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UK consumers could pay for new nuclear power plants years before they are built

Nuclear Finance  NuClear News Sept 18  Consumers could pay for new nuclear power plants years before they are built. The government is considering using a controversial financing system to build new nuclear power stations which would see customers charged for construction costs long before a project has actually been built. The fact that Mark Corben – former chief financial officer at the Special Purpose Vehicle (SPV) for the Thames Tideway Tunnel – has moved to the UK Department for Business, Energy and Industrial Strategy (BEIS) to advise on development of a new finance model for funding new nuclear projects, confirms that the Government is seriously considering this method of finance. (1

The approach, called the Regulated Asset Base (RAB) model, has been described as an “open cheque book” for developers, as consumers could be locked into paying the costs of a project going wrong – like construction taking longer than planned, or prices spiralling – indefinitely until it’s complete.

Shadow energy minister Alan Whitehead MP said: “The problem with this model as applied to new nuclear power stations is that it transfers all the risk of construction from the developer to the customers, with the rather wobbly promise of benefits to come in the future.” Like other publicprivate finance models, the RAB model has a sticky history. The government has already supported the use of RAB for the Thames Tideway Tunnel, a £4.2bn project to revamp 15 miles of sewer lines in North London, which Thames Water says a RAB model has helped lower costs. As well as taking a RAB approach to financing the Thames Tideway, the government offered a “contingent financial support” package which guarantees public money when certain parts of the project go wrong. It’s this transfer of liability first to the consumer, and then also the taxpayer, which helps lower risk and attract investors. A similar package may be offered to nuclear developers.

In 2017, the cross-party British Infrastructure Group of MPs, chaired by Conservative exminister Grant Shapps, raised concerns that bill payers had been asked to write a “blank cheque” for the project. The National Audit Office (NAO) has also been critical of the Thames Tideway contract, as it still isn’t clear how much consumers will have to pay. The idea of a RAB approach has already proven popular with the nuclear industry. EDF boss Humphrey Cadoux-Hudson recently told the Financial Times that he is in talks with dozens of private investors over financing Sizewell C, the French giant’s post-Hinkley nuclear project in Suffolk – and that the RAB model could be pivotal.

Much of the work around taking a RAB approach to financing nuclear power has been carried out by Dieter Helm, professor of Energy Policy at the University of Oxford and a figure respected by government. Writing in a blog about the model’s application to nuclear last month, Helm highlighted a number of open issues – such as which regulator would set the RAB for nuclear projects, as well as the “very severe lobbying pressures” any regulator would come under when making its RAB evaluations. Helm concludes that the RAB may be an efficient approach to financing nuclear power, but still doesn’t address fundamental issues about its cost competitiveness with other technology like wind and solar, or what do with all its radioactive waste. “It is for society to decide whether it wants new nuclear or not,” he said. “The market cannot decide.” (2)

Finally the Government has, after I feared so long it would, chosen the doomsday option to fund new nuclear power stations – one that will be disastrous for the consumers and taxpayers, says Dave Toke, reader in Energy Policy at Aberdeen University. After years of swearing that they would not offer subsidies to nuclear power, and saying that in the future the terrible drain of (historical) over-spending on nuclear power would stop, the Government has gone back to square zero. Essentially, under the Government’s proposals nuclear developers will have no real limit on what they can spend to build the power stations. It is a recipe for national disaster. No private developer is willing to take the construction risks of funding nuclear power in the UK, whatever ‘strike price’ is offered for the electricity that might be generated in future.

For Hinkley Point C the French state will pay for the inevitable cost overruns that come along with building the plant, combined quite probably, with an out-of-contract bailout by the British Government when the going gets tough. But now the Government is casting around for another nuclear power plant to be built, – Wylfa or Sizewell C – but neither developer (Hitachi or EDF) wants to take the risk of paying the almost inevitable losses on the project. So enter the Government’s new proposals which will no doubt be promoted as a simple accountancy trick to lower costs. But it hides the fact that taxpayers will take the losses. Under the RAB arrangements electricity consumers will start paying extra on their bills from when construction starts, which could be anything from 7-10+ years ahead of any energy being generated. (3)


September 10, 2018 - Posted by | politics, UK

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