Emily Gosden, Energy EditorMonday October 05 2020, 12.01am, The Times
To its supporters, it’s a crucial step to meeting Britain’s net-zero emissions goals, providing reliable low-carbon power and creating thousands of jobs. To its critics, it’s an outdated, risky technology that will push up energy bills and blight the landscape. The proposed Sizewell C nuclear plant has long provoked debate in the energy industry — but what does the government think? That’s the £20 billion question.
The twin-reactor plant in Suffolk proposed by France’s EDF could generate 3.2 gigawatts of electricity, enough to provide 7 per cent of Britain’s needs. It would be a sister station to Hinkley Point C, which EDF is building with the Chinese state group CGN in Somerset, and which the government said in 2016 should be the “first of a wave of new nuclear plants”.
Yet of five projects that were proposed to follow Hinkley, three — in Cumbria, Anglesey and Gloucestershire — have been abandoned by their Japanese developers, while CGN’s hopes of building its own reactor in Essex look politically highly unlikely amid hostility to China. That leaves the £20 billion Sizewell plant as the test case for whether the government still wants nuclear, and what it’s prepared to do to make it happen.
“What we need to see is a strong and unambiguous statement of the need for new nuclear to be able to meet the net-zero target,” Tom Greatrex, chief executive of the Nuclear Industry Association, says. He hopes an energy white paper, delayed by more than a year and now promised this autumn, will include a clear indication of how much nuclear is wanted. “Ministers haven’t said in recent times anything about the proportions of power coming from which zero-emission sources. There has to be a greater sense of direction.”
As the costs of wind, solar and batteries have fallen, critics have questioned whether nuclear is really needed. The National Infrastructure Commission advised the government in 2018 that it should commit to only one more nuclear plant by 2025 since renewables may prove to be cheaper.
Mr Greatrex insists this view is mistaken and does not reflect the requirements of Britain’s net-zero target, set last year. The Committee on Climate Change, the official advisers on that goal, say that power demand may double by 2050 and 38 per cent of it may need to be met by firm low-carbon power: either nuclear, or gas plants fitted with carbon capture technology.
Dermot Nolan, who led the energy regulator Ofgem until January, says that he believes “we probably won’t know until 2040 or 2050 if we were right to do nuclear” but that to minimise risks, “it is better to develop some nuclear at this point”. He adds: “I think there’s sufficient uncertainty about overall power demand, and sufficient uncertainty about whether a 100 per cent renewable mix will be lower or higher cost, that it’s just not putting all your eggs in one basket.”
The limited indications are that the government agrees: the business department says that “nuclear power will play a key role in the UK’s future energy mix as we transition to a low-carbon economy”. But if they do want new nuclear, ministers will need to decide how to fund it. “The current financing mechanism won’t work,” Mr Greatrex says.
At Hinkley, state-backed EDF and the Chinese are shouldering the decade-long construction costs and risks. EDF has made clear that it cannot afford to do the same for Sizewell and needs to bring in a majority of private investors. And at Hinkley, the return on investment comes through a contract guaranteeing consumers will pay £92.50 per megawatt-hour (MWh) for its electricity — more than double the price awarded to recent offshore wind projects, and politically unrepeatable.
EDF says this could help reduce Sizewell’s costs to the equivalent of £40 to £60/MWh. Mr Nolan, now at the consultancy Fingleton, says that the RAB model is “very much understood by investors” and should enable a much lower cost of capital. He believes this outweighs the risk that “if something does go wrong, then the consumer is on the hook” — especially given Sizewell should be able to learn lessons from Hinkley. “If you’ve done it before, then the risk of a disastrously expensive build should be reduced.”
Another option is for the government to take a direct stake, as it had offered to do in the now-abandoned Anglesey project, or even to bankroll the majority of the construction and then sell it to private investors once complete. EDF appears amenable to either option: it just wants a decision. It is lobbying the government for a “roadmap that will enable an early investment decision on Sizewell C”.
For local campaigners such as Alison Downes, of Stop Sizewell C, there should be no rush from ministers to commit to the “white elephant” plant, with more than a year still to go on the planning process. “Sizewell C is a bad project — if EDF can’t make it work on their own terms they shouldn’t expect the British public to bail them out,” she adds. Yet if the government decides that new nuclear plants are needed, it may have little other choice.
Sizewell C ‘cheaper than the alternatives’, industry insists
The Sizewell C nuclear plant could cost each household about £10.50 a year on their energy bills, EDF analysis suggests (Emily Gosden writes).
The levy would cover repaying investors for the construction of the £20 billion plant as well as costs for the electricity it would generate.
The French energy giant estimates that by using a regulated asset base (RAB) funding model to reduce financing costs, combined with savings by replicating the Hinkley Point C design, the cost of power from the Suffolk plant could be reduced to between £40 and £60 per megawatt hour (MWh). Its “illustrative” £10.50 per household per year figure is based on a midpoint of £50/MWh.
EDF says that this would be the total sum paid to Sizewell each year once in operation, not what it would “add” to bills; that calculation depends on what it would cost to buy the same volume of power from other sources. Recent offshore wind projects have been given the go-ahead at less than £40MWh.
However, EDF argues that wind has higher costs in terms of back-up power, and says it is confident Sizewell could actually reduce consumer bills compared with the alternatives. To try to assuage fears of consumers being on the hook for cost overruns under the RAB model, it says that even if Sizewell went £6 billion over budget — which it insists it will not — this would only add £3 a year to a household bill.