This week the Business Business Secretary, Kwasi Kwarteng, set out a new funding model to attract a wider range of private investment into new nuclear power projects, cutting the cost of financing them and reducing the cost to consumers.
The Nuclear Energy (Financing) Bill will use a model known as the Regulated Asset Base (RAB) to fund future nuclear power stations in Britain – a tried and tested method that successfully financed other infrastructure projects, such as the Thames Tideway Tunnel and Heathrow Terminal 5.
The RAB model will reduce the UK’s reliance on overseas developers for financing new nuclear projects by substantially increasing the pool of private investors to include British pension funds, insurers and other institutional investors.
Richard Fuller, MP for North East Bedfordshire and Member of the Energy Select Committee, said:
Good to see this new commitment to financing of nuclear power from the government which reintroduces an old “asset base” pricing approach, and offers to reduce the over-dependence of current pricing on potentially riskier sources of foreign state funding.
Under the new RAB model, consumers will contribute to the cost of new nuclear power projects during the construction phase – but overall consumers are expected to save more than £30 billion over the project’s lifetime on each new large-scale nuclear power station compared with existing funding mechanisms. Initial contributions will give private investors greater certainty through a lower and more reliable rate of return in the early stages of a project, lowering the cost of financing it, and ultimately helping reduce consumer electricity bills.
Currently, approximately 16% of the UK’s electricity generation comes from nuclear power and the RAB model will play an important role in attracting private investors to back new large-scale nuclear power stations, working alongside renewables on an increasingly low-carbon electricity grid.
