Sizewell B: Contract for Difference

My honourable Friend Lord Vallance of Balham, Minister of State for Science, Research and Innovation, has today made the following statement:

The Government mission to become a clean energy superpower is about delivering secure, affordable and low carbon electricity for households and businesses, reducing our dependence on volatile fossil fuel markets and protecting billpayers for the long term.

As we move towards a clean power system, electricity demand is expected to increase significantly as heat, transport and industry are electrified. Delivering this transition at the lowest cost requires a mix of technologies. While renewable energy will form the backbone of the system, baseload power such as nuclear is essential to maintain system reliability, reduce overall system costs and protect consumers from exposure to global energy price shocks.

Nuclear power therefore plays a vital role in delivering a secure, low cost and low carbon electricity system. As a source of reliable electricity produced wholly within the UK, it provides baseload generation to complement renewable output and helps reduce reliance on imports.

Extending the lifetime of existing nuclear power stations is the most cost-effective way of delivering further nuclear generation. It allows the UK to make best use of existing assets, delivering significant volumes of clean power at lower cost than alternative forms of new generation.

This approach is consistent with international best practice. Several countries, including Belgium, France and the US, have recently taken steps to extend the lifetimes of their existing nuclear power stations to strengthen energy security and support decarbonisation.

Located in Suffolk, Sizewell B is a critical part of the UK’s nuclear fleet. Since coming online in 1995, it has provided over 270 TWh of low carbon electricity, helping to maintain security of supply and reduce emissions. Without intervention, the plant is currently expected to cease operations in 2035, despite it being technically feasible for it to continue generating for an additional 20 years.

There are strong reasons to support the continued operation of the plant.

Firstly, on security of supply, Sizewell B provides electricity that is not dependent on weather conditions. This is critical to maintaining a resilient electricity system, particularly during periods of low renewable output, and helps reduce reliance on imported energy.

Secondly, analysis shows that extending Sizewell B and making continued use of the existing infrastructure will significantly reduce overall system costs, relative to a low carbon counterfactual without the project. By locking in a stable price, the contract for difference will also help protect consumers from future volatility in wholesale electricity prices. During periods of high prices, payments flow back to billpayers, delivering direct consumer benefit. Had Sizewell B been operating under this agreement during the energy price crisis following Russia’s invasion of Ukraine, consumers would have saved around £2 billion.

Thirdly, the project will support 900 highly skilled on-site roles, helping to sustain both the UK nuclear supply chain and the expertise required to deliver future nuclear projects. This is in addition to the economic benefits associated with the new investment required for the life extension works.

To unlock the private investment required for this extension, the Government have reached agreement on a commercial heads of terms with EDF Energy Nuclear Generation Ltd for a bespoke contract for difference to support the lifetime extension of Sizewell B.

The contract for difference, once signed, will enable the continued operation of Sizewell B beyond 2035, securing sufficient low carbon power for the equivalent of 2.5 million homes for a further 20 years, supporting our clean power mission and wider energy security objectives.

The key terms are as follows:

A strike price of £70.50 per MWh (2025 prices), reflecting robust due diligence and benchmarking against comparable projects.

A 20 year contract term, aligned with the planned extension period.

A two-way contract for difference structure, ensuring that when electricity prices are high, payments flow back to consumers.

Consumer protection measures, including a one-way cost gain share mechanism, which would ensure consumers benefit from cost savings during the refurbishment phase. All cost overrun risk sits with the developer.

Incentives to support timely delivery of the lifetime extension works, avoid extended plant downtime and efficiently manage operation costs.

Existing arrangements for decommissioning and waste management remain in place.

Taken together, these terms represent a balanced deal that supports investment while protecting billpayers.

Implementation of the heads of terms is subject to reaching agreement on the long-form contract for difference, as well as required regulatory approvals and legislative amendments to enable existing nuclear plants to become eligible for contracts for difference. The Government intend to progress these steps in parallel to support the timely delivery of the project. Further details of the agreement will be published in due course.

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