atw 2019-02

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atw Vol. 64 (2019) | Issue 2 ı February 68 INSIDE NUCLEAR WITH NUCNET Financing New Nuclear: Is RAB Model the Right Way Forward? David Dalton, NucNet The United Kingdom (UK) is considering a new method of funding to make sure new plants can get built. The UK government has confirmed it is exploring the “right ways” to finance new nuclear, including through potential government investment in the Wylfa Newydd nuclear power station on the isle of Anglesey in North Wales and a regulated asset base, or RAB, model for future projects. Business secretary Greg Clark said in a speech on the future of the energy market that “if nuclear is sufficiently competitive, then it is worth, in my view, turning that option into a commitment.” He said there has been “some criticism” of the prospective cost of the Hinkley Point C nuclear station project, but in its efforts to bring down costs the government is looking into financing options for new-build. “It is also why we recently announced a nuclear industry deal with its emphasis on the need to reduce the costs [of new nuclear] by 30 % through increasing modularisation and advanced manufacturing,” Mr Clark said. France’s state-controlled EDF, through its UK division EDF Energy, is building two EPR units at Hinkley Point C with the financial participation of China’s General Nuclear Power Corporation (CGN). The cost of the project is estimated at almost £ 20 bn. The financing for the project proved controversial. The deal struck with EDF Energy to build what is Britain’s first new nuclear power project in a generation has been criticised by the National Audit Office (NAO) because it guarantees the company a strike price of £ 92.50 per megawatt- hour of electricity, well above current market prices. The agreement means EDF will receive £ 92.50 for each MWh of electricity from the station that it sells into the market for 35 years. EDF will receive top-up payments – ultimately paid for by electricity bill-payers – if the market price is lower. Conversely, payments will flow in the opposite direction if wholesale prices rise above the strike price. The core of the issue is the upfront cost of financing major infrastructure projects like nuclear plants. According to the NAO it has not been commercially viable for private developers to build new generating capacity without government support. “The forecast revenues available in the wholesale electricity market do not cover the high upfront costs and other risks of building, operating and decommissioning low-carbon power plants,” the NAO said. Mr Clark’s speech is the clearest indication yet that the government is open to RAB, essentially a type of contract drawn up with the backing of government which calculates the costs and profits of a project before it is started, and allocates an investor’s profits from day one. A government regulator sets a fixed number, the RAB, which attempts to account for all the future costs involved in the completion of a project. The regulator then also sets a fixed rate of return for the investors based on those costs. Dieter Helm, the British economist and academic, says RAB would solve the problem for nuclear developers of “time inconsistency and the operating contract” – the risks to the developer that the government will renege on its part of the deal and that the plant will be forced off the system by the investment decisions of others, in particular where low-carbon investment is decided by and subsidised by government. “The RAB mechanism is honoured by the regulator and the regulator is itself backed by statute, so ultimately this duty is backed by the government,” Mr Helm wrote in a recent paper. “Because there is regulatory protection against time inconsistency and because ultimately the government stands behind the regulator and the duty to finance functions, investors treat the RAB as a very solid securitisable asset.” Nuclear power is “always and everywhere political” because it involves capital intensive and long-lived assets, and because it comes with environmental, military and technology specific risks on a scale which no private market can handle on its own, Mr Helm said. Nuclear waste lasts for many generations and plans for the storage of that waste remain a work-in-progress. Decommissioning is far into the future and cannot be left to limited liability private companies. Nuclear has important military dimensions and terrorist- related risks. Accidents, however unlikely, may create large-scale consequences, which private limited liabilities companies cannot fully provide for. According to Mr Helm, these characteristics that nuclear is a societal and political matter, over many generations. Nuclear safety regulation, nuclear funds for decommissioning, nuclear waste storage and nuclear security and secrecy remain for the state, and cannot be contracted out to private project developers. What can be contracted out to private companies is the construction and operation of nuclear power stations – in principle. In practice, most nuclear developers are state-owned, in whole or in part, and all have close links to government. “This is because of the technology and also the specific endemic challenges of project developments,” Mr Helm said. “There are unsurprisingly no purely private sector nuclear projects anywhere in the world.” Apart from Hinkley Point C, which is in the early stages of construction, there are three other new nuclear projects on the drawing board in the UK. Horizon Nuclear Power is planning to build two UK Advanced Boiling Water Reactors at Wylfa Newydd. CGN and EDF Energy have formed a joint venture with plans to build a single China-designed HPR1000 plant at Bradwell B in Essex, southeast England, a project CGN has said could use the RAB model. EDF wants to begin construction of two EPR units at the Sizewell C nuclear power station on the east coast of England by the end of 2021. However, Toshiba announced earlier this month it had decided to wind up NuGen, the company overseeing plans Inside Nuclear with NucNet Financing New Nuclear: Is RAB Model the Right Way Forward?
atw Vol. 64 (2019) | Issue 2 ı February Notes Return of Waste from Nuclear Fuel Reprocessing Until 2005, the reprocessing of spent nuclear fuel was the planned way. By the year 1994, it was even the legal requirement. Therefore the spent fuel elements were transported to France and Great Britain for reprocessing. For this purpose, the operators of the German nuclear power plants have signed contracts with the operators of the reprocessing facilities in La Hague and Sellafield. The radioactive waste caused by the reprocessing will be returned to Germany. To reflect this DAtF has published a new edition of the brochure on the management of the return of waste from nuclear fuel reprocessing. LA HAGUE SELLAFIELD DATF EDITORIAL NOTES 69 pp How does the conditioning of the radioactive waste work? pp How is this waste stored temporarily? pp Which organizations are responsible for authorization? Answers to these questions and more information can be found in the new edition of: Return of Waste from Nuclear Fuel Reprocessing 33 Now available for download at www.kernenergie.de (German) Rücknahme von Abfällen aus der Wiederaufarbeitung For further details please contact: Nicolas Wendler DAtF Robert-Koch-Platz 4, 10115 Berlin, Germany E-mail: presse@kernenergie.de www.kernenergie.de to build three Westinghouse Generation III+ AP1000 units at the Moorside site in northwest England. Toshiba said it was winding up NuGen because of its inability to find a buyer and the ongoing costs it was incurring. The company said finding the right financing model was an issue. Before the wind-up was confirmed, NuGen chief executive Tom Samson said the RAB model should be considered, although it was not clear if this was ever the case. Author NucNet The Independent Global Nuclear News Agency Editor responsible for this story: David Dalton Editor in Chief, NucNet Avenue des Arts 56 1000 Brussels, Belgium www.nucnet.org DAtF Notes
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