RC124 MayJun 2026 - Magazine - Page 14
NUCLEAR ENERGY
Developing a nuclear power program and constructing a nuclear power plant are among the most complex undertakings in the energy sector.
14—RENEW CANADA – MAY/JUNE 2026
erate-transfer (BOOT), allows private or foreign ownership during
a concession period before transferring the plant to a government
agency, aligning private involvement with long-term public control.
Finally, merchant models, where electricity is sold directly into energy markets without long-term contracts, are not usually conducive
to nuclear projects due to high 昀椀xed costs and revenue uncertainty.
Managing construction risk
Construction risk management is critical because nuclear projects are
capital-intensive and prone to delays and cost overruns. Risks arise
from technical complexity, regulatory delays and uncertainty, lack of
public support or mistrust, supply chain disruptions, and skilled labor shortages, among others. Schedule risk is particularly signi昀椀cant,
as delays can lead to increased construction costs, lost revenue, and
high 昀椀nancing costs. Unmanaged quality and safety risks can result
in regulatory shutdowns and reputational damage.
The most important mitigations to construction risk are robust
project front-end planning and sound execution of commercial
strategy. This means substantial investment in engineering and
early project design, risk identi昀椀cation and analysis, schedule and
cost estimate development, supply chain readiness for both goods
and labor, and commercial agreement development, all ahead of 昀椀nal
investment decisions that mark the transition to a construction project.
This investment can be signi昀椀cant. Combined with the licensing
deliverables and fees, funding of front-end planning for a nuclear
power project is usually still measured in billions of dollars. Public
money, or at least a blend of public and private funds, is often leveraged to 昀椀nance these early project planning investments. Funding
releases at staged intervals, such as formal phase gates, help con昀椀rm
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Because of the high capital investment required for a nuclear power
plant, combined with the life cycle considerations of the fuel and
assets, it is typical for governments or government agencies to be
involved in the business model. Examples of involvement are publicly
owned utilities, a regulated electricity market (or guaranteed electricity price), guaranteed rates of return on equity, construction backstops
or loan guarantees, and nuclear waste ownership/disposal guarantees. Government involvement in projects and supportive regulatory
structures with predictive cash 昀氀ows can enable private investment
and lower-cost debt 昀椀nancing, but this involvement introduces oversight requirements from government entities to ensure projects and
assets are managed in the public interest.
With a traditional utility-owned model in a regulated electricity
market, an established utility company will build, own, and operate
the plant, recovering costs through the regulated market. This approach o昀昀ers regulatory clarity but exposes the utility to signi昀椀cant
昀椀nancial risk if delays or cost overruns occur during construction. This
昀椀nancial risk often requires public involvement in 昀椀nancing. If the
utility is not publicly owned, public-private partnerships (PPPs) can
share risk between government and private investors, often with government guarantees or subsidies to attract private investment. While
PPPs reduce 昀椀nancial burden on private entities and can enhance
public con昀椀dence, they can also introduce governance complexity and
potential political interference.
PPP models, such as build-own-operate (BOO), place full responsibility for construction and operation on private entities or foreign
governments, which sell electricity under long-term contracts. These
models encourage e昀케ciency but require strong contractual frameworks to secure revenue and manage risk. A variation, build-own-op-
