Key developments in nuclear for 2022

The nuclear energy sector has entered into 2022 high on the political agenda, as policymakers attempt to calibrate the sector's role in the race to net zero. While policymakers and experts largely recognise the sector's potential in facilitating a carbon-neutral future, public support for nuclear projects is more ambiguous, largely due to concerns relating to the safety of nuclear plants and the disposal of nuclear waste. Nonetheless, the sector has entered 2022 with significant momentum, as December and January have seen a number of important developments for the nuclear sector within the EU and UK. In this article, we will outline three key recent developments in the nuclear sector.

EU Commission proposes "green" label for nuclear energy

On 1 January 2022, the EU Commission published a consultation on its proposal to include nuclear (and natural gas) energy in its 'Green Taxonomy'. The Green Taxonomy is a classification system establishing a list of environmentally sustainable economic activities. The economic activities listed in the Green Taxonomy are seen as key to achieving the EU's climate and energy targets for 2030 and fulfilling the EU's objective to make Europe the first climate-neutral continent by 2050. This ambition was first announced in the European Green Deal and thereafter enshrined in the European Climate Law.

If the proposal is adopted by the Member States, nuclear projects would be considered "green" investments and investors in such projects would be entitled to label them accordingly for reporting purposes. On 2 February 2022, the EU Commission approved in principle a Complementary Climate Delegated Act to amend and supplement the EU Taxonomy Regulation 2020/852, proposing a number of criteria which nuclear projects would have to satisfy in order to use the label, and it is anticipated that such criteria (as for other activities) would be updated as the technology evolves over time.

A number of Member States have however vowed to oppose the inclusion of nuclear energy in the Green Taxonomy, with Austria notably threatening to commence legal proceedings against the EU Commission, so the classification of nuclear as a "green" investment under the Green Taxonomy is yet to be confirmed.

We have covered the Complementary Climate Delegated Act in more detail here.

UK Government invests £100m into Sizewell C

On 27 January 2022, the UK Government announced an investment of £100 million to support the continued development of the Sizewell C nuclear power plant in Suffolk. The Sizewell C nuclear power plant is slated to produce 3.2 GW of electricity, enough to power around 6 million homes as well as supporting up to 10,000 jobs across the UK.

The investment takes the form of an option fee over certain rights over the land of the Sizewell C site as well as shares in the Sizewell C company. If Sizewell C reaches a Final Investment Decision, the UK Government will receive a reimbursement of the option fee with a financing return, either in the form of cash or equity in the project.

The announcement follows the UK Government's decision in November 2021 to invest £210 million in the development of the world's first small modular reactors. This supports the Government's Ten Point Plan for a Green Industrial Revolution and build's on the Energy White Paper 2020. Together with the further publication of the UK Government's Fusion Strategy, published in October 2021, and the progress in shortlisting a site for the UK's first fusion energy plant (which the UK Government hopes will be operating as a prototype by 2040), these actions demonstrate the UK Government's continued commitment to the development of the UK nuclear sector.

Nuclear Liability Protocols ratified, extending operator liability

On 17 December 2021, long awaited changes to the Paris Convention on Third Party Liability in the Field of Nuclear Energy of 29 July 1960 (as amended) (the "Paris Convention") and the Brussels Convention Supplementary to the Paris Convention of 29 July 1960 (as amended) (the "Brussels Convention") (together, the "2004 Protocols") passed the ratification threshold to enter into force. The Paris and Brussels Conventions are incorporated into UK law by the Nuclear Installations Act 1965. This is amended by the Nuclear Installations (Liability for Damage) Order 2016, which implements the 2004 Protocols through substantive provisions which took effect on 1 January 2022.

Under the 2004 Protocols, those who suffer loss or damage resulting from an accident in the nuclear energy sector will be entitled to seek greater compensation. The liability of nuclear power plant operators will now be at least €700 million, supplemented by up to €800 million of public funds under the Brussels Convention. The compensation rights were previously capped at 5 million and 300 million Special Drawing Rights respectively under the Brussels Convention; roughly equivalent to €6 million and €369 million.

Other key changes under the 2004 Protocols are to increase compensation available at 'low-risk installations' and for accidents during the transport of nuclear substances, to provide compensation for a broader range of categories of damage, and in a wider territorial scope than was previously the case. The limitation period for claims under the 2004 Protocols has also been extended to 30 years instead of 10.

Comment

The ratification of the 2004 Protocols has been long-awaited, and provides much needed certainty in the nuclear sector.  This change, coupled with the potential for the inclusion of nuclear in the Green Taxonomy, and ongoing support from the UK Government, will help the nuclear sector in the UK to push forward with support for the transition to net zero.