House of Lords - Nuclear Research and Development Capabilities

Nuclear Research and Development Capabilities - Science and Technology Committee Contents

CHAPTER 4: Energy Policies

50. Whilst it is beyond the scope of this inquiry to consider the Government's energy policies more generally, there are two inter-related aspects of particular relevance: first, whether enough is being done to encourage industry to invest in nuclear (or other low-carbon) sources of energy needed to enable the UK to meet its long-term emissions targets and to develop the R&D capabilities and associated expertise required to support those energy sources; and, secondly, how the Government intend to meet their energy security objective of reducing reliance on fossil fuels.[87] In considering these issues, we have also looked at issues relating to the commercial exploitation of opportunities resulting from nuclear R&D and associated expertise.

Background

51. The previous Government's Nuclear Energy White Paper (2008) and the current Government's Annual Energy Statement to Parliament (July 2010) both stated that nuclear energy should have a role to play in the UK's energy portfolio alongside other low-carbon sources in meeting greenhouse gas emissions targets. The Government's current policy approach is to remove any unnecessary obstacles to investment in new nuclear build. Beyond 2020, the Government told us, their targets were "focused on an 80% reduction in greenhouse gas emissions alongside secure, affordable and available supply of electricity rather than the exact contribution of specific electricity generation technologies to the energy mix".[88]

52. In September 2009, the Office of Nuclear Development (OND) was established to remove potential barriers to investment and signal clearly to the industry the serious intent of the Government to push forward nuclear new build.[89] This was followed by a National Policy Statement on Nuclear which received parliamentary approval in July 2011 and the Generic Design Assessment process for new nuclear plant. More recently, planned reforms to the electricity market set out in the Electricity Market Reform (ERM) White Paper (July 2011) are designed to encourage energy companies to invest in new low-carbon energy capacity in the UK, including nuclear. The Government intend to legislate for the key elements of these reforms in 2012.

Long-term plan to encourage the development of low-carbon technologies

53. We received a significant amount of evidence which argued that the Government's approach to energy planning was short-term and lacked the long-term clarity needed to maintain the R&D capabilities and associated expertise necessary to keep future nuclear options open.[90] Industry appears generally to support Government efforts with regard to the new build programme. Keith Parker, Chief Executive Officer of the Nuclear Industry Association (NIA), for example, told us that "in terms of [the] Government support and commitment to nuclear" both the previous and current Governments are to be "applauded" for what they have done to get the programme up to 2025 started.[91] Paul Spence, Director of Strategy and Regulation, EDF Energy, agreed.[92] Both said however that the current Government approach was not sufficiently long-term. Mr Spence suggested that the Government "need to think about what happens as we go beyond 2025 and nuclear starts to play an even bigger role at the heart of a low-carbon energy system", adding that "we need to do things now to prepare for that".[93]

54. Without long-term clarity, we question how adequate consideration can be given to assessing the R&D requirements and associated expertise needed to support a new nuclear programme beyond 2025 across a range of potential futures. Dame Sue Ion told us that both the RCUK review and the ERP report indicated that "a roadmap to define the UK's likely plans for nuclear energy within the national energy mix was essential" as well as a long-term strategy for the development of nuclear power.[94] A recent Royal Society report also called for such a strategy.[95] NNL, supported by the NIA and others, said that "a roadmap and longer term civil nuclear strategy", owned by Government, was "essential to provide the framework to define R&D requirements for both academic research and applied R&D to underpin nuclear energy options to 2050 and beyond".[96] (We return to the issue of the need for an R&D roadmap in paragraphs 132 to 142 below.)

55. According to EDF Energy:

"... there is currently an opportunity in the UK to provide a clearer, more effective framework within which Government and major parts of the industry and others can work together on developing long term UK nuclear infrastructure, including R&D ... The Government is currently working hard to ensure that the processes to enable new nuclear development are completed effectively and that the Managing Radioactive Waste Safely programme moves forward. EDF Energy recognises the effort being deployed and does not wish to deflect attention from these areas; but we believe that the wider infrastructure issues associated with supporting what will in future be a very important part of UK energy supply do need to receive more attention."[97]

56. Given this, we were pleased to hear from Professor David MacKay, the Chief Scientific Adviser for DECC, that the department is conducting some foresight work on future R&D needs by carrying out a Technology Innovation Needs Assessment (TINA) on nuclear which will look beyond the 5-10 year timescale of efforts to-date to try to "quantify the value for money" of the sector and "make a strong case for R&D support".[98] This will be completed by the end of 2011. We were also pleased to hear that DECC will be producing "hedging pathways" to identify what carbon reduction targets mean in practice and what needs to be done to achieve them. We note however that, although a number of attempts have now been made to model our future energy needs, there has been little Government action so far to follow this up. We look forward to the completion of DECC's work on the "hedging pathways" and the TINA. It is important that the Government provide leadership and take action to ensure that the findings of this work are taken forward in a new long-term nuclear energy policy. (We make a recommendation about how this should be done in paragraph 63 below.)

57. Despite the evidence we received about the need for long-term clarity, the Secretary of State was adamant that the current policies were adequate:

"Out of the four elements that we consulted on, three are now absolutely clear and certain. There is policy clearance for us to go ahead with the second Energy Bill, which will land in May next year and will be through in the second session. It will introduce the contracts for difference that I described. That will provide exactly the clarity and certainty. It is a system that has been used in other countries ... I think you will find that the big energy investors will now know exactly where they stand. Although you may have had feedback to that effect ahead of the electricity market reform White Paper, I do not believe that it would be legitimate after that publication ... that uncertainty that you describe has been lifted by the Government's very clear commitment in the White Paper. I could not make it clearer if I tried that we want to see nuclear play a part in our energy."[99]

58. In response, Mr Keith Parker of the NIA, with others, told us that he agreed with the Secretary of State's statement that "there is now clarity in the UK's energy policy" which will "help provide investors with the certainty they need to proceed with new plant". But he reiterated his earlier point that "too little consideration has been given so far to the R&D and other requirements that might be necessary to support any new nuclear programmes that could be required beyond 2025 in the period to 2050". Without a clear plan going into the future, he said, "we will simply become reliant on skills and technologies from elsewhere and ... be unable to take full advantage of the opportunities a new programme could bring, particularly to the UK's manufacturing sector".[100] (We discuss the commercial opportunities further in paragraphs 64 to 79 below.)

59. Mr Spence from EDF also pointed out that "industry involvement in R&D will stretch over at least the lifetime of these Generation III reactors, which have a design life of at least 60 years, and so we expect that our R&D efforts will be shaped by Government policy up until 2050". As yet, however, in his view, the Government's "long-term policy remains undefined".[101]

60. Dr Mike Weightman, Her Majesty's Chief Inspector of Nuclear Installations and Executive Head of the ONR, also highlighted the importance of looking at a longer timescale to meet the regulator's needs:

"We should start by thinking about existing facilities and having to deal with the legacy of the last 50 years … That will be with us for decades and we need the capability, knowledge and experience to understand what is happening far into the future. The plants that are going on now will operate for some years and the immediate new build will operate for 60 or perhaps 80 years, so you need to have the knowledge and experience far into the future. To do that, you have to have nuclear research capability to build-on to generate the world-leading people we should have here. … we need a longer-term strategy, because the timescales here are large. If I think about demographics and building up that capability, even if we identified some people today who are just coming to the end of their school careers, it may be 20 years before we would find them useful, so I think that we have to think longer-term."[102]

61. Professor Howarth of NNL told us that other countries were taking a longer-term view:

"If we look at lots of other countries at the moment, they all have that view; they all look at it from what is going to happen to the nuclear fuel cycle … Take France, for example: they have plotted out a 100-year vision associated with how to get self-sufficient in nuclear material. That needs to start now. They show how they track through the availability of the nuclear materials that they are going to need in order to get self-sufficiency in 2100. It is a really long timescale that we need to look over."[103]

62. The Secretary of State said that the Government "see nuclear as an important part of the mix going forward". He also agreed "that means inevitably that we have to have the R&D capability to ensure that we can play our part and that we can safely use a new generation of nuclear power stations and, indeed, safely use the ones that we have. We also need to have a major investment in skills because of the ageing demographic of the existing nuclear industry".[104] But in his oral evidence he did not acknowledge that, to achieve this, the Government need to set out a long-term strategy. Neither did he recognise that there are a wide range of areas where R&D and associated expertise are important and where long-term support is required.

63. Given that both the industry and regulator are calling on Government to adopt a long-term view on nuclear energy policy, we find the Secretary of State's comments worrying and complacent. The Government have stated that nuclear energy will be an important part of the energy portfolio over the period to 2050. If they are serious about this, they need a credible long-term plan to ensure that their energy policies are underpinned by adequate R&D capabilities and the associated training and expertise. We recommend that the Government should set out a long-term strategy for nuclear energy, outlining:

how they intend to keep the options open to ensure that, if required, nuclear can contribute more to the energy portfolio beyond the current plans for new build up to 2025; and
how R&D capabilities and the associated expertise will be maintained to keep the different nuclear energy options open.

The strategy should extend up to and beyond 2050.

Commercial opportunities from nuclear R&D and associated expertise

64. The potential commercial opportunities that nuclear R&D and associated expertise presents for the UK can be split into two overlapping areas: R&D of relevance to the supply chain for the current new build programme and the UK's involvement in future technology development.

DEVELOPING THE SUPPLY CHAIN FOR THE NEW BUILD PLANS

65. The UK's new build nuclear programme will involve billions of pounds and will require a significant input from the engineering supply chain.[105] Mr Keith Parker of the NIA told us that the UK has "a pretty well established supply chain", although he recognised that due to the lull in nuclear activity over the last two decades the UK faced a challenge in "bring[ing] the supply chain back up to speed".[106]

66. Dr David Clarke, Chief Executive of the ETI, said that, for the Generation III reactors being built, there was a need to reduce the costs involved in building and running them: "we need to understand how we will really engineer those systems such that we take the cost out, and the industry then sees the UK with its supply base, and the research base that sits behind it, as an attractive place to deploy those solutions".[107] The ETI believed that, as the global market grows, "there are strengths there that we could build on in a global context from an export point of view".[108]

67. The TSB has estimated that the global nuclear fission market is worth about £600 billion for new nuclear build and £250 billion for decommissioning, waste treatment and disposal over the next 20 years.[109] The TSB review identified considerable opportunities for UK businesses in the supply chain to benefit from the new build programme, building mostly on the UK's strengths in areas such as non-destructive testing (NDT), condition monitoring, decommissioning, waste disposal, and advanced manufacturing and materials. For example, the review estimated the size of the market for non-destructive evaluation (NDE) and NDT to be £10 million for each reactor for construction, and £100s of millions through the lifetime of a plant.[110]

68. To "stimulate technology development and innovation for the benefit of UK industry in areas that offer the greatest potential for boosting the UK's economic growth",[111] the TSB launched a £2 million applied R&D competition for feasibility studies targeting small and medium-sized companies (SMEs) which could become part of a new nuclear supply chain. Given the strength of interest received, Mr Derek Allen, Lead Technologist for Energy at the TSB, told us that they were "likely to be taking that forward into another round of R&D investment"[112] of about £10 million for the future competition which would be for larger collaborative R&D.[113]

69. In addition, the TSB provides funding for the NAMRC at Sheffield, established in 2010[114] and dedicated to helping UK companies to drive down manufacturing costs and drive up reliability and durability of materials to compete in the market. The NAMRC will also be one of the seven partners of the first Technology Innovation Centre (TIC) focused on high value manufacturing[115].

70. The NAMRC has been generally supported by both the academic community and industry[116] and is showing early signs of success with "16-20 industrial partners".[117] It is built on a model of public/private partnership that has, according to Professor Andrew Sherry, Director of the Dalton Institute in Manchester, proven to work for other sectors such as the aerospace industry. But several witnesses stressed that it was early days and raised a number of issues in evidence which warrant further attention.[118] For example, Mr Ric Parker, Director of Research and Technology at Rolls Royce, warned that the centre would not be "self-sustaining", and would require further Government funding. He said that "a key element ... [of funding] was the Regional Development Agencies (RDAs) that brought capital investment to it". However this element had now gone and the TSB does not have a capital investment mechanism.[119] Mr Keith Parker of the NIA also commented on the withdrawal of funding from the RDAs, stating that "the public funding, which was small but welcome, has now pretty much dried up".[120]

71. Professor Sherry said that the centre was based on a powerful model but thought that it lacked "focus, investment and strategy to drive it forward".[121] Professor Keith Ridgeway, Director of NAMRC, agreed: "At the moment I do not feel we are part of a national strategy that will take us past 2020, 2025 and the next-generation new build. I think we need a focus and strategy going much longer term".[122] In our view, there is a clear need therefore for Government and industry and academia to come together to consider whether the current support mechanisms to develop the supply chain are adequate, and to look at the role of the NAMRC within the UK's wider nuclear energy strategy. (We make a recommendation about this issue in paragraph 79 below.)

DEVELOPING NEW TECHNOLOGIES

72. Rolls Royce and Professor Mike Fitzpatrick, Lloyd's Register Educational Trust Chair in Materials Fabrication and Engineering at the Open University, acknowledged the need to develop the UK supply chain to support the new build programme and to allow UK businesses to benefit from the opportunities this would create. They were less optimistic however about the size of the export market for UK companies in the supply chain for Generation III technologies.[123] In their view, one shared by others, the real opportunity would be "taking a lead now in the development of some of the technologies for future systems" so that the UK had an exportable technology in two, three or four decades time and could take advantage of the "£1.7 trillion of investment worldwide" in these technologies.[124]

73. In order to build an industry with export potential, Rolls Royce said that it would "be necessary to ... produce products that contain new technology and intellectual property both in ... design and manufacture," this could be achieved through either "a UK vendor of reactors [which the UK doesn't have] or UK industrial involvement in the design stage of an international reactor".[125] Professor Ridgeway of the NAMRC supported this view.[126]

74. Mr Ric Parker of Rolls Royce told us that "there are two clear areas for the UK" to play a role in the development of these technologies: "the prime investment is in high-integrity manufacturing, monitoring and some of the technical and engineering support for these new facilities. Another great opportunity is ... small reactors, of the 200-, 300-megawatt size [which could] be a major earner for the UK."[127] In his opinion, the UK has both the "strength" and the "intellectual horsepower" to generate some real intellectual property and therefore lock-in value for the UK from involvement in Generation IV reactor development, particularly given the UK's strengths in the field of high temperature reactors.[128] The NIA said that "given the international dimension to the nuclear market there could also be significant benefits in international collaboration, not only in developing new Gen IV reactor designs ... but generally across the fuel cycle". In their view, and others, "involvement in relevant programmes could provide useful opportunities for UK industry as the work translates from R&D to demonstration—which might be lost without UK participation".[129]

75. Developing materials for the supply chain is another overlapping area where the UK has strengths and which is relevant to future technologies. Professor Steven Cowley, Chief Executive Officer of the UK Atomic Energy Authority and Director of the Culham Centre for Fusion Research, told us: "If you look at the intellectual problems that are challenging for Generation IV, a lot of them lie in the materials areas, such as whether we can build materials that survive in that environment. Somebody will have to supply those materials—the specialised steels and so on—and the development of those materials will put somebody in a competitive advantage in the marketplace."[130] Mr Allen of the TSB agreed. He also stressed that "there are other areas around condition monitoring of the power plant, again, where the UK has good niche markets and could become world exporters of this technology".[131] (We consider the issue of how the UK can exploit the commercial opportunities from such expertise further in paragraphs 76 to 80 below.)

Building a framework to promote commercial exploitation

76. At present, the TSB does not have a remit to fund work that is so far away from market. This means that there is a gap for applied long-term research within the current bodies that fund or conduct research (see Figures 3 and 4 on pages 19 and 20). Industry is also reluctant to provide funding without a clear steer from Government on long-term policy direction.[132] According to Rolls Royce, as a result, the Government would have to "intervene" if they wanted to "create a strong and vibrant UK industry" because the "timescales and returns are so long there are clear market failures".[133] In their view, and others, the Government need to decide whether they wish "UK industry to take a co-ordinated approach to developing this high technology, high value export market" and provide a signal to allow it to do so.[134] Mr Spence from EDF agreed: "... what the UK needs is a view about its role in an international system. ... We have some very specific areas of strength, and we should focus on playing our role in those".[135]

77. Mr Allen of the TSB suggested that the Government could play a much more constructive role if they "clearly articulat[ed] [their] future priorities, providing a framework that allows the funding agencies in particular to work with industry to ... join up the TRL levels from basic through to applied research".[136] The TSB review argued that if the UK was going to capture a significant share of the nuclear energy market, the country had to invest in those areas of nuclear engineering where there was existing capability and experience and where it was perceived by the rest of the world to be strong. It also argued in favour of more collaborative working with other countries where the UK could make world class contributions to advanced reactor systems.[137] Mr Ric Parker of Rolls Royce also referred to the need for "UK industry to be able to actively participate in ... European programmes," to exploit the commercial potential, and highlighted the need for some Government encouragement to do so.[138]

78. When we asked the Secretary of State about the Government's position on technology development, he said: "I agree with you that we need to do more on nuclear, but I am not convinced that on a 20 year view we can get into a position where we are going to be a world leader on nuclear ... on a longer-term outlook for low-carbon technologies I would not have seen a major investment in this area as being where we could hope to get the best possible return for the UK."[139] Mr David Willetts MP, Minister for Universities and Science at the Department for Business, Innovation and Skills (BIS), on the other hand, recognised that there were "issues in the longer term about what kind of role we think Britain can play in the world nuclear market 20 years out".[140] Whilst we agree with the Secretary of State that it may be unrealistic to expect the UK to become a world leader in the design of new large civil nuclear reactors, we share the view expressed by the Minister for Universities and Science that there is a need for the Government to outline the role that the UK should be playing in the world nuclear market in the longer term. We do not believe that the Government have given sufficient consideration to how the UK's strengths could contribute to specific important developments in future nuclear technologies in collaboration with the lead developers of new reactor designs.

79. Further to the recommendation in paragraph 63 above, the Government should set out in the proposed nuclear energy strategy how they intend to support the exploitation of the UK's strengths in the research base for the commercial benefit of the UK, and the role they envisage the UK playing in the global nuclear market over the period to 2050 and beyond. This should cover both the development of the supply chain for Generation III technologies and the UK's involvement in the development of new nuclear technologies in the future.

80. We put forward our ideas for how such a strategic approach could be facilitated and how research efforts should be co-ordinated in paragraphs 131 to 143 below.

Energy Security

81. The Secretary of State defined energy security as not only "our ability to access imports of crucial physical supplies of energy … [and] our ability to withstand serious shocks to the economy from price movements" but also as "a situation where we have an energy portfolio that is more balanced and less reliant on fossil fuels, given the potential shocks that can come from world fossil fuel markets".[141]

82. In the UK, there has been a growing reliance on imports of fossil fuels as the UK's gas and oil production has declined. The UK was a net importer of electricity, coal, crude oil and gas in 2010.[142] The UK's net import dependency has increased in recent years to almost 29%,[143] with fossil fuels accounting for the majority and imports of natural gas increasing by almost a third between 2009 and 2010.[144] This trend is projected to continue into the future[145]. Mr Charles Hendry MP, Minister of State for Energy and Climate Change, said that the share of imports in the UK's overall energy portfolio was set to increase by around 60% over the next 10 years.[146]

83. When we questioned the Secretary of State about how current energy policies would decrease our reliance on fossil fuels, he told us that they allow the market the flexibility to come forward with the most cost-effective solution "in a range of circumstances and be robust to a range of circumstances".[147] He went on: "the White Paper on electricity market reform ... [and the] feed-in tariffs for low carbon generation, which will involve a contract for difference ... [will mean that], if you are investing in renewables or in nuclear, you will know that you have a guaranteed price over the lifetime of the project and you can take that to your bank. ... you will therefore have the certainty necessary to go ahead and build projects that have a very high capital cost up front but a very low marginal cost."[148]

84. The CCC stated in its Fourth Carbon Budget report[149] that, as a supplier of reliable baseload[150] power, where the supply of fuel has a limited risk of interruption, nuclear can make a crucial contribution to a technically secure and diverse low-carbon power system. We therefore welcome this market certainty for low-carbon sources such as nuclear and renewables. We are concerned, however, by the illustration the Secretary of State provided to show how this would work in the longer-term. He offered two extreme scenarios: first, "a world of quite serious constraints on oil and gas supply, so fossil fuels will be increasingly hard and increasingly expensive to come by. In that context, we will be relying much more for our own electricity generation ... [from] non-fossil fuel generation, particularly nuclear and renewable"; and, secondly, "a world in which unconventional gas is available at a very much cheaper price ... You would have a lot more gas, obviously with carbon capture and storage, and correspondingly a lot less nuclear and renewable".[151] An example of the latter scenario would be if the Government allowed the extraction of shale gas reserves within the UK.

85. We find the Secretary of State's argument unconvincing. We fail to see how leaving the market to respond with the most cost-effective option will improve the UK's energy security in the longer-term and cause a move away from a reliance on fossil fuels if he foresees the possibility of a future where cheap fossil fuels could dominate. The latter scenario would not, in our view, encourage the uptake of more expensive but lower-carbon technologies such as renewables or nuclear which require long lead times to build. This is particularly concerning given that CCS would be required to make this option low-carbon and, as we have commented before, it has yet to be proven.

86. The Government have made a commitment to improve the UK's energy security by reducing reliance on fossil fuels. But in oral evidence the Secretary of State indicated that he could envisage a future in which fossil fuels will dominate. This apparent inconsistency causes us to question whether the current policy framework is sufficient to encourage more secure, low-carbon sources such as nuclear energy and renewables (see paragraphs 40 and 46 above).

87 See UK Energy Supply: Security or independence? House of Commons Energy and Climate Change Committee, 8th Report of Session 2010-12, 25 October 2011 (HC1065) for an in-depth overview of this issue Back

88 NRD 21 Back

89 DECC Website: http://www.decc.gov.uk/en/content/cms/meeting_energy/nuclear/new/office/office.aspx Back

90 NRD 05, 07, 08, 13, 14, 22, 27, 28, 30, 33, 37, 39, 42, 50 Back

91 Q 236 Back

92 Ibid. Back

93 Q 236 Back

94 NRD 29; the ERP Report op. cit; the RCUK Review op. cit. Back

95 Fuel cycle stewardship in a nuclear renaissance, Royal Society, October 2011 Back

96 NRD 07, 28, and 05, 13, 14, 22, 27, 28, 30, 33, 37, 39, 42, 50 Back

97 NRD 49 Back

98 QQ 69, 71, 81 Back