According to a recent report in the FT, the UK government has drawn up new legislation to underpin a financing plan for the new Sizewell C nuclear site in Suffolk. This will involve thousands of UK households paying more for their energy bills in order to finance the new site even before it starts to generate electricity.
It’s estimated that the Sizewell C site, which has been proposed by EDF, will cost £20bn to build. Previously, Prime Minister Boris Johnson has said that he would like the government to reach a final investment decision on “at least one” new nuclear power station before the next general election.
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Nuclear essential for meeting climate targets
The current government sees nuclear power as an important source of low-carbon energy that can help the UK reach its 2050 net zero emissions target.
When built, the Sizewell C site will produce enough electricity to power six million households. It will also contribute to the country’s energy supply for more than six decades.
When discussing Sizewell C, the Department for Business, Energy and Industrial Strategy said: “New nuclear will play a crucial part in this government’s plans to achieve a secure, low-carbon, affordable energy future.
“The government is continuing to explore a regulated asset base funding model with nuclear project developers, which remains a credible option to help secure private investment and cost consumers less in energy bills long term.”
How the project will be financed
The project will be funded using a financing model called the 'regulated asset base'. This is a popular method of financing because it cuts the cost of capital. However, it’s unpopular with nuclear sceptics who are wary of spiralling costs.
That said, EDF maintains that the steady returns guaranteed by the regulated asset base model would allow it to attract low-risk investors such as pension funds. When built, the company argues that it will create overall savings for consumers.
EDF has made it clear that the company will not shoulder all the construction costs and risks associated with building another nuclear power station. However, EDF and its partners are financing the plant in return for a generous electricity price of £92.50 per megawatt hour, which has been guaranteed by the government.
What does this mean for customers?
Alongside wind and solar, nuclear power will play an important role in generating low-carbon energy as the UK transitions towards net zero. Although the power plant will take years to finance and build, it’s hoped that it will help standardise the renewable energy market and grow the sector. As a result, customers could see a number of benefits.
For example, once operational, the plant will likely make green power more widely available. This, in turn, will provide a greater choice of energy tariffs and will likely drive down prices. All of this will also help reduce emissions and help the environment.
Although we’re still several years away from this becoming a reality, you can switch to a green tariff today and help the UK meet its green energy goals.
When you use an online energy comparison service to switch provider, you’ll be shown all the best energy deals near you from the country’s best energy suppliers. Then, you can filter these results so you only see tariffs that are 100% green or feature a greener fuel mix.
As a bonus, as well as switching to a greener tariff, you can also save hundreds of pounds by switching. The whole process only takes a couple of minutes.
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