New UK nuclear plants could be paid for upfront by consumers

Government plans to attract investors by making taxpayer help pay for cost overruns

 

The government has confirmed plans for consumers to begin paying for new nuclear reactors before they are built, and for taxpayers to pay a share of any cost overruns or construction delays.

 

In a consultation document launched on Monday night, officials said the model is “essential” to attract private investors to back the UK’s new nuclear ambitions at a price that is affordable for bill payers. The public purse would also compensate nuclear investors if the project was scrapped.

 

The new funding structure could be used to prop up EDF Energy’s £16bn plans for a new nuclear reactor at Sizewell B in Suffolk, which was left in doubt after fierce criticism of the costs surrounding the Hinkley Point C project in Somerset.

 

It could also resurrect the dormant plans for a £16bn new nuclear reactor at the Wylfa project in North Wales, which fell apart last year due to the high costs of nuclear construction.

 

The so-called “regulated asset base”, or RAB model, helps to make major infrastructure projects cheaper by shifting the risk of spiralling costs from the developer to the taxpayer.

 

It is the same model used to fund London’s £4.2bn super-sewer project, the Thames Tideway Tunnel, which has drawn criticism for raising water bills while investors reap financial rewards.

 

An EDF Energy spokesman said the model will lower the cost of financing nuclear plants, which will benefit consumers through their bills.

 

The company added that Sizewell C will be cheaper to finance and build than Hinkley Point C because it is “a near replica” of its forerunner which is already being constructed on time and to budget.

 

“It will benefit from the experience of Hinkley Point C’s engineers, contractors and suppliers and lessons from other nuclear projects, including operational EPR plants,” EDF Energy said.

 

“It can also repeat the huge boost for industry, jobs and skills already happening due to Hinkley Point C’s construction, which is on schedule.”

 

The energy industry will have until mid-October to respond to the plans before a final decision is made by ministers.

 

Dr Doug Parr, the chief scientist at Greenpeace, said: “The nuclear industry has gone in just 10 years from saying they need no subsidies to asking bill payers to fork out for expensive power plants that don’t even exist yet and may never.”

 

“This ‘nuclear tax’ won’t lower energy bills – it will simply shift the liability for something going wrong from nuclear firms to consumers,” he added.

 

Last summer, when the plans first emerged, the economist Dieter Helm, an influential government adviser, backed the RAB model as a better deal than the contract handed to EDF Energy to build the Hinkley Point project.

 

But he added that it is “neither necessary or desirable to meet the twin objectives of security of supply and decarbonisation”.

 

“No smart contracting and regulating framework can magic away the deep challenges that nuclear faces, notably: the possibility that in the next 60 years much cheaper new low carbon technologies may become available, possibly including new nuclear ones too; the very large upfront and sunk costs; the risk and the safety regulation; and the challenges of getting rid of the waste,” he said.

 

Tom Greatrex, head of the Nuclear Industry Association, said the plans are fundamental to the UK’s climate targets because they will help to reduce reliance on fossil fuels while maintaining a secure, reliable system of power generation.

 

“This approach is already well established with investors in large infrastructure projects, and will reduce the cost to consumers as we replace our ageing fleet. Doing so is fundamental to meeting net zero, and we need to get on with it now,” he said.