National Audit Office: Government adopts novel finance structure for Sizewell C and will need to monitor risks closely

• The Department for Energy Security and Net Zero successfully reached a deal with EDF and other investors to construct and operate the Sizewell C nuclear power plant.
• DESNZ estimates Sizewell C net benefits of up to £18 billion over the site's operational life. But, to help fund construction, electricity bills for the typical household could rise up to £19 a year by the time it opens from 2039.
• Sharing risk between the investors and taxpayers and consumers appears to have reduced the cost of financing Sizewell C, but the rewards for investors still appear high.
• Investor financial returns will cost consumers over £4 billion but will be justified if they help the project to cut construction costs and speed up delivery times.

The Department for Energy Security and Net Zero's (DESNZ) delivery model for Sizewell C places more risks on taxpayers and consumers than other electricity projects, but the Department believes this model has reduced finance costs and will allow the project to be delivered on time and to budget. This novel approach has costs and relies on big assumptions, a new report from the National Audit Office (NAO) has found.¹

Following negotiations, DESNZ announced in 2025 that it had successfully secured private investment from Électricité de France (EDF) and other investors.² This investment decision was over two years later than anticipated, however this allowed for a fully developed and costed timetable to be developed.

Sizewell C is projected to have a baseline cost estimate of £38.2 billion, with construction being completed by Summer 2039. Upon its completion, it could power the equivalent of 6 million UK homes for 60 years.

Consumers started to pay for Sizewell C after November 2025. DESNZ expects Sizewell C to increase electricity prices for the typical household by £4 in 2025-26, rising up to between £17 and £19 by the time it opens.

Once construction has been completed, DESNZ's modelling predicts that the net benefits for consumers could be up to £18 billion, primarily delivered through energy bill savings and reduced electricity costs compared to other ways of reaching net zero. However, as a large infrastructure project, DESNZ's modelling of these benefits shows they will not outweigh the costs to consumers until after 2060.³ They are also subject to significant uncertainty, including that other forms of net zero technology could turn out to be cheaper or better.

Under this innovative approach, government has provided most of the finance, but DESNZ owns a minority share of the company delivering the project. This intentionally limits its control over the project. DESNZ argues this is necessary to avoid the governance weaknesses that have caused issues for previous government mega projects.

DESNZ assumes that if the project was fully under public control the construction costs would rise to the ‘higher regulatory threshold' set out in the economic licence of £47.7 billion,⁴ and that the involvement of private investors is justified, as their expertise will reduce construction costs and speed up delivery.

The financial returns to investors will cost consumers between £4.0 billion to £4.5 billion unless they also help to cut costs and decrease delivery time by a commensurate amount.⁵

It is not clear how strongly the deal incentivises investors in Sizewell C to reduce construction costs. Investors told us they were strongly motivated to keep construction costs below the higher regulatory thresholds. Their returns also reduce by up to 1.6 percentage points for any overruns below this threshold.⁶ However, if construction costs rise to just below this amount, investors still earn returns comparable to other utilities.⁷

Although the investors in Sizewell C carry the normal risks of running a business, these risks are shared with consumers and taxpayers, there are limits on how much investors can gain or lose as part of the deal, and government has offered various contractual commitments to the investors.

The construction of Sizewell C is frequently compared to the UK's other nuclear site, Hinkley Point C, which is currently expected to cost double its initial projected cost, with a 7-year delay. This has sparked concerns that these problems may be mirrored in Sizewell C, but DESNZ hopes to avoid this by applying the lessons and final designs from Hinkley Point C. As a result, Sizewell C's plans are already at a much more advanced stage than Hinkley's were at the equivalent point. However, although Sizewell C should cost less than Hinkley Point C to build, it is likely that consumers will pay more for energy from Sizewell C. This is because the price of Hinkley's electricity was set before its cost overran (which has been borne by EDF), and the cost of borrowing has also increased since then.⁸

DESNZ and the Sizewell C company have committed to implementing lessons from delivering previous mega-projects, such as developing a new approach to incentivise contractors. The NAO will track the effectiveness of these measures to inform other large projects.

Gareth Davies, head of the NAO, said:

“Sizewell C forms a significant part of the government's plan for a secure and affordable clean energy supply. There has been a concerted attempt to learn from the problems of previous nuclear power construction projects and other large infrastructure schemes. This has resulted in a novel financing structure and DESNZ will need to monitor the risks to taxpayers and billpayers closely.”
Notes to editors

1. The current equity share is as follows: DESNZ 44.9%, EDF 12.5%, La Caisse 20%, Centrica 15% and Amber Infrastructure 7.6%. Amber have an option to take a further 2.4%, reducing DESNZ's share.
2. DESNZ told us the costs of alternative low-carbon technologies have risen since it undertook its modelling, which has improved its view of the value for money of Sizewell C and would move the modelled break-even point as early as 2050 in some scenarios.
3. Sizewell C has a ‘higher regulatory threshold' of £47.7 billion set by DESNZ in the Company's licence. This is close to the outturn where 90% of the Company's cost forecasts come below it (known as the circa p90 estimate). Investors and HM Treasury have committed to fund the project up to this. The Secretary of State would have to decide what to do if costs rose above this,
4. DESNZ predicts that private investors, through their due diligence, expertise and directors will help improve project management, reduce cost and deliver time savings. DESNZ's use of the the Sizewell Company's scenario-based modelling shows that if selected risks that are aligned to its investor strengths are mitigated, this would lead to sufficiently large cost and time savings.
5. Investors told the NAO they are most exposed in “tail‑end” scenarios above the higher regulatory threshold, when the Company would have to apply to the Secretary of State to make decisions over the project's future, which could involve allowing higher consumer costs (with mechanisms that can limit investors' financial returns), further government funding (diluting private investors' equity), or discontinuing the project.
6. Investors are expected to receive a rate of return of up to 13% (post-tax equity internal rate of return) assuming construction costs come in at the baseline estimate, which fall to a low of 10.8% at the higher regulatory threshold. These rates assume they sell their share of the equity once Sizewell C is operation. These returns create an incentive of up to around 1.6 percentage points to keep construction costs down.
7. SZC's baseline construction cost is 22% lower than the lowest current estimate for HPC. But DESNZ estimates an equivalent strike price (the present value of consumer payments per unit of electricity) of £133 to £155 per MWh (in 2025 prices) if costs fall between the project baseline and higher regulatory threshold (with associated schedules and after a ‘recycling' subsidy). To match HPC's fixed £129 per MWh (in 2025 prices) SZC would need to come in below the project baseline, because HPC's price was set before its cost overruns, and borrowing costs have risen since then.
8. All monetary values are stated in 2024 or 2024-25 prices. The net benefits of £18 billion and cost to consumers of the investor financial returns of £4.0 billion to 4.5 billion are both stated as net present social values in 2024 prices.