APPENDIX 13
Memorandum by the Nuclear Industry Association
The Nuclear Industry Association (NIA) is the
trade association and information and representative body for
the British Civil Nuclear Industry. It represents around 120 companies
including the operators of the nuclear power stations, those engaged
in decommissioning, waste management, nuclear liabilities management
and all aspects of the nuclear fuel cycle, nuclear equipment suppliers,
engineering and construction companies, nuclear research organisations
and legal, financial and consultancy companies. Although this
inquiry is also looking at the UKAEA we have limited our response
to the Nuclear Decommissioning Authority (NDA).
The establishment of the NDA heralds a fundamental
change in the structure of the British Nuclear Industry and the
way in which it will operate including its impact upon the structure
and work of all the nuclear site licensees. NIA has worked closely
with the DTI, the Liabilities Management Unit (LMU) within DTI
that paved the way for the NDA, the NDA team, and with our member
companies to represent the interests of our members as the proposals
have been developed and implemented. This submission has been
prepared under the auspices of our NDA Steering Group and its
three specialist sub groups. NIA therefore welcomes this opportunity
to participate in the Trade and Industry Committee inquiry.
REMIT AND
ACTIVITIES OF
THE NDA
The remit and activities of the NDA are both
heavily dependant upon third party decisions and operational plant
availability outside its direct control and there are key areas
where the approach to decommissioning will need to evolve when
those decisions are made. The following issues are likely to have
a significant impact on management, timing, contracting and lifetime
costs of the decommissioning programme:
(a) A decision by government on waste management
and the Committee on Radioactive Waste Management (CoRWM) report.
(b) A decision by government and the commercial
sector on new nuclear build.
(c) Decisions on site end states and Magnox
decommissioning timescales to be agreed.
(d) A UK strategy to be agreed concerning
civilian stocks of depleted uranium and separated plutonium.
(e) Uncertain clean up costs of legacy materials.
(f) A decision on long term storage or reprocessing
of AGR spent fuel.
(g) Availability of operational plants such
as THORP.
(h) Potential future reprocessing contracts
for THORP.
The nature and the length of time to make such
decisions has a series of potential effects on the work of the
NDA:
(a) NDA short term funding plans of around
£2.2 billion per annum is based in large part on revenue
from operational sources such as THORP. The uncertainties are
likely to cause a reduction in the NDA expected revenue stream.
This short term funding commitment and revenue reduction is of
concern to prospective tier 1 and tier 2 contractors wanting to
develop long term relationships with the NDA and their suppliers.
Government financial backing for the NDA in its commitments to
tier 1 and tier 2 contractors needs to be assured to provide confidence
when bidding for new competed packages flowing from the NDA between
2006 and 2012.
(b) The readiness of tier 1 and tier 2 contractors
to take on the range of decommissioning and allied tasks which
includes the retention of skills and expertise.
(c) A future new build option could heavily
influence the end states of existing sites, in particular if new
power stations are to be built on the same site as existing ones.
It would be a detrimental step for the NDA to take decisions on
the end-state of sites which could limit or preclude their use
for future nuclear development. This is discussed in further detail
below.
(d) The NDA have stated an objective to decommission
Magnox stations in 25 years without indicating whether they have
conducted an impact assessment and how they intend to achieve
it. Whilst supportive of plans to bring forward timescales for
clearance at the Magnox stations, NIA urge that care is taken
to ensure transparency over the decision and ensure this is the
optimum approach.
(e) The NDA's intention to encourage early
decision making by Government on CoRWM's recommendations on long
term storage of waste is fully supported since this is crucial
to the achievement of NDA's mission.
(f) The NDA strategy to be agreed with Government
on what proportion of civilian stocks of depleted uranium and
separated plutonium now owned by NDA should be treated as waste
and what can be considered as strategic stock is important. These
valuable materials are a fuel resource for future energy supply
and any decision to consign them as waste will have implications
for current and future generations.
The extent the NDA require to monitor and manage
the decommissioning process through site licensees is considered
by NIA as too intrusive and acts as a disincentive to innovation
and achievement of cost reductions. NDA contracts and the flow
down contracts that result from them to the supply chain should
be output based to encourage efficiency and innovation to ensure
contractors can provide the NDA with added value for money without
having significant restrictions placed on their activities.
The close monitoring of the existing incumbent
contracts by the NDA is raising concerns that the NDA is significantly
understaffed slowing down the administration of the existing incumbent
contracts and future contracts at tier 1 & 2 level.
The NDA's intention to work with contractors
and regulators to promote sustainable employment opportunities
within the nuclear industry including identifying and developing
the skills required for nuclear clean up is supported. However,
there does not appear to be any positive position on ensuring
that the future operational skills in the industry are maintained
and expertise is not lost. NIA considers that the NDA should lead
this strategy, not contractors who have short term contractual
requirements to fulfil. The NDA are the main driver behind decommissioning
and should be ensuring that the skills necessary over the next
25 years or more are maintained and enhanced.
In addition, the NDA's remit for skills retention
and research does not cover other parts of the nuclear industry
and it should be encouraged to support all of the UK's strategic
interests including new build as well as decommissioning. This
is dealt with more fully below.
Little reason is provided by the NDA on how
it arrived at the proposed bundles of contracts and timings published
for competition. As an example, there may be benefits to be gained
by competing Sellafield earlier than planned which could be achieved
in several different ways. NIA believe this should be reviewed
and the decision making process made transparent.
The role and remit of the NDA together with
how it is going to achieve its stakeholder expectations is not
set out anywhere in sufficient detail. Guidance on how its tier
1 contractors should interact with and assist stakeholders should
be provided. Additionally, the tier2/3 supply chain should be
considered in more detail and the fact recognised that a vital
component of the UK decommissioning and clean up capability is
actually in the lower tier companies. The NDA focus is on its
tier 1 contractors and this leaves the NDA in danger of overlooking
the skills, competences and competitiveness of the supply chain
and the way innovation may be encouraged. The creation of the
NDA has impacted radically on the supply chain in terms of its
structure and form of contracts now being passed down by tier
1 companies.
Some detail on the NDA's relationships with
other major stakeholders such as the regulators, Nirex and CoRWM
would also be helpful to the supply chain.
COMPATIBILITY OF
CURRENT PLANS
FOR NDA WITH
INCREASED RELIANCE
ON NUCLEAR
POWER GENERATION
Current NDA policy and plans have the potential
for interaction between the decommissioning programme and Government
policy of "keeping the nuclear option open". This is
particularly so given the NDA position regarding site end states
which proposes to return several nuclear sites to green field
status and de-license them. Existing infrastructure at such sites,
such as grid connections, could make them particularly attractive
for future re-use. Additionally, their current licensed status
could save valuable time if a decision favouring new nuclear build
was forthcoming.
Given this situation it may be more appropriate
for the NDA to adopt a minimalist approach and return sites to
a stable state fit for re-use rather than aiming to return them
to green field status. Also to coordinate their planning with
government policy, in particular with the energy review and any
decisions on whether the UK should engage in new nuclear build.
The NDA support for development of skills required
for nuclear decommissioning and clean up is welcomed but there
is no recognition of the skills required to support new build.
Measures being taken by organisations to enhance skills in support
of decommissioning are unbalancing the availability of nuclear
skills in the UK in favour of decommissioning. The UK nuclear
industry would benefit if the NDA took an approach which addressed
both skills retention and research and development to support
all of the UK's strategic interests including operations and new
build.
The focus of the NDA is on decommissioning and
clean up at its sites but it will inevitably be taking decisions
that affect the entire UK nuclear industry. Significant commercial
assets are owned by the NDA including Springfields and Thorp which
are critical to the operation of the UK nuclear fleet. The NDA
needs to ensure that decisions made relating to these assets meets
the requirements of the operational side of the nuclear industry
and that it has the flexibility to deal with a range of nuclear
industry futures including plant life extension as well as replacement
nuclear generating capacity.
THE NDA'S
PERFORMANCE AND
ACCOUNTABILITY
All of the above reflect in part on the NDA's
performance in the subject areas under consideration. The following
items below are additional to these.
The NDA would benefit greatly by providing stakeholders
with an indication of how it intends to monitor its progress and
achievements against its own plans and make this transparent to
all in line with its policy of openness. Stakeholder confidence
in the NDA's ability to deliver decommissioning on the ground
is important.
NDA's statutory responsibility to "take
account of the socio-economic impact of (their) activities"
is a broader issue than just the provision of support and contributions
to local communities and supply chain. The wider issues also need
to be addressed including the maintenance of the social and economic
infrastructure of the local community, for example, through the
benefits of a continued level of high employment. Also the visible
factoring of community concerns into site priorities for clean
up (dominated correctly by potential hazard reduction). In this
regard it is also important for stakeholders, particularly those
representing the local community to be seen to be able to influence
particular aspects of the NDA's decision making process.
The current NDA tier 1 contracts do not support
innovation. For example the NDA's current approach to intellectual
property rights (IPR) ownership deters contractors from putting
forward innovative ideas when they are going to lose part of the
ownership of IPR to the NDA. The NIA considers that the NDA should,
as with other Government agencies, accept a non-exclusive licence.
Additionally, the proposed cost plus nature
of contracts with very limited returns and no ability to out perform
the contract is unlikely to encourage efficiency or innovation
and may restrict the number of bidders participating in the bidding
process.
To allow programme acceleration the NDA needs
to create an appropriate competition environment for the supply
chain and hence increase the efficiency with which work is being
competed. The NDA should take on the task of driving the correct
behaviours through the tier 1 contractor to ensure the supply
chain is nurtured and not damaged over the coming years.
The close monitoring of the existing incumbent
contracts by the NDA is raising concerns that the NDA is significantly
understaffed slowing down the administration of the existing incumbent
contracts and future contracts at tier 1 & 2 level.
OTHER RELEVANT
MATTERS
NIA believes the proposed fee levels are insufficient
to attract and retain the best players in the clean up market.
More attractive performance based fee levels are available in
other international and domestic markets, both in the nuclear
and non-nuclear industries.
Research and innovation is very important to
the NDA's mission and the NDA's intention to set aside funds to
support relevant research is noted. However, it is considered
by NIA that given the nature of the challenges, the level of funding
suggested is insufficient.
Concerning the NDA competed contracts, there
is currently no information of how past environmental liabilities
on sites will be dealt with. There is concern that unless a clear
mechanism is established it is a potential area for disputes between
the NDA, the past site licensee and new site licensee. The NIA
believe a register of environmental liabilities should be established
prior to competition to give bidders a clear indication of past
environmental issues.
January 2006
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