Despite UK government’s enthusiasm, nuclear power is just not a good investment

 Investment industry lukewarm on confirmation of nuclear in UK taxonomy.
One London-based funding manager warned that the industry’s problems were
economic not environmental. A sustainability figure at one large UK fund
manager said the nuclear industry’s ability to attract capital has not
primarily been about having to manage an unattractive ESG profile. “It is
incredibly expensive and un-cost competitive when compared to the
alternatives”.

 Responsible Investor 14th March 2023
 https://www.responsible-investor.com/investment-industry-lukewarm-on-confirmation-of-nuclear-in-uk-taxonomy/

March 19, 2023 Posted by Christina Macpherson | business and costs, UK | Leave a comment

UK government is urged to “come clean” over the real cost of Sizewell C nuclear power station

 Ministers must “come clean” over the cost of the planned Sizewell C
nuclear power station, MPs have heard. Alan Brown, the SNP’s energy
security spokesman, sought guarantees about the Suffolk project, given the
increasing costs for building Hinkley Point C in Somerset. Speaking at
Cabinet Office questions, Mr Brown (Kilmarnock and Loudoun) said: “In
2016, Hinkley Point C was estimated to cost £18 billion. “The latest
update is Hinkley Point C is going to cost £33 billion. “Now, the UK
Government wants to replicate Hinkley Point C at Sizewell C. “Why then
are they still estimating the cost for Sizewell C at £18 billion and when
are they going to come clean about the real cost?”

 Irish News 16th March 2023

https://www.irishnews.com/news/uknews/2023/03/16/news/_come_clean_over_cost_of_sizewell_c_nuclear_power_station_ministers_told-3140037/

March 17, 2023 Posted by Christina Macpherson | business and costs, UK | Leave a comment

British government poised to label nuclear as “green”, but investors are not impressed

The British government is poised to redefine nuclear power as “green”
as it seeks to drum up more private investment in the sector to improve
domestic energy resilience. Ministers are set to consult on proposals to
change the so-called “taxonomy” — or financial classification system
— of energy in order to redefine nuclear projects as sustainable
investments. It is expected to lead to a reversal of the decision by the
Treasury as recently as 2021 to exclude nuclear power from the so-called
green investment framework.

The move echoes a decision last year by the
European Commission to label both nuclear and some forms of gas as
“green” investments, which prompted legal challenges from Greenpeace
and a coalition of WWF and Client Earth.

The consultation comes as thegovernment is set to provide about £80mn

in seed funding for the launch ofGreat British Nuclear, a new body which will

oversee plans to build a new
generation of nuclear power stations in the UK, according to two people
familiar with the negotiations. Ministers are anxious to accelerate the
programme which has been dogged by delays and cost overruns on the only new
nuclear plant under construction at Hinkley Point in Somerset. The
government, together with French state-backed utility EDF, are trying to
raise £20bn in private finance for the next power station at Sizewell in
Suffolk.

But investors have shown little interest in backing greenfield
nuclear projects, because of the construction risks in the highly
regulated, safety- critical sector. All new nuclear projects across Europe
have been hit by delays and big cost overruns.

Nick Stansbury, head of
climate solutions at Legal and General Investment Management, warned that
the changes to the taxonomy were unlikely to drive investment. Ministers
will also update their strategy for reaching net zero by 2050 after a judge
ruled last July that the original document provided insufficient detail and
gave the government a deadline to rewrite it by the end of this month. The
energy department refused to comment.

FT 9th March 2023

https://www.ft.com/content/2bef8242-d04b-47b9-84f8-b301692ea2f4

March 10, 2023 Posted by Christina Macpherson | business and costs, UK | Leave a comment

Britain’s “Regulated Asset Base” funding method for nuclear power is deemed not likely to work

National Infrastructure Commission model spells trouble for nuclear RAB
funding. Dr Jim Cuthbert questions whether the government’s funding method
for its nuclear power programme provides value for money, given it now
expects the plants to take nearly twice as long to build.

A major part of
the government’s energy strategy is a programme of eight new nuclear power
stations, to be funded by the Regulatory Asset Base (RAB) funding method.
One of the main features of RAB is that it involves consumers paying from
the start of construction for benefits they will only begin to receive when
construction is completed, and the plant is producing electricity.

One of
the key questions that should be answered in assessing whether a RAB-funded
project should go ahead is whether the eventual benefit consumers could
receive, in this case through cheaper electricity charges in the long run,
is enough to compensate them for the opportunity cost of the payments made
while receiving no benefit.

Given the long construction periods now
anticipated for new nuclear plants, it is unlikely that RAB financing will
be able to attain a sufficient cost advantage to do so. In 2019, the
National Infrastructure Commission (NIC) produced a paper on the
application of the RAB approach to nuclear energy, illustrating a
methodology including an approach to answering the above key question.

The NIC paper set out the results of illustrative calculations of the impact of
a range of factors on the likely value for money of RAB projects.
Unfortunately, it is something of a mixed bag. On the negative side, the
results in the paper are not presented in a way that allows the impact of
different factors to be separately identified: and, critically, the NIC
makes a central assumption about the likely length of the construction
period for new nuclear projects only about half of what the government now
assumes. On the plus side, having clarified with the NIC what methodology
it was using in the opportunity cost component of their model, their basic
approach seems sensible.

Although not clear from the original NIC paper,
the length of the construction period has a critical effect on the likely
value for money of a RAB-funded nuclear project. If the NIC’s basic model
is applied to a project with the government’s current assumption of a
13-to-17-year-long construction period, instead of the NIC’s central
assumption of eight years, then RAB nuclear is unlikely to achieve a
sufficient cost advantage over alternative approaches to compensate
consumers for the opportunity cost of their initial payments.

Public Finance 9th March 2023

https://www.publicfinance.co.uk/opinion/2023/03/national-infrastructure-commission-model-spells-trouble-nuclear-rab-funding

March 10, 2023 Posted by Christina Macpherson | business and costs, UK | Leave a comment