Nuclear and renewables compete for Britain’s family silver

Having a new member join the family is always exciting. During a recent spending review, UK chancellor Rachel Reeves announced a new arrival: Great British Energy – Nuclear. The former old government body called Great British Nuclear has now been rebranded after being revived in 2023 to meet nuclear targets. This move makes it the sibling of the Labour government’s golden child, Great British Energy. 

The word “energy” in the new title is working overtime. Despite remaining technically autonomous, both bodies’ achievements – and, crucially, budgets – are now counted under the single “Great British Energy” banner. For nuclear, this means GBP 2.5bn in investment for small modular reactors (SMRs) – miniaturised, standardised power plants that can, in theory, roll off factory floors and be deployed nationwide. Think Ikea for nuclear.

But for the original Great British Energy, the public company headquartered in Aberdeen and aimed at driving the UK’s renewables boom, every pound spent on SMRs is a pound less for solar and wind. The original GBP 8.3bn budget is untouched but now divided – only GBP 5.8bn remains for all non-nuclear investment, less than 60% of the original allocation. 

Is this a blow for renewables? It might look that way, but the underlying logic is one of synergy. Nuclear reactors and renewables together in the long term are designed to build a robust clean system – wind is intermittent, nuclear is reliable. Wind and solar lack inertia, so they do not automatically resist sudden frequency changes, while nuclear as a synchronous generator supplies stored rotational energy that helps stabilise the grid. United, they can deliver low-carbon electricity generation less exposed to global gas price volatility – the main aim of Great British Energy. 

But can this mission be achieved on a shrinking renewables budget or will the new family arrangement cannibalise the green buildout so central to government promises? The offshore wind sector is already facing tough economics. In May, Danish wind giant Orsted cancelled its Hornsea 4 project off England’s East Yorkshire coast, casting fresh doubts over gigawatt-scale projects. A long-running debate over zonal pricing, which could have reshaped the investment landscape, has added to the uncertainty, although the government in July announced it would not transition to a zonal market.

This year’s contracts for difference (CFDs) allocation round will be telling. Two years ago, the tender closed with no new subsidies for offshore wind as budget constraints froze investment. A much-needed finance boost last year led to the approval of 3 GW of new projects, indicating that money truly talks. The outcome of this year’s auction will reveal whether government support is tilting too strongly towards nuclear, just as the market craves certainty. 

Still, SMRs bring tangible benefits. In a world where electrification, heat pumps, transport and data centres increase local stress on the grid, the market is shifting toward decentralised assets – batteries, flexibility – and away from large, centralised fossil power plants. Adding more, smaller reactors fits the new paradigm. 

Rolls-Royce, selected as the partner for Great British Energy – Nuclear, aims to design and roll out SMRs occupying just 10% of the land required by traditional nuclear stations, each providing up to 470 MW. Deploying these at scale could give the UK the flexibility and local impact absent from mega projects like Sizewell C and the delayed Hinkley Point C. In the race to net zero, flexibility matters more than ever. 

The scalability of Rolls-Royce’s operations is so ambitious that they are targeting SMR rollout not just in the UK, but globally. As AI demand and data centres continue to grow worldwide, Rolls-Royce has positioned itself as a leader in the field of scalable and reliable low-carbon power generation. Its share price has rocketed as its SMR program has progressed and it has touted itself as being on track to become the highest valued company in the UK, a huge boon to the British economy if proven true. 

But for the British (GB) power market, the success of the SMR programme will be greatly informed by how Great British Energy – Nuclear is able to adapt to the changing landscape and its relationship with its more renewable-oriented counterpart. For now, these two government siblings share the same home. One can claim credit for solar panels at hospitals, the other for charting a path in next-generation nuclear. Whether their chalk and cheese approaches can deliver on formidable net-zero targets remains to be seen. Like any new family, it will take time to find a way to play nice together – without breaking the bank or their net-zero promises.

This article originally appeared as a column on www.montelnews.com