Financial, Legislative and Carbon Pricing

Accurate financial assessment is vital to the prospects for nuclear energy due to its capital intensive nature. Assessment of enabling legislation and hurdles is also required.

The impact or desirability of a carbon price to facilitate funding needs to be scoped.

Insurance and nuclear liability model needs design.

The structure and legislation for an expanded role of the nuclear regulator needs comment.

At least two significant issues need to be addressed:

1. The selection of appropriate interest rates. Recently in work done for the SA Royal Commission, Ernst and Young applied a Weighted Cost of Capital rate of 10.47% to nuclear power development when no evidence has been provided that such high rates have ever been applied to such a project. Interest rates applied during the higher risk construction period need not apply during the operations phase.

2. Performance criteria. At present many policy documents including the “Australian Power Generation Technology Report” utilise the Levelised Cost of Energy (LCOE) as a comparative performance measure which does not take into account the overall system performance.

Where the aim is carbon reductions then the cost to displace a tonne of carbon will need to be balanced against the cost of electricity production. At present there is almost no reporting of the cost to displace carbon.

Likewise, an accurate Life Cycle Analysis (LCA) for each technology needs to be assessed.

Resources – Scope requires personnel skilled in:

  • Financial advice as to methods of funding the programme including carbon pricing
  • Insurance advice and nuclear indemnity
  • Legislative and nuclear regulatory review expertise.