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Challenges facing the nuclear energy sector

Nuclear energy is clearly back on the political agenda and commercial interest in the energy sector continues to intensify. An outline of the commercial and political drivers, and the regulatory responses in this sector are detailed below.

• Commercial and political drivers
• Regulatory responses

Conclusions

The regulatory framework for the construction of new nuclear power stations will be greatly changed by the Planning Bill and the Energy Bill if they come into force.  However, the timing of their adoption and their final form (including the extent to which they will in fact make nuclear new build more viable) are still unclear, and their efficacy cannot properly be tested until the first applications for new nuclear power stations come forward.
 
More comfort is required about the treatment of nuclear power in terms of future carbon pricing, as this will be an essential factor in any decision to invest in nuclear new build. Renewables are currently subsidised by the Government and it is not yet clear whether nuclear will operate on a level playing field.  Currently, a minimum price for carbon is required before new nuclear power stations would be economical (although no commitment has been given currently that this will be implemented).

The Government is having to face up to a number of issues both on the decommissioning front and 'new build'. The Nuclear Decommissioning Authority (NDA) was specifically set up for the purpose of clearing up the nuclear waste from 20 sites, comprising 39 reactors, and 5 fuel reprocessing plants. The cost is expected to be in the region of £50 billion and will be a massive undertaking. They have also taken over the assets and liabilities of BNG and UK AEA. Whilst BNG became the manager and contractor to NDA, it is clear that, in due course, its status will also change and it will have to compete for the clean up contracts for the various sites.

The acceptance of EDF's offer for British Energy Group plc is likely to have significant effects in terms of the shape of the commercial nuclear sector in the UK and the progress of the evolving new build programme.  This acquisition will provide EDF with access to British Energy's portfolio of nuclear sites, including Dungeness, Hartlepool, Heysham, Hinkley Point, Hunterston, Torness and Sizewell.  The linkages between this transaction and the NDA's auction of nuclear sites will be of interest to and significance for other operators seeking to develop new nuclear power stations in the UK.  It is already known that the NDA will offer for sale by auction its land at Bradwell, Oldbury and Wylfa, and, except in the case of Bradwell, EDF will not be able to bid for such land.  Fierce competition can be expected as operators vie with each other to acquire strategically suitable sites for new nuclear power stations. 

The legacy radioactive waste issue has not yet been resolved. Although CoRWM has recommended deep geological disposal long term, the Government is slow to face up to the inevitable opposition to any identified repository.

It is clear that nuclear represents for many businesses a significant opportunity, but also many challenges. Awareness and familiarisation with the legal framework and obligations in such a regulated industry in the public eye is an imperative.