Legal hurdles to deployment of SMRs in

the UK

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Ian Truman

Burges Salmon LLP

9th June 2016

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Overview

Regulatory approach

Lifecycle, Phases and Key Issues of a nuclear new

build project in the current UK regulatory regime

Current government policy and its applicability to

SMRs

What is required to facilitate deployment of SMRs

in the UK

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Regulatory approach

Economics of SMRs reliant on regulators accepting claims of

developers e.g. EPZs, number of control rooms per unit etc

Claims largely untested by Western regulatory bodies - ONR/EA have

not been formally engaged and/or funded

Starting point for any ONR/EA assessment?

Goal based regulatory approach requires safety case to persuade

regulators that risks are ALARP – evidence to support claims and

arguments ?

Compatibility of UK approach with international efforts to standardise

generic design acceptance for SMRs – CORDEL, MDEP, ERDA?

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Lifecycle, Phases and Key Issues

Predevelopment Phase

Final Investment decision

Construction

Decommissioning

Commissioning

Operation

Design Complete

Key Consents

Key Agreements

Finance

Project Company

Engagement Finance Site Technology

and contracting

Licensing and

consents

Develop Design

Budget Schedule Dispute

Resolution Contract

Management Managing change

Key Regulatory Hold Point

LC 21

Refinancing Outages Change in

Law / Guidance

Safety CFD Site Licence Life

extension

FDP Site Licence Supply Chain Decommissioning Contracts

Spent Fuel and Waste Disposal

FDP Waste

Transfer Contract

GDF Development

Government Policy on

Spent Fuel

Technological advances

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Current policy

Government White Paper “Meeting the Energy Challenge”

in 2008:

“The Government believes new nuclear power stations should have a role to

play in this country’s future energy mix alongside other low carbon sources;

that it would be in the public interest to allow energy companies the option of

investing in new nuclear power stations; and that the Government should take

active steps to facilitate this.”

Facilitative actions were aimed at large nuclear and some

are not appropriate to SMRs e.g. SSA, planning reform,

funded decommissioning guidance

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Sites

Theoretically less siting restrictions for SMRs

SSA and the Nuclear NPS

Non-listed sites can come forward - s105 Planning

Act 2008 but not optimal

New NPS would have to approved by Parliament

Took 38 months to develop current Nuclear NPS

Competitive auction of land e.g. Magnox sites?

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Streamlined planning process

s15 of the Planning Act 2008 a generating station is an

NSIP if its capacity is 50MW or more when constructed or

extended

NSIP applications for nuclear reactors to be decided in

accordance with Nuclear NPS – which doesn’t currently

cover SMRs

DCO process currently takes ~15 months (assuming no

judicial review)

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Licensing a nuclear installation in the UK

Justification

Generic Design Assessment

Nuclear Site Licensing

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Justification

A decision from the Secretary of

State that the economic social or

other benefits derived from any new

class or type of practice involving

ionising radiation outweigh any

health detriment that may be caused

Application submitted to SoS

Judicial review risk

Potential timescales - 28 months

(without challenge)

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Generic Design Assessment

Not mandatory but widely

regarded as necessary

Lack of evidence to support safety

cases

Advantage for developers of

smaller versions of larger

reactors?

Lack of regulatory expertise in the

UK and abroad

Typically 4 years plus for larger

reactors – SMRs?

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Licensing

Applicant must persuade ONR

risks are ALARP

Inspection of manufacturing

facilities

Separate companies

manufacturing and constructing?

Separate operators on a site?

Typically takes about 2 years

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Funded Decommissioning Programme

s47 of the Energy Act 2008 - it is a criminal offence to ‘use’ a

nuclear site without having an FDP approved by the SoS

Decommissioning Waste Management Plan (DWMP) and a

Funding Arrangements Plan (FAP)

Developing DWMP involves comparison against a Base Case

i.e. a generic lifecycle plan for a new nuclear power station

DECC’s current base case is not suitable for SMRs e.g. it is

based on a large reactor and assumes on-site interim storage

facilities for ILW and spent fuel

Timescales?

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Nuclear liability / Insurance

Current requirement for operators is to

provide insurance or other financial security

to a limit of £140 million

The Nuclear Installations (Liability for

Damage) Order 2016 implements the 2004

Paris Protocol into UK Law

Increases limits phased in over 5 years from

€700 million to €1200 million

Low hazard installations €70 million

Not clear how government will approach

SMRs

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Nuclear Liability – cont.

The IAEA’s CSC – USA and (more recently) Canada have now

signed this convention and it offers a platform for a global regime.

Now in force following Japan joining.

UK has no treaty relations with USA, China, Russia, Canada, Korea

Supply chain joined into TEPCO case in California

UK Indemnity pressures building

Indemnities for SMR developers / supply chain?

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Finance

Certain historic finance difficulties

eased by promise of SMRs including:

- shorter construction phase

- enhanced safety

- simple design

- lower capital costs per unit

Other traditional financing difficulties

remain:

- political risk

- foak (at least initially)

- no take over of the asset

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Government support mechanisms

Revenue stabilisation

– long term CFD

Sovereign credit

guarantee – lowers

cost of borrowing

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Revenue Stabilisation

Impact of response to

the HPC strike price

Will government

accept more risk in

future?

Current uncertainty for

large nuclear and

SMRs

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Debt Guarantee

Infrastructure Guarantee allows

operator to make use of the

Government’s credit rating

Can lower the cost of borrowing

and create liquidity for the Bank

market

State Aid approval required (if UK

remains in the EU)

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Other Finance

Project financing

Sovereign model

Utility balance sheet

Government-to-Government

ECAs

Vendor credit or equity

Investor financing

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Remaining Challenges for deployment of

SMRs in the UK

Develop and resource ONR/EA to develop a regulatory model:

- risk characterization and mitigation – are SMR promises viable?

- review current codes and standards

- publish regulatory guidance

Implement facilitative package for SMRs with roadmap:

- CFDs

- commence siting strategy to pre-approve sites and update the Nuclear NPS

- Commence land auction programme if applicable

- FDP guidance

Engagement on nuclear liability

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Questions

SMR 2016 This presentation gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care

over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.