The economic realities of the energy transition

Tom Legard and Deborah Whitehouse, Partners for Industrial and Infrastructure, hosted an event at which Paul Stein, former Chair of Rolls-Royce Small Modular Reactors and sustainable energy expert, argued persuasively that mature physics must be prioritised over new technologies if net zero goals are to be met.

No doubt about it, Paul Stein’s track record in overseeing scientific innovation is impressive.  Former Director General Science & Technology at the UK Ministry of Defence, he moved to power systems giant Rolls-Royce in 2010, where his roles included Chief Scientific Officer, Director of Research & Technology, and, from 2017, Chief Technology Officer.

Paul left Rolls-Royce in December 2023 to work independently, but for the two years prior to this he was full-time Chairman of Rolls-Royce SMR – SMRs being Small Modular Reactors. A fraction of the size of conventional nuclear power reactors, SMRs are designed to be factory assembled before delivery to their intended site for installation.

Given his considerable knowledge of this area, it is hardly surprising that Paul sees SMRs as part of the solution if the UK is to achieve net zero carbon emissions by 2050. Indeed, it fits with his overall view that scaling known, mature physics should be prioritised over the development of new science and engineering that will take years to come to fruition.

Paul expanded on this stance when speaking at an insightful Odgers event focused on the economic realities of the energy transition. Major developments in manufacturing capabilities, digitisation and supply chain optimisation hold the key to hitting net zero targets, he asserted.

“There's a lot of misunderstanding about what needs to be done,” says Paul. “The net result is we're spending lots of money on things that actually won't make much difference by 2050 and we’re not spending enough on things that are really necessary to crunch manmade CO₂ before this key date.”

One technology that Paul believes is significantly misunderstood is nuclear fusion, a process whereby massive amounts of energy are released when two light atomic nuclei combine to form a single heavier one. The sun and other stars are powered in this way.

There was excitement when in December 2022 scientists at the world’s largest nuclear-fusion facility, the US National Ignition Facility, announced they had made the big breakthrough of achieving “ignition”, which simply put means creating a nuclear reaction that generates more energy than it consumes. More than 35 private companies worldwide are pursuing the holy grail of commercialised fusion energy solutions, most notably MIT spin-off Commonwealth Fusion Systems which in 2021 secured $1.8 billion in funding from a wide range of investors including Bill Gates and Google. But while some politicians are wooed by the prospects of fusion technology, eminent scientists such as Steve Cowley, the Director of the Princeton Plasma Physics Lab say it’s unlikely to make a positive difference to grid power before 2050 due to the hurdles still to be overcome. Paul believes, however, that the long term benefits are highly valuable so it’s still worth taking a bet on fusion in case the sceptics can be proved wrong.

As for wind power, while it is presently a good solution its intermittency will present problems as the energy transition proceeds. “You've got to have a look at energy as a system to realise that once we start swapping out dispatchable gas fired power stations, the cost of wind energy rapidly increases because the cost of grid scale energy storage remains stubbornly high,” observes Paul. “We have to get a sense of systems engineering and realism into the overall energy network.”

With that in mind, a strong case can be made for SMR technology. Alongside Rolls-Royce, two other leading players outside China and Russia are Westinghouse and GE Hitachi, with other worthy solutions being developed. Yet although the UK Government set up the £120m Future Nuclear Enabling Fund to help mature nuclear projects, there are worries that the UK is falling behind because of a lack of pace and targeted investment.

In the UK, manufacturing some of the components required to make SMRs commercially viable is far from easy and calls for a reindustrialisation programme and the establishment of some big, heavy engineering supply chains. Far from easy, but achievable with sufficient will and investment.

There is certainly the energy demand to make it worthwhile, and not just from the grid. The exponential growth of power-hungry AI that globally requires the equivalent power of the current UK grid over the next 5 years for example, means technology companies are desperate to find net zero solutions that will keep their data centres running.

All told, thousands of SMRs will be required globally. For the UK to benefit from this growth significant investment in steel, heavy forging and machining as well the skills to underpin them will be needed.

Paul brought the same realistic outlook to bear on the aviation industry. “A great deal of money is being spent on novel solutions which will only have a small impact by 2050, whereas simple ‘drop in’ solutions such as the development of new pathways for sustainable aviation fuels are receiving far less investment.”

Research money has been extracted from  governments convinced by academic rather than technological and engineering arguments, adds Paul, creating what he calls a “coalition of the willing” which needs industrial input to create realistic pathways.

In conclusion, Paul says efficacy is vital. Money needs to be spent in areas that will move the dial in achieving the energy transition by 2050. And by effectively reindustrialising the supply chain to make home-grown SMR manufacturing viable, the UK would be taking a very positive step towards a better future, achieving our goals of ‘levelling up’ the economy and creating hope for young people keen to make a difference to our environment.