IP AND INVESTMENT | POWER MARKET DEVELOPMENTS
Left:
The Inflation Reduction Act is already driving up nuclear R&D investment
rate at which new nuclear capacity is brought online. It is only when the turbines start spinning that any benefits are realised. Another indicator of government resolve is the amount of investment in research and development of new and improved nuclear technologies.
Boosting R&D investment There are schemes in place which aim to boost investment in R&D and the generation of valuable intellectual property, but neither seem to do enough. Firstly, the UK government has introduced a new R&D scheme targeting loss-making R&D intensive SMEs. A company is R&D intensive where its qualifying R&D expenditure is 40% or more of total expenditure. Eligible companies will be able to claim £27 from HMRC for every £100 of R&D investment. In the nuclear industry, given the very specialised nature of the industry, high costs, and presence of established players, the observed benefit of this R&D tax scheme, although welcome, will likely be less than that seen in other industries. One option for the UK Government would be to extend
such R&D tax relief to larger companies, but with a restriction that the R&D must directly relate to a green technology, and that the R&D takes place within the UK. In this way, technology which is in line with the Government’s decarbonisation strategy for decarbonising the energy grid, such as nuclear power, would be incentivised and highly skilled, well paid jobs in the UK would be secured. Although initially this would cost the government revenue, this would be outweighed by the growth of a high value sector. Furthermore, both the USA and Europe have announced
wide-ranging support for investment into clean domestic energy production, namely the Inflation Reduction Act and the Green Deal Industrial Plan. The UK has no such equivalent despite the Institute of Director’s reporting that nearly 8 in 10 businesses supported subsidies to improve how climate change is tackled or to level the playing field with the US and Europe. UK businesses are in competition with the US and Europe, so it is vitally important that the UK Government provides comprehensive, but targeted support to ensure the country’s place at the forefront of green technology. This should include ensuring that there is a workforce which is well trained, that funding is available for promising projects with high capex, and that decisions can be made quickly to prevent projects from stalling.
Having even a handful of well-funded, innovative
companies in place results in the creation of other companies in the supply chain and also provides highly trained, experienced individuals who can go on to innovate and allow the technology to be exported around the world. If markets, supply chains, and training mature overseas, the UK will inevitably be left out of the benefits provided by the energy transition. The UK already has a developed nuclear industry and the Government needs to support it. If it is successful in leading the way in building safe and reliable SMRs, for example, the technology could be exported around the world to countries which still rely on coal- or other fossil-fuelled power stations. In these coal-heavy locations development of SMRs would have an even more profound environmental benefit than in the UK. According to the IEA, of the 31 reactors which began construction since the beginning of 2017, 27 are of Russian or Chinese design. With countries more aware of the susceptibility of international supply chains being disrupted and the need to be able to take control of and manufacture key technologies, and the need to have a diverse mix of energy sources, it is clear the UK government should do more to support their domestic nuclear industry.
USA and Europe The USA and Europe have enacted their own strategies for economic growth which include additional assistance and funding for green technologies. Whilst there was some controversy about the EU designating nuclear as a green technology, overall it seems that most were in favour of this decision. The EU’s Green Deal Industrial Plan (GDIP) was in
response to the USA’s Inflation Reduction Act and allows states to more easily provide aid to allow Europe to grow its green technology manufacturing base and avoid brain drain to the USA. Having a strong core of innovative companies which are well funded and profitable has a halo effect and results in spin-off companies, joint ventures, and supply-chain companies which all positively benefit the country where they are located. As can be seen in Silicon Valley, where there is a critical mass of companies with access to expertise and investment there is a large amount of positive reinforcement with which other places cannot compete. As such it is inevitable that as companies compete for market share in the European clean energy sector,
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