Brexit is likely to be more disruptive to our existing nuclear fuel cycle businesses – and hence existing reactors – than our new-build programme

 

An amendment to the Brexit bill that would see the UK retain its membership of Europe’s nuclear club, Euratom, was defeated when the bill was passed. Speaking in the debate, Brexit minister David Jones MP said: “Euratom and the EU share a common institutional framework, including the European Court of Justice, a role for the commission and decision-making of the council, making them uniquely legally joined. Triggering Article 50, therefore, also entails giving notice to leave Euratom.”

It is not entirely clear that is the case. Nevertheless, assuming this is the government’s position, it places some barriers in the way of the government’s plans for nuclear new-build, which are already problematic (see article in last month’s New Power). But it also affects both existing reactors (a major UK power resource) and plans to develop a new industrial sector focused on small modular reactors.

The UK has a large nuclear business. It involves not just the operating reactors and those planned for construction here, but also the global nuclear fuel cycle and services businesses. What is more, nuclear is a key growth sector already highlighted in a planned industrial strategy and underpinned by research and development grants. How will these businesses be affected by the departure from Euratom?

“Absent an agreement, trade and movement of technology stops”

Tom Greatrex, chief executive of the Nuclear Industries Association, said it is possible to exist outside Euratom but that it will not be easy or straightforward, adding that it is “something that will have to be done by governments”.

Writing in the Financial Times, Nick Butler suggested that “any alternative arrangements will take time to put in place and the hiatus will set all new projects back for perhaps a year or more, as well as imposing costs on those waiting to go ahead”.

Tim Yeo MP suggested in the Telegraph that the replacement could be a “wider Europe-based pro-nuclear club including the 27 European Union member states as well as countries outside the bloc that are also developing new nuclear power plants”.

 

Going forward

One area that is fairly clear is liability in the event of a nuclear accident. The UK is a signatory in its own right to the Paris and Brussels agreements on third party liability and it was specifically introduced into domestic legislation by the Nuclear Installations Act many years ago.

Day-to-day safeguards and accounting for nuclear material are also a high-profile concern, but one for which the outcome is relatively straightforward. The UK will have an increased cost to bear when it takes over the responsibility, with resulting staffing issues for the Office for Nuclear Regulation (ONR), but the regime is well-established over decades.

The UK has a long history in nuclear energy and has played a leading role in putting both safeguards and liability regimes in place and “there is no intention to change that”, New Power was told. Where withdrawal from the Euratom treaty is more problematic is in the UK’s broader business of nuclear power.

The treaty regulates the ‘peaceful and civilian use of nuclear energy’ and is effectively a single market in nuclear, with many parallels to the overall EU free market. That includes the free movement of nuclear materials, skills and people, fissile material (nuclear fuel and its nuclear components) and nuclear waste, and it governs issues such as the use of intellectual property. Like the rest of the EU’s single market, it streamlines the movement of nuclear goods, people and services.

“Absent an agreement, trade and movement of technology stops,” one legal expert told New Power. The UK will have to come to new agreements with individual EU member states, or the bloc as a whole. But Euratom is also the counterparty to bilateral agreements with major nuclear trading partners of the UK, such as Japan (which has fuel supply, services and nuclear waste contracts with the UK, as well as for nuclear new-build) the US, Canada and Australia (suppliers of uranium), and various other trading partners. So the UK will have to secure deals with third party countries.

What are the options? They mirror those the UK is considering with respect to the single market. It is possible for the UK to sign an ‘association agreement’ with Euratom, which would bring with it treaty status with other global trading partners. Switzerland has taken this route. But that will probably require the UK to agree to Euratom’s ‘nuclear common market’ provisions – an option that is attractive within the industry, where the need to attract skilled personnel is a perennial problem, but would be in uneasy tension with other Brexit arrangements around the broader single market. In that case the intention is to exclude free movement.

On the positive side, the European nuclear common market framework has been in place for decades and is well known to all parties – unlike the Internal Energy Market, where the UK is exiting as the rules are being set. So if the UK does have to sign bilateral agreements with trading partners, a two-year timeframe is not unreasonable.

“The principles are enshrined in existing agreements and there is no reason bilateral agreements can’t piggyback for existing counterpart countries,” said Louise Moore, a nuclear specialist at lawyers Hogan Lovells, who was keen to note that the UK had stressed nuclear as a priority industry. “There is a pathway and there are options,” she added.

Moore also pointed out that there are already some partial bilateral agreements in place that could be beefed up. That includes a framework co-operation agreement with Japan – a major investor in the Wylfa project – which was expanded in December 2016.

There is, of course, a capacity problem. Does the UK have the skills and people available to carry out negotiations on Euratom and, probably simultaneously, with other countries for a series of bilateral contracts as a ‘plan B’ over the two years to Brexit? That remains to be seen.

First published in New Power, March 2017

Further reading:

Lords committee to consider energy security implications of Brexit

Brexit ‘puts operation of the UK nuclear industry at risk’, warns Select Committee