- Funding and Costs May Cause UK SMR Competition to Unravel Over Budget Issues
- UK Industry Report Calls For Quick Decisions On UK’s Sizewell C And SMR Projects
Funding and Cost Issues May Cause UK SMR Competition to Unravel
The firm did not to respond to media questions about its reasons. An industry source told the newspaper the firm is not willing to accept the government’s terms and funding offer should it win the business.
A GBN spokesman declined to comment on Westinghouse’s position. Previously, US based NuScale was not selected for the competition. GBN declined to publicly state the reason for not including the US company in the competition. (Image: Google Gemini)
Great British Nuclear (GBN), the agency responsible for the SMR program, is expected to announce two winners this June with the winners each receiving £10 billion. GBN is reported to have told potential bidders that each winner would be required, on receipt of the funding, to build three-to-four of its SMR designs. Negotiations with the four shortlisted potential bidders kicked off last November.
Is GBN’s Potential Award of £20 Billion to Two SMR Developers Enough?
There are growing fears that the economics of SMRs could prove even hard to justify at high costs for the initial four units. None of the four potential bidders have actually built their designs which means their cost estimates in their bids are not proven by experience.
Hypothetically, at 300 MW, which is the power rating for three of the four SMR offerings. Conservatively speaking at $6,500/KW, a 300 MW SMR would come in at $1.95 billion. Four of them could cost $7.8 billion, which by GBN’s calculations, is well within the £10 billion ($13.25 billion at today’s exchange rates.) that would be awarded to one of the two winners.
However, since all of these SMRs would be first-of-a-kind units (FOAK), it is more than likely that the cost of the first and even the second unit will be significantly more than $6,500/KW. Even with an order for four SMRs, economies of scale might not be significant.
Most estimates are that economies of scale based on factory production of SMRs, promised by all four vendors, only kick in when order books come in “fleet mode,” e.g., by the dozen or more. It follows that even £10 billion could be insufficient to cover the costs of four units any of the three 300 MW offerings based on their status as FOAK projects.
The situation would be even more significant, in terms of costs over running GBN funding, for Rolls-Royce. Taking the same hypothetical figure of $6,500/KW, a 470 MW PWR from the firm would come in at $3.05 billion and four of them at $12.2 billion.
Again, using GBN’s calculations, that comes in below, just barely, £10 billion ($13.25 billion at today’s exchange rates.) While Rolls-Royce has decades of experience building small reactors for the UK Navy, the commercial version of its SMR offering is larger and contains many of the unknowns unknowns for costs and schedule issues that apply to the 300 MW units.
While Rolls-Royce has promoted the concept of a “fleet” of 16 of its 470 MW mid-range PWR to the UK government, the potential order from GBN is not a “fleet” scale order and there is no promise, real or intended, from GBN for any additional funding for SMRs beyond the first four.
In other words, GBN’s implied message to SMR developers is that its mission, on behalf of the government, is to “prime the pump” for the first four SMRs. After that SMR developers of plants of any size are on their own to make the case for commercial success.
UK Government Budget Pressures Could Limit SMR Funding to One Bidder
Worse for the SMR bidders, according to the Telegraph, the UK Government is also considering awarding a contract to only one company as Rachel Reeves, the Chancellor of the Exchequer , plans to make savings in her cross-departmental spending review.
The Chancellor is reported to be struggling to balance the books as weak economic growth makes it harder to meet self-imposed “fiscal rules” for borrowing. However, in March 2025 Reeves increased spending for civilian (hospitals and schools) and defense (new weapons systems for the Navy) by £13 billion. Clearly, there are many issues in the budget process. SMRs and large scale nuclear power plants are just some of many pieces on the political chess board.
Are Trade Offs Possible Between a Sizewell C Investment Decision and SMR Funding?
A case in point is that the government is facing cost escalation and schedule delays for the Sizewell C project making it one of many high profile targets in the anticipated slashing of government spending also expected this June. The government will make its planned “investment decision” in Sizewell C, and for SMR funding. This decision will commit it whether to complete the large reactor project, the SMRs and, in the same breath, metaphorically speaking, reveal its revised budget for the whole government on June 11th.
The Sizewell C power station was originally estimated by EDF to cost £20 billion with cost controls based on lessons learned from work on the Hinkley Point C project. However, EDF has said more recently the cost for the twin 1,650 EPRs will be $35 billion with a start-up after 2030. EDF disputed reports that the reactors would cost $40-50 billion.
Separately, the UK government is already focused on the rising costs and schedule delays of the Hinkley C project which also is building twin EDF 1,650 MW EPRs. Last January World Nuclear News reported “The UK’s Hinkley Point C nuclear power plant, which was expected to be completed in 2027 and cost up to £26 billion, is now unlikely to be operational before 2030, with the overall cost revised to between £31 to £34 billion (in 2015 prices).”
If, in fact, Sizewell C is to benefit from lessons learned in the construction of Hinkley Point C, then the government’s expectation likley is that the completed cost will be less than £31 billion. Cost escalation beyond that point raises the risk of a drastic, and possibly irreversible, decision not to commit to completing the project.
There are several possible scenarios for how the government might act. First, the government is already deeply committed to Sizewell C. Not going forward would leave a highly visible and embarrassing white elephant. Such a decision would harm relations with France. EDF is a French state-owned enterprise. So the question is whether Whitehall wants to put a serious dent in its relations with the Élysée Palace to address domestic budget priorities.
Second, slashing the entire GBN SMR competition would save £20 billion ($26.6 billion) which would offset the cost escalation of Sizewell C and avoid a really tough response from the French government. However, it would prove a point made recently by Rolls-Royce that doing so would insure that the UK would fall seriously behind in terms of energy security as the first SMRs would then be built in elsewhere, e.g., in Canada, Europe, Scandinavia, and India. (See the next story on Energy UK’s response to looming budget cuts in the SMR program.)
Splitting the difference for the GBN competition, e.g., awarding one winner £10 billion, keeps the SMR initiative alive, but does nothing to promote long-term “fleet mode” production of SMRs which the UK nuclear industry points out is the only way to achieve economies of scale with factory production of SMRs.
A spokesman from the UK Energy Department told the Telegraph: “Great British Nuclear is driving forward its SMR competition for UK deployment. It has now received final tenders, which it will evaluate ahead of taking final decisions this spring.”
~ UPDATE 04/28/25 ~
French Energy Minister Calls for Combined Approach
to EDF ’S UK Nuclear Reactor Projects
EDF’s two nuclear construction projects at Hinkley Point and Sizewell C should be treated as one financial venture in negotiations, according to Marc Ferracci, France’s energy minister.
He told the Financial Times (FT) he had held discussions with the UK’s energy minister Ed Miliband at the sidelines of a conference in London last week.
“France and EDF are very committed to deliver the projects but we have to find a way to accelerate them and we have to find a way to consolidate the financial schemes of both projects.”
EDF’s equity stake in Sizewell C, a 3.2 GW nuclear station is smaller than Hinkley Point. Both projects started out with equity stakes from Chinese state owned enterprise nuclear development corporations. In both cases, the UK government ended the arrangement due to what it called “security issues.” The UK government has in part replaced that funding and has also reached out to institutional investors to pay for the power plants.
Ferracci denied that the French government was looking to use Sizewell as “leverage” against the financial troubles at Hinkley.
“It is not a discussion about leverage, it is a discussion between friends and allies. . . So there is a way through and I hope we will be able to find it in the next few months.”
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UK Industry Report Calls For Quick Decisions On UK’s Sizewell C And SMR Projects
- ‘Leadership and clarity’ needed from government to secure the future of nuclear sector
- UK Must Take ‘Bold Action’ to Promote Energy Security
The report, produced by lobby group Energy UK with input from French state power company and nuclear operator EDF, says “leadership and clarity” is needed from the UK government to secure the future of the nuclear sector.
The report found that a wide range of benefits will be delivered to consumers if the government moves ahead on plans for two EDF supplied EPR nuclear plants at Sizewell C and deploys SMRs, micro modular reactors (MMRs) and advanced modular reactors (AMRs).
“The stop-start development of the projects to date and lack of clarity over the sector’s future could see the UK lose out in the race for nuclear revival as it competes with other countries seeking to capitalize on the benefits of nuclear energy to power technology.”
“To reverse this trend the UK Government needs to take bold action.”
The report says new nuclear stations will be key for providing the additional capacity needed to help power the economy of the future. Hinkley Point C, where EDF is building two 1,650 MW EPR units, will provide about 7% of the UK’s electricity, equivalent to around six million homes. Sizewell C would then double this new capacity.
Sizewell C was singled out by Energy UK as a particularly crucial step on the road to any “nuclear renaissance.”
“ [the] Sizewell C [investment decision] will provide a clear signal about the future of the industry, allowing the UK’s nuclear capability to further develop and set the foundations for further gigawatt stations and the SMR and AMR revolution in the future.”
The outcome of the SMR competition will be announced on June 11th which is when the results of a government spending review are also expected to be published. That expectation has not stopped politicians, industry and unions from requesting GBN’s announcement to be made sooner and by doing so get ahead of any move to axe some or all of it as part of a larger budget process.
The report emphasized, “Winners [of the SMR competition] were expected to be chosen in 2024, but the competition has been delayed. It is essential that a winner is selected soon to signal commitment and show the UK is a desirable place to invest.”
The report also emphasized the benefits of building SMRs.
Adam Berman, Director of Policy and Advocacy at Energy UK, said, ““But it is imperative that we seize this opportunity at a pivotal time for the industry as we await vital decisions that will shape the future of the nuclear industry and the role it will play over the coming decades. Our country has a proud history in this field but it’s been 30 years since the last new nuclear power station came into operation and it’s high time for the country to reclaim its role as a world leader and pioneer.”
“Notable amongst these could be SMRs which, by being smaller and quicker to build and more flexible on location, could be the ideal solution for tech companies whose data centers will require large amounts of power and who are increasingly investing in nuclear globally through Power Purchase Agreements.”
“Becoming a world leader in this technology would not only show how nuclear can support economic growth by meeting the demands of businesses looking to invest and locate in the UK but also present the chance to benefit from exporting this expertise to other countries facing the same challenges. Other areas of potential for nuclear identified in the report include hydrogen production, redeploying the heat produced in power stations for use in nearby buildings and industry and the quest to make fusion a reality.”
Simone Rossi, CEO of EDF Energy, wrote in the report, “Hinkley Point C . . . will provide low carbon electricity for six million British homes for decades. It has a supply chain of 3,800 companies across Britain and has trained over 1,500 apprentices trained so far.”
“The lessons from Hinkley Point C are clear. ‘Build and repeat’, a proven design, helps to bring down costs. Its replica, Sizewell C, will generate the same amount of homegrown electricity and even more economic benefit. Sizewell C will support 70,000 jobs, with roughly 70% of the construction spend in the UK.”
“The impact is now. In the next five years Sizewell C will pump £8 billion into the UK supply chain and £3 billion of tax to the exchequer.”
The lobbying battle for UK government funding for its nuclear energy future is well underway. The real question is whether anyone at Whitehall is listening.
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