Source · Select Committees · Science, Innovation and Technology Committee
Recommendation 43
43
Deferred
Paragraph: 221
Publish Sizewell C RAB model savings calculations and Heads of Terms for funding structure clarity.
Recommendation
The Government should publish details of how the estimated savings from using the RAB model for funding Sizewell C were calculated, and provide clarity for the funding structure, by publishing the Heads of Terms for the agreed RAB funding model for that project.
Government Response Summary
The government referred to an Impact Assessment for illustrative RAB model savings for a generic plant but stated that specific Sizewell C cost details and Heads of Terms are commercially sensitive and cannot be disclosed at this time.
Paragraph Reference:
221
Government Response
Deferred
HM Government
Deferred
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 Act. 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. This analysis uses a range of estimates for the cost of finance and capital cost of project. The capital cost is based on estimates for Hinkley Point C at the point of FID, uplifted by 20–100% to account for potential cost overruns, informed by data on actual overruns from almost 200 nuclear plants around the world. It includes an assumed 60 years of operation, as well as assumed 13–17 year construction period. 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. It should be noted that the figures in the IA are for an illustrative/generic gigawatt scale nuclear plant rather than any specific project. The legislation is not specific to any individual project, each nuclear RAB project would be different and have different cost estimates. The Secretary of State will make decisions on a case-by-case basis as to which projects are suitable for a RAB. These decisions will be based on the designation criteria in the NEFA, including a judgement on the maturity of a project, and whether designating a nuclear company for a RAB is likely to result in value for money. The costs of the Sizewell C project are subject to ongoing development, and commercially sensitive project negotiations – we cannot disclose these at this time.