RC124 MayJun 2026 - Magazine - Page 16
NUCLEAR ENERGY
the project’s business case has been reviewed and feasibility remains
intact as plans mature and risks are better understood. Good oversight and unbiased review at each phase gate are critical to ensure
the project progresses as planned. Healthy commercial strategies will
seek to balance construction risk between the project owner and the
supply chain to maximize value and verify that the project is managed
appropriately. This means that as some risks begin to materialize into
issues, the decision-making structure and the mitigation of those risks
are aligned to a set of project priorities—usually focused on cost and
schedule. One of the key commercial relationships is between the
owning party and the primary engineering, procurement, and construction companies, as well as the main reactor technology provider.
These agreements need to be structured early to ensure all parties
understand and agree on the project priorities and key variables, such
as cost and schedule estimates, and that contingencies for known and
unknown risks are well understood.
Once a 昀椀nal investment decision has been made and construction is
released, the governance, change management, and dispute resolution systems within the commercial agreements that will oversee the
construction are important to the project’s ability to stay on track and
achieve commercial operation. Dispute avoidance or adjudication
boards can be useful for keeping projects moving forward and minimizing the impacts of issues as they surface in real time.
Operational risk management
When the plant is operational, risk management shifts to ensuring
safety, reliability, and long-term 昀椀nancial stability. Operational risks
include safety and compliance, equipment reliability, and regulatory
changes. Nuclear safety remains paramount, as incidents can lead to
shutdowns, liability, and loss of public trust. Regulatory shifts based
on global lessons learned or best practices can impose new compliance
burdens. Compared to construction cost and schedule risks, operational risks are signi昀椀cantly lower in terms of probability, thanks to
the robust regulatory framework in place for nuclear energy and the
highly quali昀椀ed operational teams and management systems. Operating nuclear power plants are attractive investments for institutional or
other risk-averse investors.
Investments in R&D infrastructure tailored to nuclear physics,
chemistry, and radioactive waste products associated with the nuclear
technology in operation can have signi昀椀cant impacts on facility operations. Examples of this include workforce training and development
programs that increase understanding of speci昀椀c safety and reliability
issues at the facility, as well as new business opportunities, including isotope production from the reactor or novel uses of radioactive
by-products and waste management techniques. R&D investments in
educational institutions or nuclear laboratories, speci昀椀cally focused
on reactor technologies, raise public interest in the type of reactors
selected for deployment.
At the end of life, radioactive waste products are typically transferred to a government agency for permanent disposal and long-term
care. Regulators will usually require that decommissioning and radioactive waste-disposal plans be developed prior to construction and
昀椀nancial guarantees being in place, as quantities accumulate during
construction and operation.
Operational risk and stakeholder relationships
Operational risk is closely tied to the business model and the relationships among owners, operators, and ratepayers. In regulated
utility-owned models, operational failures can lead to increased costs
16—RENEW CANADA – MAY/JUNE 2026
that regulators may disallow, creating tension between utilities and
ratepayers. While some risk is passed through the regulated price of
electricity, regulators can also cap recovery to protect ratepayers. In
PPP arrangements, private operators produce energy under longterm contracts, bearing some 昀椀nancial penalties for failures, while
public entities bear the residual risk and face political consequences.
Clear contractual frameworks are essential when ownership and
operation are separated, de昀椀ning performance obligations for both
cost and output, as well as remedies for non-compliance. Ratepayers’ exposure to operational risk varies. In regulated markets, risk is
sometimes spread more broadly across regulatory and public 昀椀nancing structures, limiting the direct cost passed on to ratepayers. In deregulated markets, they pay market prices and can be more exposed
to large incidents or failures, as demand can outweigh supply. Either
way, poor operational performance can erode investor con昀椀dence,
trigger renegotiations, and damage public trust, underscoring the
importance of transparent communication and strong governance.
Summary of key considerations
The development and operation of a nuclear power plant require the
careful integration of technical, 昀椀nancial, regulatory, and public engagement factors. The business model chosen for such a project signi昀椀cantly in昀氀uences risk allocation, 昀椀nancing structures, and stakeholder relationships. Models range from traditional utility-owned
approaches to PPPs, BOO, and BOOT, each with distinct implications
for governance, e昀케ciency, and political oversight. Merchant models
are generally unsuitable due to nuclear power’s high construction
and 昀椀xed operational costs, as well as the uncertainty of revenue.
Construction risk management is critical because nuclear projects
involve multi-billion-dollar investments and decade-long construction timelines. Risks include technical complexity, regulatory delays,
supply chain disruptions, and public opposition. E昀昀ective mitigation
requires robust front-end planning, phased funding releases, and
well-structured commercial agreements that clearly de昀椀ne priorities,
contingencies, and dispute resolution mechanisms. Government
involvement — through guarantees, regulated markets, or backstops
— is often essential to attract private investment and secure low-cost
昀椀nancing.
Once operational, nuclear power plants become low-risk, highly
reliable assets, but operational risk management remains vital. Risks
include safety compliance, equipment reliability, and regulatory
changes. Investments in R&D tailored to reactor technology can
enhance safety, workforce capability, and even create new revenue
streams, such as isotope production. Long-term planning for decommissioning and radioactive waste disposal must be embedded early
in the project life cycle.
The success of nuclear programs and projects hinges on selecting
a business model that balances risk among governments, private
investors, and ratepayers while ensuring nuclear safety and 昀椀nancial
viability. Transparent governance, strong contractual frameworks, and
proactive stakeholder engagement are essential throughout the life
cycle—from planning and construction to operation and decommissioning. While construction carries the highest risk, disciplined project
management and phased oversight can mitigate cost overruns and
delays. Operational risks, though lower, require sustained attention
to safety, regulatory compliance, and technological innovation. Taken
together, these factors show that while nuclear power o昀昀ers long-term
sustainability and signi昀椀cant local economic bene昀椀ts, it still needs robust business strategies and collaborative risk-sharing mechanisms.
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