Subsidies announced for Sizewell C development

Monday, 2 September 2024

The department said the Sizewell C Development Expenditure (Devex) Scheme will "enable continued support to the development of the proposed new nuclear power plant Sizewell C (SZC) to the point of a Final Investment Decision (FID)".

It added: "More specifically, this Devex Scheme will provide the government with greater flexibility to cover development expenditure costs up to and including FID."

DESNZ said funding for the Devex Scheme will be provided "subject to relevant approvals, including the upcoming Spending Review". It noted that the Devex Scheme is in addition to, and separate from, the existing SZC Investment Funding Scheme which was created at the point of the government's first investment in SZC in November 2022.

"Any funding provided under the Devex Scheme will only be made available to fund SZC's costs pre-FID, including in the event FID is not taken by the current projected date," the department said. "Such costs are subject to detailed assessment and provision of support under the Devex Scheme is subject to appropriate proportionality and value for money assessments. The value of subsidies granted under the Devex Scheme will be calculated accordingly."

The Devex Scheme has an overall budget of GBP5.5 billion, which DESNZ said is "the current best estimate of development costs to be incurred in getting to the current projected FID date, with a contingency in case of delay allowing the project to be funded until FID."

Support granted under the Devex Scheme will mainly be comprised of equity injections by the UK government. However, the Devex Scheme also provides for additional support through other mechanisms "where appropriate and proportionate", such as letters of credit, indemnities and guarantees.

DESNZ said the UK government has "developed a targeted financial intervention intended to deliver the SZC project". The exact scope of the package of measures, it noted, will be determined by the timing of the FID on the project, as well as market feedback received in the course of the ongoing equity raise process.

"As such, the measures are split into two parts: (a) pre-FID measures designed to fund development and some initial construction works expenditure up to a FID (the Devex Scheme); and (b) other measures which are predominantly focussed on plant construction and operation, designed to take effect at FID (a future FID Scheme)."

The Devex Scheme was referred to the Subsidy Advice Unit (SAU) of the UK's Competition and Markets Authority, which on 17 June provided its report on DESNZ's Assessment of Compliance of the Devex Scheme with the requirements set out in the Subsidy Control Act 2022.

The EDF-led plan is for Sizewell C to feature two EPRs producing 3.2 GW of electricity, enough to power the equivalent of around six million homes for at least 60 years. It would be a similar design to the two-unit plant being built at Hinkley Point C in Somerset, with the aim of building it more quickly and at lower cost as a result of the experience gained from what is the first new nuclear construction project in the UK for about three decades.

The UK government has been seeking investment in the Sizewell C project, launching a pre-qualification for potential investors as the first stage of an equity raise process last September. It has also taken legislation through Parliament allowing a new way of funding new large infrastructure projects - a Regulated Asset Base (RAB) funding model, which can see consumers contributing towards the cost of new nuclear power plants during the construction phase. Under the previous Contracts for Difference system developers finance the construction of a nuclear project and only begin receiving revenue when the station starts generating electricity.

In January, a further GBP1.3 billion of government funding was approved allowing for necessary infrastructure work such as roads and rail lines to continue pending a final investment decision being taken. In March Sizewell C Ltd, a standalone company majority-owned by the UK government, signed a deal with EDF Energy to purchase the freehold of the land which will be used for the new power plant.