Business models and risk management for nuclear power plants: From construction to operation
9th March 2026
Developing a nuclear power program and constructing a nuclear power plant are among the most complex undertakings in the energy sector. These initiatives involve not only technical challenges and regulatory scrutiny but also significant financial and operational challenges. Further, nuclear power attracts significant public attention, which means both political issues and engineering considerations must be managed in the public eye. Despite these complexities, growing interest in reliable, low‑carbon baseload energy means many jurisdictions around the world that do not currently use nuclear power are either considering or already developing nuclear programs, given the long-term sustainability and economic opportunities it offers. These greenfield jurisdictions present unique risks and challenges to the nuclear industry.
With capital costs often exceeding tens of billions of dollars and construction timelines spanning more than a decade, construction planning and risk management become critical to nuclear program success. The economics of energy produced by a nuclear power plant are highly dependent on how effectively the construction process is executed. Outcomes can depend on selecting the right business model and implementing coordinated engagement strategies throughout the plant’s life cycle that build trust within the local community.
Once commercial operation is achieved, nuclear power plants are typically low-risk, exceptionally reliable assets. This is attributable to highly skilled operators, operational management systems, and regulatory oversight. While overall risk remains low, there is a moderate risk of increased operational costs associated with regulatory shifts informed by global lessons learned or evolving best practices throughout the plant’s life. Nuclear power plants have high fixed operating costs and low variable costs, so their operational costs do not change significantly with reactor output. If they are not operated at, or near, maximum capacity, the cost of energy can become prohibitive.
Investment in research and development (R&D) programs specific to the nuclear reactor technology being managed can significantly impact operations. This means early consideration of operational business planning is important as well.
The balance, in terms of involvement and risk sharing, between governments representing taxpayers, energy ratepayers, and private entities should be aligned within the business model and reflected in appropriate commercial agreements. This article explores key project decisions, business model options, construction risk management, and operational risk considerations, including how these risks affect relationships among owners, operators, and the public.
Business models for nuclear projects
The business model chosen for a nuclear power plant determines how ownership, financing, and operational responsibilities are structured and influences how risks are allocated among various stakeholders. The feasibility of a new-build nuclear power plant depends on the type of energy market it is being considered for and on whether commercial terms can be developed to manage key risks associated with construction and operations.
To ensure the cost of electricity is affordable for customers while maintaining an appropriate rate of return on investments, the capital for a nuclear power plant will often be debt-financed and paid down over an extended period—20 to 30 years or more is common.
Nuclear regulators typically need to understand the business model to ensure clarity about who will manage the radiation hazards and nuclear liabilities associated with design, construction, and operation, including ensuring the resources and authorities exist to maintain the assets in a safe and secure manner. Regulators will often also consider technical feasibility and financial guarantees for the decommissioning phase, including long-term management and permanent disposal of used nuclear fuel and other radioactive waste produced throughout the life cycle. The business model must demonstrate that nuclear safety and security will be paramount throughout the nuclear power plant’s build, operation, and decommissioning. It must also show that funds are in place for decommissioning and nuclear waste disposal at the end of life.
Because of the high capital investment required for a nuclear power plant, combined with the life cycle considerations of the fuel and assets, it is typical for governments or government agencies to be involved in the business model. Examples of involvement are publicly owned utilities, a regulated electricity market (or guaranteed electricity price), guaranteed rates of return on equity, construction backstops or loan guarantees, and nuclear waste ownership/disposal guarantees. Government involvement in projects and supportive regulatory structures with predictive cash flows can enable private investment and lower-cost debt financing, but this involvement introduces oversight requirements from government entities to ensure projects and assets are managed in the public interest.
With a traditional utility-owned model in a regulated electricity market, an established utility company will build, own, and operate the plant, recovering costs through the regulated market. This approach offers regulatory clarity but exposes the utility to significant financial risk if delays or cost overruns occur during construction. This financial risk often requires public involvement in financing. If the utility is not publicly owned, public-private partnerships (PPPs) can share risk between government and private investors, often with government guarantees or subsidies to attract private investment. While PPPs reduce financial burden on private entities and can enhance public confidence, they can also introduce governance complexity and potential political interference.
PPP models, such as build-own-operate (BOO), place full responsibility for construction and operation on private entities or foreign governments, which sell electricity under long-term contracts. These models encourage efficiency but require strong contractual frameworks to secure revenue and manage risk. A variation, build-own-operate-transfer (BOOT), allows private or foreign ownership during a concession period before transferring the plant to a government agency, aligning private involvement with long-term public control.
Finally, merchant models, where electricity is sold directly into energy markets without long-term contracts, are not usually conducive to nuclear projects due to high fixed costs and revenue uncertainty.
Managing construction risk
Construction risk management is critical because nuclear projects are capital-intensive and prone to delays and cost overruns. Risks arise from technical complexity, regulatory delays and uncertainty, lack of public support or mistrust, supply chain disruptions, and skilled labor shortages, among others. Schedule risk is particularly significant, as delays can lead to increased construction costs, lost revenue, and high financing costs. Unmanaged quality and safety risks can result in regulatory shutdowns and reputational damage.
The most important mitigations to construction risk are robust project front-end planning and sound execution of commercial strategy. This means substantial investment in engineering and early project design, risk identification and analysis, schedule and cost estimate development, supply chain readiness for both goods and labor, and commercial agreement development, all ahead of final investment decisions that mark the transition to a construction project.
This investment can be significant. Combined with the licensing deliverables and fees, funding of front-end planning for a nuclear power project is usually still measured in the billions of dollars. Public money, or at least a blend of public and private funds, is often leveraged to finance these early project planning investments. Funding releases at staged intervals, such as formal phase gates, help confirm the project’s business case has been reviewed and feasibility remains intact as plans mature and risks are better understood. Good oversight and unbiased review at each phase gate are critical to ensure the project progresses as planned. Healthy commercial strategies will seek to balance construction risk between the project owner and the supply chain to maximize value and verify that the project is managed appropriately. This means that as some risks begin to materialize into issues, the decision-making structure and the mitigation of those risks are aligned to a set of project priorities—usually focused on cost and schedule. One of the key commercial relationships is between the owning party and the primary engineering, procurement, and construction companies, as well as the main reactor technology provider. These agreements need to be structured early to ensure all parties understand and agree on the project priorities and key variables, such as cost and schedule estimates, and that contingencies for known and unknown risks are well understood.
Once a final investment decision has been made and construction is released, the governance, change management, and dispute resolution systems within the commercial agreements that will oversee the construction are important to the project’s ability to stay on track and achieve commercial operation. Dispute avoidance or adjudication boards can be useful for keeping projects moving forward and minimizing the impacts of issues as they surface in real time.
Operational risk management
When the plant is operational, risk management shifts to ensuring safety, reliability, and long-term financial stability. Operational risks include safety and compliance, equipment reliability, and regulatory changes. Nuclear safety remains paramount, as incidents can lead to shutdowns, liability, and loss of public trust. Regulatory shifts based on global lessons learned or best practices can impose new compliance burdens. Compared to construction cost and schedule risks, operational risks are significantly lower in terms of probability, thanks to the robust regulatory framework in place for nuclear energy and the highly qualified operational teams and management systems. Operating nuclear power plants are attractive investments for institutional or other risk-averse investors.
Investments in R&D infrastructure tailored to nuclear physics, chemistry, and radioactive waste products associated with the nuclear technology in operation can have significant impacts on facility operations. Examples of this include workforce training and development programs that increase understanding of specific safety and reliability issues at the facility, as well as new business opportunities, including isotope production from the reactor or novel uses of radioactive by-products and waste management techniques. R&D investments in educational institutions or nuclear laboratories, specifically focused on reactor technologies, raise public interest in the type of reactors selected for deployment.
At the end of life, radioactive waste products are typically transferred to a government agency for permanent disposal and long-term care. Regulators will usually require that decommissioning and radioactive waste-disposal plans be developed prior to construction and financial guarantees being in place, as quantities accumulate during construction and operation.
Operational risk and stakeholder relationships
Operational risk is closely tied to the business model and the relationships among owners, operators, and ratepayers. In regulated utility-owned models, operational failures can lead to increased costs that regulators may disallow, creating tension between utilities and ratepayers. While some risk is passed through the regulated price of electricity, regulators can also cap recovery to protect ratepayers. In PPP arrangements, private operators produce energy under long-term contracts, bearing some financial penalties for failures, while public entities bear the residual risk and face political consequences.
Clear contractual frameworks are essential when ownership and operation are separated, defining performance obligations for both cost and output, as well as remedies for non-compliance. Ratepayers’ exposure to operational risk varies. In regulated markets, risk is sometimes spread more broadly across regulatory and public financing structures, limiting the direct cost passed on to ratepayers. In deregulated markets, they pay market prices and can be more exposed to large incidents or failures, as demand can outweigh supply. Either way, poor operational performance can erode investor confidence, trigger renegotiations, and damage public trust, underscoring the importance of transparent communication and strong governance.
Summary of key considerations
The development and operation of a nuclear power plant require the careful integration of technical, financial, regulatory, and public engagement factors. The business model chosen for such a project significantly influences risk allocation, financing structures, and stakeholder relationships. Models range from traditional utility-owned approaches to PPPs, BOO, and BOOT, each with distinct implications for governance, efficiency, and political oversight. Merchant models are generally unsuitable due to nuclear power’s high construction and fixed operational costs, as well as the uncertainty of revenue.
Construction risk management is critical because nuclear projects involve multi-billion-dollar investments and decade-long construction timelines. Risks include technical complexity, regulatory delays, supply chain disruptions, and public opposition. Effective mitigation requires robust front-end planning, phased funding releases, and well-structured commercial agreements that clearly define priorities, contingencies, and dispute resolution mechanisms. Government involvement—through guarantees, regulated markets, or backstops—is often essential to attract private investment and secure low-cost financing.
Once operational, nuclear power plants become low-risk, highly reliable assets, but operational risk management remains vital. Risks include safety compliance, equipment reliability, and regulatory changes. Investments in R&D tailored to reactor technology can enhance safety and workforce capability, and even create new revenue streams, such as isotope production. Long-term planning for decommissioning and radioactive waste disposal must be embedded early in the project life cycle.
Conclusion
The success of nuclear programs and projects hinges on selecting a business model that balances risk among governments, private investors, and ratepayers while ensuring nuclear safety and financial viability. Transparent governance, strong contractual frameworks, and proactive stakeholder engagement are essential throughout the life cycle—from planning and construction to operation and decommissioning. While construction carries the highest risk, disciplined project management and phased oversight can mitigate cost overruns and delays. Operational risks, though lower, require sustained attention to safety, regulatory compliance, and technological innovation. Taken together, these factors show that while nuclear power offers long-term sustainability and significant local economic benefits, it still needs robust business strategies and collaborative risk-sharing mechanisms.
As a global firm with a wealth of experts and multidisciplinary teams specializing in nuclear energy, HKA has helped clients navigate nuclear power plant construction delays and disruptions, operational issues and outages, equipment upgrade risks, and plant decommissioning. Our people, who are foremost in their fields, have assisted clients in resolving a wide range of complex issues—from funding and regulatory matters to design and construction management challenges, time and cost issues, and handover and operational best practices.
HKA’s multidisciplinary teams often participate in technical and financial due diligence to validate regulated energy costs in the nuclear industry. This includes regulatory filings with local and national regulators, nuclear waste management and oversight, and the causes and consequences of performance shortcomings on nuclear and other capital projects. In today’s resurgent nuclear sector, HKA’s experts have the skills, knowledge, and experience to provide the tailored support the industry requires as it transitions to a new era of nuclear power plants (including small modular reactors).
About the author
Darcy Holderness is a professional engineer with over 20 years of experience in the power and utilities sector. Darcy has testified as an expert at arbitration regarding engineering and technical root cause determinations and has assisted in two major arbitrations as a factual witness and proper officer. He has delivered nuclear, fossil fuel, and renewable energy projects covering all aspects of utility power plants, including fuel and waste handling, steam and water cycles, heat rejection systems, water treatment, air handling, fire protection, and HVAC. This includes over a decade of experience working with carbon capture, compression, transport, and storage systems. Darcy has also been responsible for siting power plants, initial project and organizational development, design review, contract negotiation and administration, construction oversight, commissioning, deficiency management, and operational support.
Prior to joining HKA, Darcy was a Manager of Nuclear Engineering, Construction, and Project Delivery at SaskPower. He holds a Bachelor of Science degree in Mechanical Engineering from the University of Saskatchewan.
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