Communication from the Commission to the European Parliament and the Council ITER status and possible way forward {SEC(2010) 571}
Date: 2010-05-04
Institutions: European Commission
Subjects: financing method, international organisation, nuclear fusion, nuclear reactor, nuclear research

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EUROPEAN COMMISSION 

Brussels, 4.5.2010 
COM(2010) 226 final 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

ITER status and possible way forward 

{SEC(2010) 571} 

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COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

ITER status and possible way forward 

1. 

INTRODUCTION  

This  Communication  responds  to  the  request  of  the  Council  of  16  November  2009  that  the 
European  Commission  examine  and  address  the  financing  gap  and  related  governance 
conditions concerning ITER. The purpose of this communication is to set out the governance 
and financial conditions under which the Union could support its partners in placing ITER on 
a sound and sustainable financial footing. 

ITER1  is  a  global  project  to  build  and  operate  an  experimental  reactor  with  the  aim  of 
demonstrating  the  scientific  and  technological  feasibility  of  fusion  energy  for  peaceful 
purposes. Its successful accomplishment would establish whether fusion can become a major 
sustainable energy source contributing to the EU's strategy for the long term security in the 
supply of energy. The process of nuclear fusion offers the prospect of producing an essentially 
limitless source of safe and clean energy with no CO2 emission. The ITER project should be 
followed  by  a  demonstration  reactor  on  the  path  towards  the  commercial  exploitation  of 
fusion power. 

ITER is a uniquely global cooperation - a pioneering initiative seeking to demonstrate shared 
technological  solutions  to  global  problems.  The  project  is  conducted  under  the  terms  of  an 
International  Agreement2  between  the  European  Atomic  Energy  Community  (EURATOM) 
and 6 other Parties - China, India, Japan, Korea, Russia, and the USA, which was signed in 
Paris  in  November  2006  and  which  entered  into  force  in  October  2007.  The  agreement 
established  the  ITER  Organization  (IO)  with  full  international  legal  personality,  to  be 
responsible  for  the  joint  implementation  of  the  ITER  project.  The  Agreement  has  an  initial 
duration  of  35  years  in  order  to  construct  (10  years),  operate  (20  years),  and  de-activate  (5 
years) the ITER facilities. 

With  strong  backing  of  the  Council,  the  Commission  successfully  negotiated  with 
international partners on behalf of the Community and succeeded to fix the site for building 
ITER in Europe at Cadarache, France. In addition to the linked opportunities, this agreement 
specifies that Europe’s financial responsibilities to deliver buildings and a machine arise at the 
outset - the construction phase. This also means that other ITER contributors are dependent on 
the timely completion of Europe’s contribution. 

The EURATOM contribution for ITER is managed through the European Joint Undertaking 
for ITER – "Fusion For Energy" (F4E), established as the European Domestic Agency3 by the 

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Originally denoted "International Thermonuclear Experimental Reactor". 
OJ L 358, 16.12.2006, p. 62–80. 
Under the ITER Agreement each Member has its own "Domestic Agency" responsible for managing its 
contribution,  and  especially  for  procuring  the  various  components  needed  to  build  ITER  and  to  be 
provided to ITER Organization as contributions in kind. 

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Council in March 20074 and based in Barcelona. The Members of F4E, EURATOM, the 27 
Member States plus Switzerland, are all represented in its governance. The EU contribution to 
ITER construction mainly consists of major systems and components for ITER procured by 
F4E  and  provided  "in  kind"  to  the  ITER  Organization.  The  European  Parliament  is 
responsible for giving budgetary discharge to the European Joint Undertaking for ITER. 

The construction of ITER is technically extremely challenging in its scale and complexity. It 
will represent a major engineering undertaking on the scale of the construction of a very large 
commercial  power  plant  with  large-scale  industrial  contributions  in  civil,  mechanical, 
electrical and nuclear engineering combined in unprecedented conditions.  

The launch of the ITER project marked an important milestone in the development of world-
wide big science collaboration. For Europe the project is emblematic of the EU's capacity to 
take  a  leading  role  at  the  global  level  in  science  and  technology.  The  ITER  Organization 
presents  a  possible  model  for  future  large  scale  international  collaborative  infrastructure 
projects.  Implementation  of  ITER  is  therefore  a  test  case  for  future  EU  -  international 
scientific collaboration on large-scale projects.  

The  cost  of  the  project  has  significantly  exceeded  the  original  estimates  on  which  the  EU 
budget commitment was based. In order for the EU to meet these onerous responsibilities, it 
must  address  the  need  to  find  the  additional  resources  to  frame  a  sound  and  sustainable 
financial solution for the duration of the project, not just for the next two to three years but 
until the end of the project life. Therefore the budgetary authorities need to provide additional 
means for this important project and to deal with any future cost overruns.  

2. 

CURRENT CONTEXT 

On  29  May  2009,  the  Commission  presented  to  the  Council  a  summary  of  the  status  of  the 
ITER  project,  the  challenges  faced  and  the  actions  taken.  The  Commission  also  set  out  a 
number of "boundary conditions" that it considers pre-requisite to be met in order to ensure 
the success of the project at acceptable cost and reasonable risks. These include credible cost 
assessment  and  cost  containment  policies,  realistic  timetable  and  sound  management  of  the 
project at all levels. 

At  its  meeting  of  16  November  20095,  the  Council  confirmed  its  unanimous  support  to  the 
ITER project, understanding that the construction cost of ITER would be substantially higher 
than  initially  planned,  and  "provided  that  the  boundary  conditions  elaborated  by  the 
Commission in the end can be met". The Council also concluded that the "Baseline"6 (scope, 
schedule and cost) for ITER must build upon these boundary conditions. It called for action to 
be  taken  on  necessary  management  changes  and  a  strong  policy  to  be  applied  on  cost 
reduction and cost containment.  

In  addition,  the  Council  invited  the  Commission  to  explore  possibilities  for  providing  the 
increased funding needed during the current Financial Perspectives, including advantages and 
disadvantages  of  a  loan  from  the  European  Investment  Bank  (EIB)  and  a  reprioritization  of 

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OJ L 90, 30.3.2007, p. 58. 
Documents 15815/09 RECH 401 ATO 136 + ADD 1 RESTREINT UE. 
The Baseline refers to the inter-related elements of scope (specifications of the machine to build), the 
schedule (time table for construction) and the cost. 

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funds within the current EU budget, and to present possible solution(s) to the Council as soon 
as possible. 

At the international level, the immediate critical step for the construction phase is for ITER 
international  partners  to  agree  on  the  Baseline  at  the  currently  foreseen  mid-June  ITER 
Council in China. The Commission has insisted on meeting the Boundary conditions and has 
so far declined to adopt the proposed schedule as foreseen in November 2009. The EU now 
needs to define its position for the meeting of the ITER Council.  

3. 

ITER COST 

During  the  construction  phase  EURATOM  contributes  a  value  of  5/11  (around  45%)  of  the 
total, of which 80% is funded from EURATOM and 20% from France, the rest being equally 
divided among the other 6 ITER Parties (1/11 or around ~9% each)7. During the subsequent 
operation and deactivation phases, EURATOM will contribute 34% of the total costs: 

The 2001 cost estimated the total ITER construction at EUR 5.9 billion (5896 million in 2008 
value).  The  EURATOM  contribution,  amounted  to  EUR  2.7  billion  (around  45%,  2680 
million in 2008 value), corresponding to EUR 1 735 million for the components/systems to be 
provided “in kind”, and EUR 945 million to be provided "in cash" to the ITER Organization. 
Each  Party  has  committed  to  provide  the  agreed  contributions  in  kind  independently  of  the 
final cost of procuring and delivering those components.  

The  F4E  current  cost  estimates  for  the  construction  period  (cost  for  Europe  only),  updated 
according to the proposed schedule (2007-2020) and presented to the F4E Governing Board in 
March 2010, amount to EUR 7.2 billion (7253 million in 2008 value): EUR 6.6 billion8 (6603 
million in 2008 value) for the contribution to ITER construction and EUR 650 million for the 
F4E  running  costs  and  other  activities.  These  estimates  would  require  a  EURATOM 
contribution  of  EUR  5.9  billion  (EUR  5892  million)9  and  EUR  1.3  billion  (EUR  1321 
million) of funding from France (all figures in 2008 value)10.  

EUR  2.1  billion  (current  value)  of  commitment  appropriations  from  the  FP7  EURATOM 
Budget are needed for the years 2012-2013 in order to commit the procurements needed early 
in the construction process. Programmed appropriations available in the current Multiannual 
Financial  Framework  (EUR  346  million  for 2012  and  EUR  344  million  for  2013  in  current 
value)  mean  that  EURATOM  is  facing  an  estimated  gap  on  commitment  appropriations  of 
about EUR 1.4 billion (in current value) for the years 2012-2013 (EUR 550 million in 2012 
and EUR 850 million in 2013). 

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Cost Sharing for all Phases of the ITER Project. Attachment 2(b) to the Final Report on Negotiations on 
the ITER Joint Implementation, 1 April 2006. 
As the final construction cost of the whole ITER machine will not be known because each Party will 
suffer  specific  cost  increases,  it  would  be  difficult  to  substantiate  an  estimation  of  what  share  of  the 
overall ITER construction costs the EUR 6.6 billion would represent. 
This amount is broken down as follows: 
For 2007-2011 (5 years) the estimated financial needs are about EUR 1.3 billion; 
For 2012-2013 (2 years) the estimated financial needs are about EUR 2 billion; 
For 2014-2020 (7 years) the estimated financial needs are about EUR 2.6 billion. 
To  this  contribution  about  EUR  40  million  should  be  added,  which  come  from  the  F4E  members 
(EURATOM, 27 Member States and Switzerland) other than EURATOM and France. 

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Given  the  increased  level  of  maturity  of  the  design  and  the  implementation  of  costing 
methodologies that could take into account more detailed data on the project, these estimates 
are not foreseen to undergo material variation in the short term. The scale of this funding gap 
requires a response from the budgetary authorities that is linked to a number of conditions. 

4. 

PRE-CONDITIONS FOR SOUND AND SUSTAINABLE FINANCING OF ITER 

4.1. 

Sound Governance  

The expert assessment of the source of cost overruns has identified a range of issues which 
must  urgently  be  addressed  by  the  Member  States  in  the  governance  of  F4E  and  the 
International Organisation (IO). The governance of F4E will have to be reviewed.  

To address these issues a clear programme of delivering the Boundary Conditions needs to be 
actively  supported  by  the  Member  States.  This  will  involve  improving  cost  estimates, 
transparent  monitoring  and  reporting  of  cost  evolutions,  and  proactively  managing  cost 
containment  policies  notably  addressing  value  engineering,  rationalising  allocation  of 
procurement obligations, agreeing standards and exploiting economies of scale. Following the 
resignation  of  the  F4E  director  in  January  2010,  it  is  being  restructured  and  its  cost 
containment overhaul is being put in pace by a new Director. 

Beyond  the  expert  assessment  reports,  additional  measures  may  need  to  be  taken.  In  the 
framework of the F4E governance overhaul there is need to also address the F4E procurement 
policies with European fusion research entities and industries, aiming at strategic partnerships 
and innovation. 

For the IO costs escalations related to design and management resources. The ITER Council 
will  implement  key  aspects  of  the  Management  Assessment  report  including  management 
changes currently foreseen in June. 

4.2. 

Sustainable Financial Framework 

The Commission underlines its commitment to maintain and continue its original budgetary 
allocation  for  ITER.  However,  given  the  scale  of  the  financing  gap  and  the  need  for  a 
systemic solution that will respect the Budget of the Union throughout the life of the project, 
there  is  a  need  for  additional  funds.  The  Commission  has  therefore  explored  the  options 
requested by the Council. 

Loan of the European Investment Bank 

The European Investment Bank (EIB) could be asked to grant a loan to F4E as the underlying 
research  infrastructure  activities  are  within  its  lending  objectives.  In  order  to  grant  a  credit 
line  to  F4E,  the  EIB  would  need  to  further  investigate  if  an  explicit  collateral  or  guarantee 
from  EURATOM  would  be  required.  Should  the  EIB  need  an  explicit  guarantee  from 
EURATOM,  the  Commission  would  have  to  prepare  a  proposal  for  modifying  the  legal  act 
establishing  F4E  that  would  need  to  be  adopted  by  unanimity.  Specific  provisions  would 
thereafter be set out in an agreement between EURATOM (represented by the Commission), 
the  EIB  and  F4E.  Moreover,  certain  changes  and/or  clarifications  in  the  F4E  financial 
regulation  and  its  implementing  rules  would  be  required.  However,  the  main  problem  with 
using  a  loan  to  fill  the  financing  gap  is  the  absence  of  an  identifiable  income  stream  which 

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could  be  used  to  make  repayments  on  a  loan;  in  practice  this  precludes  a  loan  as  being  an 
appropriate solution for the identified funding gap. 

Redeployment 

Additional financing needs for ITER could be partially covered by the transfer of funds from 
other  headings.  However,  given  the  scale  of  the  funding  gap  and  the  need  for  a  systemic 
approach  throughout  the  life  of  the  ITER  project,  the  recourse  to  redeployment  of  existing 
Union funds on this scale would have a significantly negative effect on a range of policies and 
programmes which are at the heart of the EUROPE 2020 agenda. In policy terms, it would not 
be  advisable  to  make  such  significant  reductions  in  these  areas.  This  issue  was  already 
signalled  in  the  Commission's  recent  report  on  the  functioning  of  the  Inter-institutional 
agreement on budgetary discipline11. 

In addition, neither of these options (EIB nor redeployment) provides a structural solution to 
this issue.  

The commitment of the Council, also towards the European Parliament, to guarantee adequate 
financial  support  to  the  ITER  project  throughout  its  construction  and  operations  phases  is  a 
pre-condition of sustainability. Excluding the options of an EIB loan and of redeployment, the 
Commission considers that the EU's commitment to the ITER project can only be met by two 
options which are appropriate to the scale and systemic nature of this issue. 

OPTION ONE: COMPLEMENTARY FINANCING FROM MEMBER STATES  

For  2012-2013,  all  EU  Member  States  and  Switzerland  would  need  to  make  additional 
contributions of the order of EUR 1.4 billion and to undertake to finance any cost overruns 
beyond those provisions foreseen in the Budget of the Union and the Multiannual Financial 
Framework for the whole life of the project. The possibility of additional contributions from 
F4E Members is foreseen by the decision establishing F4E.  

In the future, from 2014 until the end of the project, additional Member State financing would 
be  triggered  once  the  budget  appropriations  foreseen  for  ITER  have  been  fully  used. 
Consideration could be given to possible additional mechanisms increasing flexibility within 
the  Multiannual  Financial  Framework  and  to  be  used  before  triggering  Member  States' 
additional contributions.  

OPTION TWO: SET FINANCIAL PERSPECTIVES CEILINGS AT APPROPRIATE LEVEL 

Provided a solution for the financing of the whole life of the project is found, a net increase in 
the overall ceiling of the 2007-2013 financial framework could be envisaged for 2012-2013. 
However, the Council has so far set a condition that the 7-year global ceilings of the financial 
framework in terms of commitments and payments should remain unchanged12.  

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COM(2010) 185, 27.4.2010. 
Revision  of  the  ceilings  can  be  done  in  two  ways:  a)  as  a  compensation  mechanism  offsetting  the 
increase  in  one  heading  by  a  matching  decrease  in  another  or  b)  increasing  the  overall  ceiling.  A 
compensation  mechanism  has  been  used  several  times  in  the  past.  Until  the  end  of  2013  though,  the 
Commission  expects  that  the  margins  available  will  be  substantially  reduced.  Those  reduced  margins 
should be partially preserved to leave the possibility to adapt to competing future demands. 

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In the future, the financial Multiannual Financial Framework ceilings would need to be fixed 
at a level that would allow the EU to meet its commitment to the ITER project. 

Whatever option is preferred by the budgetary authorities, a sustainable solution will require a 
clear  financial  commitment  for  the  life  of  the  project  and  a  commitment  to  finance  any 
overruns outside that framework, by Member States. 

For any of the options a capping mechanism should be established to ensure sound financial 
management of the project. 

5. 

TIME FRAME 

The time frame in which a solution for the financing of ITER would need to be found is very 
limited. Taking into account the need to clarify the situation to the EU's international partners 
and the dynamics of the EU budget, the Commission proposes that the Council and European 
Parliament consider this issue as a matter of urgency. 

6. 

CONCLUSION 

The launch of the ITER project marked an important milestone in the development of world-
wide big science collaboration. For Europe the project is emblematic of the EU's capacity to 
take a leading role at the global level in science and technology.  

Finding  an  effective,  systemic  and  durable  solution  to  the  sound  financial  governance  and 
sustainability would provide a template for future global cooperation on the grand challenges 
such as energy supplies, facing our collective way of life.  

At its meeting of 16 November 2009, the Council confirmed their support to the ITER project, 
despite  the  substantial  cost  increases,  provided  that  boundary  conditions  elaborated  by  the 
Commission could be met, and invited the Commission to explore funding possibilities in the 
context of the current Multiannual Financial Framework.  

Taking into account the elements presented in this communication, the Commission calls on 
the Council and the European Parliament to provide the additional resources necessary for the 
complete period of the ITER construction and to take a decision in principle on the provision 
of the necessary funding. The Commission considers that it has to be done as soon as possible 
in  order  for  it  to  inform  its  international  partners  expecting  a  EURATOM  decision  on  the 
ITER Baseline at the next meeting of the ITER Council in mid-June.  

Once  such  a  commitment  is  given,  the  Commission  will  present  the  necessary  proposals  to 
finance the additional needs for ITER in 2012 and 2013 in line with the recent report on the 
Inter-institutional agreement. 

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