Kwarteng advances plans for funding new nuclear projects, including Sizewell C

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

The government has published documents which 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, helping these large infrastructure projects come to fruition. 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 (CfD) scheme – developers had to finance the entire construction cost of a nuclear project up front, and only began receiving revenue when the station starts 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 £30 billion over the project’s lifetime on each new large-scale nuclear power station compared with existing funding mechanisms.

This new method of funding nuclear projects will help the government realise its ambitions for a British nuclear renaissance, with plans to approve up to 8 new nuclear reactors by 2030, boosting UK nuclear power capacity up to 24 GW by 2050.

Sizewell C in Suffolk is a proposed new nuclear power plant which, if built after obtaining all necessary approvals, could power 6 million UK homes, boosting the country’s energy security and potentially reducing bills for households by providing clean, homegrown electricity.

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.

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The government is also consulting on the detail of how nuclear projects would receive their funding under the new RAB model.