New funding model designed to make nuclear attractive to big city investors

New finance model to spur next nuclear power plant builds

Phil Puccio

Planned new laws will pave the way for consumers to part-fund projects through higher bills during construction rather than through much higher electricity prices once the plant becomes operational.

The Government hopes the change to a Thames Tideway-type financing system will spur building of next-generation big nuclear plants and Small Modular Reactors designed and manufactured in the UK.

It claims consumers will save more than £30bn on each new large-scale nuclear station from reduced financial risk costs during the construction phase.

The changes in the Nuclear Energy (Financing) Bill will end Britain’s reliance on overseas developers for financing new nuclear projects.

Share some of the project’s construction and operating risks with consumers, significantly lowering the cost of capital by substantially increasing the pool of private investors like British pension funds, insurers and other institutional investors.

Energy Minister Greg Hands said: “This legislation will help us build the new nuclear power stations we need to ensure a resilient, low-carbon electricity system for future generations.

“The only way to strengthen energy security is to generate clean power in this country, for this country.

“This finance model will also support the UK’s thriving civil nuclear industry, which currently employs 60,000 in high skilled jobs and help create thousands more as we level up opportunities across the whole country.

Under the existing finance mechanism for new nuclear projects – the Contracts for Difference (CfD) scheme – required 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 Regulated Asset Base (RAB) model, consumers will contribute to the cost of new nuclear power projects earlier during the construction phase. THis

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.

 

 

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