Remarks by Angel Gurría,
OECD, Paris, 11 May 2016
(As prepared for delivery)
Director General Magwood, Chairman McGinnis, Ladies and Gentlemen,
I am delighted to open the first Nuclear Finance Conference, co-sponsored by the International Framework for Nuclear Energy Cooperation (IFNEC) and the Nuclear Energy Agency (NEA). These two bodies have joined forces to bring together experts from across the field to discuss one of the most important challenges in nuclear power financing.
We have assembled energy planning authorities, nuclear vendors, safety regulators, electricity market regulators, utilities, bankers and export credit agencies. The perspectives that each of you bring to this conversation is essential in finding new solutions to financing nuclear projects, essential in rising to the challenge of climate change.
The outcome of COP21 last December sent a strong signal that the world is taking climate change seriously, with 195 countries agreeing to take action to limit global warming to well below 2 degrees Celsius.
Delivering on this goal will not be easy. The emissions reduction “contributions” outlined by countries are not enough to get us onto a 2°C path. Our economies are still “hard-wired” to fossil fuels, withpolicy misalignments in areas such as tax and electricity markets hindering the necessary transition to low-carbon.
Nuclear electricity, along with other low-carbon energy sources, can play an important role in that transition, if cost-effective and safe solutions, including for long-term waste management are put in place. The International Energy Agency’s main scenario for meeting the 2 degrees target foresees a significant role for new nuclear plants, especially in China and India. But new plants cannot be built if they cannot be financed. Effective nuclear finance must confront and overcome a number of key challenges.
Nuclear energy is a capital-intensive business meaning that the cost of finance and the design of electricity markets are crucial in mounting an investment case. However, recent experience in OECD countries suggests that total “overnight” capital costs (all capital costs apart from financing costs) of new plants remain highly variable. Policy and technical factors can lead to construction and budget overruns – in particular for first-of-a-kind plants. This has not helped the confidence of potential financiers looking to make competitive nuclear investments.
We also need to ensure that electricity markets are designed to deliver a competitive platform for low-carbon power sources, while ensuring energy security and affordability of supply. Supported by robust carbon pricing, we need to re-establish electricity markets that work and provide the right investment signals to achieve a stable transition to a low carbon power sector.
We also need to recognise that the world of nuclear technology supply and demand has changed dramatically. On the supply side, new participants such as China have entered the world market. On the demand side, more and more countries – including many rising economies in Asia, Africa, and the Middle East – are planning to build nuclear power plants for the first time. So we have to think about new issues, such as how will nuclear exporting countries assure that the nuclear safety infrastructure in a host country is able to provide effective safety oversight? Safety must remain our top priority.
Just as it has for Japan: after the Fukushima accident in March 2011, regulators were tasked with reviewing safety of all nuclear plants, including those under construction. Adequate upgrades were implemented, where necessary. As a result, first units meeting new strict safety requirements restarted last year.
Safety is not the only significant challenge facing the evolving global supplier-customer relationships in nuclear exports. We must discuss how project risks are managed and what role can be played by governments. We must improve the transparency of nuclear exports to build confidence in the fairness and propriety of successful projects. And, as is the major focus of today’s conference, we must find ways to finance new plants.
The IFNEC, working with the expertise, skills and data of the NEA, is the ideal forum to discuss these challenges. The IFNEC brings together all the nuclear exporting countries and most of the countries that wish to build plants in the future.
IFNEC has the right charter, the right framework, and a demonstrated ability to work with the private sector – all key to improving global customer-supplier relations.
Success would help restore global confidence in nuclear projects and the countries that sponsor them. Greater confidence means a larger, more energetic market for nuclear technology. A greater market for nuclear technology means better financing conditions. Better financing conditions could allow nuclear to compete more effectively with other low-carbon technologies as we seek to transform our energy system.
Ladies and Gentlemen,
We have many of the world’s leading experts on nuclear energy. This is an opportunity to work together, to address climate change, to draw on our collected experience and expertise, so we can find the right policies, the safest policies, to deliver nuclear financing for the 21st century.
I very much look forward to hearing the results of your discussion.