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Boost for Sizewell C as nuclear funding plans advance
15 JUN, 2022 BY CATHERINE MOORE

The government is moving forward with plans to fund new nuclear projects, including Sizewell C, according to documents published yesterday.

The documents show significant progress towards implementing a new funding model which will give nuclear projects the financial support they need and attract private investment.

The new Regulated Asset Base (RAB) model will see projects receive a regulated payment from electricity suppliers. The Sizewell C project in Suffolk could be the first nuclear project to use this model, subject to the outcome of current negotiations.

Under the previous mechanism to support new nuclear projects – the Contracts for Difference scheme – developers had to finance the entire construction cost of a nuclear project up front, and only began receiving revenue when the station started generating electricity.

This model led to the cancellation of recent potential projects, such as Hitachi’s project at Wylfa Newydd in Wales and Toshiba’s at Moorside in Cumbria.

Under the new RAB scheme, private investors receive greater certainty through a lower and more reliable rate of return in the early stages of a project, lowering the cost of financing it, and ultimately helping reduce consumer electricity bills. Overall consumers are expected to save more than £30bn over the project’s lifetime on each new large-scale nuclear power station compared with existing funding mechanisms.

Draft reasons for designating the company operating Sizewell C, NNB Generation Company (SZC) Limited, to receive money through the RAB have been published today. They set out the case for the Sizewell C project meeting the criteria of Nuclear Energy (Financing) Act, introduced earlier this year. Their publication brings the government a step closer to deciding on its commercial negotiations with the project developer.

As required by the Act, the document is currently being consulted on with the Environment Agency, Office for Nuclear Regulation, Ofgem and the NNB Generation Company (SZC) Limited. The consultation will close on 4 July 2022 and is the first step in potentially allowing the nuclear company to receive funding under the RAB model.

The government is also consulting on the detail of how nuclear projects would receive their funding under the new RAB model. However, economists from the University of Greenwich have warned that it is a “dreadful model” for taxpayers, and say that they could end up paying double what the government suggests.

Currently, Sizewell C is subject to an ongoing application for development consent, which is entirely separate to commercial negotiations on the project.

Earlier this year it was revealed that the government is set to take a 20% stake in the nuclear plant at Sizewell C. This followed the Net Zero Strategy – published in October last year – which implied that Sizewell was favoured by government for a large scale nuclear plant.

Backers of the proposed nuclear power station were also given a £100M government funding boost in January. The funding commitment from business and energy secretary Kwasi Kwarteng will be used to continue the development of the project which will aim to attract further financing from private investors and, subject to value for money and relevant approvals, from the government itself.

Going forward, ministers have made a commitment to reaching a final investment decision on at least one large-scale nuclear power station this Parliament.

However, there is still a chance that government could back a second large-scale nuclear power station with the future of the Wylfa Newydd nuclear power plant under discussion. New plans for the Wylfa Newydd nuclear site on Anglesey would reportedly see a power plant built costing between £14bn and £17bn.

Despite the support for these various options, the need has remained to find a way to fund new nuclear projects going forward.

Nuclear Industry Association chief executive Tom Greatrex has previously highlighted the need to find such a solution. He told a Welsh Affairs Committee evidence session about Wylfa last year that the window of opportunity “hasn’t closed” at the site but added that it is “disappointing more isn’t happening” and emphasised the need to get a financing mechanism in place.

According to Greatrex, the existing policy framework for financing wasn’t adequate and had the RAB model existed, the project could be in a “different position” as it is a “very good site”.

BEIS nuclear projects and development director Declan Burke said it is hard to say if the outcome would have been different with the RAB model but added that as per the government’s 10 Point Plan, nuclear is a “critical part” of the country’s net zero targets.

https://www.newcivilengineer.com/latest/boost-for-sizewell-c-as-nuclear-funding-plans-advance-15-06-2022/