Practical Law

The planned nuclear new build programme in the UK has been the subject of much discussion over the last few years: will the new coalition government support, oppose or be indifferent to it? On a more personal level, how safe is nuclear power and do people want it on their doorstep? Commercially, there have been numerous debates about the economics of nuclear power, not least balance sheet capacity and financing structures that can be utilised for the programme.

Whatever your views, one thing is clear: the UK needs a secure energy supply and this, combined with a commitment to embracing a low carbon economy, has shifted focus away from discussing the hurdles to actually delivering the new nuclear build programme.

BLP has recently published a report bringing together the views of a range of senior executives responsible for different sectors of the nuclear industry (including contractors, consultants, energy companies, industry associations and regulators). The report, backed by the Nuclear Industry Association, highlights a wide and detailed view of the challenges confronting the UK nuclear industry.

The report considered several key areas which could make or break the nuclear new build programme in the UK. Some of its key findings are:

• Specialist skills vital to building nuclear power stations have been lost because of the generation gap since the UK’s last nuclear programme, but this is already being addressed: skills shortages are being identified and plans put in place to train and transfer knowledge to the domestic workforce. In terms of civil engineering skills, the UK is as well-placed as any other European nation to deliver large scale, complex infrastructure projects.
• Given the size and scale of the proposed developments, there will be an increased focus on project management and programming. There is a shortage of home grown major programme management skills in the UK, with foreign consortia/firms now delivering the biggest projects. International cooperation, whilst presenting different challenges, will be essential to the civil nuclear industry.
• Nuclear represents a big cultural shift in terms of behaviours needed on site. Safety is paramount and regulatory involvement during construction is likely to be stringent. However, it is critical that regulators do not “move the goalposts” once the framework to construct the new power stations has been agreed.
• Standardisation is key. The uniqueness of the older nuclear plants is widely regarded as the main cause behind construction and regulatory delays. The government is currently choosing and regulating two designs (so far) for use in the UK. This will allow companies to select pre-approved designs, which will go a significant way to minimising the risk of cost and programme over-runs.
• Contracts will have to share risks between parties to prevent investors in nuclear new build from being deterred from participation. Although this may seem obvious, there are particular factors which militate against maximum risk transfer to contractors. There is a limited pool of contractors with the skills and resources necessary to deliver the major elements of nuclear new build and their balance sheets will not be able to sustain major losses. Market appetite may be an issue.

What happens next?

Nuclear new build is inevitable; the industry is certainly not a “sunset industry”. The UK is right at the forefront of a worldwide nuclear renaissance that could see hundreds of new reactors built in up to 30 nations across the globe.

Clearly, there are clearly a number of challenges to delivering a successful nuclear programme. However, there are also a number of opportunities and rewards if the UK can get it right. It will give a much-needed boost to the construction industry and provide an opportunity to sustain the industry for years to come. It will provide security of energy supply and could re-establish the UK as a key exporter of engineering and construction skills and products around the world.

The eyes of the world are on the UK’s efforts to deliver a nuclear programme and to see what happens next.