Funding nuclear power and radioactive waste

Professor Gordon MacKerron, SPRU, University of Sussex

The UK Government expects substantial new investment in nuclear power as part of its approach to reducing carbon emissions and improving energy security.  It argues that it will not subsidise nuclear power but that it is taking ‘facilitative actions’ to smooth the path to substantial nuclear investment.  Achieving new nuclear investment will require investors to believe that the balance between risk and expected reward is sufficiently positive for them to commit very large sums.  (If each of the designated ten future nuclear sites were to have one reactor each located on them, the total addition to capacity would be c. 16,000 MW at a capital cost that would almost certainly exceed £20 bn.,  possibly by a large margin.)

This paper examines the various commercial risks to which nuclear power is subject and concentrates on the degree of comfort that current plans for radioactive waste management will offer investors.  This analysis will examine both current ‘physical’ plans e.g. the need for operators to provide for around 160 years of on-site storage for spent nuclear fuel and – more important – the plans that Government has announced for requiring operators to pay into a segregated decommissioning fund and the proposed ‘fixed unit price’ that Government plans to charge operators in order to take title to radioactive waste at some future point.  The paper examines how far these proposed and innovative financial arrangements are   likely to persuade investors that their ‘back end’ costs are sufficiently limited and low-risk to persuade them to invest in new nuclear power stations, and how heavily these waste considerations are likely to weigh in the context of the other financial risks of nuclear investment in the UK regulatory climate.