BUILDING AN INVESTMENT CASE | POLICY & FINANCE
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Utilities like Canada’s Ontario Power Generation are acting as champions for SMR development
are the most promising across the world in terms of an investment perspective,” explains Kotak.
Taking a lead on investment While external influences like government and industry clearly have a major role to play in de-risking investment, Kotak argues that the industry itself can do more too. “Looking generally across the nuclear sector we think the different players within the industry can have their own role to attract more investment. Looking from an operator perspective, they have a lot of experience in traditional nuclear but they can leverage those learnings across other nuclear technologies even though there are different construction timelines, and different sorts of risks associated with advanced reactors there are also a lot of synergies. That reduces those risks up front, mitigating the construction risk for example or lessening the construction time, which of course is more palatable from an investment perspective.” Furthermore, Kotak says, operators can also optimise
their existing customer relationships by identifying those that could benefit from, for example, process heat on existing sites: “Thinking slightly outside the box can move forward the discussion on how investment can be attracted by reducing those upfront costs and risks which traditionally have been the stumbling blocks to getting investment.” Kotak continues: “It is really important to understand the needs of the customers. They’re going to sign up for this. If it’s a utility just looking for power that’s straightforward, but if it’s an industrial operator, they may want heat as well. Those considerations come into play. You have to look at the whole value chain to see what’s needed and then from that look at the right technologies that will fit those needs. Once you have that it’s about trying to think about what’s the lowest risk solution that’ll meet those needs.”
“I think that’s really the how this champion concept is
a future way of being able to de-risk but also attract more investment because it enables the OEM, such as GE Hitachi, to have that operator-developer-customer lens all in one. Knowing what those connection points are is how a lot of the problems that we’re seeing with large-scale capital and infrastructure intensive projects is howe the process can be simplified to reduce cost,” she adds. Kotak also references the role of the government in supporting additional investment: “The final player that we see within the nuclear sector and having a known role in attracting more investment would be government bodies.”
However, even where governments are encouraging
investment some reform is needed to ensure that technologies and designs can not only keep up with the pace that’s needed for nuclear to remain a key part of the transition, but also for investors to recognise that there is state or central government backing and that their investment in that is also considered. “That’s something that we have seen work well in
countries where private investment has been stimulated because of central government backing and funding, for example with Poland and its nascent nuclear market. They’ve got a lot of private investment now because of government steps to reduce the complexity of regulation, enable commercial frameworks, sign binding relationships with established players. Looking at it from the regulatory perspective is also helpful when thinking about how we can encourage more investment. The current regulatory process is very drawn out and it’s not conducive to attracting investment,” says Kotak. Furthermore, Kotak contends that there is ample
evidence of an industry champion being key to a successful investment and development strategy for nuclear. “When we look at the success stories it really is where you see these partnerships and champions. In Canada, GE HItachi are closely working with OPG and the government, almost as a partner rather than a vendor, which you also see a lot in the US. Some of the troubles that some of the developers are having is because they’re on their own in some ways. They’re fighting the government and the off takers over costs and things of that nature, rather than working together,” says Kotak, adding: “Launching new technology, the vendor has traditionally taken on a lot of the risk of early units in close partnership with the customer and the off-taker to make those projects happen.”
Getting government on board A major investment risk for nuclear projects is the regulatory environment. As Kotak says: “Nuclear faces so much more scrutiny than any other technology. These regulatory processes are looking for 100% safety and that’s not just very costly, but adds complexity because if one government asks for one thing, another government will ask for that thing plus something else. So instead of having standard requirements when you have more than one regulatory agency in the picture it is actually worse because then you have the worst of both.” She argues that having government investment, not
necessarily in terms of money, but in terms of leadership, is key to addressing those kinds of investor concerns:
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