Consumers will save more than £30 billion on each new large-scale nuclear station.
- New finance model to help cut the cost of new nuclear power projects in Britain, saving consumers more than £30 billion on each new large-scale station
- legislation will encourage a wider range of private investment into new nuclear projects, reducing Britain’s reliance on overseas developers for financing new nuclear projects
- large scale nuclear power is the only technology available to provide continuous, low carbon electricity and has key role to play in reducing UK’s dependency on fossil fuels and exposure to volatile global gas prices
A new funding model to attract a wider range of private investment into new nuclear power projects, cutting the cost of financing them and reducing the cost to consumers, has been set out by the Business Secretary Kwasi Kwarteng today (Tuesday 26 October).
The Nuclear Energy (Financing) Bill will use a model known as the Regulated Asset Base (RAB) to fund future nuclear power stations in Britain – a tried and tested method that successfully financed other infrastructure projects, such as the Thames Tideway Tunnel and Heathrow Terminal 5.
The RAB model will reduce the UK’s reliance on overseas developers for financing new nuclear projects by substantially increasing the pool of private investors to include British pension funds, insurers and other institutional investors.
Under the existing mechanism to support new nuclear projects – the Contracts for Difference (CfD) scheme – developers have to finance the construction of a nuclear project and only begin receiving revenue when the station starts generating electricity. This led to the cancellation of recent potential projects, such as Hitachi’s project at Wylfa Newydd in Wales and Toshiba’s at Moorside in Cumbria.
Under the new RAB model, consumers will contribute to the cost of new nuclear power projects during the construction phase – but overall consumers are expected to save more than £30 billion over the project’s lifetime on each new large-scale nuclear power station compared with existing funding mechanisms. Initial contributions will give private investors greater certainty through a lower and more reliable rate of return in the early stages of a project, lowering the cost of financing it, and ultimately helping reduce consumer electricity bills.