On requiring insurance for nuclear power stations

What a plan, eh?

Never let it be said that Germany doesn’t have the good of all at heart. Thus it is with Günther Oettinger’s proposal to harmonise the cost of nuclear insurance across the European Union, and preferably beyond if he could.

Not content with Germany’s utterly daft decision to abandon nuclear power generation, the European Commissioner for Energy now wishes to make it prohibitively expensive for everyone else by promising to impose mandatory disaster insurance on all nuclear power plants.

Oettinger believes the current, quite limited, insurance most countries have – in Bulgaria, for instance, it is just €49m (£40m) per plant, and in France €90m – amounts to a hidden subsidy for nuclear.

Unfair, he cries. Something must be done, especially as Germany has decided to go down the costly alternative route of investment in renewables for its future energy needs. If Germans are to pay through the nose for their energy, then so must everyone else, nicht wahr?

Apparently, German economists have crunched the numbers and determined that the costs of a Fukushima in a densely populated part of Europe could be as high as €5 trillion, or about double the size of German GDP.

I’m not entirely sure how they reach this number, but plainly it would be completely uninsurable. Even Munich Re, the reinsurer for Fukushima, would struggle with that one.

If the effect was to stop future nuclear development in its tracks, that would presumably count as the right outcome. Those Germans; they certainly know what’s good for you.

25 comments on “On requiring insurance for nuclear power stations

  1. And how many European nuclear power plant built to a ~50/60 year-old design are in densely populated areas in an earthquake and tsunami zone?

  2. VftS – doesn’t matter. The German elites, having been in a state of permanent emotional breakdown since 1945, shat the bed when they saw scary stories about Fukushima, and decided to drastically change the energy policy of a major industrial society on the basis of one freak incident in which nobody died of radiation poisoning.

    So naturally Europe must do the same.

    Don’t think the French will take too kindly to this idea mind.

  3. Despite the posturing, there is actually an interesting point here. We, in rich countries, generally take the attitude that we don’t insure nuclear plants, because the chances of anything happening are very, very low, and the costs of a catastrophe so high that only governments could afford the cleanup.

    That’s all very well when it’s France or Germany which needs to foot the bill, but what would happen if Bulgaria had a nuclear disaster? Will the Bulgarian government be able to afford the cleanup?

  4. Surely a risk that is ultra low probability and ultra high consequence is the very definition of an uninsurable risk.

    So the krauts will have to come up with some method (well, not a method, just a law) of limiting the compo and clean up costs.

    Which they and their frog lackeys will do. Trebles all round.

  5. BiF>

    “Surely a risk that is ultra low probability and ultra high consequence is the very definition of an uninsurable risk.”

    Yes, that was what I was getting at there. But that doesn’t somehow make the risk vanish.

    If, as seems likely would happen, Germany would end up picking up the lion’s share of the cleanup bill for any disaster, are they (and the others who’d share the cost) entitled to some kind of oversight to ensure risks are minimised?

  6. Dave – “That’s all very well when it’s France or Germany which needs to foot the bill, but what would happen if Bulgaria had a nuclear disaster? Will the Bulgarian government be able to afford the cleanup?”

    Chernobyl has killed about sixty people. Yes, Bulgaria could afford the clean up. What they could not afford is the level of neurotics we have in the West who could and would sue at the drop of a hat for every imagined ill. The power companies are looking to be sued every time someone’s pet cat sheds some fur and naturally they realise they could not afford it. Doesn’t mean a rational legal system wouldn’t manage though. I doubt Caroline Lucas would get far in Bulgarian politics.

  7. Germany should have a special insurance to protect against starting a war again, something that is much more likely than a nuclear plant being hit by a earthquake and tsunami in Europe.

  8. XX TheJollyGreenMan
    November 9, 2013 at 12:25 pm

    Those Germans should understand enough English – basically a Germanic language with strong Saxon roots – to know what FUCK OFF means.XX

    Aye we do.

    Pity the shower of shit bag, mother fucking commy bastards in the Reichstag do not.

  9. XX Runcie Balspune
    November 9, 2013 at 8:05 pm

    Germany should have a special insurance to protect against starting a war again, something that is much more likely than a nuclear plant being hit by a earthquake and tsunami in Europe.XX

    In der Zeit von 1480 bis 1940 waren die europäischen Mächte an 278 Kriegen beteiligt – aber deutsche Lande, Preußen und später Gesamtdeutschland bloß an acht Prozent davon; England dagegen an 28 Prozent, Frankreich an 26, Spanien an 23, Rußland an 22 und Polen an elf Prozent (nach Quincy Wright: „A Study of War“, Band I).

    In the time 1480 until 1940,the European powers were involved in 278 wars, but German lands, Prussia and later Germany, were involved in a meer 8%.

    England, however in 28%, France in 26%, Spain 23%, Russia in 22% and Poland in 11%.

    (Quincy Wright: „A Study of War“, Band I).

    Now, what was the total load of bollox you were spouting again?

  10. Involved in != Starting
    Prussia != Germany (c. 1871 von Bismark)
    Furor Teutonicus != seeing the real point of my statement

  11. Dave
    I think I had taken on board your comment.
    If Germany (and other rich nations) decide there is a higher risk in (say) Bulgarian nuclear power plants they will insist not only on western levels of safety (read, for the most part, bumpf) but also inspection rights where the most minor infringement results in shutdown. The Bulgarians might choose to keep warm with the lights on and take the risk, but that would contravene regulations and then they would have to import solar power from the arctic circle in the depths of winter.
    My point is that, regardless of your personal opinion of the economics of nuclear, it is better to keep nuclear plants operational as long as possible. That gives the operator an income which can be used for maintainance, including safety maintainance.

  12. Contrary to what some people might think, the nuclear power stations in the UK are designed to withstand earthquakes. I started my engineering career working for a company called EQE – Earthquake Engineering – whose speciality was running calculations to ensure the design of the British nuclear sites could withstand what were called the 5,000 year and 50,000 year events. Much to my surprise, I learned that Britain was in fact in a fairly active earthquake zone, only not so much in terms of the human lifespan. But in longer terms, earthquakes in Britain happen frequently.

    What we did was take the accelerations expected from each event and apply them to models of the buildings and other equipment. My job was to ensure the bolt configurations of the cranes which handled the fuel would not experience stresses greater than the ASME allowables in the event of an earthquake.

    Granted, I don’t think the power stations are designed against a tsunami, but they are certainly designed to withstand earthquakes.

  13. @ Dave and anyone else who is innocently ignorant
    There IS insurance for nuclear power plants. UK and other plants pay for this and as a result the cost differential between nuclear and other low-carbon energy sources is understated. As each Lloyd’s “Name” has both joint and several liability the concept of that the cost of a nuclear accident could bankrupt some “Names” means that the premium must cover not just the insurer’s share of the claim but also the extra cost of any defaulter and premiums have to compensate for that risk whereas the frequent breakdowns of wind turbines create losses but will not bankrupt any Names so the other Names only have to pick up their own share of the losses.
    Relative to the risk, nuclear power stations have to pay premiums more than 50% higher than solar or windpower.
    The Lloyds syndicate that is 100% committed to this speciality is, over any reasonable period and most individual years, the most profitable Lloyds syndicate. Average profit to “Names” for the last 7 closed years is 40% of underwriting capacity.
    See http://www.lloyds.com/~/media/Files/Lloyds/Investor%20Relations/Syndicate%20reports%20and%20accounts/2012/1176u_20130314115523_1688J_1176u.pdf

  14. @TimNewman

    Fascinating contribution. Appreciated

    What other areas of civil engineering are held to that kind of standard?.

  15. Actually I reckon this might be insurable assuming that you might be willing to be a bit dodgy. Low Probability, High Cost if risk realised. I would be perfectly happy to collect a premium for 50 years, tidy profit, then if one goes bang, file for insolvency immediately and flee to a non-extradition country. As that is never going to happen sounds like money for old rope to me.

    Anyone wanna form a syndicate and form an insurer in somewhere relatively relaxed like Anguilla or the Bahamas?

  16. MyBurningEars,

    I’m not sure, to be honest. I know my colleagues did similar work on the Faslane nuclear submarine base, but as far as I’m aware it is only the nuclear industry which takes into account the 5,000 and 50,000 year events. But I’m really not sure.

  17. Offshore
    That too was part of my point. If you can’t persuade the client you have enough money to cover the risk, he won’t pay you the premium. So the risk is uninsurable.

  18. I´m generally pro-nuke, but perhaps a bit less enthusiastically than before, If a nuke did actually blow up somewhere in Europe (and we have had Chernobyl in living memory, Sellafield constantly leaking stuff into the environment for decades), that would be a massive externality. Who should bear the cost? Ultimately the owners of the plant should. I am sure that Lloyds and Munich could work out a realistic premium. After all, their stock in trade is rare events with catastrophic costs. Or you could set up a special fund that all the nukes have to pay into to cover eventualities.

    And the thing is, if that fund or insurance premium eats all the profits and then some, then we have our price signal, that nukes are too expensive, net destroyers of wealth, and we shouldn´t have them.

  19. If all sources of energy are to compete fairly, the insurance costs must be borne by the generator. If the government promises to foot the bill for a cleanup operation, that’s a subsidy that distorts the market. So I fully support the EU proposal.

  20. Incidentally, there is a term for the practice of parcelling out the insurance risks which are too big for any one company to handle: reinsurance. It is a major business, one in which my father specialised.

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