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Financing arrangements and industrial organisation for new nuclear build in electricity markets

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  • Finon, D.
  • Roques, F.

Abstract

The paper studies how 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 significant risk transfers onto governments, consumers, and, vendors are likely to be needed to make nuclear power attractive to investors in liberalised markets, at least for the first batch of new reactors. These different types of risk allocations will in turn induce different investment financing choices. Four case studies of recent new nuclear projects illustrate the consistent combinations of contractual, organisational, and financial arrangements for new nuclear build depending on the industrial organisation, 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

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0850.

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Date of creation: Sep 2008
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Handle: RePEc:cam:camdae:0850

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Web page: http://www.econ.cam.ac.uk/index.htm

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Keywords: electricity market; nuclear; financing;

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References

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  1. 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.
  2. 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.
  3. Roques, Fabien A., 2008. "Technology choices for new entrants in liberalized markets: The value of operating flexibility and contractual arrangements," Utilities Policy, Elsevier, vol. 16(4), pages 245-253, December.
  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. 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.
  6. Kennedy, David, 2007. "New nuclear power generation in the UK: Cost benefit analysis," Energy Policy, Elsevier, vol. 35(7), pages 3701-3716, July.
  7. Nuttall, W.J. & Taylor, S, 2008. "Financing the Nuclear Renaissance," Cambridge Working Papers in Economics 0829, Faculty of Economics, University of Cambridge.
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Cited by:
  1. Adrien de Hauteclocque & Yannick Perez, 2011. "Law & Economics Perspectives on Electricity Regulation," RSCAS Working Papers 2011/21, European University Institute.
  2. Hauteclocque, Adrien de & Glachant, Jean-Michel, 2009. "Long-term energy supply contracts in European competition policy: Fuzzy not crazy," Energy Policy, Elsevier, vol. 37(12), pages 5399-5407, December.
  3. 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.
  4. 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.
  5. 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.

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