Secreatry of State for Business, Energy and Industrial Strategy
(): 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 Ten 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 recognises 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 3.2GW of electricity. However,
with 5 of the UK’s 6 nuclear stations scheduled to close by 2028,
the Government has 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
projects by more than £30bn, 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
percent 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 Ten 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 £100m. EDF Energy Holdings Ltd will invest that £100m 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 has reached with EDF
provides the taxpayer with downside protection should the project
not proceed. In return for the £100m, 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 £100m 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.
