Greater direct government intervention in backing nuclear projects would expose the sector to the risk of competing with other spending priorities for investment, a senior official has claimed.
Hannah Bronwin, deputy director of nuclear financing at the Department for Business, Energy and Industrial Strategy, defended the government’s decision not to extend direct support to the sector beyond its offer earlier this year to explore a stake in Horizon’s project at Wylfa in north Wales.
Presenting at the Nuclear 2018 conference earlier today (6 December), she said: “The government has so many things to spend their money on, it would be much better for the sector if nuclear is not competing with all of those other requirements for government finance on the balance sheet.”
Instead Bronwin said the regulated asset base (RAB) model, which is currently being used to help finance the Thames Tideway super sewer project in London, had many advantages in terms of achieving value for money and promoting competition within the nuclear sector.
The RAB model mitigates the construction risks of projects by enabling investors to receive returns before they have been completed.
She outlined how the RAB could work for nuclear projects. An economic regulator would issue licences to the project company, containing the level of revenues and returns that the investor would be allowed to receive.
Colin Matthews, the chairman of EDF Energy, had earlier told the conference that the successful delivery of an EPR 1000 reactor-fired plant at Taishan in China opened up the prospect of using the RAB model for its next UK nuclear project at Sizewell B in Suffolk.
“This gives us the chance of a much more conventional, utility type way of funding this project,” he said, adding that a combination of construction cost efficiencies and cheaper financing through the RAB model means Sizewell could be built 20 per cent cheaper than Hinkley.
Matthews said EDF estimates that around 10GW of new nuclear plants will be required to enable the UK to meet its commitments to cut carbon emissions from electricity generation.
Peter Hall, a partner at solicitors Norton Rose Fulbright, said the project finance mechanism is off the agenda for nuclear projects.
“Project finance is not currently a solution and I don’t see it being one in the near future.”
The private sector and government working together is a “proven” model in the nuclear sector, he said: “Although the government says it’s important for industry to deliver on the nuclear sector deal, the government has a significant role to play and we can’t repeat the errors of the past.”
“We have to recognise that other industries are competing for that cash and we are looking for it on a first of a kind basis.”