The future is nuclear?

In August 2015 EDF Energy announced its preferred bidders for Hinkley Point C and the press were reporting that ministers are set to give the go ahead to the project once parliament returns in the Autumn. Since then the Government has announced a £2 billion guarantee to try and ensure the project goes ahead.1

As Claire King explains, the project has already faced significant legal hurdles and may yet face further ones with Austria set to appeal the state-aid clearance granted to the project by the European Commission in the European Court of Justice. If it does go ahead, it will be the first civil nuclear new build in the UK since Sizewell B was commissioned in 1995.

The UK currently has 16 nuclear reactors across nine sites in the UK generating 19.8% of the country’s electricity.2 The nine operating power stations have three different types of reactors. These include:

(i)   Magnox, a first generation reactor the last operating one of which is situated at Wylfa in North Wales;

(ii)  the Advance Gas-cooled Reactors (“AGR”) owned and operated by EDF Energy which were commissioned by between 1976 and 1988; and

(iii) Pressurised Water Reactors (“PWR”) situated at Sizewell B, the last nuclear power station in the UK to be commissioned and completed in 1995.

The nuclear industry in the UK as a whole is much wider, however, consisting of extensive de-commissioning activities (in the latter half of 2014 Sellafield Ltd announced that a joint venture comprising of Jacobs, AMEC and Balfour Beatty has been awarded a multi-million pound Engineering, Procurement, and Construction (EPC) framework for the Box Encapsulation Plant (BEP) project), various defence facilities (for example the Devonport Royal Dockyard which contains facilities for the refitting and refuelling of the Royal Navy’s submarines, including the Vanguard class submarines and associated sites) as well as non-power producing nuclear facilities for producing and reprocessing nuclear fuel.

However, by 2028 all but one of the nuclear power stations currently operating in the UK is set to go off line. It is in this context that the UK’s current nuclear strategy was set into motion in 2006 when a review of energy policy reversed the then Government’s opposition to new nuclear power.

In July 2011 8 sites across the country were selected to allow plant construction to be expedited and in March 2013 the Government published a 90-page industrial document setting out its “clear expectation that nuclear will play a significant role in the UK energy mix in the future” and planning to establish the UK as a leading civil nuclear energy nation.

Nuclear, it is hoped:

“will play a vitally important role in providing reliable electricity supplies and a secure and diverse energy mix as the UK makes the transition to a low carbon economy.”3

To date the only nuclear plant close to getting off the ground is Hinkley Point C. The other reactor types have not yet completed the initial regulatory steps within the UK (as to which see below). Hinkley Point C will utilise a European Pressurised Reactor (“EPR”) developed by Areva. The project will cost as much as the combined bill for Crossrail, the London 2012 Olympics and the revamped Terminal 2 at Heathrow but should provide 25,000 jobs and provide 7% of the UK’s electricity when built.

As the construction industry gears up for Hinkley Point C project it is important that all members of the supply chain (not just those at the top) understand the unique regulatory environment that the nuclear industry sits within.

The Office for Nuclear Regulation (the “ONR”) regulates civil nuclear construction within the UK both before a site is even licensed and after.4 Once licensed the legal responsibility for the safety of a site rests with the Licensee who must create and implement “adequate arrangements” for compliance with 36 Licensing Conditions as well as some other more prescriptive requirements.5

It operates a goal-setting regime rather than a more prescriptive standards-based regime that is found in some other countries.6

Following Fukishima, for example, the safety cases of existing nuclear installations within the UK were reviewed. A report by Mike Weightman, the head of the ONR, dated October 2011 concluded there was no fundamental safety weakness in the UK’s nuclear industry but that lessons could be learned including: reliance on off-site infrastructure such as the electrical grid supply in extreme events, emergency response arrangements, layout of plant, risks associated with flooding, planning controls around nuclear facilities and prioritising safety reviews.

The requirement for a robust safety case (both before, during and after construction and commissioning) that ensures that any risks are kept as low as reasonably practicable (the ALARP principle) comes with the potential for extensive delays and costs before construction has even started.

The Finnish Nuclear New Build Olkiluoto 3 (which will utilise the same EPR generator as Hinkley Point C) is already the subject of a billion euro arbitration with the Finnish Radiation and Nuclear Safety Authority awaiting new paperwork for the safety case.7 Operations at the Finnish plant are now likely to start in late 2018 compared to an original target date of 2009.

Likewise the Devonport Dockyard also suffered from huge delays and costs involving a “number of technically challenging components whilst needing to meet exacting nuclear safety standards”.8

The exacting requirements for nuclear reactor and facility design, as well as the process of Regulatory approval, can cause extensive delays and associated costs. These can occur before construction commences as comments on the design by regulators result in design changes or reassessment or during it if, for example, an industry standard changes and so has to be taken into account. For example, seismic standards have changed in the past during the construction of nuclear power stations in the UK involving reassessment of the design to ensure that the design remained sufficiently robust taking into account that new standard.

In order to try a reduce the risks of the licensing/regulatory process (and specifically the risk permission for construction will not in the end be given), the UK now has a two phase licensing process for nuclear reactors reflecting the two phase licensing process in the US. The first phase is known as the Generic Design Assessment process.

The benefits of this are supposed to include early involvement with the designers when the regulator and its advisors can have the biggest influence and assessing the environments, safety and security aspects of the reactor design before the construction of the reactor starts.

Currently only the European Pressurised Reactor (“EPR”) has completed the Generic Design Assessment or GDA process which was completed in 2012. That is the reactor which EDF will use at Hinkley Point C. The AP1000 reactors designed and developed by Westinghouse and the UK Advanced Boiling Water Reactor (“ABWR”) sponsored by Horizon Nuclear Power (which is wholly owned subsidiary of Hitachi Limited) are still going through the process.

Indeed the ONR has recently asked Hitachi-GE to address a series of “shortfalls” in the probabilistic safety analysis of its ABWR saying the information provided to date does not provide the ONR with sufficient confidence it will, without further work, be able to “deliver a modern standard full-scope PSA” allowing the ONR “to carry out a meaningful assessment within the project timescales.”9 This is despite the fact the model is already licensed in Japan and the USA.

The idea behind the GDA process for new build was to give a degree of confidence that permission is likely to be granted for a new nuclear reactor to be built. However, even when a reactor has been completed its GDA, this does not constitute permission to start construction for which a pre-construction safety report and permission will also be required from the ONR.10

It now looks likely that Hinkley Point C will go ahead creating the first new nuclear power plant since 1995. However, it remains to be seen whether the mistakes of other nuclear projects such as the Olkiluoto 3 can be avoided.

For contractors, and subcontractors, ensuring that the risks associated with nuclear design and construction are properly understood and that the contract acknowledges and deals with those risks adequately (and ideally reflecting who has control of those risks) is key.

Likewise adequate dispute resolution provisions, aimed at ensuring the resolution of disputes before the dispute, or the issues they relate to, snowball out of control, are vital.

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• 1. See “Hinkley Point new nuclear plant edges closer with £2 billion Government guarantee unveiled by George Osborne” in The Telegraph dated 25 September 2015.
• 2. See “A Guide to Nuclear Regulation in the UK” by the Office for Nuclear regulation.
• 3. See the “National Policy Statement for Nuclear Power Generation (EN-6)” Volume 1 of 2 dated July 2011 published by the Department of Energy and Climate Change.
• 4. The ONR also has some responsibility for naval sites under the control of the crown (via the MOD) in conjunction with the Defence Nuclear Safety Regulator (the “DNSR”).
• 5. For a full list of the 36 Licence Conditions see page 18 or 32 of “A Guide to Nuclear Regulation in the UK” by the Office for Nuclear regulation. When assessing the adequacy of the licensee’s safety case assessors will use the ONR’s Safety Assessment Principles or “SAPs”.
• 6. Ibid
• 7. See Reuter’s “Update 2 – Finland’s nuclear plants are delayed again”; TVO stated ” – the delays have been blamed on “planning of the plant has taken needlessly long”.
• 8. See the National Audit Report (Executive Summary) “Ministry of Defence: The Construction of Nuclear Submarine Facilities at Devonport” dated December 2002.
• 9. See World Nuclear News “Second Regulatory Issue raised with UK ABWR” dated 17 July 2015
• 10. Early versions of the PCSR for Hinkley Point C have already been reviewed and commented on by the ONR.