POWER PRICING | SPECIAL REPORT


Left: Nuclear could use inherent inertia qualities to boost revenues by offering to provide grid stability services to maintain frequency and voltage limits


Nuclear in a new market What do these market dynamics, with regular oversupply, mean for nuclear? Nuclear’s large volume and always-on nature has always


been as much of a management challenge as a benefit. It is predictable, but has always run the risk of tipping the system into oversupply at times (such as overnight) when demand is low. That is one reason it has offered good prices for industrial customers who have a consistently high load to meet. This is also one reason why nuclear is unlikely to be immediately affected by short-term negative prices. Long term contracts are typically based on seasonal prices years ahead and there are always customers who will value long- term predictable prices. The reference price for the CfD for the UK’s Hinkley Point C power plant is already pegged as a seasonal price (unlike renewables CfDs, which are affected by near-term prices). However, two aspects of the changing power market will


add more pressure on nuclear operators. Fixed price arrangements and CfDs for nuclear only work if the power plant operator can find a customer for its power. The long-term stability of prices achieved with nuclear was attractive to large users and still is. But electricity supply is changing. Some customers will also have other power sources available, such as rooftop PV. They will need to buy less power and when they do buy it will be on a variable basis to balance the variable supply from their other sources. Second, more frequent periods of negative pricing on spot markets – and the absence from those markets of customers who prefer to take an active approach to power management –will eventually feed through to depress the price achieved on long-term contracts. Furthermore, nuclear will have to react to a less


predictable power market: power usage curves are currently fairly predictable in broad terms, with low overnight demand and a typical early evening peak. That will change though: if there is high penetration of rooftop solar PV, for example, demand will be at minimum in the middle of the day (this is already common in some areas). And, if there is relatively low wind power production but electric vehicles are charging, demand may be high overnight.


It might be considered that the gas generation sector has


already found itself faced with a similar market pressure. Over the last few years large gas-fired power stations have had very low load factors – down from the 60-70% range to more like 20-30%. Even for efficient plant with the high flexibility needed to respond to volatile prices, that may not be enough to make a return on investment. In the UK market that has driven closure of gas turbines in the 300 MW range (although several remain) in favour of fleets of small gas engines, with multiple units as small as 2 MW. The gas fleet loses economies of size and efficiency, but is more responsive to peaks and has much lower installation costs (using container sized units that could even be moved to a new site if required). If this sounds like an argument for small modular


reactors (SMRs), that may be the case – but much faster deployment will be needed if SMRs are to take that part of the market. Construction for a gas engine array is around 18 months, which means low risk. In the UK, for example, developers do not have to incur build costs until they have underwritten the project with a contract in the Capacity Market, whose auctions are held four years before the delivery year. Larger reactors above 300 MW would seem to be


targetting the market segment that has recently proved so difficult for gas turbines. All these changes favour cheap, flexible plant. That is not nuclear’s strength, which redoubles the importance of co-locating with large-scale storage or hydrogen production to provide the flexibility not available from the plant itself. Nuclear retains one advantage that could boost its


revenue, and that is its ability to help keep the grid within its frequency and voltage limits. This ‘inertia’ is typically provided by large rotating machinery and where in the past it was a service automatically provided by fossil generators, now it may be contracted by the system operator as a remunerated ancillary service. Revenues are high enough for it to prompt investment in stand- alone facilities such as flywheels or static VAR devices that provide this service. These are the types of revenue opportunity that nuclear must take be ready to advantage of in the future and they should be built in to SMR designs from the start. ■


www.neimagazine.com | September 2023 | 37


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49