The UK Department for Business, Energy & Industrial Strategy (BEIS) said on 14 June that the government had 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. 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 would only begin receiving revenue when the station starts generating electricity. This resulted in the cancellation of recent potential projects, such as Hitachi’s project at Wylfa Newydd in Wales and Toshiba’s at Moorside in Cumbria, BEIS noted.
“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.”
Draft reasons for designating the company operating Sizewell C, NNB Generation Company (SZC) Ltd, to receive money through the RAB were also published on 14 June. 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.
As required by the Act, the document is currently being consulted on with the Environment Agency, Office for Nuclear Regulation, Ofgem and the NNB Generation Company (SZC) Limited. The consultation will close on 4 July and is the first step in potentially allowing the nuclear company to receive funding under the RAB model. Sizewell C is also subject to an ongoing application for development consent, which is entirely separate to commercial negotiations on the project.
The government is also consulting 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. The revenue regulations will shape how large nuclear projects such as Sizewell C receive funding in the future.