Predictable and stable licensing

Wednesday, 17 September 2014

To attract investment for new build projects, the nuclear industry needs licensing and permitting processes that are "predictable and stable, and which take account of context", says Vanessa Jakovich, a senior associate at law firm Freshfields Bruckhaus Deringer.

"The industry tends to talk about construction risk, but it's actually the licensing risk that's creating that," Jakovich said at the World Nuclear Association's 2014 Symposium held in London last week.

Vanessa Jakovich addresses the WNA Symposium (Image: WNA)

"When we all think about construction risk, Olkiluoto 3 comes to the front of our minds and I think a lot of us have taken a view that licensing risk is actually driving the construction risk at Olkiluoto," she said, referring to the delayed project in Finland.

Two examples of the 'context' of a project are that a large, mature private program "can demonstrate certainty and a speed of return on an investment", while an emerging program aims to "secure international confidence and build expertise," she said.

Driven by history and International Atomic Energy Agency principles, the licensing and permitting processes for regulating new build varies internationally, she said, meaning that project developers must navigate the "labyrinth of regulatory risk".

Some licensing and permitting objectives are axiomatic – to maximize safety and security; reduce environmental and other impacts; ensure transparency and stakeholder acceptance; achieve efficiency for regulators and industry – but the need to facilitate investment remains crucial, she said.

Practical challenges

Nuclear new build poses two difficult and competing challenges - it is expensive and one of the most heavily regulated industries of all, she said. "Like all major project structures, commitments increase as licensing risks decrease. This poses practical challenges."

Firstly, the licensing and permitting processes necessary to get a new nuclear project ready for major investment are long and costly, she said. They include securing a site and characterizing its suitability; building a 'licensable entity'; selecting and certifying a reactor design; securing a reliable supply chain capable of meeting regulator expectation (and making early long-lead item commitments at the right time); developing relationships with stakeholders and meaningful community engagement; as well as making and supporting licence and permit applications (and defending legal challenges).

Secondly, securing investment to fund the application process is difficult before these processes begin, namely, when the project has the highest levels of regulatory risk, she said.

Managing licensing timelines in a way that attracts the investment it needs – "and well before the first megawatt of electricity is sold" - the industry requires strategic planning and careful management of the interdependencies with investment milestones, she said.

New build in the UK involves a "myriad of consents", she said, across the preparatory and construction phases. The first phase includes justification of a reactor design; a Generic Design Assessment; a nuclear site licence application; a funded decommissioning plan; a strategic siting assessment; an environmental impact assessment; a Development Consent Order (DCO) application; consultation with the local community; a generation licence; preliminary site work permission, nuclear insurance; and an environmental permit. The second phase requires satisfying ongoing licence and DCO pre-operation conditions, as well as other consents for materials handling and grid connection.

Three trends

Jakovich identified three current trends, which Jakovich described as vendor-initiated ventures, nuclear neighbours, and government co-operations.

"New nuclear consortia are increasingly private companies, are no longer utility driven, are increasingly cross-disciplinary, and are driven by reactor vendors," she said.

This latter feature facilitates organic growth of a licensable entity in a competitive market for skills and resources, she said. Later investors can have less operational input. Non-nuclear investment from, for example, pension schemes sees nuclear competing with "classic infrastructure projects for traditionally conservative investors," she said. Another example is outbound investment from emerging nuclear markets building expertise.

In terms of licensing and permitting timelines, vendor-driven, multi-disciplinary consortia present four main features. There are "parallel processes", she said, whereby vendors are less willing to fund pre-licence design certification without first having a customer. There is an increased focus on alignment of key milestones, which increases the ability to identify obvious points to increase investment obligations on consortia agreements, she said. Unlike utilities, participant interest changes over the life of a project, so a consortium exit agreement becomes important and managing the licensable entity's status is an important consideration. A consortia also implies diversity and the impact of the differences between its members cannot be underestimated. Their culture, background and area of expertise affect everything from the pace of the project to the appetite for risk and from communication to stakeholder engagement.

There is a strong trend towards having new build sites in mature markets next to neighboring legacy sites, she said. The reasons for the original siting decisions – about, for example, cooling water, seismic stability, visual impacts and transport – "tend to endure", she said. Other features of this trend include an existing grid, workforce and skills and government policy.

But it presents new and interesting challenges, she said. There are the risks of neighbours "impacting on each other's safety cases" and of legacy contamination on the new build site. There would also be competition for local resources, such as transport and access, workforce and grid capacity. There is also the question of the "cumulative radiological dose impacts", she said.

In terms of licensing and permitting timelines, having a legacy nuclear neighbor presents the issue of legacy contamination liabilities.

"Granting a new licence can immediately channel the legacy liability to the new operator and there is a need to ensure the licence is not granted until the project is definitely proceeding," she said.

Another issue is cooperation on the safety case and local resource management.

"It is important to agree cooperative processes up-front to avoid an irresolvable impasse later during the licensing process," she said. "There also needs to be sharing of information to facilitate radiological assessments."

The third trend, government cooperation, includes engaging regulators in commercial licensing and permitting timelines. For example, changes to UK planning reforms are designed to increase the certainty and predictability of projects. Harnessing political goodwill to facilitate that, she said, involves community engagement, building the national supply chain and developing international relations.

"In future, there will be increasing interest from regulators and governments to identify future opportunities to improve the coordination of licensing processes with investment and development processes," she said.

Researched and written
by World Nuclear News