Nuclear Power Plants: Mitigating Risk of Claims and Delay

While nuclear energy is currently being championed for its low-carbon electricity generation and energy security, the construction of facilities to provide such energy is no easy feat. From regulatory hurdles to technical complexities, navigating the construction phase of nuclear power plants demands careful consideration and proactive risk management. The average nuclear power plant (“NPP”) has a construction cost overrun of 102.5% and projects that commenced construction between 2010 and 2020 were delivered an average of three years late.¹

This is made all the more difficult in light of the fact that there is no one single contractual precedent for nuclear energy projects, meaning that parties are required to either adapt existing forms or draft their own entirely. The contract used for the Hinkley Point C project, for example, used a combination of FIDIC and NEC contracts.² Meanwhile, progress on the project itself has been far from ideal, with recent comments describing the project as “almost unbuildable”,³ and updates from EDF noting that the plant was not expected to be operational before 2030 (the original target was 2025) and the overall cost had been revised to between £31 billion to £34 billion (up from the original estimate of £18 billion).⁴ Even best laid plans can run into problems.

Generally, these problems can fall into one of three broad categories:

1. Pre-Construction: Regulatory, Permitting and Planning Challenges
2. Construction: Technical Complexity and Design Challenges
3. Post-Construction: Operational Challenges

However, it is important to remember that many problems can be avoided, or at the very least mitigated in some way, to reduce the potential impact of issues and overrun of both costs and time, and to maintain the relationship between the parties, allowing the project to continue. This article will focus on the first two categories, the types of issues which may arise, and suggestions on how to mitigate them.

Pre-Construction: Regulatory, Permitting and Planning Challenges

One of the primary hurdles in NPP construction is navigating the complex web of local, national and international regulations and permitting requirements, including environmental regulations; radiation regulations; health and safety regulations; siting regulations; and export control regulations.

How to mitigate

1. The best way to navigate regulatory requirements is to seek advice early on the particular regulatory regimes that may apply to a project, and the steps which need to be taken to comply with them.
2. Also highly beneficial is early engagement between owners, potential contractors, and relevant local authorities, so that contractors and designers can better understand the regulatory environment they will be operating in. Early engagement also reduces the likelihood of miscommunication and non-compliant NPP designs being produced. In the UK, parties can undergo the Generic Design Assessment in collaboration with key government departments to get feedback on a proposed design before attempting a full planning application.⁵
3. Balancing and appropriately allocating risk and responsibility is also key, for example, determining who is responsible for the acquisition of relevant licenses. This is particularly key in the nuclear industry where government policy is constantly developing. In the UK, for example, the existing regulatory framework was designed with large NPPs, built with traditional civil engineering, in mind. As a result, such framework is quickly becoming outdated. To counteract this, the UK government is consulting on a variety of modifications to better accommodate advanced nuclear technologies, such as an “Approach to siting new nuclear power stations beyond 2050”⁶ (which would see a new National Policy Statement, EN-7, published, outlining the key criteria that may impact the government’s decision to grant permission for new nuclear sites) and “Alternative routes to market for new nuclear projects”,⁷ the results of which are currently being analysed.
4. The planning process can be long and intensive, so it is important to ensure sufficient float is built into any schedule to avoid delays. For example, the proposed Sizewell C project began its first community consultation in 2012, but only received a development consent order in 2022.⁸ It also faced applications for judicial review in the High Court and Court of Appeal to challenge the Secretary of State for Energy Security and Net Zero’s conclusion that uncertainty over permanent water supply strategy was not a barrier to the project.⁹

Construction: Technical Complexity and Design Challenges

The intricate design and engineering requirements of NPPs also pose significant technical challenges during construction, particularly in circumstances where many NPPs are ‘First Of A Kind’ (rather than ‘Nth Of A Kind’), meaning that there is no prior design or existing equipment that can be used, and almost everything needs to be designed and manufactured from scratch. This means it takes much longer to design and acquire the required parts, with replacements difficult, time consuming, and costly to come by. For example, a shortage of qualified manufacturers contributed to the delays on the Olkiluoto-3 project, exacerbating pre-existing delays.¹⁰

How to mitigate

1. Again, early engagement between owners and potential contractors is a must to help designers and contractors to understand exactly what the owner’s requirements are, and so that all parties can work together to develop a procurement strategy and schedule that identifies what the constraints may be and defines policies and processes to overcome these.
2. When it comes to the contract, not only must there be a clear allocation of risk and responsibility for the design, but also a clear procedure by which the parties can agree variations to the design as that develops and evolves. Such procedures should reduce unnecessary disputes and ensure that, should the design evolve for any reason, both parties will understand the implications of doing so. This will help make clear the parties’ responsibilities and the risk allocation to robustly deal with unforeseen circumstances as the project progresses, and minimise the impact of any disruption. Moreover, expressing performance standards in clear terms enables strict quality control and easier identification of whether such standards have been achieved by the contractor.
3. Due to the time critical nature of long lead and/or propriety items, it is important to also build in project control and reporting requirements to the contract. This may include provisions requiring daily or monthly progress reports, or reporting obligations as to the status of materials or manpower on site, which are exceedingly helpful (provided they are adhered to). Such reporting obligations can flag any issues in delivery or capacity of, for example, manpower, before they become critical, ensuring the parties are each made aware of the problem and it may be solved through early action, mitigating consequences for the overall project schedule.
4. Parties may also consider providing for incentives in their contracts which reward productivity by contractors, rather than penalties for delays or poor performance. The former can promote a collaborative approach to the project, rather than driving parties to adversarial positions to defend their record when problems arise.
5. Given that many NPPs are ‘First of a Kind’, personnel with specific experience can be difficult to find, and given the rate of construction of new NPPs, knowledge has the potential to be quickly lost between projects. As complex operational components are installed, parties will want to ensure that that employees are offered sufficient training, and management systems are implemented to use them effectively.

The Flamanville NPP project, for example, faced several defects challenges which contributed to significant costs increases and delays.¹¹ EDF estimated that rectifying weld defects alone would increase construction costs by €1.5 billion, delay fuel loading, and prevent revenues from being generated in 2020 from the test phase.¹²

Mitigating Disputes

Should a dispute arise (either during the construction or operational phase), the parties will also want to ensure that the contract contains a detailed claims resolution procedure.

It would be prudent to include a claims notification procedure that addresses the following:

• notice of a claim being provided in a particular way, to a specified person and by a definable deadline;
• specific documents, particulars or information being provided with the claim submission by a particular deadline;
• a particular person being required to make a decision on the information provided by a particular deadline and in a particular format.

The more information that can be shared between the parties as to the nature and context of the dispute, the better understanding the parties have of the issue, and the more likely claims can be understood and resolved quickly to the parties’ satisfaction. This is particularly key in projects such as NPPs where there are long build times as well as defects liability periods and ongoing servicing; the parties will likely want to maintain relationships insofar as possible for continuity.

When drafting dispute resolution clauses, parties may wish to keep in mind that NPP projects are a prime candidate for use of multi-tier dispute resolution (“MTDR”) clauses. Under MTDR clauses, the parties agree to undertake at least one round of steps to resolve the dispute prior to resolution in arbitration or by the courts. This may include:

• the use of Dispute Adjudication Boards / Dispute Avoidance/Adjudication Boards;
• the use of experts in an Expert Determination process; and/or
• participating in reconciliatory or mediatory meetings at the highest level of management, between, for example, management boards or in another predefined way.

This can help resolve a dispute in a manner that both preserves the commercial relationship between the parties and avoids the time, disruption and cost of litigation or arbitration.

*Tom Osborn is a trainee solicitor in the London office. 

¹Sovacool, B. and Hanee, R., ‘Beyond economies of scale: Learning from construction cost overrun risks and time delays in global energy infrastructure projects’ (May 2025) Energy Research & Social Science, vol. 123; International Energy Agency, Electricity 2024: Analysis and forecast to 2026 (May 2024), p. 49.

²https://www.fidic.org/node/42222.

³https://www.ft.com/content/ee89bce2-a3e9-48ed-82eb-85916eb24777.

⁴https://www.edf.fr/en/the-edf-group/dedicated-sections/journalists/all-press-releases/hinkley-point-c-update-1.

⁵For further information regarding the GDA process: https://www.velaw.com/insights/smrs-the-gda-process/.

⁶https://www.gov.uk/government/consultations/approach-to-siting-new-nuclear-power-stations-beyond-2025.

⁷https://www.gov.uk/government/consultations/alternative-routes-to-market-for-new-nuclear-projects.

⁸https://www.legislation.gov.uk/uksi/2022/853/contents/made.

⁹R (on the application of Together Against Sizewell C Limited) v (1) Secretary of State for Energy Security and Net Zero and (2) Sizewell C Limited [2023] EWCA Civ 1517.

¹⁰https://www.powermag.com/finnish-nuclear-plant-under-construction-since-2005-faces-yet-another-delay/ .

¹¹https://www.reuters.com/article/edf-nuclearpower-flamanville/update-1-french-regulator-clears-edfs-flamanville-reactor-despite-weak-spots-idUSL8N1MM4QE/; https://www.reuters.com/article/edf-flamanville/update-2-edfs-flamanville-nuclear-plant-faces-new-delay-over-faulty-welding-idUSL8N23R0V8/.

¹²https://www.edf.fr/groupe-edf/espaces-dedies/journalistes/tous-les-communiques-de-presse/epr-de-flamanville-edf-privilegie-un-scenario-de-remise-a-niveau-des-soudures-de-traversees-du-circuit-secondaire-principal-par-robots-et-ajuste-le-calendrier-et-l-estimation-du-cout-de.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.