BEIS Consultation on Building our Industrial Strategy ; Nuclear Industry Association response

Transcription

1 April 2017 BEIS Consultation on Building our Industrial Strategy ; Nuclear Industry Association response The Nuclear Industry Association (NIA) welcomes this opportunity to respond to the Government s consultation on its proposed industrial strategy. NIA is the trade association and information and representative body for the civil nuclear industry in the UK. It represents around 260 companies operating across all aspects of the nuclear fuel cycle, including the current and prospective operators of nuclear power stations, the international designers and vendors of nuclear power stations, and those engaged in decommissioning, waste management and nuclear liabilities management. Members also include nuclear equipment suppliers, engineering and construction firms, nuclear research organisations, and legal, financial and consultancy companies. Many of these companies will be making their own responses to the consultation reflecting their specific fields of interest. However the NIA has undertaken extensive consultation on the proposed strategy and this submission makes some broader points, based on feedback received, on behalf of the nuclear sector as a whole. Separately and at the Government s request the NIA is in the process of putting together specific proposals for a sector deal between the Government and the UK nuclear industry. This work is being led by Lord Hutton (NIA Chairman), with the support of the reconstituted Nuclear Industry Council, and will be the subject of further discussion with Government during the course of the year. Summary of key points The NIA welcomes the Government s proposed strategy, which should enable Government and industry to work together to grow the economy and improve competitiveness. However to be effective it must be properly coordinated, and prioritised across Government.

2 The nuclear industry is a key industrial sector. An effective strategy could help the UK supply chain maximise its contribution both at home and overseas. The strategy should take account of experience overseas and build on existing work, including the 2013 Nuclear Industrial Strategy. The UK needs to increase its investment in R&D, and nuclear should be a priority sector. Government should implement the recommendations of the Nuclear Innovation and Research Advisory Board (NIRAB), including R&D support for Small Modular Reactor technology, and maintain the commitment to spend 250 million over next five years on nuclear R&D. Government should take a decision on plutonium reuse as soon as possible. The UK should continue to be at the vanguard of future fusion deployment. From a nuclear perspective there should be a clear strategy for medium to long term innovation and research, built where possible on pre-existing structures. UK industry, including the nuclear sector, is facing a critical shortage of engineering and technological skills and the NIA supports Government s initiatives to stimulate take up of STEM subjects in colleges and schools. The Nuclear Skills Strategy Group has launched a Nuclear Skills Strategic Plan, which should be supported. It is vital that the UK nuclear supply chain can continue to draw on skilled workers overseas. NIA supports Government s vision for a new technical education system, but industry should be involved in deciding core technical routes. The UK s new nuclear build projects can help secure the transition to a low carbon electricity system but require the continuation of the Government s Electricity Market Reform framework. Government should consider additional incentives to ensure that risks are allocated appropriately for key national infrastructure projects. The Office for Nuclear Regulation (ONR) must be appropriately resourced, and progress maintained on identifying a site for a geological disposal facility (GDF). The shift to a low-carbon economy should be achieved in the most cost-effective way. New nuclear will provide generation at a lower cost than most other large scale low carbon generation, but the industry will work to ensure it becomes more competitive. Building follow-on stations of the same design is the most cost effective means of reducing costs. The NIA supports a co-ordinated regional approach to delivering inward investment. In terms of public procurement, the Nuclear Decommissioning Authority must maintain progress on nuclear decommissioning to provide maximum value to taxpayers. Global investment in nuclear represents an enormous opportunity for the UK and Government and industry must work closely together to maximise the potential. Government needs to ensure there is no disruption to nuclear business post Brexit.

3 Response to questions Summary Q1 A1 Does this document identify the right areas of focus: extending our strengths closing the gaps; and making the UK one of the most competitive places to start or grow a business? We believe the paper has identified the key areas of focus for a modern industrial strategy, although it would be helpful if it also provided information on the funding to be made available to bring this to fruition. The competiveness of our economy will become ever more important as the UK leaves the EU, and a successful industrial strategy building on our strengths, improving productivity, and bringing best practice to the UK can play a key role in achieving this. As the green paper recognises, the Government s strategic approach to the energy sector has already resulted in EDF Energy s decision to proceed with the construction of Hinkley Point C in Somerset, in partnership with CGN. EDF Energy also plan to develop a further site, Sizewell C, in Suffolk and EDF Energy will work with CGN on its proposed plant at Bradwell B in Essex. Two other nuclear new build developers Horizon Nuclear Power and NuGeneration - are progressing plans for further projects at Wylfa Newydd in Wales (and subsequently Oldbury in Gloucestershire), and Moorside in Cumbria. Given the contribution these projects will make to meeting the UK s energy security and carbon reduction objectives, and to the national economy, it is vital that Government and industry continue to work closely together to progress them. An important element will be the continuation of key policy measures such as the Contracts for Difference arrangements to provide price certainty and strong carbon pricing, and appropriate funding for a strong independent regulator in the ONR see response to Q15. The specific long term and capital intensive nature of nuclear projects means they require Government to put in place appropriate support arrangements. However this also results in lower costs and a better deal to the consumer, as well as bringing forward considerable benefits to the national and local economy in terms of jobs, skills and global competitiveness. For example the Hinkley Point C project will bring forward at least 25,000 job opportunities and 1,000 apprenticeships during construction, and 900 full time jobs when operational. Moreover 64% of the project s construction value is expected to be placed with UK companies. Several billion pounds of contracts have already been announced, including nearly 500 million in the South West. Q2 A2 Are the ten pillars suggested the right ones to tackle low productivity and unbalanced growth? If not, which areas are missing? We believe these are the right pillars to meet the Government s objective of driving growth across the economy and country. From the nuclear industry perspective all the pillars are important, particularly those relating to investment in science, research and innovation;

4 developing skills; upgrading infrastructure; and trade and investment. Given the impact of large nuclear infrastructure projects in bringing benefits to specific locations, the pillars relating to place are also important. More generally, from the nuclear industry s perspective, as noted above a long term and stable policy framework is an essential pre-requisite for continued growth. However the nuclear sector is a key industrial sector and a successful industrial strategy can enable the supply chain to maximise its participation in the UK s investment in nuclear energy production to the benefit of the national and local economy. It could also, particularly through increased innovation and R&D, help re-establish the UK as a global player see our response to questions 24 and 25. Q3 Are the right central government and local institutions in place to deliver an effective industrial strategy? If not, how should they be reformed? Are the types of measures to strengthen local institutions set out here and below the right ones? A3 From the central Government perspective it makes sense for the industrial strategy to be led by the Department for Business, Energy and Industrial Strategy, which has policy responsibility. However the ultimate success of the strategy will depend on how effectively it is taken into account and given priority across the whole range of Government decision making, including funding allocation. No 10 will have a key role in ensuring this happens. To ensure a coherent approach there might also be a case for establishing a joint implementation team led by BEIS but also involving other key departments such as, the Treasury, the Department for International Trade and the Department for Communities and Local Government, as well as the National Infrastructure Commission. The Welsh and Scottish administrations should also be consulted. In terms of bringing together sectors and places, we believe the emphasis should be on strengthening existing institutions rather than creating new ones. It is also important a coherent approach is taken at the local level to ensure the right infrastructure is in place to meet local growth priorities. Local Enterprise Partnerships (LEPs) and Enterprise Zones work closely with business groups in their regions and will have a good understanding of the business priorities. Looking specifically at the nuclear sector, LEPs in the South West, Cumbria and the East of England work with nuclear specific interest groups to help the supply chain and other businesses in those regions. There are also strong best practice examples in this area of LEPs from different regions sharing information and best practice on nuclear new build. In terms of financial encouragement the proposed introduction of the new 100% business rates retention system from the financial year could play a key role in incentivising local authorities to attract business investment and promote local economic growth and development.

5 Q4 Are there important lessons we can learn from the industrial policies of other countries which are not reflected in these ten pillars? A4 Whilst recognising that national circumstances vary and the UK may face different challenges to those overseas, it clearly makes sense to learn as much as possible from overseas experience. Other countries have successfully reenergised their economies through government-led industrial programmes including Taiwan, India and China. In these countries Government has often played a strong, proactive role in driving specific sectors and the UK should do the same. The nuclear sector deal is an opportunity to do this. In particular South Korea has built up an important nuclear capability - which it is now marketing successfully overseas. All of these could provide useful lessons for the UK. For example an industrial strategy here supporting the UK supply chain to provide high value content in the current new nuclear build projects could lead to major opportunities in follow on projects overseas. In this context it should be noted that the previous Coalition Government established a series of industrial strategies to grow commercial opportunities and stimulate economic growth and job creation. These included the Nuclear Industrial Strategy, which led to some valuable work across the nuclear sector. This included the creation of Fit for Nuclear, originally part of the Manufacturing Advisory Service and now run by Nuclear AMRC, which has helped over 600 companies understand how they can get their business ready to bid for work on nuclear projects. Other work looked at advice on R&D priorities and the investigation of the potential opportunities from SMR technology that could reposition the UK as a leading nuclear nation. The new industrial strategy should build on this existing strategy, rather than seek to replace it wholesale. Pressing ahead with SMR development in the UK, for example, could not only help meet our energy policy objectives but could help revitalise STEM skills, sustain and create new jobs, and grow a commercially viable and sustainable industry with major potential in overseas markets. The National Nuclear Laboratory s 2014 feasibility study estimated the potential global market as approximately 65-85GW by 2035, valued at billion. Looking at decommissioning the UK leads the world, for example in its knowledge of working in high hazard areas, and its expertise is much in demand. The Industrial Strategy should build on these areas. As we look to develop a GDF to store our nuclear waste, the experience of other countries in developing their own stores in Finland and Sweden for example should not be ignored and best practice taken from their efforts. Investing in science, research and innovation Q5 A5 What should be the priority areas for science, research and innovation investment? Research and innovation is a key driver for economic growth and the NIA therefore welcomes the Government s commitment to increase its direct funding. As the consultation paper notes, the UK has historically invested a lower proportion of GDP in R&D funding than

6 the OECD average and it is important to correct this if the UK is to maintain its competitiveness in world markets. Given the nuclear sector s role in meeting the UK s energy policy objectives over the long term, it should be one of the priority areas for this investment. This will not only help inform the Government s future policy choices but assist the UK nuclear supply chain to re-establish its capability to contribute across the nuclear fuel cycle, from new nuclear construction through to decommissioning and waste management. Importantly it could also support the performance of the UK s existing nuclear fleet and the decommissioning of our nuclear legacy. For example bringing forward the deployment of accident tolerant fuels could significantly improve the efficiency of light water reactors, lowering their operating costs. Innovation might also help reduce the NDA s total liability by improving the techniques employed to address key areas. Looking further ahead we believe the Government should implement the recommendations of the Nuclear Innovation and Research Advisory Board (NIRAB) on the level, approach and co-ordination of nuclear innovation and R&D. A key area will include R&D support for Small Modular Reactor (SMR) technology which could provide an important export opportunity for the UK industry see our response to question 4. This and other advanced technology could also create opportunities for new innovation and R&D opportunities to deliver future generations of home grown technology. Other areas identified for R&D support include future fuels (see above), 21 st century manufacture, and recycling fuel for use in fast reactors. In terms of the latter the NIA would like to see the Government commit to develop a policy for plutonium reuse as soon as possible. This would not only turn the UK s plutonium stockpile from a cost liability into an economic asset, but enhance the UK s energy security through low carbon generation. It would also set an example in managing plutonium responsibly, and provide high quality jobs and skills. We also believe the UK should continue to be in the vanguard of fusion development. On a related issue, Government will be aware that international collaboration in scientific research and development is vital for the nuclear sector, both in the UK and overseas. The UK is currently a lead player in the ITER and JET fusion programmes, and other long term nuclear related programmes, through Euratom. It is important that arrangements are put in place to ensure this collaboration can continue following the UK s departure from the EU and from Euratom. Finally, nuclear research is currently supported by a range of different funding bodies, with little co-ordination. As a result potential synergies have been lost, and it would make sense for those different streams to be overseen or co-ordinated by a single body. If NIRAB is not replaced, we believe Government should consider giving this role to NNL.

7 Q6 A6 Which challenge areas should the Industrial Challenge Strategy Fund focus on to drive maximum economic impact? The challenge areas set out in the consultation paper seem sensible. In particular the Fund should provide increased investment in low carbon energy projects that can deliver economic benefits for the UK, including aspects of the nuclear fuel cycle. This could include helping Government to support the planned nuclear new build projects; incentivising investment in nuclear and engineering capability and capacity; helping increased productivity in construction; and assisting the development of new technologies, such as SMRs and plutonium reuse, which could give the UK supply chain a lead internationally. As noted in our response to question 5, we believe the Government should implement NIRAB s recommendations for long term research. With regard to short to medium term innovation priorities the NNL is working with industry and academia to develop a Nuclear Innovation Strategy which can be used to shape priorities for funding, and some of this, for example work on robotics, could have application in other sectors. Q7 A7 What else can the UK do to create an environment that supports the commercialisation of ideas? Whilst the private sector can develop ideas through to commercialisation where there is a defined economic benefit, longer term projects (such as SMRs) require Government funding to get them to the stage where the commercial case is clear. It is important therefore that the Government s November 2015 commitment to spend 250 million over five years on nuclear R&D is maintained, and sustained into the future. In the nuclear sector, the NNL has established a strategic Nuclear Innovation Hub to connect industrial challenges to innovation, encourage collaboration, and help commercialisation. It is hoped this will lead to a step change in the impact R&D has in reducing costs and timescales for nuclear programmes. Innovation in the supply chain will help the new build developers deliver their projects. Q8 A8 How can we best support the next generation of research leaders and entrepreneurs? Ensuring consistency in the Government s approach to supporting research areas would be a useful first step. In terms of the nuclear industry the commitment of successive governments to a UK new nuclear build programme has been very helpful in restoring confidence in the long term future of the sector. This in turn has encouraged participation, both from academia and industry. Government support for long term R&D, including SMRs, will increase this further. It should be noted that over the course of its nuclear programme the UK has built up a body of world class nuclear subject matter experts but their age profile means a significant proportion will retire within the next 5-10 years. The Nuclear Industrial Partnership has created a programme to develop subject matter experts for the future, and Government should make available funding to support this.

8 Q9 A9 How can we best support research and innovation strengths in local areas? From a nuclear sector perspective the first priority is to identify a clear strategy for medium to long-term innovation and research. Where possible it would make sense to build this on pre-existing structures including Universities, business groups and industry specific business clusters or in the locations nearest to where the research is needed. Developing skills Q10. What more can we do to improve basic skills? How can we make a success of the new transition year? Should we change the way that those resitting basic qualifications study, to focus more on basic skills excellence? A10 UK industry, particularly the nuclear sector, is facing a critical shortage of engineering and technological skills. We therefore strongly support initiatives to stimulate the take up of STEM subjects in schools and further education colleges. The NIA also supports the Government s ambition to ensure everyone has the basic skills required to prepare them for further study or employment, particularly STEM skills, digital skills and numeracy; as the paper notes the UK has historically lagged in this area and correcting this should help raise the UK s (comparatively low) levels of productivity. In this context we also support the principal of a transition year to enable individuals to fill the gaps in their basic skills, although to ensure it is effective, the approach taken to testing progress should be practical and real world rather than academic. The nuclear industry is committed to skills development and has established the Nuclear Skills Strategy Group (NSSG), which is an industry-led strategic group, comprising employers, government and trade unions representing both the civil and defence sectors. The NSSG has recently launched a Nuclear Skills Strategic Plan see answer to Q13. The nuclear industry currently has 1,200 apprentices across the sector according to the NIA s 2016 Jobs Map. There has also been significant investment in training facilities such as EDF Energy s Cannington campus in Somerset, and the National College for Nuclear (NCfN), with sites under construction both in the North West and South West of England. The NCfN is developing a Level 3 transition qualification which directly addresses the basic science, maths and English qualifications. Q11 A11 Do you agree with the different elements of the vision for the new technical education system set out here? Are there further lessons from other countries systems? The NIA broadly supports the Government s approach, which should enable those students who decide not to go to university to achieve technical qualification that allow them to attain a level of professional competence that will benefit industry. The introduction of new Institutes of Technology could help achieve this, although clarification is required on how this will cover the needs of the whole country, and how the new bodies will fit with the existing National Colleges. In the nuclear sector a NCfN has recently been launched and the National Skills Academy for Nuclear (NSAN) has a high quality provider network with five flagship centres across the UK. It is important that new institutions do not duplicate their

9 activities, and in the case of nuclear perhaps consideration should be given to providing funding for programmes rather than capital expenditure. With regard to the proposed creation of core technical routes, the Government needs to consider how they will fit with the existing qualification systems. It is important that industry (including the nuclear sector) is fully involved in deciding which areas are necessary to meet specific industrial requirements, not least because in the engineering and nuclear sector, training tends to have a higher academic content and this needs to be reflected. The recent reform to apprenticeships and use of Trailblazers worked well and this system could be replicated in creating these technical routes. In this context the proposal for high quality placements is a laudable ambition but might raise some practical challenges to employers in terms of costs and resources in challenging economic times. This will also be exacerbated by the new apprenticeship targets and levy. The NSSG has written to Ministers in BEIS and the Department for Education on this issue proposing flexibility in the use of Apprenticeship Levy credits that are not used by companies on training their own staff, so funds are retained in the sector and supply chain. This could help overcome this problem. More generally we believe constant changes to the further education system over recent years has led to a lack of clarity on the part of both employees and students. To correct this, it would help, once the current improvements have been instituted, if there could be a period of stability. Q12 A12 Q13 How can we make the application process for further education colleges and apprenticeships clearer and simpler, drawing lessons from the higher education sector? We agree that a more accessible approach for applying to technical colleges would simplify the process. Since apprenticeships are essentially jobs, application processes will be different and should be designed accordingly. What skills shortages do we have or expect to have, in particular sectors or local areas, and how can we link the skills needs of industry to skills provision by educational institutions in local areas? A13. As stated in the response to Q10 the nuclear industry is facing a critical shortage of engineering and technological skills, and this issue is likely to be a key element of the Nuclear Sector Deal. With plans for nuclear new build, decommissioning and the Ministry of Defence s Dreadnought class submarine replacement programme coinciding over the next decade there will be significant growth in the nuclear workforce, with the NSSG s national workforce assessment projecting a growth in total employment rising from 80,000 in 2015 to 110,000 in Much of this growth relates to higher level STEM skills. This requirement will not be met without careful planning, and last year the NSSG launched a Nuclear Skills Strategic Plan to ensure UK nuclear employers can recruit skilled people at the required rate to meet the sector s forward programme. The Strategic Plan is

10 underpinned by five themes: meeting the demand; training infrastructure and provision; training standards and qualifications; a clearly defined and NSSG-endorsed skills delivery model; and an agreed nuclear timeline and clarity of demand requirements. It sets out 19 actions, ranging from group training arrangements for apprentices and new bursary schemes through to a clear national curriculum and regional skills initiatives. The NIA is supporting the NSSG to develop this strategy. It is also supporting the activities of the NSAN including its High Quality Provider Network and the NCfN which are helping to deliver this strategy. In terms of local issues nuclear supply chains are often clustered together in discreet geographical areas such as Cumbria or the South West where they make a major contribution in providing high quality jobs and careers. The NSSG is therefore encouraging Local Enterprise Partnerships (LEPs) spending on nuclear related activities and it would make sense for Government to support LEPs in prioritising spending in these localities on nuclearrelated activities. In addition to developing the provision of UK skills, it is crucial that the nuclear supply chain can continue to draw on the skilled workers it needs from overseas to contribute to its new nuclear build and other construction programmes. Continued access to those skills not available in the UK from within the EU and further afield must be a priority for Government in its negotiation over the UK s departure from the European Union. Q14 A14 How can we enable and encourage people to retrain and upskill throughout their working lives, particularly in places where industries are changing or declining? Are there particular sectors where this could be appropriate? As referred to in Answer 13 there are likely to be severe pressures on engineering and technological skills availability once the UK s nuclear new build and other nuclear programme get underway. As a result there could be significant opportunities over the next decade for employees in other industries, once they have acquired the appropriate skills, to transfer into the nuclear sector. These could include for example employees from the oil and gas and the defence industries which have significant synergies with the nuclear sector. With this in mind, nuclear employers have developed a range of programmes to help people transitioning into the nuclear sector, including a number of programmes offered by NSAN. Curricula are being reviewed by the NCfN to ensure suitable qualifications are in place to provide the transition training required by transitioners. Upgrading Infrastructure Q15 A15 Are there further actions we could take to support private investment in infrastructure? EDF Energy is continuing to invest in its existing nuclear stations to maintain their performance and deliver planned life extensions for the current nuclear fleet. Given their contribution to energy security and meeting the UK s carbon reduction targets it is important the current regulatory framework particularly strong carbon pricing through the Carbon Price Floor are maintained.

11 Beyond this the UK needs a balanced generation mix of nuclear, renewables and gas to provide the most affordable route to a secure and low carbon system. The plans of the four new build developers to construct 18 GW of new nuclear build in the period to the mid- 2020s will help provide this, as well as bringing major benefits to the UK economy in terms of jobs, skills and global competitiveness. There will also be significant local economic and social impacts, particularly in terms of employment and expenditure. From an industrial perspective these large infrastructure projects will also help put the UK supply chain in a position to compete for nuclear business overseas, particularly if they succeed in becoming part of a reactor vendor s established supply chain. World nuclear power capacity is increasing steadily, with over 60 reactors under construction in 15 countries the highest rate of new build in 25 years. As the UK adjusts to a more globally focussed post Brexit economy this could become particularly important in terms of our broader industrial strategy. As noted in our response to question 1 the Government s strategic approach to the energy sector has already resulted in EDF Energy s decision to proceed with Hinkley Point C, and the Government needs to work closely with the other developers to enable their projects to proceed. This includes the continuation of successful existing policy measures such as Electricity Market Reform arrangements to provide price certainty and the UK Guarantee Scheme, and consideration of other measures to ensure that risks are allocated appropriately for key national infrastructure projects. It is also important that appropriate funding is agreed for a strong, independent regulator. The ONR is highly regarded both in the UK and internationally, and underpins the industry s activities both at home and overseas. The UK s nuclear new build programme will put additional pressure on the ONR and it is important it has the resources to deal with them. Similarly the Government needs to take forward its plans to identify a site for the development of a Geological Disposal Facility for higher activity waste see response to question 16. Associated infrastructure, including enhanced road, rail and sea links, is an important aspect of large infrastructure projects and could usefully be co-ordinated where relevant in a joined up long term regional approach. Whilst LEPs will have a role to play alongside developers the National Infrastructure Commission could also play a key role in coordinating this activity. The Government should also consider prioritising communities hosting infrastructure projects, such as nuclear plant, for additional investment. This would help them maximise the opportunities for growth in terms of creating business clusters and hubs for innovation. Since these areas are often located away from established economic growth areas this should help spread benefits across the UK.

12 Q16 A16 How can local infrastructure needs be incorporated within national UK infrastructure policy most effectively? As explained in the response to Q14 the nuclear new build projects are national infrastructure projects that will meet national needs, but also have a major impact locally. Whilst there will be obligations on the developer to mitigate the effects of a project, for example in enhanced transport links, it would make sense for this to be considered in a regional approach that could consider how this inward investment into an area could be delivered most effectively. The work being undertaken to enhance local transport links through the Northern Powerhouse and Midlands Engine will help with local improvements. Another nuclear national infrastructure project is the GDF that will ultimately house the UK s nuclear waste. This project is being taken forward by Radioactive Waste Management (RWM), a subsidiary of the Nuclear Decommissioning Authority. Given its significant local impact this should also be considered as part of a regional approach. Q17 A17 What further actions can we take to improve the performance of infrastructure towards international benchmarks? How can government work with industry to ensure we have the skills and supply chain needed to deliver strategic infrastructure in the UK? The proposed Infrastructure and Projects Authority review should help identify new measures for improving the performance of infrastructure. More generally as noted earlier, there are a number of large scale infrastructure projects in prospect - such as the nuclear new build and naval submarine programmes, as well as other energy infrastructure and transport construction projects which will all compete for scarce skills and resources. Co-ordination between industries in identifying requirements could help overcome this problem. In the case of the UK s nuclear new build programme the EDF Energy, Horizon Nuclear Power and NuGeneration projects all use designs that have been or are being constructed elsewhere. This will enable the developers to benefit from the lessons learned from experience overseas, and for government to be able to assess where good practice and performance has been demonstrated elewhere. Given that all of these projects are using overseas designs with established supply chains, the Government also needs to ensure that UK companies are able to access and benefit from potential contracts. Supporting businesses to start and grow It is the NIA s view that individual members will be best placed to answer these specific questions. Q18 Q19 What are the most important causes of lower rates of fixed capital investment in the UK compared to other countries, and how can they be addressed? What are the most important factors which constrain quoted companies and fund managers from making longer term investment decisions, and how can we best address these factors?

13 Q20 Q21 Q22 Given public sector investment already accounts for a large share of equity deals in some regions, how can we best catalyse uptake of equity capital outside the South East? How can we drive the adoption of new funding opportunities like crowdfunding across the country? What are the barriers faced by those businesses that have the potential to scale-up and achieve greater growth, and how can we address these barriers? Where are the outstanding examples of business networks for fast growing firms which we could learn from or spread? Improving Procurement Q23 Q24 A24 Are there further steps that the Government can take to support innovation through public procurement? What further steps can be taken to use public procurement to drive the industrial strategy in areas where government is the main client, such as healthcare and defence? Do we have the right institutions and policies in place in these sectors to exploit government s purchasing power to drive economic growth? The nuclear industry s key relationship with public procurement is through the NDA which oversees the decommissioning of the UK s nuclear legacy. The UK s nuclear legacy represents the largest, most important environmental remediation programme in Europe, and the NDA s budget is over 3 billion per annum. Significant progress has been made in implementing this vital national programme, but it is important both for the national interest and for the nuclear supply chain - that this momentum is maintained. A stop-start approach would result in significant additional costs and would be poor value for the taxpayer. Maintaining progress on decommissioning is also important for the UK s nuclear supply chain. The NDA currently spends over half its annual budget ( 1.7 billion) with companies throughout the UK, with almost a third of that with highly innovative SMEs. Many of these companies have invested heavily in the skills and equipment required to implement the programme, and this capability and investment could be in jeopardy if the programme is not maintained. From the international perspective we welcome the support the NDA has given to the Government and industry s ambition to re-establish the UK as a global leader in the civil nuclear industry. This support has been particularly helpful in enabling the supply chain to rebuild the industry s international decommissioning credentials, for example in Japan and China, and it is important this should continue, given the huge scale of the international decommissioning market.

14 Encouraging Trade and Investment Q25 A25 What can the Government do to improve our support for firms wanting to start exporting? What can the Government do to improve support for firms in increasing their exports? Global investment in nuclear new build, existing reactor operations and waste management and decommissioning programmes represents enormous opportunity for the UK nuclear supply chain with its extensive front and back end experience. The World Nuclear Association estimates the value of investment in new nuclear build to 2035 is of the order of $1.5 trillion, with significant international procurement of $24-30 billion a year after The market for decommissioning is also substantial. This market can be best exploited by means of a strong Government/industry partnership and a coherent UK offer, and the nuclear industry is working closely with the Department for International Trade s nuclear team to achieve this, collaborating on outward and inward missions, and other initiatives. The UK supply chain and skills infrastructure has major strengths and UK companies have already won major business across Europe, the US and the Far East, and others are in prospect. Given the importance of overseas trade in the post Brexit world it is important this collaboration continues to bring these to fruition. One means of increasing the supply chain s competitiveness in the global market would be to commence a programme of funded R&D in advanced reactors and advanced fuels, as recommended by NIRAB our response to A5 refers. With regard to Brexit, a key short term issue is the need to ensure there is no disruption to nuclear business, including the industry s exporting activities, as a result of the UK s decision to leave the Euratom Treaty. Euratom arrangements currently underpin the industry s operations across the whole fuel cycle and it is crucial that the Government has a clear plan to ensure that alternative arrangements are in place to avoid any cliff-edge. More generally, increasing the availability of credit could be helpful in promoting exports, and the Government s decision in the Autumn Statement to double UK Export Finance capacity is welcome. In view of the opportunities outlined above the nuclear sector should be a key area for its attention. Q26 A26 What can we learn from other countries to improve our support for inward investment and how we measure its success? Should we put more emphasis on measuring the impact of Foreign Direct Investment (FDI) on growth? The UK has been very successful in attracting such investment into the nuclear sector with four new nuclear build projects at Hinkley Point C, Wylfa Newydd, Moorside and Bradwell B. As stated in the response to Q15 it is vital the Government s strategic approach, including its regulatory approach and other incentives, enables these projects to proceed to completion, but it is worth noting that stable and continued policy will be important in attracting inward investors for such large scale infrastructure projects.

15 Delivering affordable energy and clean growth Q27 A27 What are the most important steps the Government should take to limit energy costs over the long-term? The Government is clearly right to ensure the shift to a low carbon economy is achieved in the most cost-effective way, minimising the cost to businesses, taxpayers and consumers. The UK s competitiveness will become ever more important as it seeks to develop new markets after leaving the EU. In terms of electricity generation the UK needs huge investment in new capacity. Since % of our capacity has closed, and by the end of 2030 a further 35% of that 2010 capacity will shut down. It is vital a start is made on building new low carbon technology to replace this new nuclear, renewables and potentially also Carbon Capture and Storage. As described earlier, four developers - EDF Energy, Horizon Nuclear Power, NuGeneration Ltd and GNS (the joint venture between CGN and EDF Energy) have plans for 18GW of new nuclear build in the period up to the mid-2020s, and the Government announced its decision to proceed with the first of these projects, Hinkley Point C, in September. Taken together these projects will not only help secure the UK s energy policy and climate objectives but bring enormous benefits to the UK economy in terms of jobs, skills and our global industrial competitiveness. These are long term capital intensive projects entailing a combined investment of more than 60bn that will require significant investment over a long timeframe. This will not be forthcoming without stability in energy policy. The continuation of the Government s current support measures, including the CfD arrangements that offer stable and predictable prices for the duration of the contract; the Capacity Market; and carbon price support, is therefore very important in providing potential investors with the confidence that their investments will earn a return. They will also give customers confidence that prices will be more stable. As recognised (in the industrial strategy) the Government should consider additional incentives to de-risk large low carbon projects including nuclear and facilitate the development of nuclear power at the best possible price for consumers. These could include measures such as taking an equity stake in future projects or providing loan guarantees or export financing with a view to allowing market investment to come forward on favourable terms. Once constructed, new nuclear plant will provide generation at a cost lower than most other large scale low carbon generation, and competitive with new fossil plant once the cost of carbon is considered. To take Hinkley Point C as an example and based on the Government s assumptions for gas and carbon costs, the average lifetime cost of a new gas-fired plant opening in 2024 at 95/MWh is slightly higher than Hinkley s 92.50/MWh. Of course the nuclear industry needs to ensure that it becomes even more competitive, and work is underway to facilitate this. Based on experience overseas, building a fleet of stations of similar design is the most effective means of reducing generation costs, so it is important

16 that the industry s new build plans are not abandoned prematurely and progress to follow on stations at each of the sites. Effective planning and project management can also have a major impact on limiting cost escalations. Research and innovation in the nuclear sector is also important, not only in securing cost efficiencies in new nuclear build and decommissioning but in supporting a supply chain where the UK s expertise has enormous potential see A25. Q28 A28 Q29 A29 How can we move towards a position in which energy is supplied by competitive markets without the requirement for on-going subsidy? The NIA believes that so far as possible the Government should continue to provide a framework in which all low carbon technologies are treated equitably. However given their very different characteristics, the diverse low carbon technology types, for example nuclear and wind power, require different facilitative measures to make them viable. It would not therefore make sense for them to compete directly, because the outputs are not directly comparable. An effective low carbon electricity system will need both sources and other technologies, including storage and demand side management to optimise a balanced and secure supply. How can the Government, business and researchers work together to develop the competitive opportunities from innovation in energy and our existing industrial strengths? As noted NIRAB has made a major contribution to the potential future success of the UK nuclear industry through its advice to Government on the level, approach and co-ordination of nuclear innovation and R&D to keep future energy options open, and it is important its recommendations are followed up by Government. Research and innovation will be important if we are to maximise the potential of the nuclear sector in terms of low carbon energy and economic growth, particularly through exports. UK supply chain provision of, for example, accident tolerant fuels could be key to carving out a larger UK share of international nuclear markets. Innovations in decommissioning could also be important. Against this background there is a need for a successor body of some type to take this forward, and the NIA believes NNL could be well placed to undertake this role. Similarly there is major potential for UK involvement in the world market for SMRs, and we have been disappointed the Budget 2016 commitment to publish an SMR roadmap during last year has not as yet been met. The lack of any substantive Ministerial statement has led to concerns in the supply chain that Government may have lost interest, and a significant commercial opportunity will be lost. It is important Government makes an early statement about its continued interest and plans for taking the SMR programme forward. Q30 How can the Government support businesses in realising cost savings through greater resource and energy efficiency? Cultivating world-leading sectors

17 Q31 Q32 Q33 How can the Government and industry help sectors come together to identify the opportunities for a sector deal to address especially where industries are fragmented or not well defined? How can the Government ensure that sector deals promote competition and incorporate the interests of new entrants? How can the Government and industry collaborate to enable growth in new sectors of the future that emerge around new technologies and new business models? A31-33 As noted in the introduction to this response the Nuclear Industry Council has been tasked with developing proposals for a nuclear sector deal. This work is being led by Lord Hutton, joint Chair of the reconstituted Nuclear Industry Council, and is likely to be further discussed with Government during this year. Driving growth across the whole country Q34 A34 Do you agree the principles set out above are the right ones? If not what is missing? The principles set out in the paper seem sensible. Local Authorities, Local Enterprise Partnerships and the education sector must work together with Government to deliver growth across the whole country. The nuclear sector provides employment and economic benefits across much of the country, including some remote or relatively less prosperous areas. The current nuclear new build plans will have a major beneficial impact on local economies providing a massive boost during construction and providing long term high quality employment through their operating lifetimes of 60 years or more. As explained, the Hinkley Point C project will provide 25,000 jobs during construction and 900 jobs when operational, and the Moorside and Horizon projects will be broadly comparable. Collaboration with local businesses, through local business groups (Chambers, CBI, FSB) and regional business clusters supported by the Local Enterprise Partnership and Enterprise Zones can deliver innovative solutions that benefit the local economy. Q35 A35 What are the most important new approaches to raising skill levels in areas where they are lower? Where could investments in connectivity or innovation do most to help encourage growth across the country? As set out in our response to Q10 the nuclear sector is facing a critical shortage of engineering and technological skills over the next few years, and is taking action through the NSSG which has drawn up a Strategic Plan to ensure the industry s needs are met. In terms of local issues, nuclear supply chains are often clustered together in discreet geographical areas such as Cumbria or the South West where they make a major contribution in providing high quality jobs and careers. There are already well established bodies in these areas the Centre of Nuclear Excellence (CoNE) in Cumbria, and the South West Nuclear Hub in Bristol. The NSSG is encouraging LEP spending on nuclear related

18 activities and it would make sense for Government to support LEPs in prioritising spending in these localities on nuclear-related activities Creating the right institutions to bring together sectors and places Q36 Q37 Q38 A38 Recognising the need for local initiative and leadership, how should we best work with local areas to create and strengthen key local institutions? What are the most important institutions which we need to upgrade or support to back growth in particular areas? Are there institutions missing in certain areas which we could help create or strengthen to support local growth? A coherent approach needs to be taken at the local level to ensure the right infrastructure is in place to meet local growth priorities. As suggested in our response to Q15, associated infrastructure, including enhanced road, rail and sea links, is an important aspect of large infrastructure projects and could usefully be co-ordinated, where relevant, in a joined up long term regional approach. Existing organisations such as the CoNE and South West Nuclear Hub, together with the LEPs, have a key role to play alongside developers and potentially the National Infrastructure Commission in coordinating this activity. Nuclear Industry Association April 2017