The UK was the first major economy to legislate for a target of net zero greenhouse gas emissions by 2050. As set out in the net zero strategy and the Prime Minister’s 10-point plan for a green industrial revolution, nuclear will continue to be an important and reliable source of clean electricity as we strive to decarbonise the UK economy. By 2050, we expect that the electricity system will be built on a foundation of renewables such as wind and solar, but these will need to be bolstered by reliable low-carbon power. The UK Government recognise that large-scale nuclear is the only proven technology available to provide continuous, low-carbon electricity at scale. Ministers are therefore firmly committed to deploying new nuclear in order to strengthen Britain’s energy security and reduce our exposure to volatile global gas prices, provided there is clear value for money for consumers and taxpayers.
In 2016 we took the decision to enter into a contract for difference over Hinkley Point C in Somerset, which is currently under construction and expected to begin generating power by 2026, when it will start providing 3.2 GW of electricity. However, with five of the UK’s six nuclear stations scheduled to close by 2028, the Government have made a commitment to bring a further large-scale nuclear project to a final investment decision during this Parliament, subject to value for money and all relevant approvals. To facilitate this, we have introduced legislation for a new financing mechanism, the regulated asset base (RAB) model, through the Nuclear Energy (Financing) Bill. It is estimated that RAB could lower the cost of each new large-scale nuclear power project by more than £30 billion, compared to the existing contracts for difference model. The RAB model is also expected to reduce Britain’s reliance on overseas developers for finance by substantially widening the pool of private investors to include British pension funds, insurers and other institutional investors from like-minded countries.
After Hinkley Point C, the Sizewell C project in Suffolk is the most advanced nuclear project in the UK. As a replica of Hinkley Point, Sizewell offers a high level of design maturity and an identified supply chain. The company developing the project has applied for both a development consent order and nuclear site licence and believes it can begin construction during this Parliament. If built, the new plant could deliver around 7% of the UK’s current electricity needs (enough to power the equivalent of around 6 million homes) and create tens of thousands of jobs across the country. New nuclear is not only at the heart of our plans to ensure greater energy independence, but to drive economic growth.
The Government entered into Sizewell C project discussions in January 2021. Following significant investment from EDF, the project requires additional financial support to further mature it to a point where other private investors (and, subject to value for money considerations and relevant approvals, the Government) could consider a direct investment in the project development company. Sufficient early development funding prior to the construction of major projects is a key determinant of subsequent project performance, and to this end the Prime Minister’s 10-point plan committed in 2020 to provide nuclear development funding for this purpose.
I am pleased to announce that I will today enter into an option agreement with EDF Energy Holdings Ltd, which provides Government with an option over the land at Sizewell C and conditionally over the shares in the development company in exchange for an option fee of £100 million. EDF Energy Holdings Ltd will invest that £100 million in further developing the Sizewell C electricity infrastructure project. Should the project reach a successful final investment decision, subject to value for money and all relevant approvals, the Government would recover this funding together with a financing return, either through an equity stake in the project, or in cash.
This agreement represents an important milestone for both the Government’s nuclear strategy and the project, which has the potential to significantly contribute to the UK’s decarbonisation and security of supply objectives. However, I am clear that this agreement does not represent a Government decision that the Sizewell C project will progress. Neither is it an indication that similar commercial arrangements would necessarily be desirable for other prospective nuclear projects. Decisions on the Sizewell C Project will be dependent on decisions in respect of planning and designation under the Nuclear Energy (Financing) Bill if passed into law.
Noting that the future of the Sizewell C project is not confirmed, the agreement the Government have reached with EDF provides the taxpayer with downside protection should the project not proceed. In return for the £100 million, the Government will be granted an option on the Sizewell site and conditionally over the shares in certain circumstances of the development company. In the event the negotiations with EDF do not successfully result in a positive investment decision satisfactory to all parties, then subject to certain conditions, taxpayers would be entitled to seek acquisition of either EDF’s shares in the Sizewell C development company or the site itself, or if neither can be delivered by EDF, the taxpayer would be entitled to a reimbursement of the £100 million with a financing return. This in turn would provide Government with the possibility of proceeding with alternative nuclear or low-carbon infrastructure, and therefore support the realisation of our net zero objectives.
Today’s announcement further demonstrates our commitment to energy security, investing in our thriving nuclear sector and creating thousands of jobs.
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