Citizens Advice is calling on Ministers to safeguard consumers from potential increases in household energy bills to fund the development of the Sizewell C nuclear power plant, especially in light of global concerns about the escalating expenses of nuclear initiatives.
The primary independent advisory organization in the UK has expressed worries about the Suffolk project potentially being financially inefficient and has urged the Department for Energy Security and Net Zero to provide more transparency on its funding.
The estimated expense of constructing Sizewell C ranges greatly, from £20 billion to £44 billion. Currently, efforts are being made to secure international investors to partner with the UK government and France’s EDF.
In the previous month, the proprietor of Sizewell C’s related venture, EDF’s Hinkley Point C in Somerset, announced a delay until 2031 and a potential cost of £35bn, citing inflation, Covid, and Brexit as reasons. In a worst-case situation, expenses could reach £47.9bn. EDF reported on Friday that it had incurred a loss of €12.9bn on the project.
The French government, through its ownership of EDF, is responsible for covering any additional expenses at the Hinkley site. In an effort to ease the financial strain, French authorities have urged the UK government to contribute to the increased costs following the removal of their Chinese partner, CGN, from the Sizewell C development due to security concerns.
Nonetheless, Sizewell C utilizes a distinct financial framework compared to Hinkley, potentially leaving households vulnerable to cost increases.
Sizewell C Ltd, the organization responsible for the project, revised its electricity permit to enable the implementation of a Regulated Asset Base (RAB) model.
Reworded:
The RAB financing models, utilized in the building of the Thames Tideway Tunnel and Heathrow Terminal 5, aim to incentivize investments by providing a secure income for investors during the construction phase of a major project. This helps to decrease financing expenses, with the cost ultimately being passed on to consumers through bills.
Richard Hall, chief energy economist at Citizens Advice, stated in response to the consultation regarding the licence update that implementing the RAB model for new nuclear projects could potentially lower consumer costs by providing investors with a secure income stream that begins during the construction phase.
Our main worry is that consumers are not just facing the cost of capital, but also the amount of capital that must be used. If the required amount of capital increases significantly, the project may not provide good value for consumers, even if it is financed at a low cost.
He stated: “When considering new nuclear developments in general, and specifically the one proposed at Sizewell C, there is a high potential for significant increases in costs and delays. It is important to safeguard consumers from these risks, as they have no control over them and rely on the energy department to prevent them from bearing the burden of additional expenses or delays.”
Hall expressed worries about the suggested budget for advertising and marketing outlined in the license discussion. He stated, “Taxpayers should not have to cover the expenses for promoting Sizewell C.”
According to a report conducted by the University of Greenwich Business School and reported by the Guardian, the projected cost for Sizewell C is £38.4bn and it is expected to be finished by 2039. The report also predicts that the consumer surcharge to finance the project will increase from £4.07 in the first year to £27.82 in year 15, resulting in a total additional cost of £239.21 for households during the construction phase.
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Alison Downes from the Stop Sizewell C campaign expressed concerns about the government’s decision to rely on EDF for the construction of Hinkley Point C. She believes that when Sizewell C inevitably exceeds its budget and timeline, future ministers will have to justify why it was deemed acceptable to transfer the construction risks to consumers and taxpayers. She questions why the government has not learned from the Hinkley Point fiasco and recognized that using RAB funding for Sizewell is not a wise choice.
The Sizewell C project, which is estimated to generate 70,000 jobs and provide electricity for 6 million households, has already cost the government over £1 billion.
Last year, the Observer reported that Centrica, which owns a minority stake in Britain’s nuclear power plants, expressed interest. Last week, its CEO Chris O’Shea confirmed that the company is still interested.
According to a spokesperson from the Department for Energy Security and Net Zero, initiatives such as Sizewell C will result in more environmentally-friendly, cost-effective, and reliable energy for the foreseeable future.
We estimate that the cost for large-scale nuclear projects will only add around £1 per month to the average household’s bill.
Our model offers consumers more value for their money by reducing the cost of financing construction, which is one of the primary contributors to the high costs of new nuclear projects.
Source: theguardian.com
