1. SMR Overview Nuclear South-West Ian Truman Legal Director, Nuclear
Wednesday 30 November

2. SMR Training:
What are SMRs?
Government policy
Why are they getting so much attention
CCS Competition
The market and challenges ahead
Leading designs
Legal Issues for deployment
Financing

3. World’s first civil nuclear reactors at Calder Hall were only 60MW(e)
What are SMRs?
IAEA:
“an advanced reactor that produces electric power up to 300 MW(e), designed to be built in factories and shipped to utilities for installation as demand arises.”
US DOE:
“a small modular reactor needs to be able to offer the advantage of a lower initial capital investment, short construction time, scalability and siting flexibility to include some locations that might be less suitable for conventional nuclear reactors.”
World’s first civil nuclear reactors at Calder Hall were only 60MW(e)
Today reactors are over 1.5GW(e)
Size increase over time to take advantage of economies of scale
Smaller reactors traditionally developed for research and propulsion of ships and submarines
Economy of scale - as electrical output rises so does thermal efficiency i.e. the proportion of gross ME(e) to Thermal MW(t) increases.

4. Government Policy
2011
Report from House of Lords Select Committee on Science and Technology
2013
Nuclear Industrial Vision Statement
Nuclear Industrial Strategy
Long Term Nuclear Energy Strategy
The UK’s Nuclear Future
2014
SMR Feasibility Study
Energy and Climate Change Committee report on SMRs
2015
Government response to committee report
Government Spending Review
BEIS Competition
2016
DAS Report on SMR Enablers
ETI Report on preparing for deployment
2011 – 13:
recommendations on R&D including UK as a top table nuclear nation leading direction of future tech and fuel cycle.
To be a key partner of choice in commercialising Gen III+, IV and SMR nuclear technologies worldwide
2013:
Industrial Vision Statement - to achieve significant shares in overseas new build programmes through becoming a key partner in Gen III+, IV and SMR nuclear technologies
Nuclear Industrial Strategy - Commitment to deployment of SMRs in UK and abroad
Long Term Nuclear Energy Strategy – Maintain options for nuclear making major contribution to longer term energy mix including SMRs
2014:
Roadmap – Nuclear energy R&D vision to include SMRs
Feasibility study – assessing SMR designs deployable in next 10 years with prospect of UK IP
Committee report – focus on investment and siting
2015:
Gov response to committee report – recognition of potential of SMRs
Govt spending review and competition
2016:
SW 4.8 GW compared to 10.2 GW in the SE, 11.4 GW Midlands, 13.8 GW East Anglia, 9.9 GW in NW and 14.7 GW in NE

5. Why are SMRs getting so much attention?
UK plc
Last chance to be a reactor vendor?
UK content and IP
UK market up to 2035 projected at ~7GW
International Export opportunities - global market up to 2035 projected to be between 65-85GW which amounts to £ billion
Potential for a further £100 billion from alternative applications
UK has not been a reactor vendor since 2006 when BNFL sold WEC
Aim to develop marketable IP in:
Detailed design
Manufacture
Construction
Fuel fabrication
SMRs are particularly well suited in some respects to developing countries where:
Electricity needs are dispersed;
Grid capabilities are limited;
There is a need to balance electricity production against the variable supplies of renewables; and
Deliver dual use such as electricity and district heating or desalination.
There are of course challenges to deploying SMRs to remote locations such as effective control of the reactor, operation and maintenance, security and non-proliferation concerns.

6. Why are SMRs getting so much attention?
UK Energy Generation Mix
Policy drivers for new nuclear are still there – energy trilemma
Are the days of GW scale nuclear over - questions over current approach – risk, complexity, finance?
What have SMRs got to offer?
Energy Security
Low Carbon
Affordability
Large GW plants might take advantage of economies of scale but are difficult to finance and generally prone to going over time and budget (apart from Korea)

7. What have SMRs got to offer?
The Economics of Nuclear Power
Nuclear is expensive to build but cheap to run
Overnight cost (£/Kwe) - the amount of capital required to build the asset overnight (EPC and owner’s costs but excludes financing cost, operating expenses and operational performance).
Levelised cost of electricity (LCOE) (£/MW/h) - the ratio of the total cost of a generic plant (including both capital and operating costs) to the amount of electricity that is actually expected to be generated over the lifetime of the plant.
Projected Overnight Cost and LCOE for first of a kind SMR comparable to GW scale nuclear BUT what about next of a kind
LCOE is a key component of the strike price
Examples of LCOE:
HPC - ~£87 MW/h
NuScale – FOAK £65MW/h NOAK £59MW/h
Terrestrial - £32-40 MW/h

8. What have SMRs got to offer?
SMRs cost less
Lower capital costs than GW scale nuclear - but still £billions
Capital cost typically accounts for 75% of LCOE for large reactors
SMR more ‘bite-sized’
Easier to finance?
Economics are currently based on projections of SMR developers……
Worldwide ave overnight cost for GW scale nuclear is $6-10 billion
Typical market capitilisation of major utilities:
GDF Suez $50 billion
EDF $46
KEPCO $27 billion

9. What have SMRs got to offer?
They are quicker to build
Factory based manufacture, modular build
Simpler designs
Estimated construction time ~3 years rather than 10 years
What does this mean?
Less exposure to inflation and cost escalation risk
Less interest paid – lower cost of borrowing
Earlier returns for lenders/investors
Improved reactor economics
More flexible energy policy

10. What have SMRs got to offer?
Next of a kind savings
Standardisation of design and multiple units
Factory manufacture allowing innovative cost and time saving techniques
Further time and cost savings from learning
Potential to shorten construction time
Economy of scale v economy of multiples

11. What have SMRs got to offer?
Simpler, safer and more reliable
Integral design – less to maintain, less to go wrong
Some designs inherently safer
On-line refuelling – increase performance
Lower O&M costs
Passive safety – natural convection

12. What have SMRs got to offer?
Flexibility
Modular construction allows additional capacity
Good fit for the UK grid?
Load following
Co-generation of heat and power:
District heating
Industrial Heating
Desalination
Hydrogen production
Back-up power
Disposal of plutonium

13. What does history tell us?
“An academic reactor or reactor plant almost always has the following basic characteristics: (1) It is simple. (2) It is small. (3) It is cheap. (4) It is light. (5) It can be built very quickly. (6) It is very flexible in purpose. (7) Very little development will be required. It will use off-the-shelf components. (8) The reactor is in the study phase. It is not being built now.
On the other hand a practical reactor can be distinguished by the following characteristics: (1) It is being built now. (2) It is behind schedule. (3) It requires an immense amount of development on apparently trivial items. (4) It is very expensive. (5) It takes a long time to build because of its engineering development problems. (6) It is large. (7) It is heavy. (8) It is complicated.”

14. Lessons from the CCS Competition
Background to the CCS Competition
The Grant
Considered to have great potential for low carbon energy generation but little practical experience of putting technology into practice
Government aim that private sector would invest without subsidy at an agreed CFD strike price
Government recognised intervention was necessary to commercialise and took steps to address this including reforming the electricity market and the offer of grant funding
Up to £1 billion of grant funding to more than 1 successful bidder but no guarantees on amount or that grant would be given
Majority of funding only available after selection i.e. limited during FEED study period to develop bids
Power island (non CCS infrastructure) excluded from grant funding on state aid grounds
Could apply for costs of feasibility studies, EPC formulation, planning and environmental works if an inherent part of CCS project viability

15. Lessons from the CCS Competition
CFD
CCS competition took place before ERM had been finalised
Bidders could be asked to bid on strike price
Alternatively short listed bidders may negotiate a bespoke CFD
Key Project Risks:
Joint and several liability between consortium members
Parent company guarantees and Performance Bonds
Cost recoverability under the FEED Contract
Financing risk
Government support mechanisms and change in law risk
Sites, consenting and third party risk
Change of law and termination risk
Exit options
Reputational risk
Transfer of knowledge
Relief events and Force Majeure
Catastrophic failure
Procurement

16. The Market and Challenges ahead
The race for commercialisation
What does the UK government need to do?
Significant first mover advantage
Investor confidence:
Agree HPC
Finalise government policy and regulatory framework
Decide what it wants and pick a winner
Revise EN-6 and allocate Sites
Fund the ONR
GDA slot(s)

17. The Market and Challenges ahead
Challenges for developers
Win the competition…..
Cost certainty
Financing / investment - manufacturing facilities?
GDA slot
Siting and licensing/consenting
Secure a forward order book to underpin investment case and maximise next of a kind savings
Safety case for alternative applications
Export the technology across the globe

18. Leading Designs
General characteristics of PWR SMRs
Novel designs
15 – 350MW(e)
60 year lifetime – generally longer than other SMRs
2-5 year construction time
Re-fuelling intervals typically 2-4 years
Fuel enrichment typically <5%
IMSR, Moltex etc

19. Legal Issues for Deployment
Key Legal Issues for SMRs - Licensing
Evidence for justification – these are new designs
GDA slots
Regulatory expertise/capacity – novel designs, passive safety
Goals based regulation – familiarity and evidence
Suitability of ONR SAPs and TAGs
Licensing and control of off-site manufacturing facilities
Challenge to ONR norms:
Resource sharing between operators
Reduced staffing requirements
Single control rooms for multiple units
Reduced EPZ

20. Legal Issues for Deployment
Key Legal Issues for SMRs - Siting
Nationally Significant Infrastructure Projects (EN6)
Hatlepool and Heysham
Wider site availability for SMRs
Work ongoing regarding siting of SMRs - new/updated EN-6 expected
Existing nuclear sites – NDA or defence
Niche applications will require change to ONR/BEIS siting policy
Key issue for SMR developers

21. Legal Issues for Deployment
Other legal issues
Development consent - may not need grid connection and / or upgrade works
Permitting:
Environmental permits
Grid connections?
FDP - New base case for DWMP?
Insurance - SMRs not prescribed sites
State aid & Brexit - WTO Agreement on Subsidies and Countervailing Measures
Risk of challenge

22. Commercial and Financing Issues
Commercial Issues
CFD– risk allocation, strike price?
Infrastructure guarantee
Other support – government providing a site, political risk and change in law
Financing – chicken and egg

23. Commercial and Financing Issues
Absolute cost relative to GW scale nuclear may be low but still billions
Certain aspects are easier – lower capital cost, shorter construction time, shorter pay back period, option for self financing
Other risks remain the same – political risk, technology risk
SMR specific challenges – securing investment in advance of forward order book?
Completion risk –simpler and quicker to build but still major risk
Political risk – nuclear = political risk
Regulatory / licensing risk – UK regime considered world leading but question over applicability to SMRs
Technology risk – SMRs are new technology
Electricity market – current uncertainty whether the government has got this right
Operations – SMRs may be cheaper to run and more reliable
Environmental – SMRs could be better for the environment
Nuclear incident – SMRs are safer but operators will still have to insure them
Reputational risk – new, high profile technology so still relevant
Less sensitive to interest rates
May need new financing structures?
Debt financing:
Banks / financial institutions
ECA
IDO’s
Capital markets e.g. bonds
Equity financing:
Local and foreign investors
Shareholders – vendor equity
Capital Markets – IPO

24. Commercial and Financing Issues
Government grant funding – USDOE has provided $217 million to NuScale over 5 years
UK government research funding of £125 million
Current UK policy is for government to facilitate private investment through CFD and infrastructure guarantee
Contribution of a site?
Relatively bite-size capital costs off balance sheet?
Export credit agencies – US Exim?
Vendor equity more prominent?
Project finance?

25. Questions?