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Financing Arrangements and Industrial Organisation for New Nuclear Build in Electricity Markets

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  • D. Finon
  • F. Roques

Abstract

The paper studies how the risks specific to a nuclear power investment in liberalised markets - regulatory, construction, operation and market risks - can be mitigated or transferred away from the plant investor through different contractual and organisational arrangements. It argues that at least for the first new reactors significant risk transfers onto governments, consumers, and, vendors are likely to be needed to make nuclear power attractive to investors in liberalised markets. These different types of risk allocations will in turn induce different investment financing choices. Four case studies of recent new nuclear projects illustrate the alternative consistent combinations of contractual, organization, and financial arrangements for new nuclear build depending on the industrial organisation, the market position of the company and the institutional environment prevailing in different countries. The most likely financing structure will likely be based on corporate financing or some form of hybrid arrangement backed by the balance sheet of one or a consortium of large vertically integrated companies.

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Bibliographic Info

Article provided by Intersentia in its journal Competition and Regulation in Network Industries (CRNI).

Volume (Year): 9 (2008)
Issue (Month): 3 (September)
Pages: 247-282

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Handle: RePEc:sen:journl:v:9:i:3:y:2008:p:247-282

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Web page: http://www.crninet.com/

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  1. Magali Delmas & Bruce Heiman, 2001. "Government Credible Commitment to the French and American Nuclear Power Industries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(3), pages 433-456.
  2. Roques, F.A., 2007. "Technology Choices for New Entrants in Liberalised Markets: The Value of Operating Flexibility and Contractual Arrangements," Cambridge Working Papers in Economics 0759, Faculty of Economics, University of Cambridge.
  3. Levy, Brian & Spiller, Pablo T, 1994. "The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 201-46, October.
  4. Roques, F.A. & Nuttall, W.J. & Newbery, D.M. & de Neufville, R., 2005. "Nuclear Power: a Hedge against Uncertain Gas and Carbon Prices?," Cambridge Working Papers in Economics 0555, Faculty of Economics, University of Cambridge.
  5. Pablo T. Spiller & Ingo Vogelsang, 1997. "The Institutional Foundations of Regulatory Commitment in the UK: The Case of Telecommunications," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(4), pages 607-, December.
  6. Nuttall, W.J. & Taylor, S, 2008. "Financing the Nuclear Renaissance," Cambridge Working Papers in Economics 0829, Faculty of Economics, University of Cambridge.
  7. Kennedy, David, 2007. "New nuclear power generation in the UK: Cost benefit analysis," Energy Policy, Elsevier, vol. 35(7), pages 3701-3716, July.
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Cited by:
  1. Jean-Michel Glachant & Adrien de Hauteclocque, 2009. "Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy," RSCAS Working Papers 2009/06, European University Institute.
  2. Adrien de Hauteclocque & Vincent Rious, 2009. "Reconsidering the Regulation of Merchant Transmission Investment in the Light of the Third Energy Package: The Role of Dominant Generators," RSCAS Working Papers 2009/59, European University Institute.
  3. Jewell, Jessica, 2011. "Ready for nuclear energy?: An assessment of capacities and motivations for launching new national nuclear power programs," Energy Policy, Elsevier, vol. 39(3), pages 1041-1055, March.
  4. Adrien de Hauteclocque & Yannick Perez, 2011. "Law & Economics Perspectives on Electricity Regulation," RSCAS Working Papers 2011/21, European University Institute.
  5. Jewell, Jessica, 2011. "A nuclear-powered North Africa: Just a desert mirage or is there something on the horizon?," Energy Policy, Elsevier, vol. 39(8), pages 4445-4457, August.

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