GEMMA TAIT: Hello, everyone, and welcome to our Construction Blueprints podcast. I am Gemma Tait-- GB Regional Leader for Construction and your podcast host. I'm delighted to be joined today by Kate Fowler, our Global Head of Nuclear. So hello to you, Kate.
KATE FOWLER: Hi, Gemma.
GEMMA TAIT: So in today's episode, we're going to be exploring Small Modular Reactors-- or SMRs, as they're abbreviated to-- what exactly is that makes nuclear construction so unique, and some of the challenges faced by insurers and the industry alike. So, Kate, shall we get started?
KATE FOWLER: Let's go.
GEMMA TAIT: Thinking then how unique nuclear construction is, what are some of the key factors that make all construction projects so unique, particularly in terms of timeline and project management and how some of these factors influence insurance underwriting?
KATE FOWLER: So anybody who hears me speak about this-- I'm going to be a little bit of a broken record. I always say that a nuclear construction project is just like any other mega project up until that point where you actually put nuclear fuel in the reactor, which is at the very end, probably the last 6 to 12 months. So it's just a construction project. Once you get nuclear in the reactor, now it's an actual nuclear project.
And typically, we see insurers that only want to do the construction or the cold side of it pull back on some of the coverages they offer and exclude that hot zone area. We'd really like to see more insurers offer up the hot zone coverages and do the entire life cycle and streamline the policy for clients and help eliminate any potential gaps that we see. But anyone who's looking to get into this space, truly, it's just a mega project up until the very end when the fuel comes in and you start some of that hot testing and commissioning of it.
As far as timeline goes, I think the reason we're seeing more insurers actually take interest in this is because of the shortened timeline of SMR deployments versus a gigawatt-scale reactor. Some of the gigawatt-scale reactors-- I mean, we're seeing 10-plus years to actually get it deployed, which is really difficult for some insurers to come on a construction program that they know they're going to be committed to for 10 years.
SMRs-- every design has some varying timelines as to how long they think it's going to take to get that very first one built. But generally, we're seeing somewhere around three- to five-ish-year timeline, which is a lot easier for insurers to put within their appetite. So it is a much shorter timeline for them. And obviously, that's going to have an influence on the insurance underwriting, the amount of time that they're actually doing things. And then that testing and commissioning piece at the end, that's going to have a piece in it as well.
Obviously, once you get into hot testing and commissioning, you've got an increased risk. Some of these are looking at shortened testing and commissioning timelines versus what we've seen for large-scale reactors. So that realistically is going to be easier for them to bring into appetite as well if you have just a 6-month time period for testing versus a 12-month or longer that we may see for gigawatt-scale technologies.
GEMMA TAIT: So thinking about some of the insurance obligations, who is it that bears primary responsibility for nuclear insurance obligations within the SMR projects? And really, how are those liabilities typically allocated across the various different project stakeholders?
KATE FOWLER: So for just thinking about the nuclear risk in itself-- so we're not going to see that nuclear risk really come into play until we have the fuel, like I mentioned before. So once fuel gets on site, that's step one. And normally, to bring fuel on site, you do have to have a nuclear liability policy in place. And then once it goes into the reactor, obviously you still have to have nuclear liability in place.
But for all projects, whoever is the ultimate asset owner or the licensee, whoever gets licensed by the regulator is going to be the one that has to procure that liability insurance. And the way nuclear liability works globally is there's generally either strict or economic channeling of that nuclear liability. And really what that means is the operator or the licensee, they have full responsibility.
So either no other party can be named in a suit. Or if you're in the United States, anybody technically could be named in a lawsuit with respect to nuclear liability, but it's all going to channel to the licensee's nuclear liability policy. So going through construction and into operations, anybody who's a part of the project, who's a supplier, a vendor, a contractor, really, they don't have a nuclear liability risk like they would think about if there was a large-scale event. There are nuclear liability policies out there for suppliers and vendors.
But when you're thinking about a meltdown explosive event that we wouldn't normally see for nuclear event, if anyone has concerns about what their liabilities would be with respect to that, that truly does sit with the owners and operators. And something unique in the United States is we actually have obligatory limits for nuclear property as well. So if someone is constructing a plant, there has to be insurance in place to do on-site decontamination. And those liabilities could technically be passed to a third party, but generally, that will sit with the operator as well.
GEMMA TAIT: OK, so turning then to different insurance limits for SMR projects, do they vary at all by geographic region? And what are the implications for project developers and/or operators?
KATE FOWLER: So they do vary by region with respect to nuclear liability. I'll talk about property first because that's the easy space. I mentioned outside of the US, there really are no required limits for property necessarily. It's really about what makes the most sense for that asset. Most of the time, it's going to be a maximum foreseeable loss that you would insure to. We don't see insurance to full asset values for nuclear facilities because, realistically, there's probably not enough capacity out there in the world for a large-scale reactor, at least.
In the US, we have those obligatory limits for property, like I mentioned. It is 1.06 billion, and that is technology, location, size-agnostic so as it stands today. Whether you're building a 20-megawatt or 100-megawatt or a full-gigawatt facility, they all have to buy the same. For liability, there are different nuclear liability regimes around the world that dictate what are the obligatory limits for nuclear liability.
But the great thing is those are also caps-- they're caps on liability for the industry, which helps support the growth in the industry. So some place like the UK buys 1.2 billion euros in nuclear liability insurance. In the US, we buy 500 million. But we have something called the secondary financial protection program. That's an industry pool that actually brings up the limit to about $13 billion in nuclear liability for any given asset.
Canada buys a billion Canadian, so everybody has their own rules. And part of the challenge that brings to the SMR industry is most of these laws that are in place right now, they're completely technology- and size-agnostic. So once again, whether you're building something that might be considered a microreactor or you're building a full-gigawatt, large-scale reactor, everybody has to buy the same limits of liability insurance for nuclear, which may or may not make sense. And it could potentially become really cost-intensive for a small developer to buy limits that size when they're building an exceptionally small type of reactor.
GEMMA TAIT: Looking forward at some of the potential challenges for the industry as we move forward, what are the major supply chain challenges facing the SMR industry, particularly considering things like fuel supply, human resources, and procurement of specialized equipment or services? Really thinking about some of those future challenges-- I know we've heard a little bit about more recently, certainly in the press, across Europe and more broader.
KATE FOWLER: Yeah. So supply challenges in every aspect of the project is this, I'll say a big question mark for the industry globally. I mentioned before there's hundreds different technologies out there, and a lot of them are trying to use off-the-shelf designs. So that could mean you've got 50 different developers all wanting to utilize the same type of turbine generator or the exact same transformer. We don't necessarily have the supply chain for assets built up right now to provide that level of materials to 50 different designs at the same time.
So that's the first issue we have is, the materials and the equipment itself are not built up enough to support so many different designs that are in the pipeline right now. And then when we move to fuel, there's new and innovative fuel technologies out there which are going to increase safety margins for some of these designs, which is absolutely fantastic. But there is no commercial supply chain right now.
One of those technologies is called TRISO fuel. It's very cool. They're little pebbles. And there's quite a few different technologies out there right now that are designing to use TRISO fuel. There's no commercial developer of TRISO fuel today. The US does have a provider that is strictly for government use, but nobody in the commercial space.
So there is the potential for issues getting uranium just with the conflict that's going on in Russia and Ukraine, because a lot of fuel did come from Russia. So that's the first piece of it. But then actually, getting someone to manufacture the fuel that some of these technologies need, we don't have a robust supply chain for that either. And then when we move on to the human resource side of it, the industry hasn't grown much in the last 30 years or so.
We've seen a lot of people retire, a lot of people leave the industry. So there's really a finite number of people that are specialized in this space right now. And now that we're looking at this explosive global growth, a lot of different countries are looking to build up their human supply chain. An example of that is in Romania, they've got, I think it's an E3 center now where they're going to train the next level of nuclear professionals.
A lot of companies are looking at schools now to build up their nuclear engineering programs to support the industry that's coming. But really in every facet, we're seeing a human supply issue as well. And it's not just on the nuclear side. It's also on the people who are going to build these. A lot of countries either don't have nuclear assets or haven't built nuclear assets in a long time. So having the people that are specialized enough to construct them and having high-quality welders to be able to work at these sites, every single layer of the process, we really need to build up that chain and train people and get them ready for this next step of growth we're going to see in the industry all around the world.
GEMMA TAIT: OK. So what is it that's really currently needed from the insurance marketplace to really enable the successful deployment of the various new technologies that you've just been talking to us about?
KATE FOWLER: So we're seeing a lot of new deployment models. The way we've historically seen things in most countries around the world is, these are government-backed projects, government-owned projects. And we're going to continue to see that. But we're seeing a lot of people looking at behind-the-grid assets and providing direct power to data centers and chemical production facilities. So these aren't going to be government-backed.
And they are seeing insurance challenges today on things that they need in the insurance space for nuclear technology development and deployment that the industry just hasn't seen yet. And a lot of that is being driven by the financial investors and things that they need to make sure that they feel comfortable with providing backing for the risk. And it's things like professional liability or professional indemnity, the cost of decommissioning, being able to have those dollars upfront to assure that you can decommission the asset at end of life, which may be 40, 60, 80 years in the future.
But I think large scale, we're going to see so many deployments, possibly all at the same time. So having the market develop the capabilities to actually do nuclear construction, hopefully underwrite the actual nuclear risk during construction, I think that's going to be key to ensure that there's enough capacity out there for all the different projects that are being discussed globally.
GEMMA TAIT: OK. Thank you for your contribution to today's episode and for sharing your perspective on such an important topic for all of us.
KATE FOWLER: Thank you so much for having me.
GEMMA TAIT: Thank you to all of those of you who are listening and for joining the Willis Construction Blueprints podcast. We'll talk to you again on the next one.
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