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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.

Suggested Citation

  • Finon, D. & Roques, F., 2008. "Financing arrangements and industrial organisation for new nuclear build in electricity markets," Cambridge Working Papers in Economics 0850, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0850
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    References listed on IDEAS

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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. 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.
    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. 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 201-246, October.
    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 607-607, 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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    Citations

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    Cited by:

    1. Adrien de Hauteclocque & Jean-Michel Glachant, 2011. "Long-term Contracts and Competition Policy in European Energy Markets," Chapters,in: Competition, Contracts and Electricity Markets, chapter 9 Edward Elgar Publishing.
    2. Brookes, Naomi J. & Locatelli, Giorgio, 2015. "Power plants as megaprojects: Using empirics to shape policy, planning, and construction management," Utilities Policy, Elsevier, vol. 36(C), pages 57-66.
    3. Hauteclocque, Adrien de & Glachant, Jean-Michel, 2009. "Long-term energy supply contracts in European competition policy: Fuzzy not crazy," Energy Policy, Elsevier, pages 5399-5407.
    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.
    6. Kessides, Ioannis N. & Wade, David C., 2011. "Towards a sustainable global energy supply infrastructure: Net energy balance and density considerations," Energy Policy, Elsevier, pages 5322-5334.
    7. 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.

    More about this item

    Keywords

    electricity market; nuclear; financing;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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