Plan for UK nuclear financing model moves upfront cost to energy bills

Legislation paves way for firms building nuclear plants to charge households long before completion

The government plans to resuscitate the UK’s nuclear energy ambitions by creating a financing model that could pile part of the upfront cost of the £20bn Sizewell C power plant on to householders’ energy bills before it starts generating electricity.

The energy secretary, Kwasi Kwarteng, set out legislation on Tuesday that would share the early construction costs with consumers, with the aim of reducing the UK’s reliance on overseas funding for nuclear projects by making them more attractive to domestic investors.

The long-awaited legislation could also pave the way for the government to take a direct stake in the Sizewell C nuclear plant by using tens of millions of pounds of public money during its risky development phase – replacing the China General Nuclear Power Group (CGN), which has a 20% share of the project.

Kwarteng said the existing financing scheme, which was used to back the Hinkley Point C nuclear scheme in Somerset, had led to “too many overseas nuclear developers walking away from projects, setting Britain back years”.

The legal backing for a new financing model is expected to help clear the way for the energy firm EDF to build Sizewell C in Suffolk after years of wrangling over how to fund the huge upfront cost of constructing a nuclear plant.

Under the new financing framework, known as a regulated asset base (RAB) model, EDF would start earning money – collected from energy bills – long before the reactor begins generating electricity.

The government said each household would not have to pay more than a few pounds a year extra on its bills to support the project during construction, but Sizewell C could save households more than £30bn over the facility’s lifetime.

The plant, which is still going through the planning process, could eventually power 6m homes, but has been plagued by opposition from local campaigners, concerns about costs and the involvement of state-owned CGN.

CGN is a minority partner in EDF’s Hinkley Point scheme, and is interested in building its own reactor at Bradwell-on-Sea in Essex. However, its involvement in the nuclear industry has faced growing worries over national security. The US has urged the UK to cut the company from its nuclear programme.

Kwarteng said: “We urgently need a new approach to attract British funds and other private investors to back new large-scale nuclear power stations.”

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The government’s nuclear ambitions have foundered in recent years, with companies including the South Korea power utility company Kepco and Japan’s Hitachi and Toshiba abandoning plans to build in the UK.

Greg Hands, the minister for energy and clean growth, said the legislation would help the UK to build “the new nuclear power stations we need to ensure a resilient, low-carbon electricity system for future generations.

“This finance model will also support the UK’s thriving civil nuclear industry, which currently employs 60,000 in high-skilled jobs, and help create thousands more as we level up opportunities across the whole country.”

Contributor

Jillian Ambrose Energy correspondent

The GuardianTramp

Related Content

Article image
New UK nuclear funding model could leave taxpayers liable
Ministers are expected to announce plans to bolster nuclear industry this week

Jillian Ambrose Energy correspondent

14, Jul, 2019 @1:10 PM

Article image
Drop in wind energy costs adds pressure for government rethink
Tories urged to look at onshore windfarms which can be built as cheaply as gas plants and deliver the same power for half the cost of Hinkley Point, says Arup

Adam Vaughan

23, Jul, 2017 @5:03 PM

Article image
Reactor goes here ... the £18bn Hinkley Point C starts to take shape
Adam Vaughan visits the nuclear site in Somerset, where EDF is pushing ahead despite challenges from unions and Brexit

Adam Vaughan

21, Apr, 2017 @1:05 PM

Article image
Brexit will delay new British nuclear power stations, warn experts
Analysts say exit from EU atomic treaty is ‘lose-lose’ that will raise costs and safety questions at plants such as Hinkley Point C

Adam Vaughan

27, Jan, 2017 @3:24 PM

Article image
Nuclear watchdog raises Hinkley Point C concerns
Management failings could affect safety at EDF power station if unaddressed, says inspector

Adam Vaughan

25, Mar, 2018 @3:20 PM

Article image
UK green energy expensive? Not any more. From now on it's cheap
A record low price set for offshore wind power is good for UK jobs, the taxpayer and household bills. It is bad news for Hinkley C and the nuclear industry

Adam Vaughan

11, Sep, 2017 @11:38 AM

Article image
China must wait four years for decision on Bradwell nuclear plant
After Hinkley Point C go-ahead, Essex reactor would be even more significant for China - and more controversial for UK

Graham Ruddick and Tom Phillips

16, Sep, 2016 @6:26 PM

Article image
Hinkley Point nuclear plant building costs rise by up to £2.9bn
EDF Energy blames ground conditions for rise but says energy bills will not go up

Jillian Ambrose Energy correspondent

25, Sep, 2019 @4:38 PM

Article image
EDF could build second nuclear plant 'for 20% less than Hinkley Point'
Company claims a plant at Sizewell in Suffolk would be £4bn cheaper than £20bn project

Adam Vaughan

17, Jan, 2018 @11:30 AM

Article image
EDF faces £1m a day bill to keep French nuclear reactor offline
Prolonged closure at Flamanville plant after fire damage piles further financial pressure on state-owned energy firm

Adam Vaughan

21, Feb, 2017 @7:00 AM