New NEA report: Ensuring the Adequacy of Funding for Decommissioning and Radioactive Waste Management
Financing arrangements for nuclear decommissioning and radioactive waste must be both adequate and flexible enough to adapt as innovation reveals new technological options and societal circumstances change over long periods of time.
The question of how to best achieve adequacy and flexibility will become more pressing as many reactors around the world approach end of operations and countries begin to implement programmes for decommissioning and disposal of waste.
Overall, the report finds that the funding systems of NEA countries are sound. However, this study highlights the need to broaden current approaches to incorporate greater flexibility in order to ensure sustainability over the requisite lengthy periods of time in the face of unforeseen—yet inevitable—changes in a range of dimensions. Implementers must have the ability to respond to technological changes, financial changes, and evolving societal preferences.
One particular challenge is to adapt to changes in economic and financial framework conditions over long time periods. For example, in some cases, returns on assets previously believed to be ‘safe’, such as government bonds, have dropped significantly. Such changes may necessitate adaptations in funding requirements or investment strategies.
This new NEA report on Ensuring the Adequacy of Funding for Decommissioning and Radioactive Waste Management was launched in an online expert roundtable on 18 June 2021, where the NEA presented analysis and recommendations to broaden current approaches and ensure long term sustainability of funding. The report highlights the limitations of traditional methods of forecasting costs based on a linear method of discounting estimated future costs. Building on examples of adaptive approaches already in place to various extents in some countries, the NEA recommends a “circular approach” to effect periodic reviews of conditions and stakeholder consultations.
The report acknowledges the crucial role of governments in ensuring the adequacy of funding arrangements, in particular with respect to disposal and long term waste management. The report sets our cases studies that demonstrate how, in many NEA countries, sensible changes to funding approaches are already underway to respond to changing circumstances. The case studies reveal that adaptations and modifications are still often couched in the language of the linear approach. A key recommendation, then, is to broaden the conversation about the circular approach to facilitate future adaptations.
“Nuclear plant decommissioning in NEA countries is adequately funded. We have set aside the resources, the resources will be available to make sure that these plants can be deactivated and decommissioned, and the sites remediated as appropriate,” NEA Director-General William D. Magwood, IV noted during his opening remarks. “The circular approach allows us to consider or sometimes even re-consider funding arrangements with a broad, long-term perspective.”
“The ability to credibly demonstrate and communicate long term solutions – including financial plans – for decommissioning and waste management is central to building public confidence in nuclear energy,” added Diane Cameron, Head of the Nuclear Technology Development and Economics Division of the NEA. “This discussion is also timely as important activities move from planning to implementation, making the question of the adequacy of funding arrangements a practical rather than a conceptual concern.”
The NEA Chief Energy Economist Jan Horst Keppler, who provided a briefing on the key findings of this study, explained that linear decision-making frameworks have been a useful starting point for establishing funding systems. However, they assume that key parameters such as technologies and their costs, the discount rate, the return on capital or the operating lifetimes of nuclear power plants will remain stable for several decades. “Transitioning from a linear to a circular approach recognises explicitly that ensuring the adequacy of funding for decommissioning and radioactive waste management is not akin to traditional project finance, which we suppose in the linear approach or in the polluter pays principle,” said Keppler. “It’s a dynamic societal process requiring multiple adjustments along the way.”
The report also presents insights from case studies of the funding arrangements for decommissioning and radioactive waste management in 12 NEA member countries: Belgium, Canada, Finland, France, Germany, Japan, Korea, Spain, Sweden, Switzerland, the United Kingdom and the United States. While the case studies demonstrate that many NEA member countries are already adapting their funding systems to changing realities, they also show that in some cases these adaptations are taking place in an implicit, partial or ad hoc manner and could benefit from a coherent circular approach and framework. An added insight from these case studies is that funding arrangements need to take into account the specific circumstances of each member country, which can differ considerably.
In this context, the new NEA report provides a conceptual framework for a new approach as well as “Elements of good policy practices” that allow for necessary adaptations to take place in a more explicit and systematic manner.