UK to start talks with EDF on funding for Sizewell C

BEIS said the government is considering options to enable investment in "at least one" nuclear power plant by the end of this Parliament, in 2024.

"This is the next step in considering the Sizewell C project, and negotiations will be subject to reaching a value for money deal and all other relevant approvals, before any final decision is taken on whether to proceed. The successful conclusion of these negotiations will be subject to thorough scrutiny and needs to satisfy the government’s robust legal, regulatory and national security requirements," BEIS said.

BEIS listed 13 "core parts" of the Energy White Paper, which included "continuing to explore a range of financing options" for new nuclear with developers including the regulated asset base (RAB) funding model, which "could help secure private investment and cost consumers less in the long run". It added: "Given the scale of the financing challenge, we will also consider the potential role of government finance during construction, provided there is clear value for money for consumers and taxpayers."

Humphrey Cadoux-Hudson, managing director of nuclear development at EDF, said: "We are eager to start discussions with the government on a suitable financing model for the project and we look forward to the next phase of scrutiny of our plans by the Planning Inspectorate."

Sizewell C will build on progress EDF is making with its Hinkley Point C project in Somerset, he said, since "as a copy", it will benefit from lower construction and financing costs. "We are confident that we can arrive at a funding solution which will provide value for money and help to lower energy bills for consumers," he said.

In addition to the announcement about Sizewell C, Tom Greatrex, CEO of the Nuclear Industry Association, also welcomed the government’s "commitment to engage with other developers" because the UK will need "much more" nuclear capacity - large, small modular and advanced reactors - to achieve net zero.

"Stopping burning fossil fuels for power, no longer using diesel for transport and reducing how much polluting gas for heating will need four times our current capacity of zero emissions power," he said, adding that Wylfa, Bradwell and Moorside are all sites suitable for large-scale nuclear reactors.

The Wylfa Newydd and Moorside projects, each of which received hundreds of millions of pounds in private sector development costs, were abandoned due to lack of government support. The plan of China General Nuclear - EDF's junior partner on the European Pressurised Reactor projects at Hinkley and Sizewell - to build its Hualong One (HPR1000) reactor design as Bradwell B in Essex, has yet to receive a decision from the government. The HPR1000 is currently undergoing the Generic Design Assessment process with UK regulators.

Noting that the Climate Change Committee has warned the UK's zero-carbon generating capacity is set to fall over the next 10 years, Greatrex said the government’s commitment to an appropriate financing model for new nuclear capacity "to cut the cost of capital, increase the pool of investors and reduce the price of electricity is key to unlocking the potential for thousands of clean energy jobs across the country".

Hugo Lidbetter, a partner specialising in energy and infrastructure at European law firm Fieldfisher, said the decision confirmed nuclear power's role in the UK's future energy strategy.

"EDF's Sizewell C project in Suffolk is the only UK nuclear development project anywhere near realistic deployment. With new build nuclear projects taking anywhere up to 10 years to construct, by agreeing a framework for the project, the government could achieve its stated ambition of starting construction of a new nuclear plant in the UK within this parliament."

He added: "With the existing fleet of advanced gas-cooled reactor nuclear power stations facing retirement in the next decade and all remaining coal stations closing within the next two years, that only leaves one nuclear plant (Sizewell B) and a handful of large emissions-producing combined cycle gas turbines to complement the growing number of intermittent renewable projects supporting the UK's growing energy needs."

Clive White, senior vice president for Critical Mission Solutions-International at engineering firm Jacobs, said: "The support for the development of the next generation of nuclear technologies including SMRs and the decision to enter into negotiations on Sizewell C are very positive steps forwards. Nuclear power provides the UK with a resilient baseload capacity, while also creating high paying jobs throughout the UK that make a significant contribution to the country’s net zero commitments to help tackle the climate emergency.”

Julianne Antrobus, global head of nuclear at PA Consulting, said: "[It's] good to see plans to open up the new nuclear financing challenge to different options, a focus on regional prosperity and kick-starting the hydrogen economy. Success will require industry, government and society to collaborate on an unprecedented scale, and collectively get behind the energy transition challenge."

Trade union Unite said the government "needs to put its foot on the accelerator" in its talks with EDF, adding that the Sizewell C project could create up to 25,000 jobs during construction and at least 1500 apprenticeships, and an estimated 2500 businesses in the supply chain would also benefit.

Peter McIntosh, Unite's national officer for energy, said: "We appreciate that there are a number of hurdles still to get over, such as the financing model and the progress of the Hinkley Point C nuclear energy plant in Somerset which EDF is also building. These negotiations are complex, so obviously there is a danger that they could be spread over a long period when time is of the essence to meet the energy demands of industry, businesses and the consumer in the coming decades. Sizewell C ticks a number of key boxes, including the generation of thousands of highly skilled jobs, which will benefit the post-pandemic, post-Brexit UK economy."

Vince Zabielski, special counsel at Pillsbury law, said the Energy White Paper's commitment to maintaining the RAB model as a means of financing nuclear projects is "a great idea", as it allows nuclear developers to borrow money at a cost close to what the government would pay, but the RAB model "won’t be enough to crack the problem of affordable power, at least not on its own".

"The RAB model doesn’t solve any underlying issues affecting project risk, and until the basic performance issues are addressed, we can continue to expect more of the same. Unless carefully implemented, the RAB model may actually encourage sloppy project planning and sub-par project risk management," he said.

"The major problem with building a new nuclear plant using the existing RAB model is that there is little incentive for the developer to identify and mitigate risks in order to build it on-time and on-budget. The developer has no skin in the game - after all their investment is safe come hell or high water.

"Absent a robust governance mechanism, ideally combined with a contracting strategy that aligns the interests of the consumer with those of the developer, the consumer could wind up footing the bill no matter how incompetently the developer proceeds."