UK households will have to add a surcharge to their energy bills to pay for new nuclear power plants in the UK while the government is working on laws to underpin the new funding plan.
Ministers want to propose a bill this fall that would allow Sizewell C, a £ 20 billion nuclear power plant proposed by France’s EDF for the east coast of England, to run a funding model called the regulated asset base, several people thinking about said .
This model would mean that energy bills payers begin to share in the cost of the Sizewell, Suffolk facility long before it produces electricity.
Boris Johnson has said he wants the government to make a final investment decision in “at least one” new nuclear power plant before the next general election as the UK seeks a net zero emissions target by 2050.
Last year, the Prime Minister approved nuclear power as an important source of low-carbon power generation alongside wind and sun.
With 3.2 gigawatts of generating capacity, Sizewell C would produce enough electricity for 6 million households and could contribute to the UK’s energy supply for more than six decades.
The regulated asset-base financing model is often used for large infrastructure projects in the UK such as the Thames Tideway “Super Sewer” in London because it lowers the cost of capital, but it has yet to be applied to complex nuclear power plants.
Under the model, power plant owners could gradually add the value of a partially built facility to their regulated assets during the risky construction phase. They could then charge UK households an agreed regulatory rate of return through their energy bills to cover financing costs.
The state-backed EDF said the steady returns guaranteed by the regulated asset-base model would enable low-risk investors like pension funds to be attracted and result in overall savings for consumers.
But the model is deeply unpopular with nuclear skeptics, who have said it exposes consumers to construction risks, especially cost overruns.
EDF plans to use a design called the European Pressurized Reactor on Sizewell C, but budgets have skyrocketed on other projects with similar technology, including the Hinkley Point C facility under construction in Somerset.
The Department of Business, Energy and Industrial Strategy said, “New nuclear energy will play a vital role in this government’s plans to achieve a safe, low-carbon, affordable energy future.
“The government continues to examine a regulated asset-based financing model with nuclear project developers, which remains a credible option to secure private investment and lower energy costs for consumers in the long term.”
The Treasury Department supports the regulated asset base model, said several people briefed on the department’s stance. The Treasury declined to comment.
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EDF Energy, the UK arm of the French utility company, has campaigned with the government for legislation to underpin the regulated asset base.
Simone Rossi, CEO of EDF Energy, told a Reuters event last month that legislation was “an essential requirement for” [Sizewell C] activated ”and that it is now“ really, really essential ”.
EDF executives have made it clear that the company will not bear all of the construction costs and risks of another nuclear power plant, as it did at Hinkley Point C.
EDF and its junior partner at Hinkley Point C, the Chinese state-owned company CGN, are funding the facility at a government-guaranteed generous electricity price of £ 92.50 per megawatt hour.
The price, which is controversial among environmental associations, was agreed in 2012 and increases with inflation.
UK ministers started formal negotiations with EDF on the financing of Sizewell C in December. The government said at the time that it would “consider the potential role of public finance in construction, provided there is a clear price-performance ratio for consumers and taxpayers”.
Stephen Thomas, Professor Emeritus of Energy Policy at the University of Greenwich, said he envisions the government having to take a “strategic stake” in Sizewell C, “as a signal to investors that this must not collapse, and ditto EDF” .
It is not yet clear what role CGN will play in Sizewell C. CGN is working with EDF to fund 20 percent of the development costs of the Suffolk plant, but some Conservative MPs are opposed to Chinese involvement in the UK’s critical infrastructure. CGN declined to comment.
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