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How can the UK govt fund the Hinkley c nuclear power project?

DieterHelm 12th June 2018 Dieter Helm: If the government decides to invest in further nuclear power
station projects, it should obviously try to do so at minimum cost. The
Secretary of State, Greg Clark, has suggested that one option might be to
develop a Regulated Asset Base (RAB) model. Is this concept fit for the
nuclear purposes? How does it compare with the other two options currently
under consideration – direct investment and financial guarantees, and the
Hinkley-style CfD approach. (No assumption is made here as to whether
nuclear projects should be proceeded with: it is about the best means, not
the end).

The RAB approach is in a first best world probably inferior to
the direct procurement route, but the latter is ruled out by the Treasury
imposed constraints. The RAB model is a second best, but much better than
the Hinkley style contract.

None of these approaches leads to the conclusion that nuclear is either necessary or desirable to meet the twin
objectives of security of supply and decarbonisation, though it would
contribute to both. No smart contracting and regulating framework can magic
away the deep challenges that nuclear faces, notably: the possibility that
in the next 60 years much cheaper new low carbon technologies may become
available, possibly including new nuclear ones too; the very large upfront
and sunk costs; the risk and the safety regulation; and the challenges of
getting rid of the waste. It is for society to decide whether it wants new
nuclear or not. The market cannot decide. If that decision is to proceed,
the RAB model is both plausible and preferable to the Hinkley model.

July 7, 2018 - Posted by | business and costs, politics, UK

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