This week on Cleaning Up, Michael welcomed Tom Samson, CEO of Rolls-Royce SMR. Rolls-Royce SMR are among a raft of new companies innovating in the field of Small Modular Reactors, hoping to provide nuclear energy in smaller, more repeatable modules at a lower price point than traditional gigawatt-scale reactors. Michael had questions for Samson on nuclear’s “desperately poor track record” for price control, and the feasibility of nuclear finding a role in an energy landscape full of increasingly cheap renewables.
Michael Liebreich So, Tom, tell me exactly what you and Rolls-Royce SMR do. SMR, in the nuclear context, means what?
Tom Samson I'm the Chief Executive Officer of Rolls Royce SMR Limited, and I lead a team that is now about 600+ people across the UK, designing and trying to bring our new Rolls Royce factory-built SMR to market. SMR stands for Small Modular Reactor, and in the context of nuclear, SMR is quite a broad church. There's everything from a few megawatts, to us. We're probably the largest SMR in the market; we're getting over 470 megawatts electric power from our unit. So, we're at the high end of the scale, but we’re around a third of the size of the units that are being built at Hinkley. We are looking at on-grid applications, making traditional electricity, and off-grid applications, where SMRs can be dedicated to powering data centres, for hydrogen production, for other energy intensive usage applications as well.
ML Why does modularization transform the economics? Surely you make things cheap by making them big in nuclear; you've gone the other way. Why is that a better solution economically?
TS You make things lower cost by building them on a much smaller scale. We've extensively used modularization to transform how a nuclear power plant can be built. We build it in a factory, not in a field, and that's the big differentiator. We’re combining our nuclear capabilities with our production, manufacturing expertise, to make highly complex, heavily-engineered products in a factory environment, and then the site focuses on assembly of modular products. The containment, for example, is a steel containment that will be produced on-site in a number of steel plates, that will be then welded together and delivered to site as modules. That’s what allows us to drive down the costs, improve on the schedule, and allow for the inbuilt learning curve to flow from unit to unit within a factory environment.
ML I've got the perfect description of what you're doing: it's a Lego nuclear reactor! It's modular because you're going to build it from pieces on site. Now, the difficult question is, how much cheaper will this be than the gigawatt scale power stations? What price point are you going to deliver power at?
TS I think in the Regulated Asset Base space, we're going to be between £40 and £50 per megawatt hour, and I think in the Contract for Differences space, we're probably going to be between £60 and £70. Probably around £70 for the first units, and as we get down that learning curve, subsequent units then coming in around the £60 or below mark, as we come down that cost curve.
ML The only thing worse for cost control than nuclear, frankly, is the Olympics. If I was to say, right now, I will buy one of these, but you have to take the risk of any cost overruns that push the price above £70 per megawatt hour, would you sign that contract today?
TS I think we would, Michael. That's why we're in this business, our job is to deliver that cost certainty, and deliver those projects. Now, we wouldn't necessarily do that project for a fixed price, lump sum number; we may have a fixed target, we may have a target element, we may have contingency, and we try and do that as clearly and as transparently as possible, all of which would build up to those numbers that I referred to.
ML Let's talk about the role of SMRs in the energy system. Because even at £40, £50, per megawatt hour: that is higher than the cost of other sources of clean electricity. Why would anybody use your solution?
TS The quality of nuclear power is quite unique in the clean energy space. Now, you talk about other alternative sources of energy; they're not often compared on a like-for-like basis with what is equivalent, firm power that's providing available, dependable, always-on, clean power, 24/7. That in itself is a valuable element to any balanced energy mix. And so, in fact, the greater the dependency on intermittent renewables, the greater the reliance there will be on having a form of clean, dependable, available power.
ML But the nuclear has to play nicely with the renewables, right? So, how do you integrate what you're doing into a grid which is going to be dominated by cheaper, but variable renewables?
TS We've got to think of this number - and I use it a lot in my thinking - 8760. 8760 is the number of hours in a year. We've got to have generation available 8760 hours a year, and that's essential for customers, for stability; it's essential to ensure that we've got a grid that we can rely upon. And I think that's the first thing we have to think through. I think there will always be an element of base load - you may say it will be higher or lower than it's been historically - but I think there will always be a chunk of power that has to be met 8760 hours of the year.
ML But running a plant 8760 hours a year would mean switching off vast amounts of renewables. Are you saying that unless you can sell all your electricity close to 8760 hours per year, you cannot be built?
TS Well, if you only generate power for 60% of that time, then the cost of that power has to be increased accordingly. You're right: renewable wind, renewable energy can operate for 30% of the time, and still be economical at that point. Now, my question to you, Michael, is: is there a direct correlation between that demand and supply on a second by second basis, today? There isn't. So, do you have a full match between the demand for clean energy, which is 24/7, and the supply of clean energy? That doesn't happen today. I've explained that we do offer a flexible solution, by how you can combine multiple SMRs to produce a combination of grid electricity, produce hydrogen, produce ammonia, produce synthetic fuels, in a variety of forms.
ML But you need to be temporally flexible, not flexible in different uses.
TS Well, the grid still needs power to cover 8760 hours of the year. Now, I'm not saying that's the only use that we provide, but it's definitely a role that nuclear can play in a balanced energy mix. And it's maybe not a convenient argument from a renewable perspective, but again, we're not against renewable: I think there should be as much renewable built in this country as possible, and hopefully that 30% will get up to 50%; it will never get to 100%, even in a country like the UK. I think the electrification agenda over the next 20, 30 years is going to drive huge demand for clean energy. And I think that's the marketplace in which we expect our Rolls Royce SMR to flourish.