A new funding model to attract a wider range of private investment into new nuclear power projects like Wylfa Newydd has been set out by the Business Secretary Kwasi Kwarteng.
The Nuclear Energy (Financing) Bill will use a model known as the Regulated Asset Base (RAB) to fund future nuclear power stations in Britain.
UK Government said it would cut the cost of financing them and reduce the cost to consumers.
It added 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 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 UK Government said 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.
Business and Energy Secretary Kwasi Kwarteng, said: “In light of rising global gas prices, we need to ensure Britain’s electricity grid of the future is bolstered by reliable and affordable nuclear power that’s generated in this country.
“The existing financing scheme led to too many overseas nuclear developers walking away from projects, setting Britain back years.
“We urgently need a new approach to attract British funds and other private investors to back new large-scale nuclear power stations in the UK.
“Our new model is a win-win for nuclear in our country. Not only will we be able to encourage a greater diversity of private investment, but this will ultimately lower the cost of financing new nuclear power and reduce the costs to consumers and businesses.”
Currently, approximately 16% of the UK’s electricity generation comes from nuclear power.
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.”
UK Government added: “A large-scale project funded under this scheme will add at most a few pounds a year to typical household energy bills during the early stages of construction and on average less than £1 per month during the full construction phase of the project.
“However, overall, the lower cost of financing the project is expected to lead to savings for consumers of at least £30 billion on each project. This translates to a saving of more than £10 per year for an average domestic dual fuel bill throughout the life of the nuclear power station – which can operate for 60 years – compared to the existing CfD scheme.
The government’s Energy White Paper also committed to bringing at least one new large-scale nuclear project to final investment decision during this Parliament, subject to all relevant approvals.
In December 2020 ministers announced the start of formal negotiations on Sizewell C and those negotiations are ongoing.