On 1 July 2022, Minister Jetten for Climate and Energy informed the Lower House about the actions the government has taken to implement the coalition agreement in the area of nuclear energy.
On the same date, he answered questions from MPs Erkens (VVD) and Kops (PVV) about the models for financing new nuclear power stations in our country and about the financial benefits of nuclear energy. In this blog, we briefly outline the background to these Parliamentary letters and highlight the legal challenges that the central government will face in the coming decade in implementing the presented plans.
Until recently, nuclear power seemed to have little future in the Netherlands. The nuclear power plant in Dodewaard (KCD) has been out of operation for decades and is awaiting decommissioning, while the government is wrangling with the shareholders about how to pay for it. The only nuclear power plant still in operation, the one in Borssele dating from 1973, was initially scheduled to be closed in 2013. When that proved to be an unrealistic option, the shareholders of the Borssele Nuclear Power Plant (KCB) and the Dutch government agreed to stop nuclear energy production in 2033. This was laid down in the Borssele Nuclear Power Plant Covenant of 2006 and subsequently also by law, in Article 15a of the Nuclear Energy Act (Dutch: Kew).
But a new wind has been blowing for some years now, and nuclear energy is hot in the Netherlands. The Paris climate objectives obviously play an important role in this regard, but there are also causes specific to the Netherlands. On the one hand, there is the relatively trouble-free operation of the KCB over a period of now 50 years, and the large support base that exists for this nuclear power plant among the local population. Appeals against licences for the KCB are rarely lodged by local residents, but almost without exception by national or internationally active environmental groups, such as Greenpeace and Wise. On the other hand, there is the internationally known Urgenda judgment from 2015, which requires the Dutch State to make an extra effort to reduce national CO2 emissions. Not for nothing did EPZ present a vision of the future as early as 2020 that provided for extending the operating life of the existing nuclear power station (485 MW) and building two new power stations of 1500 MW. Finally, the war in Ukraine painfully exposed the risk of dependency on fossil fuels and gave an extra impulse to the search for alternatives.
Coalition agreement 2021
In this light, it is not surprising that the following passage is included in the coalition agreement of the Rutte IV cabinet:
“Nuclear energy can complement sun, wind and geothermal energy in the energy mix and can be used to produce hydrogen. It also makes us less dependent on gas imports. That is why the nuclear power plant in Borssele will remain open longer, with due regard for safety. This government is also taking the necessary steps to build two new nuclear power stations. This means, among other things, that we will facilitate market parties in their explorations, support innovations, invite tenders, review the government’s contribution (financial and otherwise), and put legislation and regulations in order where necessary. We also ensure the safe, permanent storage of nuclear waste.”
In the field of nuclear energy, the government took two steps that were quite revolutionary for the Netherlands:
- Further extension of the KCB’s operating life beyond 2033
- The construction of two new nuclear power stations
Both steps are ambitious. For the KCB, it is a question of extending the operating life after 60 years of operation, which will require solid proof of safety after 2033. The Netherlands has no (or no longer has any) experience with new construction, while new construction projects abroad faced the necessary challenges. Stakeholders therefore eagerly awaited the letter in which Minister Jetten for Climate and Energy would explain how the government intends to realise these plans. That letter has now been published.
Operational life extension of KCB
Article 15a(1) of the Nuclear Energy Act states that the permit for the KCB, insofar as it concerns the release of nuclear energy, will expire on 31 December 2033. Extending the operating life of the KCB therefore requires an amendment to the Nuclear Energy Act. Minister Jetten is preparing the bill to this end in cooperation with the State Secretary for Infrastructure and Water Management, Vivianne Heijnen. The State Secretary for Infrastructure and the Environment is responsible for policy in the area of nuclear safety and radiation protection, and has systemic responsibility for licensing, supervision and enforcement in relation to nuclear applications, for which the Nuclear Safety and Radiation Protection Authority (ANVS) is the independent competent authority.
An environmental impact report will be drawn up in connection with the amendment to the law.
In addition, extending the operating life will require an amendment to the Borssele Nuclear Power Plant Covenant, to which the state and EPZ and its shareholders are parties. For that matter, EPZ’s underlying public shareholders are for the time being aiming to terminate the KCB and not to continue it, according to the Minister. A Kew licence will then have to be granted.
The schedule for extending the operating life of the KCB is currently as follows:
Autumn 2022: start of EIA for the extension of the operating life of the KCB
Spring 2023: bill to amend the Environmental Management Act in order to extend the operating life of the KCB to be consulted
Autumn 2023: submission of bill to amend the Environmental Management Act to extend the operating life of the KCB to the Second Chamber of Parliament
It is not expected that an amendment to the Act will take effect before spring 2025.
Construction of two new nuclear power plants
For the two new nuclear power plants, the Minister is currently gathering knowledge and experience from a number of European countries that are also developing new nuclear power plants and is talking to other governments, network operators, regulators and public and private developers of nuclear power plants. In doing so, the Minister is looking at choices made about the deployment of nuclear energy in the energy system, the role of the government and financing models, as well as the risks/safety and storage of radioactive waste.
Part of this study is looking into the choice of location of nuclear power plants. The current locations reserved for nuclear power plants in Article 2.8.4 of the Spatial Planning (General Rules) Decree and in Article 5.156 (2) of the future Quality of Life Decree are Borssele/Vlissingen, Maasvlakte I in Rotterdam and Eemshaven (municipality of Het Hogeland). However, Eemshaven no longer appears to be a location for a nuclear power plant. In early March 2021, a motion by Beckermann et al. was adopted, calling for the location of Eemshaven to be dropped from spatial policy. The motion by Sienot and Mulder was also adopted, calling for no nuclear power plant to be built in the province of Groningen. The draft guidelines and detail level memorandum for the EIA for the Main Energy Structure Programme therefore include the possible development of nuclear power at the Maasvlakte I and Borssele locations, not at Eemshaven, among the alternatives to be investigated. If these locations do not offer any solution, the possibility of extending the study to include an additional location will be considered.
This autumn, the minister will inform the Lower House about the choice of location. Once a preferred location has been identified, an environmental impact assessment will be drawn up, according to the Minister. It is not immediately clear from the letter how this environmental impact assessment relates to the environmental impact assessment being prepared for the Main Energy Structure Programme.
For the time being, we assume that the two new nuclear power plants will be licensed under the Environment Act. This is less relevant to the Kew licence because the Kew has not been incorporated into the Environment Act. However, the Environment Act is relevant to the incorporation of the nuclear power plants into the environmental plan. Article 9b(1)(b) of the Electricity Act 1998, as amended by the Implementation Act for the Environment Act, stipulates that the Minister for Climate and Energy must adopt a national project decision as referred to in Article 5.2 of the Environment Act for the construction and expansion of a production installation with a capacity of at least 50 MW in the case of an installation for the generation of sustainable electricity other than by means of wind energy. For non-sustainable electricity, the Minister for Climate and Energy is obliged to adopt a national project decision only if the capacity is at least 500 MW. In our opinion, electricity generated by a nuclear power plant does not currently fall under the definition of ‘renewable electricity’ within the meaning of Article 1(1), opening words and (u), of the Electricity Act 1998, but this may change in the future. For example, the government considers energy from nuclear power stations to be ‘relatively sustainable‘. In addition, for the time being there are no objections from ‘Brussels’ to qualifying nuclear energy as a sustainable economic activity. Whereas the current nuclear power plant in Borssele has a capacity of 485 MW, a capacity of at least 1500 MW is obvious for the new reactors; a national project decision will therefore in any event be required. If the capacity of one or both nuclear power plants is less than 500 MW, the Minister for Climate and Energy may still issue a national project decision if national interests are involved that cannot be efficiently and effectively promoted by the provincial or municipal authorities (see Article 2.3(3), opening words and (a), of the Environmental Act).
In the case of land allocation – if the land is owned by the government – the standard from the Didam judgment will have to be observed. This standard requires that a government body that intends to sell a property offers scope to (potential) candidates to compete for that property if there are several candidates for its purchase or if it can be reasonably expected that there will be. This room for competition does not need to be offered if it is established beforehand, or may reasonably be assumed, that on the basis of objective, verifiable and reasonable criteria only one serious candidate will qualify for the purchase. The Didam judgment offers the scope to establish criteria in policy on the basis of which the buyer is selected. These criteria must be objective, verifiable and reasonable. In addition, depending on the further requirements imposed on the founders/operators of the nuclear power plant, procurement law will have to be observed. In light of this, we will not be the only ones wondering whether the Minister will opt for a classic, public selection procedure (tender) or an innovative selection procedure.
The following timetable for the decision-making process on the two new nuclear power plants is given in the letter:
Autumn 2022: letters to parliament on the integration of nuclear energy in the system, including determining the preferred location, analysing which financing models will be worked out and how the knowledge infrastructure on nuclear energy will be brought up to standard
Spring 2023: start of EIA for new power stations for the purpose of establishing the preferred location
Autumn 2023: final decision by both chambers on financing, role and costs of government and awarding process for new power stations
After the political decision in the autumn of 2023, the allocation process for the new power stations will commence. According to the Minister, the parties will only want to enter this allocation process if it is clear that the nuclear energy policy for the coming years is consistent and firm. The Minister notes in this respect that this will be laid down in the National Energy System Plan (the main outlines of which are intended to be adopted as early as possible in the next government term). In the autumn, the Minister will inform the Lower House of Parliament of the most suitable instrument for laying down nuclear energy policy.
Which instrument is the most suitable depends on the choices that will be presented to the Lower House in the autumn. A subsidy model, for instance, will lead to a different determination than a state participation, according to the Minister.
And that brings us to the point of financing the two new nuclear power stations. This is an issue that was a blocking factor in the Dutch context during the past period, because the government’s position was that new construction had to be 100% privately financed. That position now appears to have been abandoned, or Minister Jetten has in any event indicated that he is currently investigating various forms of financing, partly on the basis of experience abroad.
In the answer to the parliamentary questions of member Erkens, the minister discusses a large number of financing models (a state participation, subsidisation via the SDE++ scheme, the Contract for Difference model, the Regulated Assed Based (RAB) model, the Mankala model, financial participation by citizens, and CAPEX financing). The Minister does not express a preference for any one or any combination of these models. However, the Minister writes that entering into a new state participation – whereby the state takes a risk-bearing stake in companies – is appropriate only if legislation and regulations and any other (public law) instruments are not sufficient to safeguard the public interests. The advantage of share ownership is that the state, through the control it enjoys as a shareholder, can influence the price of companies. On the other hand, it goes without saying that with public funds the state also shares in the business and other risks. According to the Minister, a state participation is appropriate only if other instruments are not sufficient to safeguard the public interests.
After years in which the production of nuclear energy in the Netherlands seemed to be in terminal decline, there is suddenly a new impetus for this form of energy supply, under pressure from the climate and energy crisis. If it were up to the government, the Netherlands would have three nuclear reactors in operation within the next ten to fifteen years, two of which would be new. EPZ’s vision of the future speaks of 3500 MW of installed nuclear capacity. That is not only an administrative and financial challenge, but also a legal one. Minister Jetten’s letter of 1 July 2022 touches on a few legal challenges, such as public participation, but there is of course much more: from procurement to state aid law, from structuring to project financing, from environmental law to nuclear energy law. Not all of these issues will end up in Parliamentary Papers, but they will have to be taken very seriously by those involved. Legal errors and omissions can be costly and time-consuming.
For the central government as an organisation, too, the administrative and legal challenges are numerous, if only because the construction of new nuclear power plants requires the flexible cooperation of a large number of departments, from finance to infrastructure and the environment, and non-governmental organisations such as the ANVS. They would do well to invest now in building up the knowledge that will be needed to steer the construction and operation of two new nuclear power plants in the right direction. It is also worth considering taking advantage of the new building to carry out a general revision of the Nuclear Energy Act. The current law dates back to 1963, as did the most important governmental decree for nuclear power plants, the Decree on Nuclear Installations, Fissile Materials and Ore (Bkse). Kew and Bkse have never been completely revised, while there have been many developments in the legal field, especially internationally, since then. A comprehensive revision would also be a good way to refresh the level of legal knowledge within the government. The timing of the revision is a point of attention. As is well known, ongoing legislative changes are generally not conducive to the realisation of projects under act at hand. In view of the great time pressure on increasing the share of nuclear energy in the Dutch energy mix (and the corresponding work pressure on the civil servants involved), it would seem obvious to carry out the comprehensive review when the licences for the operating life extension and the new construction have been granted. The experiences gained with these licences will then be a good source of inspiration for a new Nuclear Energy Act which will enable the Netherlands to move forward again by several decades.
About Stibbe and nuclear energy
Stibbe is a full-service law firm, assisting government and businesses. Stibbe is involved in all relevant projects in the Netherlands relating to nuclear installations. For decades, Stibbe has been assisting EPZ, the operator of the only nuclear power plant in the Netherlands. Stibbe also advises URENCO, NRG, and PALLAS.