New nuclear financing model can deliver cheaper ‘firm’ low carbon power
14 October 2019
Consumers could pay significantly less for low carbon electricity from future nuclear power stations as a result of a new approach to funding being proposed by the Government, according the Nuclear Industry Association.
Today is the deadline for responses to a consultation on the ‘Regulated Asset Base’ (RAB) funding method. The RAB model encourages investment into major infrastructure projects by delivering reliable returns, at a reduced rate, before a plant is operational. This reduces the need for large-scale, long-term borrowing at high interest rates, which significantly increases the cost of power.
The RAB approach is widely used internationally and has attracted investors for the construction of UK infrastructure projects including the Thames Tideway Tunnel and the Heathrow Terminal 5.
The consultation also sought views on the regulation of nuclear projects seeking RAB funding.
Tom Greatrex, CEO of the Nuclear Industry Association said:
“We urgently need to commit to future new nuclear power stations if we are going to reach the goal of net zero carbon emissions by 2050. Wind, solar, and other zero carbon renewables have an important part to play, but nuclear can provide the high volumes of constantly available, reliable, clean power that’s needed as a complement.
“Now we have begun building new plants in the UK, we need to continue the momentum and benefit from experience at home, as well as where stations have been successfully built abroad. A new funding model can bring in a wider pool of investors and, along with repeat builds, bring costs down.
“Developers will need to show their projects meet appropriate and robust criteria to qualify. The risk of going over budget is far outweighed by the potential reduction of financing costs which have a huge effect on bills. This makes the RAB a potential win-win for consumers and investors, in addition to helping us meet our national energy and climate goals.”
Nuclear is essential to the UK’s decarbonised electricity mix, with the Committee on Climate Change advising that to reach net zero by 2050 – as legislated by the UK Government – that 38% of our power generation needs to come from ‘firm’ low carbon power, like nuclear.
By 2030, all but one of the UK’s current nuclear fleet will retire. Without replacing this capacity, there will be a significant reduction in our ability to reduce carbon emissions.
The government will now begin reviewing the submissions and will announce next steps in the coming months.
Notes to Editors:
- In May 2019 the Committee on Climate Change said in its “Net Zero – Technical report”: “Power sector decarbonisation does not rely on variable renewables alone, but a portfolio of technologies including nuclear power”
- Nuclear power currently provides around 20% of the UK’s electricity, and over a third of all low carbon electricity.
- The nuclear industry generates a fifth of all electricity used in the UK, directly employs around 64,000 professionals and has the support of 74% of the public. In 2016 its activities directly contributed £6.4 billion to UK GDP. The power generated by existing power stations avoids the emissions of 22.7 million tonnes of CO₂ a year – the equivalent of taking around a third of Britain’s cars off the roads. Read the Nuclear Activity Report.
- All but one of the UK’s existing nuclear power stations are set to close by 2030