Unfit for purpose

In October 2004, the European Commission (EC) made its first report to the European Parliament on nuclear decommissioning funds, on the back of concerns about the safety implications of poor funding, fund mismanagement, and distortion of competition. The second report takes a step further in comparing European nuclear operators’ and states’ funding practice with that of an EC recommendation adopted in 2006.

The most obvious general finding of the second report was that there is a vast difference in decommissioning strategy and funding across European states, although it does not force the ‘one size fits all’ stance. Sweden and Finland are singled out for praise at their good practice and legal enforcement of the ‘polluter pays’ principle.

The report notes that decommissioning strategies are decided on the basis of cost, repository availability, social consequences and other factors, and implies that work has been deferred or brought forward depending on the money available. It is the government of some countries that makes these decisions, whereas in others it is up to the operators (subject to regulators).

The longest deferral period in Europe is for England’s graphite reactors, which have a huge 130-year timescale before final site clearance after plant closure. The UK Nuclear Decommissioning Authority has stated it plans to reduce this to 25 years. In Italy and France, ‘immediate dismantling’ is being carried out over a “relatively long timeframe”, according to the report.

Insufficient funding, apart from being contrary to the ‘polluter pays’ principle, can turn out to be an unjustified economic advantage amounting to state aid, which distorts competition between electricity producers, it says.

The Czech Republic, Hungary, and the Netherlands have opted for a strategy of deferred decommissioning but Slovakia and Bulgaria say they plan to move from deferred decommissioning to immediate or, as in the case of Kozloduy 1–4, a solution falling somewhere between the two. Long-term financial security is an area that appears to require further development.

The report says all member states have set up a body to review and assess fund management and cost estimates, but the role of these bodies is rarely detailed and requires close monitoring.

In several states, such as Italy, UK, Slovakia, Bulgaria and Lithuania, funding is provided by more than one system. In Germany funds are held and managed internally by commercial operators, although this has been criticised it has provided reasonable funds.

Shared ownership requires a specific solution to funding issues especially where the part-owner is from another member state. Particular attention needs to be paid to new power plant construction where ownership is shared by several countries.

There are many instances where a dedicated fund has not been created but instead there is an assumption that treasury funds will be made available when required. The report points out that while the liabilities for most installations are small compared to power reactors this is not the case for reprocessing and plutonium-handling facilities.

Since 2004, further detailed information on cost estimates has been obtained but many operators have been reluctant to tell the EC how the figures have been calculated.

Slovenia has a well-defined fund which meets the best practice outlined in the 2006 recommendation however, the responsibility for the Krsko power plant is shared with Croatia with the latter yet to establish a similar system. As a consequence, only half of the required funding for decommissioning is currently being set aside.

The vagaries of cost-discounting have also played out across Europe and “should be addressed” by harmonisation, according to the report. A combination of a long deferral period and inappropriate use of discounting rates can create long-term fund problems. Further problems are created when there isn’t proper oversight of cost estimates and poor fund performance. Also, in several countries, it is assumed that the state will underwrite any financial shortfall related to early closure problems.

Misuse of decommissioning and waste management funds was found in several countries. In Italy, money obtained from an electricity tariff is placed in a state fund and the part not required for decommissioning is used for other purposes of state interest.

In the UK, about half of today's funding for civil installations is provided from the state budget, based on a three-year commitment. The current shortfall in operating profits, which provides the remaining funding, and absence of a segregated fund results in a requirement to reorganise short-term decommissioning activities.

Belgium has drafted a new law which will see decommissioning funds used to finance totally unrelated power investment projects in a manner which could be seen as preferential to the project rather than prudent fund management.

Lithuania has in some cases used its national fund to co-finance energy sector projects to provide replacement capacity for its reactor, which was shut down early.

In terms of information within the public domain, the funding situation is “far from satisfactory” in many member states. Bulgaria did not reply to the EC's questionnaire or react to specific requests for information, and the report states that the early closure of the Kozloduy 1–4 power reactors has led to important funding issues.

The information provided by the UK was “quite sparse”, especially compared to most states, and disproportionate to the size of its nuclear industry. The information made available by the NDA on its website provided some counterweight to this criticism.

Germany responded to the EC's questionnaire some time after the study had been completed thereby removing an important element from the comparison being undertaken in one of the targeted studies.

The report noted that the claim of “commercial sensitivity” was used in many cases to withhold liability estimates and estimates of funds collected. “Given the detailed information available in this domain and the willingness of many operators to provide such information, this argument is not considered valid,” it said.

The report concluded that the benefits of harmonised decommissioning funding methodologies should be explored. For future nuclear constructions a common approach should be progressed but for currently operating systems the EC’s activities need to be based upon independent evaluation and reporting.

Corrina Thomson is deputy editor of Nuclear Engineering International