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

  • D. Finon
  • F. Roques

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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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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  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. Kennedy, David, 2007. "New nuclear power generation in the UK: Cost benefit analysis," Energy Policy, Elsevier, vol. 35(7), pages 3701-3716, July.
  3. Fabien A. Roques & William J. Nuttall & David M. Newbery & Richard de Neufville & Stephen Connors, 2006. "Nuclear Power: A Hedge against Uncertain Gas and Carbon Prices?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-24.
  4. 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.
  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. 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.
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