Hovering at a ridiculously low share price of 88p in early morning trade – a figure that represents just half of the past 52 week high – Rolls-Royce has this morning announced the results of a study and which is the first phase in a programme of work designed to consider siting, collaboration opportunities and the socio-economic benefits of deploying Rolls-Royce SMR (Small Modular Reactors) units on land within the NDA (Nuclear Decommissioning Authority) estate along with some other locations across the UK that are currently still being evaluated.
Further to the energy related commentary piece that I put out earlier this week and that, even in the knowledge that Rolls-Royce SMR technology was well advanced and currently undergoing what is termed as a ‘Generic Design Review’ process under the auspices of the UK’s Office for Nuclear Regulation and that the company has a very long and justifiably proud history of nuclear power reactor development [Vanguard class SSBN and Astute class SSN submarines are powered by Rolls-Royce PWR2 reactors] I had decided that, due to the above regulatory process and because Rolls-Royce and the NDA had not at that stage completed the process of identifying sites to potentially build ‘Small Modular Reactors’, I chose not to include them in the wider piece covering immediate energy related issues and problems.
Before moving on to the very interesting and important announcement from the company in relation to further SMR technology development moves and that is, as far as I am concerned, an area of expertise and development one that Rolls-Royce has enormous growth potential lying ahead, I would remind that when the company last week released its Q3 update it reiterated expectations of low to mid-single digit underlying revenue growth, improved full year underlying operating profit margin of approximately 3.8% and importantly, expectations for free cash flow to have been modestly positive. That the share price of one of the most important and forward thinking UK industrial companies is languishing at such ridiculously low levels following what can only be described as having been a massive effort put in by CEO Warren East and his team to rebuild and revitalise Rolls-Royce from the bottom up simply beggars belief!
While the recovery in Civil Aerospace engine activities (RR engine flying hours are still at only 65% of their 2019 levels) may not be as fast as had been hoped as the market recovery from the impacts of Covid plus other factors have had on the overall industry, the point here is that Rolls-Royce was at least able to confirm that this important sector of business has and is gaining momentum. Not lost either is that the company confirmed strong demand in its Defence division and that the company is sitting on a large order book and also that its Power Systems division continues to show strong growth and a much-expanded order book. Last but by no means least should be realisation that having successfully refinanced itself the company and completed planned disposals, the outlook in my view for this vitally important UK company can only but get better.
Back to the announcement in relation to Small Modular Reactors (SMR’s) and first, to provide an idea of what these are and why they are, in terms of future UK energy requirement and development, absolutely crucial:
The International Atomic Energy Agency (IAEA)describes Small Modular Reactors (SMRs) as being ‘advanced nuclear reactors that have a power capacity of up to 300 MW(e) per unit, which is about one-third of the generating capacity of traditional nuclear power reactors. SMRs, which can produce a large amount of low-carbon electricity, are:
Small – physically a fraction of the size of a conventional nuclear power reactor.
Modular – making it possible for systems and components to be factory-assembled and transported as a unit to a location for installation.
Reactors – harnessing nuclear fission to generate heat to produce energy.
On its website the IAEA suggests that:
Many of the benefits of SMRs are inherently linked to the nature of their design – small and modular. Given their smaller footprint, SMRs can be sited on locations not suitable for larger nuclear power plants. Prefabricated units of SMRs can be manufactured and then shipped and installed on site, making them more affordable to build than large power reactors, which are often custom designed for a particular location, sometimes leading to construction delays. SMRs offer savings in cost and construction time, and they can be deployed incrementally to match increasing energy demand adding that:
One of the challenges to accelerating access to energy is infrastructure – limited grid coverage in rural areas – and the costs of grid connection for rural electrification. A single power plant should represent no more than 10 per cent of the total installed grid capacity. In areas lacking sufficient lines of transmission and grid capacity, SMRs can be installed into an existing grid or remotely off-grid, as a function of its smaller electrical output, providing low-carbon power for industry and the population. This is particularly relevant for microreactors, which are a subset of SMRs designed to generate electrical power typically up to 10 MW(e). Microreactors have smaller footprints than other SMRs and will be better suited for regions inaccessible to clean, reliable and affordable energy. Furthermore, microreactors could serve as a backup power supply in emergency situations or replace power generators that are often fuelled by diesel, for example, in rural communities or remote businesses.
In comparison to existing reactors, proposed SMR designs are generally simpler, and the safety concept for SMRs often relies more on passive systems and inherent safety characteristics of the reactor, such as low power and operating pressure. This means that in such cases no human intervention or external power or force is required to shut down systems, because passive systems rely on physical phenomena, such as natural circulation, convection, gravity and self-pressurization. These increased safety margins, in some cases, eliminate or significantly lower the potential for unsafe releases of radioactivity to the environment and the public in case of an accident.
SMRs have reduced fuel requirements. Power plants based on SMRs may require less frequent refuelling, every 3 to 7 years, in comparison to between 1 and 2 years for conventional plants. Some SMRs are designed to operate for up to 30 years without refuelling.
Rolls-Royce says that “work with NDA’s mission to clean up the UK’s earliest [Magnox] nuclear power station sites safely, securely and cost-effectively in order to release them for other uses – with the aim of benefiting local communities and the environment.”
The announcement from Rolls-Royce this morning follows on from an announcement earlier this year from the Department for Business, Energy and Industrial Strategy (BEIS) confirming that the NDA would work alongside interested parties, including Rolls-Royce SMR, in order to enable engagement on potential future nuclear developments on its sites.
Rolls-Royce SMR says that it has “matched the sites against a set of assessment criteria that will enable plants to be operational by the early 2030s, including: existing geotechnical data, adequate grid connection and a site large enough to deploy multiple SMRs. In doing so the study identified four potential land parcels where multiple SMRs could be located, equivalent to up to 15GW of capacity. Two of the sites – Trawsfynydd and land neighbouring the Sellafield site – are within the control of the NDA. The two other sites – Wylfa and Oldbury – are on NDA land leased to Horizon Nuclear Power.
Rolls-Royce SMR said the Berkeley site, which could house 4-6 SMRs (total maximum potential of 3GW), requires further investigation potential and that “Any formal commitment of NDA land, or other support, would require government approval via NDA’s sponsoring department, BEIS,” it noted”. The study also identified potential sites, where a total of up to 5.5GW of SMR capacity could be deployed, that are outside of the NDA’s estate. These include: Hartlepool, which could house 2 SMRs; Heysham, where 3 SMRs could be deployed; and Bradwell, which could house 4-6 SMRs.
Rolls-Royce SMR CEO Tom Samson said that “Identifying sites that can host our SMRs is a key step to our efficient deployment – the sooner that work can begin at site, the sooner we can deliver stable, secure supplies of low-carbon nuclear power from SMRs designed and built in the UK and that we must maintain this positive momentum and work with the NDA and government departments, to ensure we capitalise on the range of siting options, focusing on those that maximise benefit to the taxpayer while enabling power to come online as close to 2030 as possible.”
NDA CEO David Peattie added: “This study is a tangible step forward in our mission to safely decommission our sites and free up land for future use, delivering benefit to local communities and so to the wider economy. We’re engaging with several potential partners to explore the use of land in our estate whilst utilising the NDA’s nuclear sector expertise to support the delivery of the UK government’s energy security strategy.”
The Rolls-Royce SMR is a 470 MWe design based on a small pressurised water reactor. It will provide consistent baseload generation for at least 60 years. 90% of the SMR – about 16 metres by 4 metres – will be built in factory conditions, limiting on-site activity primarily to assembly of pre-fabricated, pre-tested, modules which significantly reduces project risk and has the potential to drastically shorten build schedules.
The SMR design was accepted for Generic Design Assessment review in March this year with BEIS asking the UK’s Office for Nuclear Regulation along with the environment regulators for England and Wales to begin the process.
CHW (London – 10th November 2022)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785
Skype: chwheeldon
@AirSeaRescue