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The Economic Benefit of the Improving the UK's Nuclear Supply Chain

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The Economic Benefit of the Improving the UK's Nuclear Supply Chain The economic benefit of improving the UK's nuclear supply chain capabilities March 2013 March 2013 Contents Executive summary ................................................................................... 3 1 The Nuclear supply chain in the UK ............................................. 13 2 Consultation findings..................................................................... 17 3 International case studies ............................................................. 27 4 Economic impact of nuclear new build – gross impacts........................................................................................... 35 5 Net impact of capability improvements........................................ 61 6 Realising the potential ................................................................... 75 7 Conclusions and summary............................................................ 86 Annex A: Technical annex ...................................................................... 95 Annex B: Sectoral GVA and employment forecasts................................................................................................. 112 Annex C: References............................................................................. 119 The economic benefit of improving the UK's nuclear supply chain capabilities March 2013 Executive summary This study by Oxford Economics and Atkins, quantifies some of the potential economic impacts associated with developing the capabilities of the UK's nuclear supply chain1. The study takes place against the backdrop of the UK Government's policy that new nuclear should be able to contribute as much as possible to the need for new low carbon electricity generating capacity. It is recognised that industry has already set out its plans to develop approximately 16GW of new nuclear power in the UK. Developments of this scale would present significant opportunities in the UK nuclear sector from which the UK supply chain can benefit. The UK Government has therefore stated its commitment to ensuring that the new nuclear build programme not only delivers much of new generating capacity required but also that it delivers economic benefits to the UK including ensuring the nuclear supply chain is well positioned to access UK and long term export markets. As a result of the policy aims with respect to new nuclear, the objectives of this study were to provide: a short review of current UK capabilities to be informed by industry consultations and a review of the literature; international case studies; an assessment of a range of potential levels of domestic content within new nuclear projects in UK; a bottom-up net cost-benefit analysis of scenarios in which UK economic activity is increased above the baseline; and an indicative cost-benefit analysis of policies contained in the Nuclear Supply Chain Action Plan. In this study we define the UK's supply chain capabilities as any work that can be undertaken within the UK. Consultees’ views on current capabilities A consultation exercise with industry bodies and private sector companies in the supply chain was used together with Atkins’ own experience to inform the study and, in particular, the modelling assumptions. It should be noted that there is a significant degree of uncertainty around current capabilities across the various 1 In this study we define the UK's nuclear supply chain capabilities as any work that would be undertaken within the UK. Likewise, the economic benefit to the UK from improving the UK nuclear supply chain is additional gross output, GVA and employment captured within UK boundaries. 3 The economic benefit of improving the UK's nuclear supply chain capabilities March 2013 tiers and component areas of the UK nuclear supply chain, particularly given the considerable length of time since the last nuclear reactor was constructed in the UK and the early stage of the current nuclear programme. The views expressed were however informative in deriving the necessary set of modelling assumptions. We acknowledge that the estimated ranges expressed within this report (with respect to the share of the new nuclear programme that could be captured by the UK supply chain) represent just one view of potential UK activity. It is recognised that it is no more or less valid than other views which various industry groups and participants may hold. It is also acknowledged that the nuclear consortia which have set out plans for new build in the UK may set voluntary ambitions or targets for the proportion of the value of the plant which should be sourced within the UK. In doing so, the subsequent value captured by the UK supply chain could differ somewhat from the range of results presented within this report. Therefore the primary purpose of the subsequent analysis was to demonstrate, under a range of assumptions, the potential magnitude of economic impacts that could accrue to the UK supply chain and the UK economy from the development of a new nuclear programme. Notwithstanding the inherent uncertainty in analysis of this type, the clear and transparent assumptions employed in this study, together with an accepted modelling framework of economic interactions, enabled such an assessment to be made. This provides a clear picture of the potential scale of economic impacts over the period to 2030. In reality, the eventual magnitude and timing of the benefits to the UK from a new nuclear programme will be determined largely by the scale and time horizon of the programme as well as the level of UK supply chain involvement. The results of this analysis should therefore be viewed as illustrative of a range of possible outcomes and dependent on a number of modelling assumptions. In summary the consultation exercise found: There was general agreement that the UK may currently be able to deliver around 45% supply chain requirements. It was suggested that this could rise to approximately 60% if challenges were addressed, barriers were removed, a new build programme gathers momentum and industry was supported; It was felt that the supply chain did not need to undertake significant levels of new R&D to deliver on the new builds. Though it was thought that additional R&D could help open export markets; and All respondents recognised that there is currently an opportunity for the UK’s reputation to be enhanced through delivery of Hinkley Point C. Successful delivery would strengthen the perception of the UK supply chain. This was viewed as being important given the general view that foreign competition was strong and UK firms will face a significant challenge from overseas companies. 4 The economic benefit of improving the UK's nuclear supply chain capabilities March 2013 The value to the UK is still significant The results presented in this report are indicative and are driven by the modelling assumptions on the scale and deployment profile of new nuclear reactors. They represent particular views of potential UK activity and we recognise they are no more or less valid than other informed views which various industry groups and participants may hold. Our modelling suggests that despite limited capability in some areas of the We assume the UK supply chain currently, the UK could benefit substantially from nuclear new build. could capture 44% For modelling purposes we assume that the UK supply chain could currently of the total value capture 44% of the total value of a new nuclear reactor as informed by industry of a nuclear consultations and a review of available evidence. The same process enabled us to arrive at a view in which the UK share rises to 63% of a single reactor as a reactor under result of government intervention and other actions undertaken by organisations current involved in nuclear new build. These interventions and actions may increase the capabilities, rising UK share of a single reactor by increasing the competitiveness of UK firms, or by to a potential 63% realising capabilities in areas where the UK has some potential through with supply chain additional investment (e.g. capital or training). improvements. The UK shares discussed above form the basis of two scenarios modelled in the study, representing current capabilities (Scenario A) and improved capabilities (Scenario B) in the UK. Table 1 shows the assumed UK shares of various nuclear new build activities for an individual reactor commencing construction in 2012 and the associated values2 under Scenarios A and B. Table 1: The UK's share of new build costs of a single 1.65GW reactor, construction commencing in 2012 Scenario B (from third Scenario B relative to Scenario A Reactor value reactor onwards*) Scenario A (additional) (£m, 2012 prices) UK value (£m, UK value (£m, UK share UK value (£m, UK share UK share 2012 prices) 2012 prices) (% points) 2012 prices) Pre-licensing technical & design 311 90% 280 90% 280 0% 0 Regulatory, licensing & public enquiry 5 90%490%40%0 Programme & construction management 331 50% 166 80% 265 30% 99 Civil construction & installation 1,989 60% 1,193 80% 1,591 20% 398 Nuclear Steam Supply System 829 10% 83 25% 207 15% 124 Balance of nuclear island 829 30% 249 60% 497 30% 249 Non-nuclear island 1,326 40% 530 70% 928 30% 398 Instrumentation & control 796 35% 278 35% 278 0% 0 Fuel 209 50% 105 70% 146 20% 42 Infrastructure 6 100% 6 100% 6 0% 0 Total (single reactor, 2012 construction) 6,630 44% 2,894 63% 4,204 19% 1,310 * In Scenario B the UK only attains the higher shares from the third reactor on, with the first two reactors having UK shares equal to Scenario
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