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British households will pay for nuclear construction long before it supplies any electricity, under the govt’s new plan

the model is deeply unpopular with nuclear sceptics, who have said it would expose consumers to construction risks, notably any cost overruns. 

EDF and its junior partner in Hinkley Point C, the Chinese state-owned company CGN, are financing the plant in return for a generous electricity price of £92.50 per megawatt hour guaranteed by the government.  

The price… was agreed in 2012 and rises in line with inflation.

UK households face energy bills surcharge to fund nuclear plants

Ministers plan legislation for new financing model to underpin building of £20bn Sizewell C reactor,   Ft.com 
Nathalie Thomas in Edinburgh and Jim Pickard in London, 7 jul 21,

British households face paying a surcharge on their energy bills to pay for new nuclear power stations in the UK as the government draws up legislation to underpin the new financing plan. Ministers aim to unveil legislation in the autumn that would enable Sizewell C, a £20bn nuclear power plant proposed by France’s EDF for England’s east coast, to go ahead through a financing model called the regulated asset base, said several people briefed on the government’s thinking. This model would mean that energy bill payers start contributing towards the cost of the plant at Sizewell in Suffolk long before it generates any electricity.  

Boris Johnson has said he wants the government to reach a final investment decision on “at least one” new nuclear power station before the next general election ……….

  Under the model, owners of a power station could add chunks of the value of a partly built plant to what would be its regulated asset base in stages during the risky construction phase. They could then charge an agreed regulatory return on this value to UK households through their energy bills, in a move designed to cover financing costs. State-backed EDF has said the steady returns guaranteed by the regulated asset base model would allow it to attract low-risk investors such as pension funds and would lead to overall savings for consumers.

But the model is deeply unpopular with nuclear sceptics, who have said it would expose consumers to construction risks, notably any cost overruns.  

  EDF is planning to use a design called the European Pressurised Reactor at Sizewell C, but budgets have spiralled at other projects deploying similar technology, including the Hinkley Point C plant under construction in Somerset. The Treasury is supportive of the regulated asset base model, said several people briefed on the department’s stance…..

EDF and its junior partner in Hinkley Point C, the Chinese state-owned company CGN, are financing the plant in return for a generous electricity price of £92.50 per megawatt hour guaranteed by the government.  

The price, which was controversial with environmental groups, was agreed in 2012 and rises in line with inflation.  UK ministers entered formal negotiations with EDF over the financing of Sizewell C in December. The government said at the time that consideration would be given “to the potential role of government finance in construction, provided there is clear value for money for consumers and taxpayers”.  

Stephen Thomas, emeritus professor of energy policy at the University of Greenwich, said he imagined that the government would have to take a “strategic stake” in Sizewell C “as a signal to investors that this won’t be allowed to collapse, and ditto EDF”. It is not yet clear what role CGN will play in Sizewell C. CGN is financing 20 per cent of the development costs of the Suffolk plant alongside EDF but some Conservative MPs are opposed to Chinese involvement in critical UK infrastructure. CGN declined to comment.  https://www.ft.com/content/d115c0bd-da17-4bbf-a070-b62b525c7fa1

July 8, 2021 - Posted by | politics, UK

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