Business Secretary argues new nuclear projects are critical for enhancing energy security and cutting emissions, but critics argue that level of subsidy support is spiralling
The government has today announced £100m of fresh funding to support the proposed Sizewell C nuclear plant in Suffolk that could see it ultimately take a stake in the controversial project, as negotiations with developer EDF over how to deliver the proposed power plant.
Business Secretary Kwasi Kwarteng said the new funding injection would enable the continued development of the project as it aims to attract further financing from private investors and, subject to value for money and relevant approvals, the UK government.
The government has said it wants to see at least one large scale nuclear project reach a Final Investment Decision this parliament, so as to provide a pipeline of future projects that can follow on from the Hinkley Point project that is currently under construction.
However, negotiations over how to provide long term subsidy support to new large scale nuclear plants have faced significant challenges, with developers opting to shelve projects and concern within government over the potential involvement of Chinese state-backed investors in proposed projects.
Anti-nuclear campaigners have argued that with renewables costs plummeting in recent years, large scale new nuclear projects would prove both unnecessary and hugely costly for billpayers.
But the government and the nuclear industry have countered that with many of the UK’s existing nuclear power plants due to retire over the next 15 years new capacity is urgently required to help decarbonise the UK’s energy system and bolster energy security.
“In light of high global gas prices, we need to ensure Britain’s future energy supply is bolstered by reliable, affordable, low carbon power that is generated in this country,” said Business and Energy Secretary, Kwasi Kwarteng. “New nuclear is not only an important part of our plans to ensure greater energy independence, but to create high-quality jobs and drive economic growth.”
The government said negotiations with EDF were ongoing and highlighted how it the project got the go-ahead it could power the equivalent of around six million homes, as well as supporting up to 10,000 jobs in Suffolk and across the UK.
Kwarteng said the funding announced today “will further support the development of Sizewell C during this important phase of negotiations as we seek to maximise investor confidence in this nationally significant project”.
Specifically, the £100m option fee is to be invested by EDF into the project to help bring it to maturity, attract investors, and advance to the next phase in negotiations. In return, the government will take certain rights over the land of the Sizewell C site and EDF’s shares in the Sizewell C company, providing opportunities to continue to develop nuclear or alternative low carbon energy infrastructure on the site should the project not ultimately be successful.
If Sizewell C reaches a Final Investment Decision, the government will be reimbursed the £100m option fee with a financing return, either in the form of either cash or an equity stake in the project.
If the project does not reach a Final Investment Decision with EDF then the government would ask for either the Sizewell C Company shares or the Sizewell C site or, if EDF is unable to provide these assets as requested by government, the money would be refunded by EDF together with a financing return.
Simone Rossi, CEO of EDF Energy, welcomed the new arrangement. “We’re very pleased that the government is showing its confidence in Sizewell C which, if approved, will lower energy costs for consumers and help to insulate the UK from global gas prices,” he said. “Together with our own investment, these funds will allow us to continue to move the project towards a financial investment decision.
“Sizewell C will benefit from being a near replica of Hinkley Point C in Somerset which is more than five years into construction and making great progress in the challenging context of the Covid pandemic. Sizewell C will provide a huge economic boost to East Suffolk where it already enjoys the support of most local people. It will also bring new opportunities for thousands of nuclear supply chain companies up and down the country.”
The new funding comes as the Nuclear Energy (Financing) Bill, which will enable a Regulated Asset Base (RAB) funding model framework for new nuclear projects, passes through Parliament.
The government hopes that a RAB model could drastically lower the cost of new nuclear projects compared to the existing Contracts for Difference subsidy model and as such make the project attractive to a wider range of potential investors.
Ministers have also earmarked up to £1.7bn of new direct government funding to help get new nuclear projects to a Final Investment Decision this Parliament project – on top of a £120m enabling fund to support further nuclear projects and inform potential investment decisions during the next Parliament and a £210m investment in Rolls-Royce plans to develop the UK’s first Small Modular Reactor (SMR).
However, anti-nuclear campaigners seized on the government’s latest funding injection as further evidence that new nuclear projects require enormous levels of subsidy to even get to the point where they are green lit.
“This cash injection is a tacit admission by the government that nuclear is not commercially viable, but they are so fixated on getting 20th-century nuclear technology delivered they’ll just keep throwing taxpayers’ money at it,” said Greenpeace UK’s policy director Dr Doug Parr. “Including all the other subsidy sources, Sizewell C will now have subsidised development, subsidised construction, subsidised power production and subsidised waste management, for a project by a subsidised company.
“The economics of this project are all over the place, with UK taxpayers left to pick up the tab. Instead of pursuing outdated, costly technologies, it’s time the government got a grip on the clean technology race going on globally and went for 100 per cent renewables power as fast as possible.”
The news comes in the same week as Rolls Royce Rolls-Royce reportedly launched a competition to find the location for the main factory to build its planned fleet of small nuclear reactors.
The FT reported that an industry consortium led by Rolls-Royce has written to several of England’s regional development bodies and the Welsh government asking them to pitch for the manufacturing site, highlighting the potential for up to £200m of investment and the creation of up to 200 direct jobs.