Nuclear Power new reactors and higher responsibility for damage

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1 SOU 2009:88: Kärnkraft - nya reaktorer och ökat skadeståndsansvar 2 November 2009 Nuclear Power new reactors and higher responsibility for damage Summary Remit On 11 December 2008 the Government decided to appoint an inquiry chair to review the legislation in the area of nuclear technology and radiation protection. The Inquiry s remit was extended through supplementary terms of reference adopted on 8 April Under them the Inquiry was to draft proposals for new legislation for the public examination of new facilities that will make controlled generational shifts possible in the Swedish stock of nuclear power facilities, in accordance with the assessments presented in Government Bill 2008/09:163. The Inquiry was also charged with drafting proposals to make it possible to abolish the Nuclear Power Phase-Out Act (1997:1320) and remove the ban in the Nuclear Activities Act (1984:3) on the construction of new nuclear power reactors. One of the Inquiry s main tasks has been to propose amendments to the Nuclear Activities Act and the Environmental Code that will make it possible to gradually replace existing nuclear power reactors with new nuclear power reactors. One precondition for obtaining permission to construct new reactors in Sweden is to be that the new reactor replaces one of the older reactors and that the older reactor is permanently shut down. The new nuclear power reactors may only be constructed on one of the sites where present reactors that are in operation are located. The legislation is to be framed in a way that provides the conditions for controlled generational shifts in Swedish nuclear power. The Inquiry s terms of reference say that applications for permits for new reactors are to be examined on the basis of an overall perspective that integrates security of energy supply with other interests. The applications are also to be examined according to the statutory requirement of best possible technology, when the generation of long-lived radioactive waste is also to be assigned great importance, in addition to radiation safety. The safety requirements are to be tightened gradually. Against this background the Inquiry has made a special analysis of and drafted proposals concerning: the forms for the public examination of new nuclear reactors; and the forms for regular overall assessments of safety at Swedishnuclear power reactors. The Inquiry has paid particular attention to the impact of the amendment legislation on the present programme for the management and final disposal of spent nuclear fuel and nuclear waste. The Inquiry s terms of reference say that one important precondition for the continued operation of nuclear power is that the safety requirements continue to be tightened gradually. The Inquiry has also drafted a proposal for the abolition of the Nuclear Power Phase-Out Act (1997:1320). The Inquiry s remit was extended on 19 August 2009 through further supplementary terms of reference to include 1

2 analysing whether unlimited liability for radiological damage should be imposed on the owner of a facility and considering and proposing to what extent the operator of a facility should have a liability to provide financial guarantees for compensation for those affected by a radiological accident. These matters are to be considered in the light of consideration for injured parties, costs for the State, municipalities and county councils and economic, insurance and other aspects. The Inquiry is now continuing to work on its final report, which is to be presented no later than 30 April 2010 according to its supplementary terms of reference. In its further work the Inquiry will consider the conditions for the coordinated regulation of activities in the area of nuclear technology and radiation protection and propose the amendments that will need to be made to acts and ordinances. In this work the Inquiry will study the possibilities of bringing together the provisions of the Nuclear Activities Act and the Radiation Protection Act in a single act and will also consider the possibilities for better coordination with the provisions of the Environmental Code. In its further work the Inquiry will also consider the need for and possible formulation of a statutory regulation of the long-term responsibility for the sealed final disposal site for spent nuclear fuel. Main points of the report Generational shifts in the Swedish nuclear power stock The forms for public examination under Chapter 17 of the Environmental Code Chapter 17, Section 1 of the Environmental Code gives the Government far-reaching scope to steer these activities in the desirable direction The Inquiry s deliberations have led to the conclusion that examination of the permissibility of new nuclear power reactors to be conducted under Chapter 17, Section 1 of the Environmental Code, according to the Inquiry s proposal, will already give the Government far-reaching scope to steer these activities in the desirable direction in terms of industry, energy, labour market, climate and regional policy with the present wording of that provision. Permit applications for new reactors can thus be examined on the basis of an overall perspective including security of energy supply in the way specified in the Inquiry s terms of reference and foreseen in Government Bill 2008/09:163 A Cohesive Climate and Energy Policy Energy. Based on the Inquiry s terms of reference this means there is no reason to propose amendments to Section 1. Addition of a new provision, Section 2 a, to Chapter 17 of the Environmental Code In contrast the Inquiry has concluded that a new provision should be added to Chapter 17 of the Environmental Code. It should match the preconditions for permission to construct new nuclear power reactors set out in the Inquiry's supplementary terms of reference and Government Bill 2008/09:163 A Cohesive Climate and Energy Policy Energy. The Inquiry therefore proposes that a new provision, Section 2 a, be added to Chapter 17 of the Environmental Code. It would state that one precondition for the construction of a new nuclear power reactor in Sweden will be: that the new reactor replaces one of the present electricity generating reactors; that this older reactor has been permanently shut down when the new reactor is starts operating; and that the new reactor is constructed on a site where one of the present electricity generating reactors in operation is located. 2

3 A new reactor does not necessarily have to be constructed on the same site where the nuclear power reactor to be replaced is located Under the Inquiry s proposal, a new nuclear power reactor does not necessarily have to be constructed on the same site where the nuclear power reactor to be replaced is located. It should be possible to locate the new reactor on one of the other sites where present electricity generating nuclear power reactors are operating. The term site In this context, the term site refers to the area for the nuclear facility that has been assigned to industrial and energy purposes, etc. in the municipality s detailed development plan. A nuclear power reactor that has been shut down permanently should be demolished in coordination with similar projects Shutting down a reactor permanently does not mean that the reactor must be phased out and dismantled immediately. This requires a special permit under the Ordinance on Environmentally Hazardous Activities and Public Health Protection (1998:899). How and when the reactor will be phased out and dismantled will be determined in connection with the examination of the permit application conducted under the Environmental Code. After receiving a phase-out permit, the holder of a permit for a nuclear power reactor must not resume operations in order to extract nuclear energy. The Inquiry also proposes the introduction of a new rule in the Ordinance on Environmentally Hazardous Activities and Public Health Protection (1998:899) to the effect that anyone who has received a permit to dismantle or phase out a nuclear reactor must not resume the operation of that reactor in order to extract nuclear energy. Introduction of a veto override for new nuclear power reactors The Inquiry s final proposal with regard to the Environmental Code is to amend Chapter 17, Section 6 of the Environmental Code so that the same possibility of making an exception to the municipal veto that now applies to a new facility for intermediate storage or final disposal of nuclear material or nuclear waste will also apply to new nuclear power reactors provided that the activity is deemed to be of exceptional importance from a national perspective. Examination of permissibility under the Nuclear Activities Act (1984:3) The examination of permissibility under the Environmental Code and the Nuclear Activities Act to be coordinated The examination of permissibility under the Environmental Code should also steer the examination of permissibility under the Nuclear Activities Act. The Inquiry proposes doing so by adding a provision to Section 5 of the Nuclear Activities Act. The amendment would state that the restrictions that apply to new nuclear power reactors under the Environmental Code shall also apply to the examination of permissibility under the Nuclear Activities Act. As a result of this, the provision in Section 5 a, first paragraph of the Nuclear Activities Act banning the issue of permits for new nuclear power reactors can be abolished without thereby clearing the way for an unlimited number of reactors under the Nuclear Activities Act. 3

4 Particular importance to be attached to best possible technology and to the management of spent nuclear fuel and nuclear waste An application under the Nuclear Activities Act for permission to construct a new nuclear power reactor has to be examined under the statutory requirement of best possible technology. This examination has to assign the management and final storage of spent nuclear fuel and nuclear waste great importance, in addition to nuclear safety and radiation protection. This is stated indirectly through the fundamental provisions of the Nuclear Activities Act and through a reference in the Act saying that the general rules of consideration in Chapter 2 of the Environmental Code shall be applied to the examination of matters under the Act. On the basis of the focus that applies to nuclear safety work, and is set out in the Inquiry's terms of reference, and also considering the reference in the Act to Chapter 2 of the Environmental Code, the Inquiry takes the view that the Nuclear Activities Act should explicitly state that the question of the best possible technology and the management of spent nuclear fuel and nuclear waste shall be assigned particular importance in connection with the examination of permit applications for new nuclear power reactors. The Inquiry therefore proposes that Section 5 of the Nuclear Activities Act be amended to state that the question of the best possible technology and the management of spent nuclear fuel and nuclear waste shall be assigned particular importance in connection with the examination of permit applications for new nuclear power reactors. The process for examining permit applications should not be detailed in the Act The construction and commissioning of new nuclear power reactors is a long process. International experience suggests that it can take at least 10 years to go from the opening of the permit process to the start of routine operations at a new reactor facility. If the practice for the permit examination process that has been established at international level is also applied in Sweden, this means that the examination of a new nuclear power reactor will proceed in stages during which the question of best possible technology in various aspects of importance for safety and radiation protection will gradually be defined more closely. However, in the view of the Inquiry there is no reason to set out details in the Nuclear Activities Act of how the permit examination process should be designed. This is a matter that should be left to practice. New definition of a permanently shutdown reactor One precondition for permissibility to construct a new reactor is that the older reactor has been shut down permanently no later than when the new nuclear power reactor starts commercial operations. An existing nuclear reactor may be shut down for reasons other than to create opportunities to construct a replacement reactor. This may happen either because the supervisory authority considers for safety reasons that the reactor must not be operated until certain measures have been taken or because the permit holder has concluded that operating the reactor is no longer financially attractive. The permit holder may insist that the reactor should re-start once the necessary measures have been taken. So a reactor can be shut down for an extended period several years without the permit holder declaring for that sake that the reactor has been shut down permanently. This has the effect of blocking the possibilities for other actors on the market who would be interested in making such an investment of replacing this reactor with a new reactor. Such a situation can create a position where the actual permit for the reactor that has been decommissioned acquires a high market value in a way that could have a harmful impact on the electricity market. A nuclear power reactor that has been decommissioned for an extended period without the permit holder declaring that it has been shut down permanently can also lead to certain concerns in terms of safety and radiation protection. 4

5 The Inquiry therefore proposes that a reactor that has not been connected to the electricity grid for the past five years shall be regarded as permanently shut down. A reactor whose permit holder, after making a closure decision in the usual way, applies for and receives a permit to phase it out, i.e. electricity generation in the reactor has ended and will not be resumed, is also covered by the definition of a permanently shutdown reactor. Inspection and enforcement under the Environmental Code relating to nuclear activities and activities using radiation to be taken over by the Swedish Radiation Safety Authority As a result of the division of legal matters between the Nuclear Activities Act, the Radiation Protection Act and the Environmental Code, the Swedish Radiation Safety Authority and the county administrative boards make their own independent examinations of matters relating to nuclear activities. This overlapping supervision may turn out to be problematic in certain respects, especially in connection with an expansion of new nuclear power. As concluded by the Inquiry, at present the county administrative boards largely lack resources for supervision of ionising and non-ionising activities, i.e. nuclear activities under the Nuclear Activities Act and activities using radiation under the Radiation Protection Act. If the county administrative boards were to begin to enhance their resources in terms of staff with expertise in ionising and nonionising radiation this could lead to a fragmentation of supervision resources in this area between the county administrative boards and the Swedish Radiation Safety Authority. The Inquiry has therefore made the assessment that the Swedish Radiation Safety Authority should take over inspection and enforcement under the Environmental Code in matters relating to ionising and non-ionising radiation. Requirement of a regular overall assessment of reactor safety and the impact on security of supply in the area of electricity generation The Swedish Radiation Safety Authority s regulations provide that nuclear power stations shall conduct a unified analysis and overall assessment of safety at each nuclear power reactor at least every ten years. The regular overall assessment is an important and fundamental principle for safety and radiation protection work at nuclear facilities. The overall assessment involves a process that enables the supervisory authority to gradually tighten the safety requirements relating to the operation of nuclear power stations. The Inquiry therefore proposes that the Nuclear Activities Act be amended to require any party who has a permit to own and operate a nuclear facility to conduct a regular overall assessment of safety. Regulating the requirement to conduct a regular overall assessment in the Act emphasises its importance as a safety principle and increases clarity for permit holders. However, the point of raising the requirement for regular overall assessments to the level of the Nuclear Activities Act has not been that the assessment is to be carried out in some other way or on the basis of significantly different criteria than at present under the regulations of the Swedish Radiation Safety Authority. The regular overall assessment of safety at Sweden s nuclear power reactors provides safety indications that can have implications for national security of supply in a longer-term perspective. 5

6 Decommission of nuclear power reactors and other reactors The Inquiry proposes that the annex to the Ordinance on Environmentally Hazardous Activities and Public Health Protection (1998:899) be amended so that the terms used in the provisions relating to nuclear power stations and other reactors are adapted to the terminology generally applied in this context and used in Government Bill 1999/2000:63 on approval of agreements concerning compensation in connection with the closure of the Barsebäck power station, etc. Nuclear Power Phase-Out Act (1997:1320) The Inquiry proposes that the Nuclear Power Phase-Out Act (1997:1320) shall cease to apply at the end of June The implementation of a generational shift in the Swedish stock of nuclear power facilities that gives emphasis to aspects such as security of supply and long-term perspectives in particular means that nuclear power will be an important energy source for the foreseeable future. Government Bill 2008/09:163 A Cohesive Climate and Energy Policy Energy states that the Swedish nuclear power stations will be operated for the whole of their economic life. As a result the Nuclear Power Phase-Out Act appears unnecessary and should therefore be abolished. Abolition of the Nuclear Power Phase-Out Act means that there will no longer be any tools to use to stop the operation of a functional nuclear power reactor for energy policy reasons. The Inquiry has studied the contents of the agreements made as a result of the agreement between the State, Vattenfall AB and Sydkraft AB on the closure of the two reactors at Barsebäck. The Inquiry's assessment is that the expiry of the Nuclear Power Phase-Out Act will not affect the compensation from the State to the two company groups or the decision taken by the Riksdag (Swedish Parliament) on the undertakings for the State that follow from the agreement. The agreements made between the companies affected in connection with the agreement with the State are not affected either if the Nuclear Power Phase-Out Act ceases to apply. Impacts and implementation of the Inquiry s proposals The Inquiry s proposals will not result in higher costs either for public institutions or for companies or other private parties. However, its proposals may have some impacts on price formation on the electricity market, on investments in other forms of power and on competition on the electricity market. If the Inquiry s proposals lead to applications for permits to build new nuclear power reactors according to the conditions proposed by the Inquiry, this will obviously also have implications for the activities of the Swedish Radiation Safety Authority as a supervisory authority. The Inquiry proposes that the legislative amendments relating to generational shifts in the Swedish nuclear power stock enter into force on 1 July

7 Nuclear liability Unlimited liability The Inquiry finds that there are overriding reasons for introducing unlimited liability for the nuclear power industry even though unlimited liability is not a guarantee that injured parties can always receive full compensation for damage suffered. There is an ethical and symbolic value in adhering as far as possible to the environmental law principle that the polluter pays. Monetary levels for financial guarantees for compensation The Inquiry proposes that an operator of a facility in Sweden be obliged to have liability insurance or some other financial security that corresponds to EUR 700 million and that will always cover the liability to pay compensation under the 2004 Protocol amending the Paris Convention. Under the Inquiry s proposal, an operator of a nuclear power reactor that is in operation in order to extract nuclear energy shall be obliged to ensure that funds corresponding to EUR 500 million over and above EUR 700 million, or a total of EUR 1200 million, are available for every accident so as to compensate injured parties who are entitled to damages. Like the Nuclear Liability Inquiry, this Inquiry proposes that in individual cases the Government will be able to decide on lower insurance levels or levels of other financial security for facilities where the risk of a radiological accident is deemed to be small. The minimum acceptable insurance level or level of other financial security that the Government may decide on shall be set to an amount corresponding to EUR 80 million. Different alternatives for the financial guarantee Nordic Nuclear Insurers (NNI) assess that they are able to issue liability insurance limited to EUR 700 million. At the same time, NNI has announced exceptions to the liability insurance in relation to the requirements that are applicable under the 2004 Amending Protocol. The exceptions include the time bar for personal injuries in excess of 10 years and measures to deal with environmental damage referred to in the 2004 Protocol. Since the Inquiry is proposing that operators of a nuclear power reactor that is in operation in order to extract nuclear energy shall be obliged to have liability insurance or other financial security totalling EUR million, the Inquiry has identified four main alternative financing solutions for the interval from EUR 700 million to EUR million. The Inquiry s starting point has been that it is important for the State to give operators incentives to try to arrange, from their owners or on the market, a guarantee of financial compensation that is as satisfactory as possible up to the equivalent of EUR million. The system should be designed in such a way that the owners of the operators of facilities find it interesting to assume more of the responsibility for the risks associated with the operation of nuclear power plants. The four alternatives that the Inquiry has made a special study of are fund deposits, state insurance, mutual liability insurance and the provision of security. In summary, the Inquiry can conclude: that a system of external fund deposits in which the operators build up a fund through charges paid to the State exhibits significantly more disadvantages than advantages. It involves the inefficient employment of resources and is not in line with how the State normally handles similar undertakings. For new actors wishing to enter the Swedish market and obtain a permit to operate nuclear power reactors, such a fund may be an obstacle to them entering the market. 7

8 a state insurance solution the State acts as a reinsurer for the part that is not covered by the operators liability insurance should only be considered in exceptional cases in order to cover the State s subsidiary liability. One alternative is for the State to provide credit guarantees instead. Even if the undertaking of the State as an insurer has similarities with state credit guarantees and other similar undertakings, there are more differences between these undertakings. Credit guarantees are used to support activities of common interest to society such as agriculture, exports and housing construction. Guarantees have also been used to support banks in crisis and for investments in infrastructure. There is nothing in the preliminary works to the Budget Act to indicate that the legislator intended the provision of state guarantees to be used to take over the business of the insurance industry in insuring companies against any damages resulting from various types of disasters. A credit guarantee is a guarantee commitment by the State that applies in this case as if it were a matter of a State liability. The Inquiry is of the view that the owners of the nuclear facilities, not the State, should provide guarantee commitments. that mutual liability insurance the owners of nuclear power reactors in Sweden agree on a voluntary agreement based on joint and several liability has considerable similarities with the provision of security in the form of guarantee commitments by the parent companies, but appears to be a stronger alternative since the joint approach means that the undertaking is based on the resources of more companies; this aspect ought to provide particular reassurance that it is the nuclear industry that will be responsible for the financial consequences if an accident occurs. The mutual insurance alternative has a couple of attractive advantages. It is efficient in a resource perspective and it ensures, at quite a satisfactory level, that it is the nuclear industry that will really pay for the second stage in the event of a serious accident. the provision of satisfactory security such as personal guarantees, bank guarantees, mortgages in real property is a satisfactory alternative. If guarantee commitments by the parent companies are accepted, this means, in the view of the Inquiry, that the proposal will be more expensive than mutual insurance for the nuclear industry and therefore for electricity consumers. This is because an individual guarantee commitment ought surely to be viewed as more risky, in terms of credit risk, than a mutual undertaking. At the same time, individual guarantee commitments would be weaker than mutual insurance from all parent companies, so that individual guarantee commitments would make it more likely that the State would nevertheless have to pay for the second stage in the event of an accident. However, the alternative is an attractive second-best solution to the extent that the companies concerned cannot agree on a mutual undertaking. Limitation of the liability to pay compensation under the reciprocity rule The Inquiry proposes that Section 12 of the legislative proposal of the Nuclear Liability Inquiry be amended so that the Act states that if radiological damage occurs outside Sweden the operator s liability to pay compensation shall be limited to the amount of liability that applies in the other state in respect of Sweden. Principles for a state system for settling claims The Inquiry proposes that the party that provides compensation funds, i.e. the insurer and possibly the State, retain control of the compensation funds. A financial solution that, for example, entails the provision of security requires state involvement in the form of the approval and management of the security provided. If this security needs to be used to compensate injured parties after a radiological accident, the State will have to handle the settlement of claims in this area. The State may also need to undertake the settlement of claims for its subsidiary liability. If the operators of the facilities find a funding alternative that does not have any state 8

9 involvement, they are free to enter into their own agreements on the settlement of claims with stakeholders on the market. Conditions to be fulfilled for continued operation under the Nuclear Activities Act The Inquiry proposes the addition of a provision to the Nuclear Activities Act (1984:3) that authorises the Government to provide that a permit for nuclear activities shall be combined with the conditions needed to secure the liability and obligations that follow from the Act on Liability and Compensation in the Event of Radiological Accidents. Need for expanded and uniform supervision in the area of nuclear liability The Inquiry proposes that the Swedish Radiation Safety Authority be given overall responsibility for supervision in the area of nuclear liability. The Inquiry also proposes that the Authority be authorised to approve the operator s insurance or other financial security under Section 41 of the legislative proposal presented by the Nuclear Liability Inquiry. This approval should be given after consultation with the Swedish National Debt Office. Criminal liability The Inquiry proposes that the criminal law provision in Section 44 of the legislative proposal presented by the Nuclear Liability Inquiry be removed since corresponding criminal liability also occurs under Section 25 of the Nuclear Activities Act. Impacts and implementation of the Inquiry s proposals Because the Inquiry recommends unlimited liability and also a considerable increase in the level of the amounts of liability that must have financial cover in the form of liability insurance or other financial security, its proposal results in higher costs for the nuclear power industry than under present legislation. For low-risk facilities the Government will be able to reduce the amount that has to be covered by insurance or other security. For facilities assessed as having lower risk, the cost increase will probably not be as pronounced as for reactor operators. The Inquiry s proposal means that the Swedish Radiation Safety Authority will be given new supervisory duties that the Authority does not have any previous experience of and that are not covered by the additional resources previously announced for the Authority. The Inquiry s proposals can also have implications for the Legal, Financial and Administrative Services Agency, which the Inquiry proposes should handle the state part of claim settlement. The new act and other legislative amendments concerning nuclear liability will enter into force on the day on which the 2004 Protocol amending the Paris Convention and the Supplementary Convention enters into force for Sweden. 9

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