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UK’s new nuclear financing plan is a nightmare

Tax-and-spend budgets can be dispiriting. But at least Kwasi Kwarteng
squirrelled out a “£30 billion” consumer windfall this week.
Apparently, we’re going to be that much better off on “each new
large-scale” nuclear power plant he’s planning for Blighty.

And all
thanks to “a new funding model” — the regulated asset base, or RAB.
Where the business secretary has plucked his figure from is not exactly
clear. But it’s all part of his conversion to a new nuclear nirvana —
one all the more crucial, too, “in light of rising global gas prices”.


Yes, it’s debatable whether gas prices will still be on the up in, say,
2035 when a new Kwasi nuke might actually be built. But who cares about
that? Buried in the budget was the news ministers have set aside “£1.7
billion to enable a final investment decision” this parliament on a new
reactor (who else spends that sort of sum making a decision?) and is in
talks with EDF over Sizewell C in Suffolk.

On top, Kwarteng has dusted off
Wylfa on Anglesey, the project Hitachi spent four years trying to fire up
before jacking it in and writing off £2.1 billion. Apart from the
decade-long delays in getting built, construction cost overruns are
nuclear’s forte: France’s Flamanville, up from the initial €3.3
billion to €19.1 billion; Finland’s Olkiluoto, up from €3 billion to
€11 billion; and our very own Hinkley Point C, up from £18 billion to
£23 billion.

Kwarteng knows all that. But he’s calculated that the RAB
model, where consumers “contribute to the cost of new nuclear power
projects during the construction phase”, can not only attract private
investors but also allow lower electricity prices in the long run: his
so-called “£30 billion” saving.

For him, it beats the
“contracts-for-difference” template of Hinkley Point C. Both models are
deeply flawed. But the RAB is worse. First, because developers, and their
backers, have no incentive to keep costs down. Sure, there’d be an
independent regulator to rule on cost overruns.

But with investors making
their return on the size of the RAB, the more cost they can get past the
regulator, the better. And, second, because if the project keels over,
consumers are still left with the bill. “Nukegate” in America is proof
of that: two reactors in South Carolina built by Westinghouse that blew up
the company after costs ballooned from $9.8 billion to $25 billion. The
plants were never completed: a scandal leading to criminal lawsuits. But
consumers are still paying for the nukes: billions of dollars of costs,
making up 18 per cent of their electricity bills.

Guess what, too? Fresh
from Chapter 11 bankruptcy, it’s Westinghouse that Kwarteng fancies for
another go at Wylfa.

 Times 30th Oct 2021

https://www.thetimes.co.uk/article/new-nuclear-plan-is-a-nightmare-63schq6ks

R

November 1, 2021 - Posted by | business and costs, politics, UK

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