Source · Select Committees · Welsh Affairs Committee
Recommendation 8
8
Acknowledged
Financing new nuclear projects at Wylfa faces ongoing challenges despite the RAB model.
Conclusion
The introduction of the Regulated Asset Base (RAB) model is welcomed as a better alternative to the Contracts for Difference (CfD) scheme for nuclear developments. However, financing new nuclear projects is not straightforward and there will still be challenges under the RAB model. For a development to progress at Wylfa, important issues still remain regarding financial commitment. (Paragraph 47) Nuclear energy in Wales 27
Government Response Summary
The government acknowledges the complexities of financing nuclear projects under the RAB model and reiterates its belief that the model encourages private investment while protecting consumers. They outline existing mechanisms like value for money assessments, the Nuclear Energy (Financing) Act 2022, and Ofgem's regulatory oversight to manage risks and ensure financial commitment.
Government Response
Acknowledged
HM Government
Acknowledged
As a tried and tested funding model for large-scale infrastructure projects, the Government believes that using RAB could encourage private sector investment and cut the cost of projects by reducing the cost of project finance, the biggest driver of new nuclear project costs. We recognise the importance of ensuring that – in contributing towards the costs of projects using the RAB model –consumers are protected from unacceptable levels of risk, and the interests of consumers are central to the Nuclear Energy (Financing) Act 2022, which establishes use of the RAB model on nuclear projects. The Act requires the Secretary of State to consider the interests of existing and future consumers of electricity, including their interests in relation to the cost and security of supply of electricity. A nuclear project would be subject to detailed value for money assessments before being approved for a RAB or awarded a Government Support Package. As the RAB could support multiple nuclear projects in the future, the Government will continue to monitor its impacts on consumer bills alongside other energy schemes. The Sizewell C Project is part of the Government’s Major Projects Portfolio and is subject to HMT Green Book approvals and assurance, as well as Major Project Review Group approvals in advance of key decision points. During construction a project will be incentivised to deliver to time and schedule, through an incentives regime managed by the economic regulator, Ofgem. Ofgem’s principal objective is to protect the interests of all existing and future consumers, and during construction Ofgem will have full oversight and audit rights to the project’s activities.