Listen to the Dolphin – Not the Cumbria Chamber of Commerce!

Listen to the Dolphin.jpg

This is what the Dolphin says: “New Nuclear? Construction 2 Catastrophe, You Pay!

This is what the CEO of Cumbria’s Chamber of Commerce says: ”

“The trick here is that they are, effectively, transferring risk from the private sector developer to the consumer”

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Rob Johnston, Chief Executive of Cumbria Chamber of Commerce,

Nuclear Sector Deal brings fresh hope for Moorside

The nuclear industry is hugely important to Cumbria.

It employs more than 27,000 people here if you include those working on nuclear submarines in Barrow alongside the Sellafield workforce.

For that reason, Cumbria Chamber of Commerce argued the case for a Sector Deal for nuclear when we responded to the Government’s Green Paper on Industrial Strategy last year.

Sector deals – a concept floated in the Green Paper – are partnerships between the Government and industry on sector-specific issues that can help boost productivity, employment, innovation and skills.

Previous deals have covered life sciences, the automotive sector, creative industries, artificial intelligence and construction.

The nuclear sector deal was published last week.

So what does it mean for the nuclear industry in Cumbria?

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “If there’s one central theme to the document, it’s cost saving.

Rob Johnston

“It may have been signed off by the Business Secretary, Greg Clark, but it has the Treasury’s fingerprints all over it.

“There are targets to make savings of 20% on the bill for nuclear decommissioning, currently estimated at £119bn, and savings of 30% on nuclear new build projects, all by 2030.

“It remains to be seen if these targets can be achieved. They are certainly ambitious, particularly for an industry where safety considerations mean that cutting corners is not an option.

“It will require an industry that is very process-oriented and risk averse to embrace innovation and change in a way that it hasn’t been able to do before, and it will require the industry regulator to be receptive to change too.”

He continued: “That said, there are some very sensible proposals in the Sector Deal around expanding apprenticeships, bringing more women into the industry, developing small modular reactors, improving competitiveness and making it easier for businesses to enter the nuclear supply chain.

“It’s encouraging for Cumbria that the Deal envisages the total number people employed by the nuclear industry will rise from 87,000 to 100,000 by 2030. That presents another challenge though, particularly in Cumbria, in finding and training people with the necessary skills at a time when our working-age population is shrinking.

“Perhaps the most positive aspect is the proposal for a funding model for new build that could unlock projects such as Moorside.”

The Government has been criticised for agreeing too high a ‘strike price’ for the electricity generated by the Hinkley Point ‘C’ nuclear power station under construction in Somerset.

In order to get EDF Energy and its Chinese partner to commit to the project, they were offered a guaranteed price of £92.50/MWh for the electricity, in 2012 prices, rising in line with inflation.

That compares with a strike price of £57.50/MWh for the latest offshore wind energy projects in the North Sea.

The nuclear strike price is high because the private sector has to borrow at commercial rates of interest to fund construction and then has to carry the risk of delays and cost over-runs.

With costs for other low-carbon technologies falling, it is unlikely that the Government would sanction another nuclear power plant unless the strike price can be reduced.

The most positive aspect is the proposal for a funding model for new build that could unlock projects such as Moorside

Cumbria Chamber argued that the Government should invest directly in nuclear new build to de-risk projects and so bring the strike price down.

Ministers are planning to do this for Hitachi’s Wylfa Newydd nuclear power station at Anglesey in North Wales.

But the Sector Deal says that, for projects beyond Wylfa, including NuGen’s proposal for a nuclear power plant at Moorside in West Cumbria, it is looking at the ‘regulated asset base’ model for funding.

This is a method used in the utility sector to facilitate investment.

The model guarantees that the regulated utility company’s investment will be recovered over time from consumers.

This guarantee makes investments relatively low risk and so brings the cost of raising finance close to that for financing government borrowing, even though the borrower is the utility company – not the Government.

Rob said: “The trick here is that they are, effectively, transferring risk from the private sector developer to the consumer.

“That isn’t a perfect solution but it should mean that the cost of delivering nuclear new-build projects such as Moorside comes down and that ought to mean that the electricity they generate costs less.”

He added: “It is vital that Moorside goes ahead, not only for Cumbria but in the national interest to provide energy security and reduce our CO2 emissions.

“Moorside will generate low-carbon electricity to power 6m homes, equivalent to 7% of the UK’s electricity needs. Once operational, the reactors will sustain 1,000 permanent jobs on site so boosting the Cumbrian economy.

“We hope that this funding proposal can unblock the log jam and allow Moorside to proceed.”

The Sector Deal recognises the role of the nuclear industry in achieving the ‘Clean Growth Grand Challenge’ set out in the Industrial Strategy.

Nuclear provided 20% of the UK’s electricity in 2016, and the UK is one of the few countries with a nuclear industry covering the full life cycle of fuel production, generation, decommissioning, waste management and research.

The sector contributes £12.4bn to our economy and each civil nuclear worker adds an average of £96,600 per annum in GVA.

The Sector Deal argues that, by reducing costs, the industry can capitalise on a domestic market worth an estimated £75bn and global markets estimated at £100bn (waste and decommissioning) and £1.2tn (new build) up to 2035.

The aim is to secure £2bn domestic and international contract wins by 2030.

The Government believes that the cost of manufacturing components, in particular, can be reduced by innovation and the adoption of advanced methods of production and economies of scale.

Perhaps controversially, it argues that levels of cost reduction achieved outside Europe and North America can be replicated in the UK.

The Sector Deal offers some clarity on the regulatory arrangements to apply after Brexit. It confirms that the Government is aiming to secure “a close association” with Euratom and is putting in place arrangements for continued nuclear cooperation with key trading partners.

The Nuclear Safeguards Act 2018 will provide a legal framework for a domestic nuclear safeguards regime, overseen by the Office for Nuclear Regulation.

Other key aspirations in the Nuclear Sector deal include:

  • A framework to support development and deployment of small modular reactors (SMRs), with the Government providing £56m for R&D;
  • Improve productivity and competitiveness in the nuclear supply chain, and reduce barriers to entry, with the Government co-funding a £30m supply chain and productivity improvement programme;
  • A co-ordinated global campaign to promote the UK’s nuclear expertise overseas to maximise exports;
  • A review into decommissioning and waste management arrangements to speed up decommissioning and clean up;
  • Increase the proportion of women in the nuclear workforce from 22% to 40% by 2030;
  • Maximise the use of the Apprentice Levy to deliver additional apprenticeship starts within the nuclear supply chain, with a target of 50% female participation by 2021;
  • Increase the number of nuclear PhDs;
  • Consider expansion of the National College for Nuclear, which has campuses in Cumbria and Somerset;
  • Dedicated ‘career champions’ to help the sector deliver work experience placements for students in schools, further and higher education.

You can read the Nuclear Sector Deal in full here.

 

 

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