Nuclear is antithesis of an industrial strategy but Catapult soldiers on

Posted on 6 Feb 2013

Centrica’s decision to pull out of the EDF consortium to build nuclear plants at Hinkley Point in Somerset, and Sizewell, Suffolk has had no material effect on the pipeline of work for the British nuclear supply chain, experts say, but it knocks confidence in the UK's overall industrial strategy.

On Tuesday Centrica pulled out of of the nuclear new build programme with EDF Energy, leaving the door open for a Chinese partner to help the French energy company to build Hinkley Point C.

Keith Parker, chief executive of the Nuclear Industry Association, says this decision has no material effect on the proportion of work that British companies will receive from these new build projects.

“EDF is building the EPR (reactor model) and therefore Areva will get the nuclear island contract, which is a given. They may well use some British contractors for part of that work but the rest of the power station – 80% of the build – will be available and British companies can tender for that,” he said.

“The main issue is that they (UK companies) need to demonstrate they are capable and they can compete on price, quality and other metrics. We and the Nuclear AMRC are designed to help them to this. ” Parker adds the Centrica announcement will not devalue this effort at all.

And some suppliers say there will be positive effect on their order book. Vince Middleton, chairman of Newburgh Engineering and a founder of the Nuclear AMRC. “The immediate impact [of Centrica] is that it will secure our work for the AGR reactor fuelling equipment we manufacture, because they’ll have to extend the [component] lives again.”

Middleton says there might be a negative impact on his business in two to three years time when there is an order review. “I can understand why Centrica has done it. We make building nuclear in this country a right pain in the backside. There are too many people having their say and we needed a courageous government to make a simple ‘We’re doing it’ decision years ago.”

Within the forever changing picture, nuclear new build contracts certainly need more detail for the supply base to mobilise.

Hitachi, which bought the assets to the Horizon nuclear power project, has said that based on previous experience, they would localise 60% of the contract. What is not clear is whether Hitachi 60% by number, weight or value of contracts. The detail is crucial; 60% of the number of contracts in the build could be the low value portion, and 60% by weight is a lot of concrete.

At the heart of the matter for engineering SMEs is confidence: confidence to invest in contracts that are secure, confidence that procurement plans won’t change.

Could all bets be off for the UK supply base if a Chinese partner joins up with EDF on Hinkley Point? “I very much doubt that will happen,” says the NIA’s Keith Parker. “I can’t speculate on that, but it’s not a risk for UK manufacturers. The ownership within the consortium is not a major factor in determining who in the supply chain will get the work.

Whatever Centrica means for the UK nuclear new build supply chain, the loss of the last potential British owning partner highlights a sad and shameful truth of British industrial policy.

Had the government not sold our nuclear capability in the first place, we could be selling an indigenous, Anglo-American designed and built nuclear reactor (Westinghouse), which some argue to be a superior technology to the Areva AP design, to the world.

That surely would have been a far better example of industrial strategy than the multinational, on-off, hot-cold composition of Britain’s existing nuclear industry, as an exporting sector in its own right, whose future is now beyond the control of any British company or government.

Professor Keith Ridgway, head of the Nuclear AMRC in Rotherham says the industry needs to look forward rather than backward, and become competent for a range of nuclear capabilities when any future work comes to the UK

“We don’t have a British reactor, but we never did have,” he says.

“There is effectively a US, French and Japanese reactor. What we are all hoping for is a reasonable slice of the supply chain of whichever reactor is put into the UK. Parts such as vessels, pump cells, piping, reactor internals etc. The aim is that those will get into the main supply chain. And this is for Gen 3 [Generation 3] reactors.

“Globally, and there’s no reason why the British can’t be a big player in this – we should be looking at Gen 4, modern reactors at 200MW. In my view that will be the future because, check the US nuclear sector websites, but the capitalisation of the companies who will use these is more than $70bn.”

A brief history of UK nuclear strategy:

2006 – Westinghouse Electric Company sold by BNFL to a group led by Toshiba.
January 2008 – Labour government publishes ‘Meeting the Energy Challenge’, a white paper that commits the government to nuclear power.
September 2008 – EDF agrees to buy British Energy for the £12.5 billion “in a move set to kick-start the UK’s nuclear power strategy” (The Daily Telegraph).
May 2010 – Coalition government takes office. Reaffirms its commitment to nuclear power in the UK.

So Britain sells its nuclear build capability and only major energy utility with the scale to deliver nuclear at about the same time the government commits to developing nuclear power.