Will the nuclear decommissioning model actually work?

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The story this week about funding the reclamation work at Ffos y Fran has wider implications than are immediately obvious. Whether the company actually has the money available to carry out the promised reclamation work is still to be determined, although some thorough forensic financial investigation suggests that it has. Whether that money has been deliberately moved around in an attempt to shelter it for the company’s shareholders is unclear, but goes to the heart of the dispute. Court proceedings will answer those questions in due course.

The underlying question, though, is how realistic it is for any company to be expected to set aside large amounts of profit during the operational years of a facility in order to pay for restoration work on completion. Clearly, the suggestion that it is a reasonable expectation was key to the consent for the site in the first place; it is the enforceability of that which is now in doubt. It doesn’t really fit the capitalist model of enterprise which involves initial capital expenditure to get a project operational and then maximum extraction of profit during the operational phase. Committing to several years of heavy expenditure requiring the time and attention of the company’s owners and managers for no return at all really doesn’t fit the model. It should be no surprise at all if any company in that position attempted to avoid – or reduce – its liabilities.

It’s a model, though, in which government seems to be placing blind faith when it effectively allows private companies to build and run major projects. In yesterday’s post, I referred to the long-term implications for an independent Welsh government of allowing Wylfa Newydd to go ahead. The assumptions around the Hinkley Point C project include that EDF will be picking up the full costs of decommissioning through a Funded Decommissioning Programme, and the agreed strike price for electricity provided by the plant includes an allowance for those costs. The problem, though, is that no-one really knows what those costs will be – and the decommissioning work will continue for decades, not just years, during which the company will no longer be receiving any income for the electricity produced. The probability of that actually happening seems to me to be vanishingly small, with the likelihood being that some or all of the cost will ultimately fall back on public funds. The same will be true for Wylfa Newydd, meaning a large potential liability for a future Welsh government. Ffos y Fran is an interesting case study, but nuclear decommissioning is on an enormously larger scale – billions rather than tens of millions. Is that being understood?