Spending review brings mixed fortunes for nuclear

It was always clear that the Comprehensive Spending Review would be critical for the nuclear industry given that it would determine the overall revenue available for decommissioning work through the Nuclear Decommissioning Authority (NDA). However, the support given to the development of small modular reactors (SMRs) in the UK has been a welcome surprise.

That the UK Government was interested in SMRs was, of course, well known following the commissioning of the feasibly study produced last year by a consortium led by the National Nuclear Laboratory. However, it was somewhat of a surprise to have the Chancellor announce that the Government would run a competition to choose an SMR design for the UK with an intention to build it in the 2020s.

The Government has not commissioned a prototype/development reactor since Dounreay’s Prototype Fast Reactor in 1975. If the Government ends up building an SMR itself, this would be the first Government built power station since 1995, which is a remarkable move for the first Conservative Government since the industry was privatised by the last Conservative Government.

The technology has caught George Osbourne’s eye, and he is clearly the driving force behind its promotion. He sees SMRs as a means to deliver more flexible nuclear power in the UK and, more importantly for him he believes this will be an opportunity for the UK to be a world leader in this aspect of nuclear technology. His aim is for SMRs to become an export opportunity for the country into the next decade.

For the nuclear decommissioning supply chain this week’s announcement will be a relief, as the flow of decommissioning work would have started to dry up if the NDA had suffered the kind of budget cuts imposed on DECC’s core budget. But it is not all good news for the industry as, while the money the NDA receives from the Government each year will rise by £110million, this amount will only compensate for the money they will no longer receive from selling electricity from Wylfa following its closure.

However as NDA CEO John Clarke told their supply chain event earlier this month they expect commercial income to fall in other areas too, notably as fuel management contracts come to an end. Some level of cuts seem inevitable although asset sales (for example the Moorside site) could offset this to some extent. The NDA themselves also point out that many of the commercial contracts depend on aging infrastructure and so reliability issues create an increasing amount of volatility in the income levels the NDA can expect over the next 5 years.

While the Spending Review did not result in the rapid slowdown in decommissioning work that many had predicted, it will create more volatility that the supply chain has been used to. The NDA is due to consult on their strategy following the Spending Review in January next year. It will be crucial for the supply chain to monitor and understand how the NDA intends to handle these challenges over the next five years.