can be transferred from one project to the next, reducing the risk of construction and cost overruns. The inevitable objection that such a strategy embeds the risk that operational issues identified with one power plant could affect the entire fleet can be mitigated be using tried and tested underlying technologies and engineering and careful sequencing of any innovation.

The Government, through Great British Nuclear, must choose between the potential cost benefits of a standardised nuclear fleet of gigawatt reactors and the energy security and resilience that a diversity of reactor designs provides.

The UK is an international market leader in the manufacture of nuclear fuels and is uniquely positioned with the capability of delivering the entire nuclear fuel cycle. The nuclear fuel sector in the UK has the potential to increase enrichment capacity, which can provide security for domestic nuclear fuel supply chain and further export opportunities.

By publishing a detailed Nuclear Strategic Plan, as we recommend, which includes the types and number of reactors to be built in the UK, the Government should provide a signal to the nuclear fuel industry to step up and increased its end-to-end fuel manufacturing capacity. The Government should set out in the Nuclear Strategic Plan how it will capitalise on the strengths of the UK’s nuclear fuel supply chain to secure a resilient supply of nuclear fuel for any new planned reactors and develop further export opportunities. (Paragraph 90) Advanced nuclear technologies

The Government is at a cross-roads in its policy on small modular reactors (SMRs). So far it has funded a consortium led by Rolls-Royce with over £210 million of research and development funds to develop a concept SMR design, and now, to further develop the design to the extent that it can pass the generic design assessment process. That public funding was matched with £280 million from the private sector. It has subsequently announced that Great British Nuclear will launch and administer a competition in which other vendors’ technology would be assessed. What is then required is a set of pivotal decision on the actual deployment of, rather than research into, SMRs.

It is not uncommon, in the face of an unclear strategy or unresolved internal arguments about financing, for governments to defer decisions rather than take them. But this would be the wrong course. The UK risks losing the advantage of 102 Delivering nuclear power the public investment that has already been made; as well as contributing to the ambiguity in our future energy supply; and perpetuating a level of policy risk that is likely to drive a risk premium on costs, to the detriment of the taxpayer and billpayer.

In developing a Nuclear Strategic Plan the Government should answer the questions of: • what deployment of SMRs it wants to see, if any; • what technologies and vendors it intends to deploy, and whether they will be from a single supplier or multiple suppliers; • what sites should SMRs be located at; and • what financial model would be used to support the contribution of SMRs to electricity supply?

From the commissioning of Calder Hall in the 1950s, the UK has always had a strong capability in nuclear research and development. At a time where there is a global commitment to reduce carbon emissions and to reduce dependence on fossil fuels for reasons of energy security, the UK’s capability in new nuclear technologies is a strength.

Whilst investment by Government in early stage and demonstrator reactors will drive forward innovation for advanced modular reactors (AMRs), bringing them closer to commercialisation, what is also important is the UK having a regulatory environment and incentives for private investment. This has been demonstrated to work in the UK’s fusion sector, where as well as strong Government funded demonstrator programme, the regulatory system, skills environment and developing supply chain, is attracting private companies and private investment to the UK.

AMRs may offer new advantages in terms of cost and the potential for co-generation. But if they are to advance the research and development needs to move from the desk and the lab towards demonstrators, and this will require the Government to make decisions as to which technologies to fund.

The Government should continue its support for the Advanced Modular Reactor Research, Development and Demonstration programme and ensure that it takes decisions on funding particular technologies and projects without delay, so that it keeps pace with competitors.

The UK is a leading global player in uranium enrichment and nuclear fuel fabrication and has the potential to replace Russia’s contribution to the global supply chain of advanced fuels. We welcome the launch and allocation of funding from the Nuclear Fuel Fund to support the development of the capabilities needed to meet current and future nuclear fuel demands. (Paragraph 128) Delivering nuclear power 103 Fusion

The work of the UK Atomic Energy Authority has resulted in a thriving research and development fusion cluster at the Culham Science Centre in Oxfordshire. As well as operating the world’s leading torus and spherical fusion reactors, the Culham facility benefits from being part of a consortium of 30 fusion research organisations and universities from 25 European countries and has attracted private companies from around the world, many of which plan to build demonstrator reactors at Culham.

Since 2010, the UK public investment into fusion research and development has totalled around £970 million. All such investment of taxpayer funds has alternative uses, whether in science, energy, or other fields. Sceptics of fusion argue, in the much-repeated phrase, that the benefits of fusion are always 20 years away—with the implication that such funds could be better spent elsewhere. It is true that fusion is highly unlikely to make a material contribution to electricity generation by 2050, in the time to contribute to our net zero commitment being met. It is also true that there are many risks, uncertainties, and dependencies—such as the development of materials—that mean that fusion may not in the foreseeable timeframe realise it tantalising potential.

However, in recent months breakthroughs have been made in fusion research, including doubling of the record for power generated in a tokamak; there is a growing number of private fusion companies clustered in Culham and the UK is a leading nation in the ITER project.

We believe that it is not the time to abandon our long-standing commitment to fusion, just at the point when it is giving cause for optimism; when the zero- carbon imperative is strong; when we have an internationally admired and well- run organisation in the UK Atomic Energy Authority, and when positive spill-over effects are being felt from the research.

To maximise the benefits that we gain from investment in fusion requires a long-term approach to give confidence and stability to investors and international partners and so we recommend that fusion is a part of the Government’s long-term energy plan. (Paragraph 146) Nuclear skills gap

It is not surprising that the nuclear sector has not been the industry of choice for many STEM specialists embarking on a career. At a time when no new nuclear plants had been approved for decades, this was a sector thought by some not to be one with a bright future in which to contemplate a lifetime career specialisation.

However, if the Government and the nuclear industry credibly adopt a stable, long term plan of growing the nuclear sector, there are very significant attractions to recruitment: new build and new technologies involve innovation and technical 104 Delivering nuclear power advances; the timescales of nuclear commitments offers the prospect of enduring careers; the global revival of nuclear power offers international opportunities; and financial rewards are likely to remain high.

As part of a strategic approach to nuclear, the Government and the industry should set out steps deliberately to communicate to school-leavers, graduates and to those changing careers, the particular advantages of choosing to work in the nuclear industry.

It is highly desirable that, in expanding employment in the sector, opportunities should continue to be broadened to people from sectors other than nuclear. Apart from the wider pool of talent available, it is important there should be flows into and out of the nuclear industry from other industries. The risk for any industry that is too insulated from others is that it can be insular and impervious to different ways of thinking that are practiced in other industries. At a time of such rapid technological change and innovation, it is important that the nuclear industry participates in this movement, and avoids the degrees of groupthink in which a relatively small number of people move between a relatively small number of organisations within the same sector.

As a matter of strategic planning, the Government and the sector should, at a time of expansion, deliberately increase the permeability of the sector to other commercial, engineering and scientific sectors.

We were impressed by the obviously effective working relationship between the National College for Nuclear and the Hinkley Point C Project. In this case, the training provided, and the apprenticeships offered, are clearly tied to a specific employer and site. We were concerned that there was a lack of clarity on who should fund the development of the curriculum and teaching materials for courses mounted exclusively to serve the needs of a particular employer. The Government and the Nuclear Skills Strategic Groups should develop a clear protocol on this. Should further nuclear new build proceed, with multiple organisations in the developer and in the supply chain requiring apprenticeships, there must be no delay in developing courses arising from ambiguity on who pays for that development.

In line with Sir Paul Nurse’s recommendations for greater flexibility on pay with conditions for Public Sector Research Establishments, we recommend that a consistent set of pay flexibilities should be applied to public bodies in the sector with financial discipline applied through the overall budgets for bodies. (Paragraph 185) Financing

Gigawatt-scale nuclear projects cost tens of billions of pounds to plan and construct before a single unit of electricity is generated. Their long period of construction, complexity, and subordination to potentially variable regulatory standards have been associated with large cost-over runs and delays. For all of these reasons, and more, the financing of gigawatt-scale new nuclear power has proved formidably challenging. Most civil nuclear nations have built new nuclear power stations on the public sector balance sheet, as did the UK for all of its existing nuclear power stations. Hinkley Point C has been financed off the Government balance sheet by Delivering nuclear power 105 the French Government-owned utility EDF and Chinese CGN. Its construction is proceeding in return for a 35 year Contract for Difference (CfD) fixed at £92.50/ MWh in 2012 prices. The conceived cost of construction has increased from £18 billion at the time of the final investment decision to £32 Billion in 2023 and its completion date is now forecast to be 2027, around two years after EDF’s estimate at the time of Final Investment Decision (FID). It is important to note that the estimates of that cost overrun as result of the CfD model are not to be met by UK consumer or taxpayer, but by the companies. The CfD runs for 35 years from start- up during the 2025–2029 period. If the plant is not generating electricity by 2029 then the contract would be shortened by one year up until 2033 after which the contract will be cancelled and EDF will not receive any top-up revenues from the CfD.

Given the demonstrated unwillingness of private investors to take on all of the construction risk of gigawatt scale nuclear plants through the CfD model, it is inevitable that a public-private risk sharing model should be contemplated if new gigawatt-scale plants are to be constructed. The Regulated Asset Base (RAB) model— which has been given Royal Assent in the Nuclear Energy (Financing) Act is one such. However, the model entails significant uncertainties and downsides. Chief among these is that although the financing of a plant should be cheaper in headline terms than a model in which the private sector shoulders all construction risk, the extent to which this represents value for money depends on the financial value of the construction risk being absorbed by the public balance sheet. The consumer or taxpayer is taking an unknown and uncertain risk of cost overruns, yet disburses funds from day one without earning a return.

The Government should show how this offers value for money to taxpayers and should be open to other alternative partnerships between the public and private sectors as practised in other countries (including those set out in Table 2). The choice to proceed with gigawatt-scale nuclear power should not be made without robust estimates of its value for money, including the financial value of the construction risk being assumed by taxpayers or billpayers. A headline lower cost than Hinkley Point C is not justified if the value of the risk is too great. This is true even if it forces a conclusion that—for all its other advantages—gigawatt scale new nuclear is not financeable on defensible terms, and that the UK’s nuclear ambition would need to be pursued through other nuclear technologies.

So far, the Government has not published financial figures which allow the cost of this risk transfer to be known. The Government must publish figures, before signing contracts for new gigawatt-scale nuclear, which allow a proper assessment of value for money to be made, including setting out the level and potential cost of construction risk to be borne by the consumer or taxpayer.

It may be the case that the size of capital outlay means that private investors will not repeat a CfD contract for new nuclear, whatever the price. But the lack of alternative choices should not mean that any terms will be acceptable for a RAB financed plant. The Government should make, and disclose, its best estimate of the value of the risk that would be taken on by the public, and a clear plan of how those risks can be managed through incentives during the development, construction and operational phase of the project’s lifetime. (Paragraph 220) 106 Delivering nuclear power

The Government should publish details of how the estimated savings from using the RAB model for funding Sizewell C were calculated, and provide clarity for the funding structure, by publishing the Heads of Terms for the agreed RAB funding model for that project.

This is an important moment for the future of small modular reactors (SMRs) as we set out in Chapter 3. Following the £500 million Government and investor funded development of an SMR concept through to the beginning stages of regulatory approval. Clarity is needed on the Government’s plans to deploy the technology if it completes the generic design assessment. This includes deciding on what financing model will be made available should the policy be to deploy SMRs in supplying power to the grid. The Contracts for Difference (CfD) model has proved successful in financing and driving down the costs of clean energy. Key to the success of CfDs for renewables to date has been competition between potential operators which has driven down the price paid for electricity generation.

If a single supplier of SMRs were to be available, either through Government choice or following the Generic Design Assessment process, the CfD auction model will not be suitable. As part of a clear and specific strategy for SMRs, the Government should come to a view quickly on what financial model would be available for the initial deployment and communicate this clearly to developers.

We welcome the proposed inclusion of nuclear energy generation in the UK Green Taxonomy as it reflects the low-carbon contribution of nuclear power and may make new building projects more attractive to private investors as with other low-carbon energy generators.

The Government should conduct and publish the results of its consultation quickly, and during this time review nuclear energy’s access to the Green Financing Framework with a view to ensuring consistency and addressing the contradiction between the two. (Paragraph 235) Regulation and location

The Office for Nuclear Regulation (ONR) Generic Design Assessment’s (GDA) goal- based approach is well regarded internationally and is intended to be adaptable for any new technology. We welcome the work that the ONR has done to modify the GDA to allow more flexibility for new reactor designs that seek to enter the UK market.

Some witnesses are concerned that the GDA has capacity constraints and is a lengthy and expensive process given that there are no site-specific guarantees afterwards. Whilst acknowledging the need for UK sovereignty over regulations, witnesses pointed out the considerable overlap of the technical approval process for new reactors between established nuclear nations.

The Government should consider how it could reduce the GDA application timelines and the required resources through international collaborations between regulators, and should provide access to pre-engagement for new nuclear developers prior to Delivering nuclear power 107 entering the GDA. The ONR should examine ways to recognize, in whole or part, safety approvals for mature reactor designs granted by partner countries with similarly high standards to capitalise on work previously done.

The Government should ensure as part of a specific and detailed nuclear strategy that the ONR, the Environment Agency and Natural Resources Wales have the necessary resources to process applications from the growing range and number of applicants in a reasonable timeframe.

Whilst the ONR has recently adapted the GDA to be more suitable for small modular reactor (SMR) technologies, to date no SMR design has completed the entire three step process. The ONR should reflect, both during and after the first SMR has completed the GDA, on the lessons to be learned on efficiency and applying appropriate safety cases for these smaller technologies, from other similar bodies, such as the Environment Agency and Health and Safety Executive that regulate Fusion energy facilities.

Although the reputation and integrity of UK nuclear regulation must be maintained, there are opportunities to improve the efficiencies of nuclear regulation by running processes such as the Generic Design Assessment (GDA), and site licencing, in parallel.

The Government should work with regulators, devolved administrations, local authorities, industry leaders, and others to streamline planning and environmental requirements wherever possible. The Office for Nuclear Regulation should look for opportunities to run the Development Consent Orders and the GDA in parallel for experienced vendors who have already successfully completed the GDA with other reactor designs or who have reactor technology that has been approved by other regulators.

Given that the Minister envisaged a three-year timeline to develop, consult upon, and designate a new nuclear National Policy Statement (NPS), and that as of 18 July 2023 the consultation stage had not even started, we are concerned that there may be a creeping delay in updating the NPS for new nuclear. This would not only send the wrong signal to a sector poised for investment but could cause delays in deployment. New nuclear developers require knowledge of where a reactor can be built if they are to advance their plans.

The Government should progress the consultation on the new NPS EN-7 for nuclear power and should meet its previously stated deadline of early 2025, and ideally publish the new NPS earlier than the deadline. Any update should identify where reactors smaller than 1 GW can be sited, as well as sites for larger reactors. (Paragraph 267) Nuclear decommissioning and waste

Decades of mismanagement of nuclear decommissioning in the UK—from inadequate provision for decommissioning costs, to record keeping so negligent as to have left ponds of radioactive waste whose content in unknown—has made the responsibilities of the Nuclear Decommissioning Authority (NDA) some of the most challenging, complex and consequential of any organisation in Britain today. The 108 Delivering nuclear power NDA has made progress in the last five years in simplifying its structure, making more credible estimates of the costs of decommissioning, and replacing complex and opaque subcontractor arrangements with more straightforward ones. The vast annual budget for the NDA—necessarily between £3.5 billion and £4 billion—and the critical importance of its work means that the performance of the NDA must be kept under close review by the Government and Parliament, and that it should have a strong relationship with the Department for Energy Security and Net Zero, the Treasury and the Prime Minister’s office.

The experience and expertise which the NDA has in civil nuclear decommissioning is more than any other country in the world, as a result of the head start the UK has had in being the world’s first civil nuclear nation. As countries who were later in constructing civil nuclear power stations have to turn to safely and economically decommission them, the NDA’s expertise can be deployed globally. This is a tremendous export opportunity for the UK expertise which can raise revenue.

The NDA should establish, with the involvement of government, a long-term plan to expand this international work while monitoring a thorough and dependable service within the UK.

Most of the nuclear waste that the UK must safely handle and dispose of has already been produced by previous nuclear installations. The incremental waste generated by new nuclear power plants is not likely to be a material factor in decisions on approving new gigawatt-scale plants. We note, however, evidence presented to us that indicated that small modular reactors and advanced modular reactors would produce waste which may require different handling.

It is imperative that a clear understanding of the waste consequences of new nuclear technologies, how it will be dealt with and at what cost, should be part of the decision- making on approving the case of these technologies.

Since 2006, Government policy has been to establish a Geological Disposal Facility (GDF) for the long-term storage of nuclear waste. Despite this, Nuclear Waste Services, which is the body responsible for establishing a GDF, is not at the point of having found a community willing to host a GDF or to be able to conduct the detailed geological investigation required to establish a suitable site for a GDF. The timelines and costs for building a GDF are also uncertain.

The first waste is not expected to be placed into a Geological Disposal Facility (GDF) until the 2050s and until then, there is sufficient interim storage for both current and predicted future nuclear waste. The Government should continue work to identify a site for a GDF which will be geologically safe, and which will enjoy the confidence of the local community. Given that interim storage has been used for over 50 years and that waste from new nuclear facilities would be a small addition to the stock of waste held, we do not believe that new nuclear plants should be halted until a GDF facility has been established. (Paragraph 297) Delivering nuclear power 109