13 September 2010
With the closure of coal-powered energy stations, the proposed private sector-funded nuclear alternatives will be vital to meet the UK’s needs. But as Hamish Lal reports, the builds could be seriously delayed due to a lack of clarity on the part of the Government
The secretary of state for energy and climate change Chris Huhne tells us we are “on course to make sure that the first new nuclear power station opens on time in 2018”. However, it is ultimately the private sector that will determine if new nuclear power stations open in this decade, or indeed at all, with EDF and Centrica planning to build the first power station by 2017, and a consortium of RWE and E.on following with their first by 2020.
But neither the private sector nor the Government can solely control the timetable or the process. The UK will face an energy shortfall when certain coal-fired power stations cease operation in 2015 (to comply with EU air-quality legislation). So renewable and/or nuclear power is fundamental to the UK reducing carbon emissions by 34 per cent by 2020.
Although the private sector appears keen to develop new nuclear power, the following regulatory obstacles involving the interrelationship between the Government and the private sector still need to be overcome.
The Government’s decision to abolish the Infrastructure Planning Commission (IPC), which would oversee major planning applications, lacks detail to the point where the private sector is underinformed and expects a delay to the start of construction.
The Government’s constitutional plans and detailed operation of the Major Infrastructure Planning Unit (which will replace the IPC) is now needed urgently if delays are to be avoided.
According to decentralisation minister Greg Clark, the new unit will be rapid and accountable in nature, with ministers taking decisions.
But the private sector is looking closely at the transitional arrangements. If an application has reached decision stage before the new legislation is in place and the National Policy Statement (NPS) for nuclear has been designated the IPC will decide the application. If the NPS has not been designated, the IPC can merely make a recommendation to the secretary of state, who then takes the decision.
Two things drive this scenario. First, the speed of the new legislation, and second, progress with the NPS for nuclear power generation, known as ’EN-6’. This NPS needs to be consulted upon, agreed to and voted on by Parliament. Given that the timetable for the NPS has lost six months there is, unsurprisingly, concern in the private sector.
Planning issues are in part contingent upon the generic design assessment process, which deals with licences for reactor designs. The previous government did much to increase resources at the Nuclear Installations Inspectorate (NII) and recent problems or delays appear to concern the private sector.
The Health and Safety Executive, which houses the NII, has stated that it will probably have to issue an interim decision on the safety of the two new proposed reactor designs in June 2011. It was originally planned that the NII’s decision would be final, such that the reactor design could feed into the overall design, which in turn would influence the planning application.
An interim decision raises two concerns for the private sector. First, the NII has not said how long it will take to approve or reject designs, and second, the private sector will need to take certain design and planning risks to mitigate delays to the timeline.
From the Government’s perspective, judicial review will remain a concern, especially given comments from Greenpeace highlighting that the Government may be letting utilities continue with building works for reactors that have not yet been granted safety approval.
Funded decommissioning programmes
The private sector must make adequate provision for the costs of decommissioning power stations and the long-term management of waste. The Government has made it clear that the private sector bears 100 per cent of these costs, and many interested parties are vigilant to ensure this.
Putting aside the Government’s commitment to a carbon floor price and the private sector’s desire to reform the electricity market, the fundamental issue is that the fixed unit price for intermediate-level waste and spent fuel has not yet been settled. This means that certain financial, commercial and risk-sharing decisions remain unsettled. The overlap between a subsidy and an incentive makes this obstacle fascinating for public administrative lawyers.
From a lawyer’s perspective, it is impossible to provide robust advice to the private sector on how best to proceed to meet the publicly stated times for the start of electricity production of new nuclear power stations.
The politics of nuclear are likely to cause further delay to the planning process if the IPC is unable to be abolished and properly replaced. Equally, Government views on the costs of waste, waste management and ringfenced funds to deal with decommissioning are critical to the private sector. If it gets these things wrong the private sector will need to reconsider its financial models, which will ultimately affect all consumers of energy in the UK.
Hamish Lal is a partner at Jones Day