The Nuclear Regulatory Commission (NRC) held a public meeting on October 11, 2012, to gather information relating to financial qualifications (FQ) for a combined license (COL) applicant for a "merchant" (i.e., non-electric utility) nuclear power plant. The NRC requires a merchant applicant to demonstrate that it "possesses or has reasonable assurance of obtaining" the funds necessary to cover estimated construction costs and related fuel cycle costs in order to obtain a license.
Making this predictive finding has proved challenging for the NRC. Merchant reactor developers do not finance projects "off of their balance-sheet," from ratepayers, or, in today's market, from commercial lenders. Rather, as today's meeting participants noted, they will likely assemble funds through the Department of Energy's loan guarantee program and foreign export credit agency-insured credit facilities, both of which use project finance structures. The challenge for merchant applicants is that committed construction loans and sponsor funding typically cannot come together until after issuance of a COL. But, the NRC Staff is insisting that developers of merchant reactors prove their economic viability by assembling committed funds prior to receiving a COL.
A practical and well-established solution exists. Recognizing market realities and that the NRC's finding of reasonable assurance of FQ at the time of licensing is a predictive one, the NRC could require committed funding prior to the start of licensed construction, rather than prior to COL issuance. Reasonable assurance of obtaining funds necessary to cover construction costs could be based on a license condition requiring appropriate financing prior to commencing licensed construction. Indeed, the NRC has used this approach on numerous occasions to demonstrate FQ for non-reactor applicants. Adopting a rational approach to FQ for merchant reactors at this time would lend much-needed stability to the COL licensing process and would support financing efforts, while ensuring that the policy objectives underlying the FQ review (i.e., nuclear quality and safety) are satisfied. It's time to cut the Gordian knot.