DECOMMISSIONING FINANCING

INLA 2014Marc Beyens

Godelieve Vandeputte

Frequently asked questions about nuclear energyIs it safe ?What about the environment ?

IAEA FUNDAMENTAL SAFETY PRINCIPLES AND SAFETY REQUIREMENTS

IAEA Fundamental Safety Principles and Safety Requirements

• Principle 7, para. 3.29 IAEA Fundamental Safety Principles SF-1 “Protection of present and future generations” :

“Radioactive waste must be managed in such a way as to avoid imposing an undue burden on

future generations”

IAEA Fundamental Safety Principles and Safety Requirements

• Requirement 10 IAEA General Safety Requirements GSR Part 1, Provision for the decommissioning of facilities and the management of radioactive waste and of spent fuel :

“The government shall make provision for the safe decommissioning of facilities, the safe

management and disposal of radioactive waste arising from facilities and activities, and the safe

management of spent fuel”

MINIMUM CRITERIA FOR ADEQUATE FINANCIAL ARRANGEMENTS FOR DECOMMISIONING

IAEA HANDBOOK ON NUCLEAR LAW, II, p.74

Financial arrangements must be :• Available when needed (could be needed

before the end of lifetime of a plant)• Provided by the licensee• Commensurate with a facility specific and

periodically reviewed cost estimate

OECD

OECD Nuclear Energy Agency, “Decommisioning Funding : Ethics, Implementation, Uncertainties, A status Report” (2006) n° 5996, p. 33 :

• Polluter pays principle• Sufficiency• Availability• Transparency

Polluter Pays Principle

Contributions to the fund are to be made by nuclear installations during their operation to reach, at the latest by the time of final shutdown, a level that is sufficient to cover all decommissioning and waste management expenses

Polluter Pays Principle

If not/inadequately implemented : The installation state will ultimately be held

responsible for providing adequate financial resources for decommissioning:

Article 26 of the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management

Sufficiency

In order to cover the costs of decommissioning of the installation and the long-term management of decommissioning radioactive wastes the contributions are to be in line both with the total fund collection period, and the strategy chosen for decommissioning

Sufficiency

• Total fund collection period :Funds are managed to keep pace with inflation

and cost escalation• Strategy for decommissioning :– Immediate or early dismantling– Deferred dismantling (safe enclosure/safe storage)– Entombment

Sufficiency

• Strategy for decommissioning– Immediate or early dismantling :

=decontamination and dismantling immediately after operation period

Advantages : availability of know-how and experienced staff from the operational phase; early reduction of residual risk; improved security of funding; absence of imposition of an undue burden on future generations; decreasing uncertainty in cost calculations

Sufficiency

• Strategy for decommissioning– Deferred dismantling :

• = postponing the dismantling by several decades during which the nuclear power plant is kept intact and placed in protective storage to enable the radionuclides activity to decay until it reaches levels that reduce difficulties of handling

• Can be chosen when insufficient facilities are available for disposal of radioactive waste, for possible overall benefits from radioactive decay, for allowing a longer period for collection of funds

• Risks : additional costs long-term surveillance and maintenance; loss of funds or insufficient funds performance; more rapid increases in decommissioning costs than growth of needed funds

Sufficiency

• Strategy for decommissioning– Entombment :• =encapsulating the facility on site by encasing

radioactive structures, systems and components in a long-lived substance, such as concrete and keeping it isolated until the radionnuclides have decayed to levels that allow the site to be released from nuclear regulatory control• Chernobyl 1986• Emergency option

EntombmentAllright!But how can we get rid of the bodyAnd, ohmygawd, what will that cost?

Availability

The funds are to be available at the appropriate time. It is vital to manage and periodically review the funds in a manner that ensures a level of liquidity compatible with the timetable for decommissioning liabilities and their costs

Transparency

The funds are to be used only to cover the costs of the decommissioning obligations in line with the decommissioning strategy, and not be used for other purposes. The funds must be transparent to the respective national authorities and other relevant stakeholders as regards the accumulation of money, the expenses and the financial management. It is also necessary that the funding system complies with national tax laws

FINANCING MECHANISMS

3 Types of funding models

• Funding from the tax payer (applicable when the Government is the owner of a facility) : the Government may pay its expenses from the annual budget or pay into a fund

• The funds are managed within operating organizations in internal segregated or non-segregated funds

• The funds are managed externally by a dedicated independent body which may be a private or state-owned entity. Such external segregated funds may be centralized (for the entire industry) or decentralized (with as many funds as there are operators).

Checks and balances in the management of the funds

Avoid conlicts of interests : checks and balances should be introduced among the parties responsible for :

• Regulating and monitoring decommissioning finances• Paying for decommissioning activities• Holding the funds in the general accounts• Creating the investment policy and guidelines• Managing the fund• Authorizing the payments for decommissioning• Monitoring and controlling decommissioning finance

Approaches to raising funds

When examining what has been done in practice (*), these approaches include :– Setting funds aside by the operator from the sale of electricity generated

by the NPP– Levy (surcharge) on sales of electricity of any origin (even non-nuclear)– Donations from other countries, international organizations e.g. the

European Union or financial institutions (has e.g. been done for new EU Member States)

– Subsidies by national or regional governments– Interests/profits from the financial operations of the fund – Benefits from estate or equipment sold before or during decommissioning– Penalties imposed by the nuclear regulatory authorities

(*) Wuppertal Institute for Climate, Environment and Energy)

Key influences on financing mechanisms for disposal of waste

• Diversity of the country’s major waste producers• Influence of waste producers outside the nuclear

fuel cycle• Role of the national Waste Management

Organisation• Siting and nature of storage and disposal facilities• Possibility to exchange waste• Use of common installations

INVESTMENT POLICY FOR DECOMMISSIONING FUNDS

Investment policy for decommissioning funds

• Prudence principle : Investment risk should be avoided even if this results in lower performance= consistent with the principle that decommissioning funds should be established to avoid a burden on the future generations

Investment policy for decommissioning funds

• In some countries nuclear operators are entitled to borrow back (part of) the capital of the externalized fund, at current interest rates, either against securities or on condition that they fulfill criteria of minimum financial credit ratings by an international rating agency

• Other countries require (part of) the investments to be in government or other bonds, even if this approach may limit the profitability of the funds

• Some countries require the operator to obtain a bank guarantee for decommissioning costs

Investment policy for decommissioning funds

• What happens if the funds are insufficient ?legislation needs to indicate whether, in such a circumstance, it is ultimately the operator or the government which covers the shortfalls

CONCLUSION

Conclusion

• Adequate financial resources must be available for decommissioning

• Minimum criteria include the polluter pays principle, sufficiency, availability at the appropriate time and transparency

• Funds can be managed by the goverment, internally by the operators (but then the assets in the fund should be separated from other assets and liabilities) or externally by a private or state-owned independent body

• When investing the financial resources earmarked for decommissioning the prudence principle should be respected at all times.

Decommissioning of the Windscale Advanced Gas-Cooled Reactor

ANNEX : PRACTICAL EXAMPLES

UNITED STATES

• Title 10 of the Code of Federal Regualtions, Part 50.75 (e) requires licensees to demonstrate financial assurance for decommissioning by one or more of :– Prepayment : a deposit by the licensee at the start of

operation in a separate account such as a trust fund– External sinking fund : a separate account outside the

licensee’s control to accumulate decommissioning funds over time

– Surety, insurance or parent company guarantee : assurance that the cost of decommissioning will be paid by another party should the licensee default

UNITED STATES

• Each licensee must report to the NRC every 2 years the status of its decommissioning funding. The report must estimate the minimum amount by using the formulas found in 10 CFR 50.75 (c) but licensees may determine a site-specific funding estimate provided its amounts are superior.

• Approximately 70 percent of licensees (usually rate-regulated) are authorized to accumulate decommissioning funds over the operating life of the NPP

UNITED STATES

• Licensees may choose from the three alternative decommissioning strategies : – DECON : immediate dismantling– SAFSTOR : deferred dismantling– ENTOMB : to date no NRC licensed facilities have

requested this option

Nuclear drum

FRANCE

• Two types of funds :– The nuclear operators set up internal restricted funds covered by

dedicated assets managed under separate accountability; these funds shall account for all future costs related to decommissioning as well as waste management and shall be entirely set up from the beginning of operations of each given nuclear installation

– The National Radioactive Waste Management Agency (ANDRA) has set up two additional restricted funds :• The research fund (collected through a tax on operator) : research works

related to the future storage facility dedicated to long lived high and medium level wastes;

• The construction fund (not yet fed): for the construction and operation of this facility

FRANCE

• Currently, the research fund is the only of these two funds to be fed : construction of the waste facility will not start before 2025

• Future payments to the construction fund might be settled under bilateral conventions operator – ANDRA.

UNITED KINGDOM

• In the UK there are three main operators, British Energy (BE), British Nuclear Fuel (BNFL) and the UK Atomic Energy Authority (UKAEA). The UK government’s Nuclear Decommissioning Authority (NDA) was set up in 2005 to take over the sites of BNFL and UKAEA and is also expected to manage the decommissioning of BE’s sites

• The funding mechanisms that resulted in identifiable funds represent only 1% of current liabilities

UNITED KINGDOM• There have been a number of major changes in the way

decommissioning provisions have been collected. • Provisions were initially set up as internal unsegregated provisions,

however these were not passed on to successor companies• A consumer subsidy was introduced in the 1990s – Fossil Fuel Levy (FFL)

– in order to finance inter-alia decommissioning costs. The absence of any segregated fund, and the creation of NDA has seen the main part of this subsidy used by the government for purposes other than nuclear decommissioning

• A new Nuclear Liabilities Fund (NLF) was created (segregated fund) to which BE makes periodic contributions.There can be no guarantee that the assets in the segregated fund will be sufficient; therefore the fund is underwritten by the UK Government to ensure safety and environmental protection.

GERMANY

• The decommissioning financing regime is determined by the Atomic Energy Act and statutory ordinances promulgated on the basis of this Act, commercial law and tax law, as well as general administrative provisions

• Following the Polluter Pays Principle, the licensees are responsible for decommissioning activities. They are free to decide on the decommissioning strategy they would like to follow, and have to bear the respective costs;

GERMANY

• Decommissioning of publicly owned nuclear facilities is financed from the current budget. There are no provisions made for future payments. The Federal Goverment mostly covers the bulk of the costs , but for some projects part of the costs is covered by the Länder

• For facilities with mixed public-private ownership, arrangements are required to clarify the proportion of the costs to be borne by the public and that by the private organisations

GERMANY

• The private owners of NPP’s build up internal non-segregated funds according to German commercial law based on their liabilities according to the Atomic Energy Act. On the corporate group level, international accounting standards are applied. The obligation to set up provisions (internal, unrestricted decommissioning funds) starts with the beginning of the operation, however the complete amount is not required at this time.

SWEDEN

• Responsibility of the licence holder for waste and decommissioning

• Licence holder pays a fee per delivered kWh of electricity to “Nuclear Waste Fund” – covers expenses spent nuclear fuel + decommissioning+

research + future government costs– Is a separate government agency

• Guarantees for – Shortfall in case of early closure– contingencies (higher costs than expected)

SWEDEN

• Fee calculated on a 40 year earning period per reactor

• Decommissioning strategy is chosen by the operator subject to regulatory authorities’ approval. No binding time limits are set. Storage facilities for decommissioning waste must be available before dismantling. Deferral could be justified for twin reactors with common safety systems

SPAIN• Royal Decree 102/2014 requires the conclusion of technical-

administrative specifications between waste management organisation ENRESA and the owners of NPP to deal with conditions reception waste/decommissioning (to be approved by the Ministry of Industry upon agreement of the Nuclear Safety Council (the regulator))

• Provision of funds originally based on a general fee on the electricity tariff, but since 2005 the nuclear utilities bear the bulk of the expenses

• Fund managed by state company ENRESA collecting supply and access fees proportional to electricity sales + fees of the licensees of NPP’s and of other facilities generating nuclear waste

SPAIN

• Financial management based upon principles of security, profitability and liquidity.

• Decommissioning strategy : immediate dismantling 3 years after shutdown except for Vandellos I NPP (in safe enclosure for 30 years). End-point : green field

BELGIUM• Synatom, a subsidiary of the licensee Electrabel, is responsible for

establishing and managing the provisions for the decommissioning and the management of spent fuel of the NPP’s (segregated internal fund)

• Synatom is overseen by the Nuclear Provisions Commission and the State holds a “golden share” which gives it the power to veto certain decisions

• 75% of the provisions can be lent back to the operators which fulfill certain solvency criteria

• Every 3 years a review of the cost calculation by the Nuclear Provisions Commission

• Decommissioning strategy : reference scenario is immediate decommissioning with green field end status

The ultimate goal of a green field…