The UK government has decided that the huge new 3.2 GW Sizewell C nuclear plant proposed by EDF for the Suffolk coast should go ahead. It will be costly- the estimated construction cost is now put at £38 billion, up from an earlier estimate of £20bn.
The UK government will be the largest shareholder, with a 44.9% stake, while EDF’s share has fallen to 12.5%. Centrica will take a 15% share, while La Caisse, a Canadian investment group, will hold 20% and investment manager Amber will take an initial 7.6% stake. UK power consumers will start paying a share of the construction costs under the ‘RAB’ Regulated Asset Base funding system as soon as building starts- presumably later this year. They and taxpayers may also end up facing any cost overruns due to delays.
As the BBC noted ‘The project will be funded with a mixture of equity and debt - £8.8bn in equity from the government and the other investors, and £36.6bn in debt that will be provided by the National Wealth Fund (NWF). Interest payments will be part funded by a levy on all electricity users of an estimated £1 per month for the decade-long construction phase. The total debt and equity comes to over £45bn to allow for a buffer or contingency in case costs overrun. The NWF said it was unlikely it would need to provide the full amount of the loan’.
But not everyone agreed. Alison Downes, director of local pressure group Stop Sizewell C, told the BBC that ‘the project had only crawled over the line thanks to guarantees that the public purse, not private investors, will carry the can for the inevitable cost overruns’. She added: ‘It is astounding that it is only now, as contracts are being signed, that the government has confessed that Sizewell C's cost has almost doubled to an eye watering £38bn - a figure that will only go up.’
The government however sees it as a good investment for the future and says that the funding arrangements are robust and will actually save money. The Department for Energy Security and Net Zero has produced a ‘value for money’ report which says that earlier analysis concluded that there were ‘few, if any, investors in the market with the risk appetite to finance a nuclear project using a CfD’, but that ‘a RAB model would reduce the present value cost of building and financing a new nuclear plant by £30bn, compared to a CfD model’. That’s because some of the risk would be passed on to the customers. Under the now agreed RAB, its claimed that the overall saving would be £2bn p.a. over the project’s lifetime. Well, if it’s such a good deal you might say why not buy 2!
The report seems very confident that the benefits will outweigh the costs and it claims that the choice of nuclear as opposed to (more) renewables is justified: ‘The underlying electricity system modelling shows that, compared to the counterfactual of additional deployment of onshore and offshore wind supported by flexible sources of generation, SZC delivers significant benefits as the marginal nuclear plant on the system beyond HPC. Although the capital costs it adds to the system are higher, these are outweighed by the benefits of reduced network, interconnector and balancing costs.’
That’s far from clear: as the Guardian noted ‘The project has promised to generate electricity at a price of between £86 & £100 a megawatt-hour (MWh) on average over the 60-year life of the project. As a comparison, the market reference price used to pay low-carbon energy subsidies last summer was just over £80 a MWh’. Actually, those figures are none too reliable. Some renewables got CfD strike prices much lower than that in the 2024 round: wind got £54-59/MWh, solar PV £50MWh. And for nuclear, the Guardians figure (which interestingly was quoted as lower in its earlier editions) seems to be what the developers promised. As far as I know, no one has yet come up with definitive numbers for what it will actually work out at under the RAB system.
However, it may be worth noting that Hinkley Point C, Sizewell C’s sister EPR project, got a £92.5/MWh CfD strike price in 2016, inflation index linked. But it is still to be ¬finished: it would be over £128/MWh now and likely more later. To be fair, recent supply chain and inflation cost rises will have pushed up renewable costs- although that will also be the case for nuclear costs. You could say that is why the government is providing £20m or so in extra support for Sizewell! But the government has also now set higher ceilings for the renewable strike prices in the next CfD round, with wind offshore wind caped at £113/MWh, up from £102 in 2024, while for on-shore wind its £92/MWh, up from £89. But the cap for solar is set at £75/MWh, down from £85/MWh in 2024. Note though that when the competitive auction process gets underway, projects are likely to get final strike price contracts well under these max price levels. And they are still likely to be less than Sizewell will achieve, when it eventually gets running- maybe in the mid to late 2030s.
Of course, the renewable strike prices do not take into account the need for grid balancing and that can add extra cost for variable renewables like wind and solar, with storage being one of the options, along with the occasional use of some cheap gas turbines, possibly using green hydrogen at some stage. But could the new Sizewell reactor be used flexibly for balancing? That backup up role is sometimes used as a justification for nuclear. The DESNZ report says that ‘whilst not factored into the monetised analysis, there is potential for the plant to operate on a load-following basis, varying the core electricity output of the plant to respond to system demand. EPR technology is technically capable of operating in this manner. If pursued, a load-following approach could benefit the electricity system, reducing system operator costs by adding flexibility to respond to changes in demand’.
However, that would reduce the plants efficiency and add to its operating costs. So might some other ideas the report mentions: ‘Excess heat in the form of steam extracted from SZC could be used in a variety of use cases including: i) a supply of low carbon heat, ii) hydrogen production, and iii) direct air carbon capture from the atmosphere’, although none of that is included in the monetised analysis. It also does not take into account the risk ‘that other technologies come forward that lower system costs more than SZC, or the risk that any more innovative or lower cost financing agreements become available to existing technologies’. But, thankfully, ‘decommissioning costs are included in the monetised impacts analysis’. A small mercy…but at what level?
And what about other nuclear-related costs? In a series of letters to the press, Dr David Lowry has asked who will be liable ‘for the long-term stewardship costs of radioactive waste above the "cap" established by the government’, given that ‘the radioactive waste will remain at the reactor site for up to 160 years after commissioning.’ And he also asked who would be liable ‘for paying clean-up costs if there were to be a significant radiological accident at the plant’, remembering the very high total clean-up and compensation costs of the 2011 Fukushima accident in Japan. That has been put, by the Japanese government, at ¥21.5 trillion (US$187 billion). As that disaster demonstrated, nuclear can be an unforgiving technology. Given its uncertain costs and dubious benefits, is it worth the risk when there are arguably better alternatives which use local fully renewable energy sources- not imported nuclear fuel?
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