Source · Select Committees · Science, Innovation and Technology Committee
Recommendation 40
40
Accepted
Paragraph: 218
Demonstrate value for money to taxpayers for gigawatt nuclear, including full construction risk estimates.
Recommendation
The Government should show how this offers value for money to taxpayers and should be open to other alternative partnerships between the public and private sectors as practised in other countries (including those set out in Table 2). The choice to proceed with gigawatt-scale nuclear power should not be made without robust estimates of its value for money, including the financial value of the construction risk being assumed by taxpayers or billpayers. A headline lower cost than Hinkley Point C is not justified if the value of the risk is too great. This is true even if it forces a conclusion that—for all its other advantages—gigawatt scale new nuclear is not financeable on defensible terms, and that the UK’s nuclear ambition would need to be pursued through other nuclear technologies.
Government Response Summary
The government referred to its Impact Assessment for the Nuclear Energy (Financing) Act 2022, which estimates RAB could save £30bn, and its published analysis from November 2022 that concludes Sizewell C is likely to offer value for money.
Paragraph Reference:
218
Government Response
Accepted
HM Government
Accepted
The illustrative costs of building and financing a new nuclear power plant using the RAB model as compared to a CFD are outlined in paragraphs 72 - 74 and tables 2 - 4 of the Impact Assessment (IA) for the Nuclear Energy (Financing) 2022 (the Act). Furthermore, Annex 3 of the IA for these Regulations, and section 4.1 of the IA for the Act has a summary of the modelling assumptions. The IA highlighted that a gigawatt scale nuclear plant financed by a RAB approach could save upwards of £30bn (in 2021 prices) on the cost of building and financing compared to a CfD, thereby reducing the overall cost of the project. A RAB model can provide a revenue stream during construction which will avoid compound interest and therefore reduce financing costs (the main driver of nuclear project costs) compared to a CFD, which only provides revenue in operations. To designate a nuclear company in relation to a project, the Secretary of State must be of the opinion that doing so is likely to result in Value for Money. The department has undertaken an analysis of the Sizewell C project to determine this, which was published in November 2022. This analysis has been completed in line with HMT Green Book principles on how to appraise and evaluate projects. Based on this analysis, the Secretary of State is of the opinion that designating NNBG SZC in relation to the Sizewell C project is likely to result in Value for Money. This is because proceeding with a RAB funded Sizewell C Project: • is estimated to reduce costs to consumers of a low-carbon electricity system, in the majority of scenarios which have been modelled. • has an estimated return on government investment which is positive in the majority of scenarios which have been modelled. • has substantial non-monetised benefits, in particular protecting security of supply of the GB electricity system.