How can SMRs contribute to the UK?
18 October 2016
There is a lot of talk about Small Modular Reactors (SMRs) at the moment. The United States Government has put money into development of specific technologies and has identified a site and the Chinese have stated that they will have floating SMRs built by 2019. The UK Government are holding a competition for accessing development funding to assess the future potential for SMRs in the UK.
As yet, no country has an advanced generation SMR in commercial operation, so is the excitement about the new technologies justified? We consider how SMRs could contribute to the UK’s security of supply and the wider economic benefits that could arise from development and deployment of SMR technology in the UK.
Is there a role for SMRs in the UK power sector?
We see SMRs as co-existing with significant levels of renewables and low-carbon technology such as solar, wind, battery storage and virtual power plants (VPPs), as well as with large-scale nuclear and flexible thermal generation. Each technology will provide a different service to the power sector, ranging from secure, baseload generation to efficient, flexible peaking capacity, encompassing optimisation of output from intermittent technologies and provision of grid balancing services.
The clear gap in the market for SMRs is to provide additional complementary low-carbon, baseload capacity:
- On a small-scale that can be expanded over time, based on demand growth and the retirement of older baseload capacity;
- With a short construction period, based on its modular nature and factory-based construction; and
- That supports construction quality, efficiency and economies of scale.
When might SMRs be able to contribute?
If the UK takes a decision to be an early mover in SMR development, there is an opportunity for the country to become both an SMR centre of excellence and an SMR manufacturing export hub, creating jobs and an export market for this new technology. If the UK wishes to be an SMR centre of excellence, there is a need for host sites to provide commercial scale demonstration plant and operational plant.
In terms of timescales, an SMR technology would need to achieve regulatory approvals before construction could start, so agreeing a slot for GDA approval and acquiring a site would be critical. There is a limited time window for a technology to gain development funding from the UK Government, achieve GDA approval and construct a demonstration site as a precursor to a commercial development programme.
If Government is able to support the process by assigning a GDA slot, identifying a suitable site and facilitating site acquisition, it is feasible that an SMR technology could reach commercial operation before the end of the 2020s. If an SMR development were to be categorised as a critical infrastructure project that would provide additional support to its viability.
Is there space for both large-scale nuclear and SMRs?
SMRs enable baseload nuclear capacity to be considered in circumstances when large-scale nuclear generation is unsuitable; for example, to meet smaller demand increments, to enable development on smaller, nuclear-designated sites and (dependent on technology) to support some degree of load-following capacity. We talk about the role of nuclear in the UK energy mix in our blog http://pwc.blogs.com/energy_spotlight/2016/02/how-does-new-nuclear-generation-help-the-energy-trilemma.html
The smaller footprint requirements of SMRs mean that there is a wider range of potentially suitable sites available:
- Within the constraints of safety and security requirements, SMR sites could be located closer to population centres than traditional nuclear sites, due to their smaller footprint and their overall design (e.g. many technologies have much of the reactor below ground).
- Their lower requirements for access to cooling water, due to their scale and plant design, could open up non-coastal sites and increase their attractiveness for deployment in more remote regions globally, where they could support more localised grids.
- Brownfield sites, such as those previously used for older nuclear or thermal plant, are more likely to be of a size suitable for SMR development, with an existing grid connection sufficiently large for a modular plant, reducing the ancillary costs associated with greenfield site development.
Some SMR technology vendors have indicated that over 30 plants would need to be developed to achieve full economies of scale. The UK market alone would not support this scale of investment, so a manufacturing hub combined with export demand would be an important feature for any UK-based SMR technology. The importance of gaining regulatory approvals in each export market could also be the catalyst for standardised international licencing, increasing the likelihood of success for the technology.
So who are the competitors for SMRs?
It’s clear that SMR technology vendors are competing against each other, both for the right to be a preferred technology in the UK and to support global market ambitions. What’s also clear to us is that there are too many SMR technologies and that, given that profitability will be dependent on the number of modules sold; there will be winners and losers. So demonstrating that a technology is a market leader amongst SMRs, with a robust business plan, is a precursor for success.
We think that SMRs are also competing against other low-carbon solutions targeted at the late 2020s; such as the combination of energy storage technologies (e.g. batteries) with intermittent renewables. As storage capability becomes commercially viable, the intermittency challenge of deploying solar or wind will reduce and become a larger part of the energy mix. SMR technologies will need to demonstrate robust economics and the potential for improved competitiveness as further economies of scale are achieved.
Where do SMRs go from here?
We are confident that there is a role for SMRs in the UK electricity market. In our next paper, we will discuss the challenges SMR technology owners will need to overcome to progress to a site-specific development project
Karen Dawson | Director - Strategy
+44 (0)207 8044 591
Will Harrison-Cripps | Assistant Director
+44(0)20 7212 4167