UK government confirms Sizewell C eligible for RAB financing
14 June 2022
The British government has published documents which show "significant progress" towards implementing a Regulated Asset Base (RAB) funding model for new nuclear power projects. It has set out its case for the Sizewell C project to receive funding under the model and launched a consultation on how projects would receive RAB financing.
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How the proposed Sizewell C plant could appear (Image: EDF Energy)
Under the existing mechanism to support new nuclear projects - the Contracts for Difference (CfD) scheme - developers have to finance the construction of a nuclear project and only begin receiving revenue when the station starts generating electricity. The CfD approach was used to finance Hinkley Point C, with the developer agreeing to pay the entire cost of constructing the plant, in return for an agreed fixed price for electricity output once the plant is online. However, this approach places the entire construction risk on developers and led to the cancellation of other potential new build projects, such as Hitachi's project at Wylfa Newydd in Wales and Toshiba's at Moorside in Cumbria.
The Department for Business, Energy and Industrial Strategy (BEIS) announced in June 2018 that the government would review the viability of a RAB model for new nuclear projects and committed in January 2019 to publishing an assessment of this model by the summer. Under this model a company receives a licence from an economic regulator to charge a regulated price to consumers in exchange for providing the infrastructure in question. Most recently, the RAB model was used to successfully finance the construction and operation of the Thames Tideway Tunnel and Heathrow's Terminal 5. In December 2020, the UK government announced it would begin talks with EDF to enable investment in the planned Sizewell C nuclear power plant project.
The government published a statement on the procedure and criteria for designating projects to benefit from the RAB model on 11 April this year, setting out some of the factors the Secretary of State is likely to take into account when assessing the maturity of the projects of prospective nuclear companies, and whether designating a company for the purposes of the RAB model is likely to result in value for money for consumers and taxpayers.
BEIS has now published draft reasons for designating the company operating Sizewell C, NNB Generation Company (SZC) Limited, to receive money through the RAB model. It said the reasons set out the case for the Sizewell C project meeting the criteria of the 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," BEIS said.
As required by the Act, the document is currently being consulted on with the Environment Agency, the Office for Nuclear Regulation, electricity markets regulator Ofgem and NNB Generation Company (SZC) Limited. The consultation will close on 4 July and is the first step in potentially allowing the company to receive funding under the RAB model.
"We're really pleased at the progress the government is making towards a decision on Sizewell C, and its preliminary assessment that the project represents value for money and would strengthen Britain's energy security," said Sizewell C Director of Financing and Economic Regulation Julia Pyke. "We look forward to the outcome of the consultation on the draft reasons for designation, and will continue to work hard to develop the project so that it delivers the maximum possible benefits for communities in East Suffolk and for the UK as a whole."
The 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. It would be a “replica” of Hinkley Point C plant, under construction in Somerset.
In January, Business and Energy Secretary Kwasi Kwarteng announced GBP100 million to advance the Sizewell C project to the next stage of negotiations, and help it attract further private investment.
Sizewell C is also subject to an ongoing application for development consent, which is entirely separate to commercial negotiations on the project. The deadline for a decision on Sizewell C's application for a development consent order has been set as 8 July.
The government has also launched a consultation on the detail of how nuclear projects would receive their funding under the new RAB model. The consultation seeks views on the proposals to inform the policy behind the regulations, ahead of laying them in draft before parliament. BEIS said the revenue regulations will shape how large nuclear projects, like Sizewell C, receive funding in the future.
The RAB model of funding nuclear projects is expected to help the government realise its ambitions to approve up to eight new nuclear reactors by 2030, boosting UK nuclear power capacity up to 24 GW by 2050.
Researched and written by World Nuclear News