Two stories: 1) How SMRs may curb nuclear development and... 2) Why Reform can't cancel UK's renewable energy projects

Two posts in one!

More hype about Small Modular Reactors (SMRs)

The amount of hype about SMR development seems to grow at inverse proportion to the likelihood of real SMR deployment. We are now witnessing a blast of PR about SMRs timed for the visit of Donald Trump to the UK (see HERE). In practice the imaginary SMR surge, which appears mostly in press releases rather than real projects, may well signal a lack of development of nuclear reactors in the West.

In an earlier post I discussed how so-called SMRs do not exist as a concept (See HERE). That is as a concept distinct from earlier attempts to develop mainstream nuclear power using reactors that are smaller than today’s mainstream projects. The nuclear industry gradually increased the size of reactors to reduce costs per MW through capturing economies of scale. Logic dictates that SMRs will be more, not less, costly than the conventional contemporary nuclear projects.

USA SMRs

However, SMRs could be more of a burden for the nuclear industry than a boon. That is because instead of building large conventional projects, small ones are being done instead. For example, in the USA the last completed nuclear reactor project, Vogtle 3&4, is around 2200 MW. Projected SMRs are in the 100-400MW range. The policy drive for SMRs has recently been doubted by the former Chairman of the US Nuclear Regulatory Commission, Alison Macfarlane. Her (co-authored analysis) implies that nuclear waste problems from SMRs will be worse than with conventional reactors. The paper also says that ‘many studies show that the economics of SMRs will be much costlier than that of large LWRs, thereby will not be competitive or profitable.’ (See HERE)

But what is actually being ‘built’ now, that SMRs such as Kairos and Natrium, are well below 1000 MW in total? When I say ‘being built now’ it is not clear how far these projects have got into building the nuclear part of the project, which is important. They are likely to be a long time coming, even though they are small compared to mainstream nuclear projects. Others may follow, but we cannot be certain. The previously widely trumpeted Nuscale project has got nowhere, for example. Critically, SMRs are dependent on large amounts of Government demonstration funding and are not funded on a commercial basis like Vogtle, or for that matter, renewable energy projects. If SMRs are the object of development, then we may end up with a lot less nuclear development than if the focus was on standard sized nuclear reactors.

Ontario SMRs

The focus on SMRs could be especially distracting for nuclear prospects since all the accounts I have suggest that they are going to be a lot more expensive, MW for MW, than (even) conventional nuclear reactors. This is already clear from the so-called SMR project at Darlington in Ontario. I wrote in the earlier post on SMRs (see HERE) that:

‘The Ontario Government has given the go-ahead to the so-called SMR project at Darlington. Acclaimed as a breakthrough, it may only be a breakthrough as being the most expensive nuclear power scheme in history. Its starting price, as around $21 billion (Canadian dollars, see HERE) for 1.2 GW is almost the same as the final price of the Flamanville EPR reactor in France built by EDF. This came in at €13 billion, roughly 4 times its original price tag (see HERE). Yet Flamanville has a generating capacity of 1.63 GW, that is around a third larger than the sum of the capacities of the four new Ontario reactors! So the Darlington scheme is already a third more expensive than Flamanville!

The crucial difference between the new Ontario scheme and the French power plant at Flamanville is that construction is only about to start at the Canadian scheme. So, let's repeat this. The (spuriously) acclaimed Ontario SMR scheme is already around a third more expensive than the widely panned super-expensive French Flamanville EPR even before the inevitable construction cost increases start piling up!

Given that all nuclear power plant built in the West this century has all come in a great deal more expensive than projected before construction, the cost will spiral even farther upwards. It is likely that the Ontario SMR project will win the prize of the most expensive nuclear project (per GW) this century! Even at its projected price the Ontario SMR scheme is calculated by the Ontario Clean Air Alliance to be up to 8xs more expensive than wind power (See HERE) This puts my arguments in this post in perspective, SMRs are going to be a lot more expensive than conventional nuclear power!’

Now if the Ontario Government had given the go-ahead (and agreed to fund) a conventional plant of the same size as the four SMRs (1.2 GW) then there would be good chance the whole project would be completed. But given the modular nature of the Darlington project we cannot be sure if the entire 1.2 GW will ever be built. Apparently the contract given to the project developers is just for the ‘first of four’ SMR reactors (See HERE). Given cost escalations it may well be that the project will be mothballed after 600 MW, or even just 300MW. This may very well be the case especially if the Progressive Conservatives fail to win the next election in Ontario.

UK and Poland SMRs

There are signs in other countries that the funding of SMRs by Governments are substitutes for conventionally sized power plant. In the UK there are no current plans to build any more EDF 3200 MW projects like the one being built at Hinkley C and planned for Sizewell C. Rather the Government is talking about SMRs to be built by Rolls Royce. But each unit will only be 400 MW. There is talk of ‘three’ being built, but it maybe that after the difficulties and tremendous cost escalations of building the first one emerge, that’s all we’ll get.

Meanwhile Poland has put a plans for large conventional reactor plan on the back-burner and is talking about building the same type of reactors planned in Ontario. They talk about six, but again, the clock could well get stuck at one or two after the problems with building the reactors emerge.

When the buzz about SMRs first emerged in the 2010s, at first mainstream nuclear leaders expressed caution about the idea. But now they seem have been hoisted onto the bandwagon. Maybe they thnk it is going to be the only nuclear show in town in the West. Maybe, but it could end up being a rather small show. The current fanfare in the US and UK about ‘fast tracking’ regulatory approval will not help much. The problems with SMRs are to do with engineering and economics, not regulation. Meanwhile, weakened nuclear safety standards will leave future generations with totally inadequate rules to deal with greater volumes of nuclear waste from any so-called SMRs that do actually get built.

Can Reform cancel Milband’s renewable programme?

People have been wondering about the impact of Reform’s Richard Tice’s threat to cancel soon-to-be-issued Government contracts for largescale renewable energy. Is Energy Secretary Ed Miliband quaking in his boots? I doubt it. Essentially, I think that Tice’s threats are hot air, useful only as bit of PR coverage. I am sure lawyers for renewable energy companies will have told their clients to ignore Tice and carry on as planned with their bids.

Specifically Tice targeted the contracts that will soon be awarded under the Government’s current allocation round for renewable energy contracts (called ‘AR7’). Most of the contracts will go to onshore wind, solar farms and offhsore wind projects. The project developers will receive ‘contracts for difference’ (CfDs) which will guarantee generators specific payments per MWh for 20 years.

This Tice threat is, of course, nonsense although it rhymes with the behaviour of some populist right wing governments in the West. Perhaps the difference is that Reform will not be so stupid as to repeat these experiences. In 2018 the (then) newly elected Progressive Conservative Government in Ontario cancelled renewable energy contracts that had been awarded. Yes, that’s right, the same Government that now thinks SMRs are the way ahead!

Ontario and USA renewable cancellations

The Ontario Government had to pay out large sums in compensation because of its windfarm cancellations. The cancellation of the largest project, an 18.5 MW wind project called ‘White Pines’ led to the Ontario Government paying out the equivalent, in 2024 money of over £60 million to the White Pines developers. That’s a lot to pay for an 18.5 MW wind project! The Government certainly did not save any money.

More recently Trump’s visceral hatred of offshore wind farms has led to the US Federal Government cancelling permits for two (contracted) projects which were already being built, namely the Empire and Revolution projects. TheFederal Government has already rolled back and ‘un-cancelled’ the Empire project. Orsted, the Danish (Government owned) developer has now sued the US Government over the cancellation of Revolution. I guess that the main reason the Trump-Federal Government has not already caved on this one already is because the US and Danish Governments are not on very good terms. I will bet on Orsted winning its fight to be allowed to complete the windfarm, or if not that, gouging the US Government for a lot of money.

UK law and the renewables programme

In the UK the legal position is very straightforward. UK Common law rules against so-called ‘retrospective’ action, this is action by the Government that would penalise people or business who took action that was in line with previous Government contracts or laws. Could a future Reform Government cancel renewable energy contracts if it passed a new Act of Parliament saying so? No, it could not, or at least not without costing the tax payer extremely large sums of money. They could pass as many laws as they like, but the courts would take no notice, and the Government would have to pay punitive damages for cancellation of contracts that had been issued by a previous Government. There’s some legalese from the House of Lords HERE about the comon law on retrospective action.

In fact, when interviewed by one of the more forensic journalists (ie Evan Davis of Radio 4) Tice appeared to backtrack in recognition of these legal facts of life (See excerpts HERE). He merely stated (what we would assume anyway) namely that a Reform Government would not be at all accommodating if developers wanted to alter the terms of the contract. In the past the Government has, for example, allowed some offshore wind developers from AR5 to enter part of the projects again in the next round (AR 6) after interest rates went up. They wanted, and got, a better price than they has in the previous allocation round.

Of course, the AR7 contracts would not be cancelled. This would end up being very expensive for the Government who would have to pay out several billions for cancelled contracts. These are contracts that would otherwise, when mplemented through built projects, cost the Exchequer, and the energy consumer, nothing. That is because the CfDs are not funded by the taxpayer, and the CfDs that are issued are unlikely to cost the consumer more than the wholesale price anyway. Certainly not billions! Onshore wind and onshore solar will come in at under the recent wholesale power price which consumers pay, and quite probably offshore wind as well. We’ll have to wait and see what the results of the AR7 round are.

Will Tice’s intervention increase the bidding price for renewable energy contracts because of perceived extra uncertainty? I doubt it. Yes, developers would be aware that they would not be able to get variations on contract terms. On the other hand, they can decide not to implement the contracts without penalty (which they would suffer under the present Government policy). That’s because it can be assumed that they will not be any auction rounds for the duration of a Reform Government, after which the slate will be clean for future bids. So that would be a reduction in project risk.

Cheap solar and wind

Some schemes, mainly solar farms, and a few windfarms, are able to go ahead without CfDs by signing power purchase agreements (PPAs) with big energy consumers. A Reform Government would severely limit, but not extinguish possibilities for doing this, by introducing more English planning restrictions on solar and wind farms. They are likely to curb windfarms and ban solar farms from usable farmland (although how usable remains to be seen). That would rule out most solar farms in England, but not in Scotland, Wales or Northern Ireland. The planning regimes there are organised by the devolved governments.

Of course, the proposals coming from Reform are bad news in that they will dramatically slow renewable energy development. However, a point of solace is that even now, and certainly by the time they would take office (by no means a certainty!) there will be a lot of renewable energy projects contracted and consented. Altogether renewable energy will generate the large majority of UK renewable electricity. Sadly, Reform’s attentions will be diverted into pumping ever larger amounts of money into a fruitless drive to make the Rolls Royce SMR commercially competitive. Only to prove that it never will be!

Renewables v SMRs - it’s a walkover!

All in all the anti-renewable forces of Trumpism on both sides of the Atlantic, are, in effect, puffing up the prospects of SMRs to obscure their vandalism of renewable energy programmes. However, whilst large renewable deployments will continue, there will be meagre results from the SMR programmes. These will constitute a much lower amount of total capacity compared to the programmes for building conventional reactors.

The cost comparison of new projects is already sobering for nuclear power for conventionally sized contemporary reactors. The figure below compares Hinkley C with other technologies. This is even though the Hinkley C costs, shown in Figure 1 below, are supported by EDF who are paying for cost overruns. The prospects for SMR are considerably worse.

The prices in Figure 1 consist of a) the CfD contracts issued for offshore wind, onshore wind and solar farms in 2024 uprated to 2025 prices b) the contract issued for Hinkley Point C nuclear plants in 2012 uprated to 2025 prices and c) an estimate of costs of power from a new combined cycle gas power plant based on charitable market-based assumptions (see note 1 below)¹

1. I am assuming capital costs of around £800 per MW (it would almost certainly be a lot more under current conditions) a 40 per cent load factor (average for CCGTs last couple of years, see HERE) c) a 55 per cent conversion efficiency (perhaps optimistic given operation in current conditions with frequent downshifting of production) and fuel prices of £30 per MWh of gas plus carbon costs d) a 15 year effective contract period which is the same as 2024 renewables e) a 7 per cent discount rate