nuclear-news

No2NuclearPower April 19, Nuclear Finance Philip Hammond appears to be planning to give nuclear power a massive multibillion state funded boost. Clothed in talk of a new means financing infrastructure projects the massive public handout to nuclear power was a key accompaniment to the Spring Budget statement. The notion of ‘Regulated Asset Base’ (RAB) financing of nuclear power projects is being grotesquely distorted to hide the fact that this is a cover for the Government risking very large sums of money to be lent to nuclear power developers. Put simply, nuclear power projects are expensive so the electricity consumer will lose an awful lot of money and prices will be jerked upwards. Either that or taxpayers will take a hit and funding of public services will suffer big time.

 

For instance the Financial Times describes the use of “RAB” (regulated asset base) financing as similar to the system used to build the Thames Tideway tunnel’ Under such schemes the developers are allowed to charge consumers in advance for the capital building projects. What Ministers are not emphasising of course, is that in industries such as water the Government does not lend lots of money to the privatised companies. They raise this on private markets. But in the case of nuclear power plants the bulk of the money needed to build them will be borrowed from the Government.

 

 

RAB has been used to try to finance nuclear power plants in the USA, in the states of Georgia and South Carolina recently. The result was disaster and the developing company, Westinghouse, went bust. But this was ‘normal’ RAB where the developer takes the risk of cost overruns. But in the proposed UK nuclear version it will be the electricity consumer who goes bust when the almost inevitable cost-overruns set in! The nuclear RAB is really a cover for a nuclear bailout. So let’s call it a ‘nuke bailout RAB’.

 

What makes this move even more infuriating for green energy supporters is that Hammond offered what amount to a few superficial titbits for green energy in his Spring statement. Meanwhile renewable energy projects will not be able to take part in RAB projects. Not only will nuclear power be funded under much more preferential terms compared to offshore or onshore renewable energy projects but they will be directly funded by government and large parts, if not all, of their liabilities guaranteed by the treasury – again something that does not apply to renewable energy. (1)

 

 

According to Harminder Singh, Power Analyst at GlobalData, the RAB model would shift the risk from the developers to consumers, thus raising the electricity bills of consumers. Consumers will be effectively paying for an asset that will come up some time in the future, with all the risks associated with it. Furthermore, with the cost escalations associated with nuclear power projects, there is an additional uncertainty regarding how much it will add to the consumer power bill. The model has so far not been used for projects as expensive as nuclear power plants, which is seen as a key cause for concern. On the other hand, the RAB is a useful tool to attract private investments in the sector, as investors are able to see a fixed rate of return as the project is being built. The key problem that RAB addresses is that of high cost of capital for nuclear power projects. It is revised at regular intervals to take into account increases in capex – subject to regulatory approval. The regulatory protection and government backing means that the RAB is treated as a strong, secure asset. (2) http://www.no2nuclearpower.org.uk/wp/wp-content/uploads/2019/04/NuClearNewsNo116.pdf