Nuclear building plan shifts financing on to consumer
Hinkley nuclear power station
Britain’s nuclear energy industry could be kickstarted by asking electricity consumers to contribute through their bills to the cost of building new power stations.
Under the proposed financing model, known as the Regulated Asset Base (RAB), energy firms would start earning money – collected from energy bills – long before the reactor begins generating electricity.
Consumers would save more than £30 billion over the project’s lifetime compared with existing funding mechanisms.
The RAB model was used to finance other infrastructure projects, such as the Thames Tideway Tunnel and Heathrow Terminal 5.
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.
This 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.
Business and Energy secretary, Kwasi Kwarteng, has set out legislation said that sharing the early construction costs with consumers would help reduce the UK’s reliance on overseas funding for nuclear projects.
Kwasi Kwarteng: ‘we need a new approach’
Mr Kwarteng, said: “In light of rising global gas prices, we need to ensure Britain’s electricity grid of the future is bolstered by reliable and affordable nuclear power that’s generated in this country.
“The existing financing scheme led to too many overseas nuclear developers walking away from projects, setting Britain back years. We urgently need a new approach to attract British funds and other private investors to back new large-scale nuclear power stations in the UK.
“Our new model is a win-win for nuclear in our country. Not only will we be able to encourage a greater diversity of private investment, but this will ultimately lower the cost of financing new nuclear power and reduce the costs to consumers and businesses.”
Currently, approximately 16% of the UK’s electricity generation comes from nuclear power. The SNP government in Scotland is opposed to building nuclear power stations.