Nuclear - clarification of risks for private sector investment
The Government has published a Consultation on the Future of Nuclear Power alongside its Energy White Paper published on 23rd May (click here to link to previous Law Now article). The consultation primarily deals with the option of private sector investment in new nuclear power stations and the Government’s evidence for its preliminary view that this would be in the public interest. Not surprisingly, the Government’s principal arguments relate to:
- tackling climate change; and
- ensuring security of energy supply.
Private energy companies considering investing in new nuclear should note that, under the Government’s current vision, private investors would be responsible for full decommissioning costs and a share in the full costs of waste management. Subject to the UK Government’s potential liability for third party damage in accordance with international conventions, risk transfer to the private sector will be an important consideration in deciding whether to proceed with new nuclear power.
The Government does, however, also set out proposals to clarify the risks for private sector involvement, including:
- Establishing, in legislation, a nuclear decommissioning and waste management costs fund (or funds) to ensure private energy companies can securely meet these costs. The Government favours independent funds being held by bodies, such as a trust, throughout the operational life of the power station. The public sector would also require protection from credit risk and reduced reactor life.
- Government approval of each operator’s waste and decommissioning plan. Compliance with the plan will then be obligatory for the operator.
- A mechanism so that the public sector continues to bear the cost of existing legacy waste and the owners of new nuclear plant bear a proportionate share relating to the cost and disposal of their waste. Whilst some initial infrastructure would be common, it is expected that new waste would also lead to the construction of new waste vaults.
- The handing over of responsibility for low level nuclear waste to the Nuclear Decommissioning Authority and the reconstituting of the Committee on Radioactive Waste Management (CoRWM).
- The continued use and involvement of the Managing Radioactive Waste Safely programme to manage waste.
Costs borne by the private sector will vary depending on the number of new nuclear power stations built and the ability to store new waste with legacy waste. A consultation is proposed shortly on a long-term waste management solution including the Government’s proposal of waste disposal in a geological repository and safe and secure interim storage facilities.
The Government is looking to implement measures that reduce uncertainty for energy players considering investment in new nuclear power stations. However, private investors will be keen to understand the details and scope of actual and potential liability relating to the full costs of decommissioning and waste management. The closing date for the consultation is 10 October 2007.
