nuclear-news

No2Nuclear Power, 26 July 19 The government has confirmed its intention to go ahead with plans to charge electricity consumers for new nuclear reactors before they are built, and for taxpayers to pay a share of any cost overruns or construction delays. In a consultation document launched in the week before the summer recess, officials said the model is “essential” to attract private investors to back the UK’s new nuclear ambitions at a price that is affordable for bill payers. The public purse would also compensate nuclear investors if the project was scrapped. The new funding structure could be used to prop up EDF Energy’s £16bn plans for Sizewell C and to resurrect the dormant plans for Wylfa Newydd.

The hope is that the “regulated asset base”, or RAB model, will make major infrastructure projects cheaper by shifting the risk of spiralling costs from the developer to the taxpayer. Under the model, the developer would receive a regulated price to give it a return on its investment expenditure, including during the construction period, and this would be levied on energy bills. In the case of an extreme overrun, the government – effectively the taxpayer – could either have to step in and pay the extra cost or scrap the project and pay compensation to investors. The Government says its assessment of the RAB model has concluded that it has the potential to reduce the cost of raising private finance for new nuclear projects, thereby reducing consumer bills and maximising value for money for consumers and taxpayers. (1)

The energy industry will have until mid-October to respond to the plans before a final decision is made by ministers. (2)

Dr Doug Parr, the chief scientist at Greenpeace, said: “The nuclear industry has gone in just 10 years from saying they need no subsidies to asking bill payers to fork out for expensive power plants that don’t even exist yet and may never. This ‘nuclear tax’ won’t lower energy bills – it will simply shift the liability for something going wrong from nuclear firms to consumers.”

Last summer, when the plans first emerged, the economist Dieter Helm, an influential government adviser, backed the RAB model as a better deal than the contract handed to EDF Energy to build the Hinkley Point project. But he added that it is “neither necessary nor desirable to meet the twin objectives of security of supply and decarbonisation No smart contracting and regulating framework can magic away the deep challenges that nuclear faces, notably: the possibility that in the next 60 years much cheaper new low carbon technologies may become available, possibly including new nuclear ones too; the very large upfront and sunk costs; the risk and the safety regulation; and the challenges of getting rid of the waste.” (3)

“Let’s face it: nuclear power is hideously dear and far from ideal”, says Nils Pratley in the Guardian. “The government should be backing renewables, not tying itself to an expensive nuclear future. That bill-payers got stuffed in the deal that brought the Hinkley Point C project into existence is beyond dispute these days. Even government ministers barely quibble with the National Audit Office’s assessment that consumers will be paying through the nose for 35 years.” He says the “regulated asset base” (RAB) approach exposes consumers to the cost of overruns, and in effect also requires them to provide financing at zero interest, a point made by the National Infrastructure Commission last year. The NIC report said: “There is limited experience of using the RAB model for anything as complex and risky as nuclear.” Second, no financing model can disguise the core truth about nuclear – the technology is hideously expensive. Even after recognising the need to have secure “baseload” supplies, it recommended commissioning only one more nuclear plant, on top of Hinkley, before 2025. That remains a common sense analysis. Renewables are winning the price race. Let us pray, then, that a love-in with RAB does not reignite ministerial fantasies about a “resurgence” in nuclear. We don’t want a resurgence. We want to build as few new reactors as possible. (4)

RAB financing is more usually applied to projects where there is a natural monopoly, such as the Thames Tideway where Thames Water is a monopoly provider of water and sewage services to the ratepayers who bear the burden of the additional cost. Applying a RAB to a specific project in a competitive market raises difficulties with the need to ensure that only those ratepayers who would benefit from the additional cost of a nuclear RAB would incur the additional cost. It will be difficult, for instance, to explain to consumers on non-nuclear green tariffs why they are being compelled to pay an additional cost for generating capacity that offers them no benefit.

Even if an assurance of minimal risk to investors is offered, it is not clear whether the investors targeted, for example, pension funds, sovereign wealth funds and investment funds, will be willing to invest the huge sums required. Such investors have never invested in nuclear projects so the RAB model may fail simply due to lack of investors. The new funding model won’t make any difference to the construction and operation record of nuclear reactors around the world, and the record of EPRs in particular is abysmal. Nor will it change the fact that nuclear vendors are in financial disarray. (5)

Dave Toke at Aberdeen University has published a layman’s guide to the ‘Regulated Asset Base’. (6) He says the system will allow the Government, though an appointed ‘Regulator’ to launder electricity consumer’s money to pay for the inevitable cost overruns, whilst the Regulator assures the public that this all represents ‘value for money’.

The RAB proposals were supposed to be included in a long-awaited energy white paper that the business department has been working on for months, but, according to Bloomberg, this was blocked by the Chancellor of the Exchequer Philip Hammond, because of the potential spending implications for a new prime minister. The plans also included funding for carbon capture and storage and a domestic energy efficiency programme. Whitehall officials across departments were concerned the document was both incomplete and too sizable a policy plan to put forward just before a new premier takes over

The nuclear tax will apply to all electricity consumers even if they have chosen a 100% renewable tariff or live in Scotland where the Government is opposed to the construction of new nuclear power stations.http://www.no2nuclearpower.org.uk/wp/wp-content/uploads/2019/07/NuClearNewsNo118.pdf