Podcast transcript: How nuclear generation will play a part in a greener economy
32 min approx | 31 March 2021
Hello, and welcome to The 10 Point Pod, a special podcast boxset from Energy Voice Out Loud in which we assess point by point the UK Government’s plan for a green industrial revolution. We’re drawing this together with expertise from our sponsors for this series, EY, and leaders from across the energy industry.
My name is Ed Reed. I’m an editor at Energy Voice where we are leading the global energy conversation. I’m delighted to be joined for this conversation by my co-host, Chris Lewis, UK Infrastructure Leader at EY, and special guest, Anne Falchi, Programme Manager at EDF Energy Sizewell C.
The UK Government has committed to achieving net zero by 2050. Well, renewable energy generation fluctuates as the sun shines or the wind blows. One power source shows remarkably little fluctuation, and that is nuclear. The world’s first full-scale nuclear powerplant was opened in the UK in 1956, and since then, popular opinion has fluctuated, but nuclear generation hasn’t.
That said, the UK’s current nuclear plants are coming to the end of their operating lives, and there are questions about what comes next. The 10 Point Plan puts nuclear at Point 3 on its list, and the Government has committed to supporting new large- and small-scale nuclear projects, although caveating this with references to value for money. Nuclear has often been criticised as being too expensive, although I’m sure Anne may disagree.
Looking ahead, Hinkley Point C is due to come online in the mid-2020s, and the new generation of modular reactors may come in the early 2030s. Taking the opposite tack is Germany, where the Government has recently agreed to pay their power producers around $3 billion to shut off nuclear powerplants. So it’s a tough decision to take when considering those net zero ambitions.
Nuclear doesn’t seem to have the same buzz around it that some of the other net zero sectors do. So I suppose the first question for you, Anne, is, what part does nuclear have to play in the UK’s green economy plans? Should it even count as green?
So thank you for the opportunity. So the first thing is I would say at the moment the largest source of low-carbon generation in the UK is still nuclear, like 20%, whatever the weather, as you mentioned. So it is today playing an active role to meet net zero. It is already there at scale. So, yes, it is fundamental for reaching the net zero target, and, I think, for two reasons, as we move forward.
The first one is for the scaling issue. You can put almost all the solar you can, all the electric vehicles on the street, all the offshore wind in the North Seabed, it’s not going to be enough to generate low-carbon energy for both electricity and heat. The scaling issue makes nuclear well-suited, because one of the beauties of nuclear is that it’s very powerful. This is also the challenge, because it’s so condensated in terms of energy. But it doesn’t require a lot of land. So with a small footprint, you can actually produce a lot of energy.
So scaling is key, and nuclear can contribute to that. And, actually, if you look in the history, who has managed to increase their low-carbon generation at the scale we need? It wasn’t Germany with the Energiewende, it wasn’t even Spain or UK even with the high rocket numbers we can see now in terms of offshore coming online. It was actually Sweden and France, with nuclear. And that was done 30 years ago. So I think the scaling issue means that we need nuclear, and that’s true in the UK, that’s true worldwide, actually.
The second point is security of supply, and you’ve mentioned that. But operating a system with things that can go off and on in a second or in a minute, like solar panel, at the smallest level, you have a cloud coming on your solar panel, and you stop producing. And if you stop producing, first, you don’t have electricity, but it’s very disturbing for the system. And if you imagine running, operating a system at the scale of the UK, with only things that can go off and on in a second, it is very challenging.
So what nuclear offers is actually some inertia in the system. The inertia, it’s a bit techy, but if you think about when you are riding a bicycle, sometimes you have enough energy, you put your foot out of the pedals, and, actually, the bicycles continue to run. And that’s what nuclear is doing. That’s what inertia is about.
And so it means that if at some point you have a decrease in your generation, or an increase in your demand, your inertia provides that time to react. So on the security of supply, on the quality of electricity, nuclear is also key, because it provides this stability the system needs. So for these two reasons, low-carbon electricity at scale and making sure that our system in the future is still at the same standard of quality as it is today, I think the nuclear has a role to play.
Chris, what do you think? Looking at the buzz around green technologies, do you see a way for nuclear to capture some of that zeitgeist?
Yes, absolutely. Nuclear doesn’t emit much carbon. That’s the key to it. And, as Anne said, by being always available, it plays a key role in the system. And that means that the system as a whole will get power with no carbon emissions. And when you look at what nuclear will replace in the system today, it’s still fossil fuels, it’s still gas. Today I had a look at where our power’s coming today. 42% is coming from gas still. So nuclear and other renewables, and wind and solar, the purpose is to get fossil fuels out of the system so we don’t rely on them.
And I suppose, looking at that question about what space there is for nuclear, what does nuclear compete with? Is it those classic hydrocarbon feedstocks, coal, gas? And is there some way perhaps that it can be seen as a complement to renewables, Anne?
Absolutely. I think it’s certainly a complement, and I think it’s a complement that’s the renewables are not keen to talk about at the moment. But it has the right qualities for that, because it’s there all the time, and it’s providing inertia, as we discussed before. So it’s a complement, it’s not a competition, because of the scale.
This said, another thing that nuclear can do... You were talking about, yes, we are not as trendy as wind or solar. People don’t want us in their club. Are you renewable or not, are you green or not? They don’t want nuclear in the club, basically. But nuclear can also be... I think it’s a key piece in the puzzle. So if you think about the things that you need to complement the wind and solar intermittency, what you need is flexibility.
So you need this kind of inertia, but, also, you need this flexibility. How on earth are you compensating, like grey days, as we have sometimes in the UK, or days without wind? And everything is about storage, all forms of storage. But if all the vehicles were electric, they would only provide one day of the UK demand. If all the vehicles were electric, that’s one day of UK demand. So you can’t go far.
Then you’ve got what is trendy today, hydrogen. And the wind industry is also key in promoting hydrogen. You take water, and you make hydrogen with clean electricity. That’s wonderful. And hydrogen, you can store it. It’s quite easy to store. So that’s fantastic.
Actually, hydrogen, it’s a chemical process. It’s like nuclear, it’s like big processes, it’s boring, but it wants stability. So producing hydrogen, that works fantastically well with nuclear. They work hand in hand. Nuclear can provide electricity for hydrogen, and then you can store the hydrogen and you can compensate where the wind is not blowing. So it is a complement to the renewables. It’s not in competition. Yes, it’s really a complement.
But thinking you can go all the way to net zero without nuclear is actually... it’s a complacency, and it’s allowing for gas roaming around in the system for longer, in my view.
Yes, and I think we need to build a system that can both power the demand we’ve got at the moment. We’re also, looking at powering more the transport we’ve got. We’re also looking at powering heat. So in order to get rid of carbon emissions, there’s quite a lot more power demand that’s going to come in. clearly, any new power generation capacity we need to put in needs to not emit carbon, and that’s why I think nuclear is part of a system.
I think people often compare the cost of nuclear to the cost of offshore wind. And offshore wind, as we said, is intermittent. So maybe when we get to a state when there is no gas left in the system, we’ll be comparing always-available nuclear to the cost of wind and solar plus storage. But at the moment, the power that we generate from nuclear and from offshore wind at the moment, this is displacing gas and coal out of the system.
I’m glad that you brought up that question of cost, because, obviously, this is front-and-centre, I suppose, of much of the discussion around energy choices, I suppose, and particular nuclear. And it is one of the areas that nuclear seems to get a lot of flak about.
Obviously, in looking at the way in which, say, the prices for offshore wind have come down, and those sorts of new energy sources, which, as mentioned, have got a bit more trendy buzz about them, given that, do you think that nuclear can put a cost-competitive foot forward? And, I suppose, in addition, is there a way to control costs or ensure that costs are low enough to be competitive and not, I suppose, impinge on safety, which I think is obviously one of the key concerns around nuclear use?
So I’ll start with what we have at the moment. What we have today is a nuclear fleet in the UK, but that’s also true in France or in other countries, an existing nuclear fleet that provides electricity, which is the cheapest form of low-carbon generation today. This is what it is. I think we need to be careful about, as Chris is starting to explain, what do we mean by cost?
So it’s true, I can’t avoid that, I suspect, is that the track record of the nuclear industry recently to build new stations on cost and schedule hasn’t been fantastic. But it hasn’t always been the case, and it’s just a matter of learning how to do these things again.
So, collectively, we’ve lost these skills. We haven’t built nuclear stations for a long while. We are not performing that well in any major infrastructure project at all, in fact. So there is a skill to rebuild here. But this is possible. And I’m using the offshore wind as a benchmark. So when we signed the HPC CfD price, HPC price was actually cheaper than the offshore industry. So we need to have in mind that if you think about the cost today, actually, the average cost of nuclear is still way below the average cost of offshore wind, of what is there today. No doubt about that.
So we are on a journey, and we think...the industry needs to perform and to learn back and to deliver the cost reduction that the other industries have delivered. We can’t just say, oh, we have to be there. We can’t be complacent with that. I think the challenge there, we have to tackle it.
But if you think about the cost, I would mention two things. One is, as Chris has said, is really to be careful to compare apples with apples. So nuclear is providing electricity all the time, not only when the wind is blowing. So you need to compare this type of electricity with what you would request on top of wind and solar to make the system as the same quality. So that’s the first point.
The second point is how are we going to deliver this cost reduction? And, largely, I think it’s about the financing costs. So if you think about what is the cost of a nuclear station, a third is about the capital expenditure and other costs, and, actually, two-thirds is about the financing cost. So it is about making sure that the financial market is confident in the industry. And if you deliver that, then you’ve got ways to really dramatically change the scale of cost reduction you can achieve.
Yes, I was going to say that, Anne. As powerplants, they are some of the cheapest to run. It’s the high capital cost to build the plant. And the challenge you see there is the way in which we’ve been financing. So I think just changing the financing structure and accessing a lower rate of return for the investors in the 3% to 5% range will lower the cost significantly, and we can get down to the £60/MWh target that the Government’s got as part of its affordable energy system.
And so I think one of the points about the ten-point plan that the Government set out has obviously been that question about the economy and employment. And, obviously, there’s one of those big questions around offshore wind, for instance, and the level of construction that takes place within the UK and the amount to which that is imported. Anne, how does the nuclear industry compare in terms of UK content versus imported knowledge, materials, that sort of thing?
So I think the nuclear actually is doing quite well on that topic. So if you think about the Hinkley Point C, which is built at the moment, the UK content, so out of every pound we spend, EDF spends, 65% of that stays in the UK and creates jobs. And for the nuclear industry, it is really important.
So, first, for Sizewell C, we will increase that to more than 70%, so out of every pound paid, 70% will stay in the UK and create jobs. And it is part of the value for money for me. What are we offering to the UK? We are offering low-carbon generation but fair and in a system that works for everybody, where we are offering long-time careers, so long-time jobs. We are offering training for young people. We are making sure that the jobs are not only in the London offices but in Wales, in all parts of regions.
And it’s always been in the DNA of the nuclear industry. Today we have nuclear stations in all parts of the countries, and we are part of local communities. We are in the landscape for a hundred years. This is what we are talking about. So we are here to stay. And helping the communities to develop and thrive and actually enabling the UK economy to become fairer and to have a fair net transition, for us, it’s really key.
Fantastic. Well, listen, I think we’re going to take a short break there, but then we’re going to come back, and we’re going to look a little bit more at the future. And, obviously, the Government has talked about modular reactors, and I think that might have an impact on some of those cost discussions. So I think we’re going to take a pause, and we’ll come back.
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So welcome back. And just to pick up on that question about the future and what the future looks like, obviously, there are a number of ways in which people see the nuclear industry continuing to evolve. Chris, what do you think? What does the future hold for us? People throw around terms like thorium or molten salt. What do you think? What have you got your eye on?
I think there are lots of potential interesting new types of technologies in nuclear. The main point to note is there is a very tight regulation around the nuclear industry that actually makes the pace of innovation very slow. And from a cost-effective point, to provide power, actually, the ideal is to build the same thing again and again and again that is a repeatable, proven technology. And that’s where we are, and that’s where you see the experiences from many other programmes, like the Koreans, the big economies of scale by building the same thing again and again.
So I think that’s the core part of where we are with the large reactors. However, there is a whole series of interesting technologies out there, as you mentioned thorium, molten salt, both for smaller versions of the large reactors that we’ve got, that can be built more like a car on a production line, as well as different types of technology that actually offer different benefits as well.
So we are going to see, I think, a lot of innovation in the nuclear space, but don’t expect it to happen at the pace that it would happen in other industries, because just going through a process to get the design approved that you can go and build something is a process that takes three to five years and is very complex in and of itself.
Sure. Anne, what do you think? Obviously, you’ve got a particular model in mind for Sizewell, but is there any new technology that you’re thinking about?
So as a developer, we are, of course, building the current station, so Hinkley Point, HPC, Hinkley Point. And we intend to, as Chris has said, to make the most of it and to also build a little sister for Hinkley Point, which will be Sizewell C. But we also recognise that there are new models, there are new designs that are worth exploring, and we are doing that.
I think what is key to that and what Hinkley Point and Sizewell C are doing is providing a baseline for these new models to emerge, and with baseline, I mean the skills, the competencies, the jobs that would enable the further reactors to be built.
And, as Chris was saying, these things are not happening in a night, so you need to think carefully, you need to prepare that. But these projects, at the moment, they are changing the landscape of some part of the UK. They are providing tens of thousands of jobs. They are providing learning opportunities. We have a lot of apprenticeships. And this is the foundation of which the other projects can actually build.
And this is creating a competitive advantage, I think, for the UK. You are starting with what you know, and you can then have a flow of projects where the UK can, why not, export that to the wider world and become a leader on these technologies. But for that to happen, what really is fundamental is to have a foundation. You need to have a robust foundation.
And so in terms of building that foundation, let’s take this back to you, Chris, in terms of building that foundation, what do you think the Government…I suppose that’s what it comes down to, isn’t it, is it a question of the Government? Is it a question of private capital? What is making it possible? And what needs to change?
I think we’ve seen through this ten-point plan some really good confirmation of some of the things we need. So, as Anne said, I think, earlier, we’ve got about 20% of the power today that comes from nuclear. We need to at least replace that 20%. And so what we really needed was certainty that when the Government designed out the net zero system, they saw a need for a certain amount of nuclear power demand. And that is clearly stated.
And I think what the Government have done is said we want more large-scale reactors that we’ve got, similar to Hinkley Point C, at Sizewell C, but we also want to create space, up to 9GW, say, which is available for some of these small modular reactors and advanced reactor types, so that in the future power mix we can both have large plants, and we can lead development and rollout of smaller modular plants.
Now, they’re going to take time. It’s going to be 2030 or later by the time that we get some of those other plants onto the system. So I think the Government have done very well in saying, we want nuclear power in the system, we want the large plant, and we want small plant.
Now I think there’s a challenge for the industry. So the first challenge to overcome is this one of how do we get affordable finance in to make the power affordable. If the finance is a lot cheaper, if it comes from international and large pension funds and there’s long-term money, the price to consumers will come down. As Anne said, it could come down by half just by making that change. So that’s the first challenge, how do we attract those international finance entities into these projects like Sizewell C.
And I think the second challenge is how do you create a roadmap and a path for the small modular reactors, for the advanced reactors in terms of the development? And what the Government has done is made some funding available for some of those new types of technologies.
I think the challenge now is for industry, innovators, a lot of these new companies that you see emerging, for them to prove that they can make the technology work, that they can fit it into the system and they can play a key role. And in order to do that, they’re going to have to prove they’ve got a design that they can get through a design assessment, the regulatory challenges ahead of them.
And, Anne, I suppose, obviously, you’ve got an international presence, do you think that the UK Government is being sufficiently attractive, I suppose, to ensure those long-term investments, obviously, the step after Hinkley Point and Sizewell? Is there enough of a draw to come to the UK?
I think so, depending on the right policies are in place. I think what the Government has recognised before any other government is that there wasn’t the market for low-carbon electricity, and it has created great policies with the CfDs to tackle that. And now you have a policy framework in place which has worked perfectly for both the offshore but also for Hinkley Point with the CfD framework. And that was fantastic.
The challenge with the nuclear industry is that it’s a very large project. You need to put a lot of capital upfront. And so I suspect where the challenge comes is that to attract private investors, they can’t wait for the ten years’ construction. That’s the challenge we are facing now.
And so in order for them to come and play their role and take the part of the limited risks, they need to have a framework in place that would work for them too, which is what the Government is considering with the RAB model. It is exactly that. So I think first movers, UK is still on the frontline, is on the frontline, in terms of policymaking, efficient policymaking. So that’s very attractive. Very robust regulator, so it’s very attractive also for developers to be assessed by the UK regulator. A lot of value, consistency in decision-making process. So it’s all very, very well.
And what is very important for the nuclear industry is continuity, which I think is provided again by The White Paper the Government has issued is providing this kind of long-term view and the stability, the continuity, that the nuclear industry needs to make sure it stays there, it improves, and it tackles its challenges.
I suppose, in terms of that question, an international technology flowing and money flowing and things like that, I suppose the critical thing is clearly the extent to which the UK can both learn and export technology and key learnings to other parts of the world. Chris, do you think that we’re ready for that sort of an environment?
Yes, I think the nuclear power is already an international market. I think it’s going to become a lot more international with some of these new technologies. And we’ve got a lot of great things going for us in the UK. So, obviously, we developed the first power station, we’ve also got a fantastic regulatory environment, and we’ve also got good support services around the development and build and design.
I think, increasingly, as well, you’re going to look at these new technologies are going to be more and more the collaborations of different companies coming together and building standardised design. So, yes, it’s going to become more of an international market, and the UK’s got a lot to offer.
Fantastic. Well, listen, thank you so much to both of you, Chris and Anne. I think there’s been some really great points and a really great discussion. I suppose the point that really stands out to me as being, I think, possibly the most important is that question of cost and that question of finance. And, obviously, how to finance those next projects and where that money comes from seems to be really crucial in terms of making it affordable.
And I suppose that links into that, that question that we started with about how nuclear makes its place in a world that sometimes seems a bit sceptical about it as a technology. And to our listeners, please let us know your thoughts on nuclear through our social media channels, or you can email us at firstname.lastname@example.org. And if you want to be part of the conversation and share your story with the energy industry, you can also email email@example.com.
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We’re going to be digging into the rest of The 10 Point Plan over the rest of this year, leading up to COP26. So please look out for those. But for this, the third episode of The 10 Point Pod, I’ve been Ed Reed. Thank you for listening.
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