Further announcements will have additional legal implications. The Government has undertaken to reduce the regulatory uncertainty around nuclear new build through changes to the planning system, through generic design assessment (GDA) and by seeking a strengthening of the emissions trading scheme.
The Government is committed to reform of the current planning regimes such that new build will be covered by national policy statements Ñ the planning process should become faster, cheaper and more relevant to genuine local issues. Finally the Government is conducting strategic siting assessments (SSAs) and strategic environmental assessments (SEAs) on any new build sites.
Further, we shall be entering the next phase in the GDA process. Four nuclear reactor designs have been submitted, an initial regulator assessment of which is expected to complete in spring 2008. It is understood that the detailed assessment work on the design is expected to run until 2010-11. It is expected that only three of the four designs will proceed to this next phase.
One of the key legal issues concerns waste and decommissioning liability. Although policy on the issue is still being finalised, the Government supports the recommendation that radioactive waste should be buried. A key aspect of the Government’s vision is a fund ensuring that all energy companies can securely cover their decommissioning and waste management costs. The Government’s solution is the funded decommissioning programmes (FDPs) required under the Energy Bill.
However, it has been asserted that the FDP mechanism is effectively a fixed-price contract for the Government to take the waste and also that the Government absorbs the final end risk. Others, such as Dr William Nuttal of the University of Cambridge, have commented: “It is often said that a new nuclear power station has never been built from scratch anywhere without subsidy... but that logic misses a key point. There is no reason Britain could not be the first to do it. For instance, the UK was the first major country to break up monopoly and to move to a competitive market in electricity generation.”
Under the Energy Bill, the site operator or the Secretary of State can request modifications to an approved FDP. The Secretary of State must then decide whether the proposed modification is to be made and notify the affected parties. The Bill gives the Secretary of State flexibility to amend a decommissioning programme, for example to reflect advances in decommissioning technologies or where cost estimates change. While disagreements as to whether modifications should be allowed seem likely, it is difficult to see how one could compare the initial waste and decommissioning arrangements to a fixed-price contract where one party bears the risk. In all likelihood, modifications will be needed since technology will no doubt change. ‘Fixed price’ would only mean fixed price if no changes were needed. Further, subsidies to the proposed trust may be required if the power station has to be closed and decommissioned early for technical or financial reasons.
There are concerns over planning, namely whether the changes to the planning regime will delay nuclear new build.
The Planning Bill now provides that a development consent order, replacing existing planning permissions and other consents, is required for development of a nationally significant infrastructure project. A significant question then arises as to whether applications to the infrastructure planning commission (IPC) need to include just the generating station or the associated upgrading of relevant grid infrastructure.
This may become more transparent as both the Planning and Energy Bills evolve. While an application to the IPC encompasses all matters that would have been covered under the existing Planning Acts and the Electricity Act, it does not appear necessary to include every grid upgrade required to support nuclear new build. This is provided that the IPC can be satisfied that these ancillary works can be completed with the necessary consents and authorisations and, more importantly, that the likely scope of the works can be described sufficiently for their likely environmental effects to be included in the project’s environmental statement. This is of fundamental importance both to the timetable and financial modelling aspects.
Carbon pricing costs are another significant consideration. Under the current European Trading Scheme (ETS) forward carbon credits for 2008 are trading at around £23 per tonne. Clearly, as the price goes up, it makes other forms of electricity generation (gas and especially coal) more expensive and new nuclear more competitive. However, a fundamental concern is that there is no long-term guarantee that a high price for carbon will exist. Some have proposed a system in which the Government would auction long-term contracts for the supply of carbon emissions reductions over a 20- or 30-year period. The Government has recognised the importance of longer-term predictability and is seeking to strengthen the European Union ETS to build greater investor confidence in the existence of a long term carbon price. This is much more than just a simple legal issue and has financial, commercial and environmental overlaps.
An overarching legal question concerns the application of judicial review. Challenges may arise both in terms of the Government decisions on new nuclear and also during the authorisation process, but further iterations of the Government’s proposals are expected to provide greater clarity and reduce ambiguity and investor concerns.
Hamish Lal is a partner in the construction and engineering group at Dundas & Wilson in London.