The government has set out new proposals under which consumers would pay for new nuclear power plants prior to them being built.
It is part of its plans to explore a new financing model, called Regulated Asset Base (RAB), to attract “significant” private investment for future nuclear projects, allowing developers to charge customers in advance through an add-on to their existing bills.
The government says such a model 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”.
It adds the RAB model, which was used to fund the £4.2 billion Thames Tideway Tunnel project, could reduce the cost of financing infrastructure and risk for developers “while limiting the impact on consumers’ bills in the long term”.
The news comes as the government is proposing to invest up to £18 million to help develop what will be the first mini nuclear power station in the UK.
BEIS has launched a consultation on its proposals and is seeking views from stakeholders and interested parties – until 14th October 2019 – on how a Nuclear RAB model could be implemented within the current energy system.
It is also proposing a similar financing model for carbon capture, utilisation and storage (CCUS) projects.
Business and Energy Secretary Greg Clark said: “A critically important step in reaching net zero emissions will be transforming the energy system so the economy can be powered by affordable, secure and clean energy. We will need to change not just the way we use energy in our homes and businesses but also how it is produced and delivered. We need to do this in a way that keeps the cost of energy as low as possible and ensures our energy security is never compromised.
“Through our modern Industrial Strategy we are building on our international leadership in clean growth to invest and develop the technologies and funding models we will need to reach net zero emissions.
“This new funding model has the potential to help UK industry seize the global challenge of the low carbon transition by building the infrastructure we need, while offering value for money for consumers and taxpayers.”
The UK Nuclear Industry Association (NIA) welcomed the news.
Chief Executive Tom Greatrex said: “The RAB model promises to make a substantial contribution to reducing the cost of building the new nuclear capacity we need if we are to meet our climate change targets of reducing our reliance on fossil fuels while maintaining a secure, reliable system of power generation.
“This approach is already well established with investors in large infrastructure projects and will reduce the cost to consumers as we replace our ageing fleet. Doing so is fundamental to meeting net zero and we need to get on with it now.”
EDF Energy, which is building the Hinkley Point C nuclear power station in Somerset added nuclear power is needed, alongside renewables, to switch from polluting fossil fuels and reach net zero emissions.
A spokesperson said: “Nuclear’s proven technology reduces the difficulties and cost of trying to decarbonise the electricity supply we all use and depend on. Lower costs for financing nuclear will benefit consumers through their bills and today’s consultation shows a way this can happen at Sizewell C in Suffolk.
“As a near replica of Hinkley Point C – Sizewell C will be cheaper to construct and finance. It will benefit from the experience of Hinkley Point C’s engineers, contractors and suppliers and lessons from other nuclear projects, including operational EPR plants. It can also repeat the huge boost for industry, jobs and skills already happening due to Hinkley Point C’s construction, which is on schedule.”
Greenpeace, however, said the government’s proposals will shift the liability from developers to billpayers.
Chief Scientist Dr Doug Parr added: “The nuclear industry has gone in just 10 years from saying they need no subsidies to asking billpayers 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. Greg Clark himself has acknowledged that nuclear is being outcompeted by renewables. If ministers want affordable and clean energy, the fastest, safest and cheapest way to do that is to boost renewables like wind and solar.”