The UK's Department for Business, Energy and Industrial Strategy’s Expert Finance Working Group (EFWG) said on 7 August that government support is needed to stimulate private investment in the development of small modular reactor (SMR) projects in the UK. EFWG was set up in January as part of the Advanced Nuclear Technologies initiatives announced by Energy Minister Richard Harrington in December 2017. Its remit was to offer independent advice on the potential for small SMR projects to raise private investment to facilitate their future commercial deployment.
In its report, “Market framework for financing small nuclear”, EFWG notes that small nuclear projects range from micro-generation schemes to 600MWe reactors. Costs range from GBP100 million ($129m) to GBP2.5 billion. While each project will have its own structure and risks, EFWG said its recommendations apply to all the small reactors being considered for development by 2030.
EFWG chair Fiona Reilly said in the preface to the report: "Despite the increase in global activity and interest in small nuclear there remains a market failure in getting technologies and projects to commercial delivery, and in particular in securing sufficient financing for projects from the private sector."
She added, "In developing its recommendations for a market framework, the EFWG thoroughly reviewed the risks associated with small nuclear, considering who is best able to manage such risks, the consequences of the risks and how the consequences can be managed."
Some of the barriers to small nuclear projects which the UK government can help to overcome are "relatively straightforward", such as making sites and Generic Design Assessment (GDA) slots available. "Some require the same support that any industry needs to bring innovation forward," the report said. "Others are more fundamental around a lack of understanding/misunderstandings around nuclear and the need to get the first projects across the line to create the market."
Among its recommendations, the report says: "Government should enable the small nuclear sector through a clear policy and a market framework, rather than down-selecting technologies." The government should also work with stakeholders from the energy, nuclear and finance sectors to develop a common understanding of the risks. "For those technologies capable of being brought to market by 2030, government should focus its resources on bringing first-of-a-kind projects to market by reducing the cost of capital and sharing risks," EFWG notes. "This could be done through assisting with the financing of such projects through a new infrastructure fund and/or direct equity and/or government guarantees. The government could also provide funding support mechanisms such as a Contract for Difference, a Power Purchase Agreement or potentially a Regulated Asset Base model."
EFGW says the government should work with the Office for Nuclear Regulation and the Environment Agency to review regulatory processes to develop "an optimised and flexible approach and through the Generic Design Assessment process allow the market to down-select technologies". It should also establish an advanced manufacturing supply chain initiative to promote manufacturing capability in the UK and "to challenge the market on the requirement for nuclear specific items, particularly balance of plant, thereby reducing the costs of nuclear and the perceived risks associated with it".
EFWG notes that private finance “will not come forward to develop first-of-a-kind small nuclear projects without some government support in helping to remove the barriers to the development”. Essentially EGW recommends creating an environment similar to early wind and solar commercial development “by creating a market whereby the small nuclear sector can develop and over time bring in more and more private sector financial involvement to create a sustainable industry and to in turn bring down the costs of energy”.
The report says: “It should be remembered that in the early stages of wind projects they were funded 100% by strategic equity, from investment grade rated corporations, particularly during the construction period.” The government should bring together nuclear vendors, utilities and developers with the finance sector to collaborate in small nuclear projects.
