New funding plan paves way for Sizewell C nuclear plant

Funding rules paving the way for a new major nuclear power station have been announced by the Business and Energy Secretary, Kwasi Kwarteng.

The move is the latest stage in efforts to build the £20bn Sizewell C project in Suffolk.

The proposed plant is still subject to planning approval, but until now, the Treasury has been uncertain of how to pay for it.

Even if the project is approved, it still faces strong local objections.

The government said the new financing model could help cut the cost of new nuclear power projects in Britain, saving consumers more than £30bn on each new large-scale station.

The proposals include electricity customers paying for part of nuclear schemes' costs upfront through bills.

The new model, known as RAB (Regulated Asset Base), has already been used to finance some large infrastructure projects, including the £4.2bn Thames Tideway "super-sewer".

It allows investors to receive returns before the projects have been completed.

The Treasury was initially reluctant to use the RAB model.

Not only does it add money to consumer bills over the lifetime of the project, but it also leaves consumers vulnerable to cost overruns, which have plagued previous nuclear developments.

However, contractor EDF Energy has been adamant that lessons learned on previous projects - and the fact that it is building an identical plant at Hinkley Point - have largely mitigated those risks, says BBC business editor Simon Jack.

Mr Kwarteng said the new funding model was a better way to finance such projects.

"The existing financing scheme led to too many overseas nuclear developers walking away from projects, setting Britain back years," he said.

"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."

Employers' organisation the CBI said the new financing model was "a crucial step in building a secure, affordable and greener energy system in the years ahead".

"Getting new projects off the ground will be a huge boost to supply chains and can deliver jobs right across the UK," said Tom Thackray, director of the CBI's decarbonisation programme.

The Nuclear Industry Association said it would add a small levy to bills of no more than a few pounds during the early phase of construction and less than £1 a month over the course of a project.

It "warmly welcomed" the plan, adding it would also bring substantial savings in terms of CO2 emissions worth £526m a year at today's carbon prices, or £18 per year for every UK household.

But the high cost of big nuclear plants and the plummeting cost of renewables such as offshore wind make the project controversial.

However, the enormous amount of low-carbon non-intermittent electricity that it produces is considered by the government to be an essential part of the UK's future energy mix as existing nuclear plants are phased out.

The recent intermittency of wind power has also made the case in ministers' minds for an "always on" part of the energy supply, our business editor adds.

Together, Hinkley and Sizewell C are expected to produce 14% of the UK's current electricity needs, but they are unlikely to be operational until the late 2030s.

The new funding plan has been greeted with dismay by campaigners against the proposed plant.

Alison Downes of Stop Sizewell C described it as "a desperate measure to attract investment" for "a project so toxic that no one wants to pay for it".

She added: "Compared to other energy solutions, Sizewell C is an expensive distraction - too damaging, too slow for our climate emergency and with serious question marks over its reactor technology."