Jul 20, 2018

Ep 43: Paul Murphy - Managing Director / Lawyer, Gowling WLG

Managing Director / Lawyer
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Show notes

Q1: How did you become a nuclear lawyer?

A1: Paul Murphy started as project finance attorney, working predominantly in the power industry with Bechtel Power Corporation, which had both fossil and nuclear groups. Paul Murphy was asked to participate in a working group at the International Atomic Energy Agency (IAEA) for Innovative Financing for Nuclear, which led to his career as a nuclear lawyer. The high project costs of nuclear plant construction and history of high impact delays led to challenges in project financing and lenders were nervous to provide money for the project. Most power plant construction is financed through project finance, but this model was not well-suited for nuclear construction, which has historically been built supported by balance sheet financing. Deregulation in the electric utility market, related to natural gas and renewable energy, has made it difficult to build and operate nuclear power generation plants.

Q2: Could a state purchase a nuclear plant if it was in danger of shutting down?

A2: Paul Murphy has seen municipalities take over nuclear plants in danger of shutting down, but states have not historically gotten involved. Long term benefits of nuclear power plants are not realized in the 30-year financial model used by the states. After Chernobyl in 1986, Italy shut down all nuclear power plants and ended up paying a higher price for power than France, which had continued to operate nuclear plants. This is similar to Germany’s decision to cut all nuclear power at Fukushima and focus on renewable energy. When solar and wind are not able to provide power, Germany imports energy from France’s nuclear base.

Q3: What is the innovative aspect to nuclear financing?

A3: Paul Murphy recognizes that the U.S. is still experiencing first-type problems with the new nuclear technologies from the lender perspective. Until plants have been built on-time and on-budget, lenders will approach the projects with extreme conservatism. Possible solutions include government support or executing a power purchase agreement (PPA) with high end users to develop revenue, such as used in France. The possibility of fleet construction with small modular reactors, in which the reactors could be built in stages to kickstart revenue before all reactors are constructed. Cheapest and easiest to build projects may not support long term goals.

Q4: Is nuclear regulation hard to change from a political standpoint?

A4: Paul Murphy sees public perception about changes to nuclear regulation is driven by the reasons for the changes. One example is China, where the pollution has become such a health risk that the cost increase of nuclear power becomes acceptable and necessary. Intermittent generation only works if there is backbone energy source to step in when that is not generated, and if the cost is only analyzed as being used for backup energy, it becomes much more expensive. When moving away from a competitive market, the case has to be made to population that goals are not being met and the decisions are necessary for the future of energy. Energy policy changes affect the whole spectrum of the energy industry and economics.

Q5: The U.S. population takes energy availability for granted, but intermittent energy sources are being incentivized, putting the availability at risk.

A5: Paul Murphy believes intermittent energy will only work as a base load if there is grid-scale energy storage, which may or may not be feasible. The nuclear energy industry is highly regulated, but renewables such as solar are not, especially when comparing the waste of energy production (nuclear waste vs. solar panels). Collaboration between agencies and industries is required to solve the energy problem and meet the climate change goals that are currently not being achieved. Not directly addressing the issues now will only lead to greater challenges and issues later.

Q6: Why was the climate change problem described as “two degrees” and why doesn’t it have an impact?

A6: Paul Murphy sees a lot of the technical analysis is lost on the general population and the impacts of a two degree climate change have not been communicated effectively. The ability to take your area of expertise and knowledge and convert it into a simple path forward. In other industries, a certain level of risk has been accepted, but people have a very low risk tolerance of nuclear power generation. People also associate nuclear power with nuclear weapons, even though the two industries are very separated. Initiatives happening at the state level, including reaching out to the public with the facts, are compelling to the general population. The person who delivers the information and the way it is delivered makes a difference in the public perception that they are receiving objective information or being deceived.

Q7: What did you do after you left Bechtel?

A7: Paul Murphy returned to private practice after leaving Bechtel and working on financing for reactors in Abu Dhabi. He is now with Gowling WLG working in the international nuclear industry as a nuclear lawyer. The minimal changes in the U.S. nuclear energy industry is not representative of the large nuclear power growth around the world. UAE is one of the newcomer countries that had no previous nuclear energy industry. A lot of countries see nuclear power as a solution to a problem, but there are three core issues holding back development of the program: financing, human resources development, and public acceptance. Long term bonds are created between countries to share nuclear technology and drives the overall bilateral relationships internationally.

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