The Government is hiding the fact that, based on its own figures, Sizewell C could very well result in a huge increase in consumer bills, several times larger than it has so far been implied. This is because consumers will be expected to pay directly for what the Government’s own figures say is a high likelihood of extensive cost overruns. The Government will expose consumers to this risk in order to protect corporate investors from suffering the losses themselves – otherwise the Government will not get private investors. This is under the so-called Regulated Asset Base (RAB) method of funding Sizewell C.
According to the Financial Times the Government and EDF are both going to take a 20 per cent equity stake in Sizewell C. They say the rest of the finance will be paid by private investors. But what the Government do not explain is that this is likely to be at the cost of consumers being forced to pay for large cost overruns as the price that will need to be paid for protecting the profits to be made by various corporate investors, including EDF themselves. Otherwise there is no way that the private investors will not invest in the project. No amount of Government payrolled investment consultants is going to persuade large corporations of whatever their type to lose their shirts on new nuclear power projects!
The Government plan is that the cost of the power project will be raised initially by EDF (20% share), the Government (20% share) and the other 60 per cent from private investors. Yet this money will only cover the Government’s hopeful lower estimates of the costs.
According to the Government’s impact assessment of the costs of Sizewell C, published in October 2021, the costs of the 3.2 GWe Sizewell C under the Government’s financial mechanism is going to range from £24.6bn (£7,700 per kW) to £41,6bn. The Government say that their base case is £6400 per kW and that their projections are based on either 20% or 100% cost escalations beyond this (based on historical performance of nuclear reactor construction). This generates the £24.6 bn to £41.6bn range when you calculate this for 3.2GWe.
So let’s get this right. The Government estimates that Sizewell C could quite plausibly have cost overruns of up to £17 billion. Energy consumers will pay for these cost overruns through their energy bills.
Consumers will have to pay for them because otherwise private investors will not invest their money in the Sizewell project. The cost overruns could be very large, perhaps even larger than the eye-watering projections produced in the Government’s own impact assessment. Recent nuclear projects (including all of the Sizewell C -style RPR projects) have been about three times their initial projected costs.
These extra costs that the consumer will have to bear for cost overruns are before account is taken of the money the Treasury will have to put into the project (which reduces spending on other things) and, crucially, what the consumer will have to pay for the actual electricity generated by Sizewell C. There is no decision on how much EDF will be paid for the power generated by Sizewell, although it seems that it will be a lot more than the cost of supplying the same electricity from wind power or solar power.
Energy analysts are sceptical about the Treasury’s willingness to come up with the funds to buy the suggested 20% equity stake. Professor Steve Thomas, from the University of Greenwich, said: ‘BEIS in its impact assessment estimates the overnight cost at £27-41bn, with completion in 2037-41. So EDF and government are both signing up to £5.4-8.2bn. Not sure where EDF will find that and given Sunak could only find £3bn to subsidise energy bills (the rest is a loan), also not clear the Treasury will want that.’
It is clear that the energy consumer will pay a heavy price for protecting the financial interests and profits of large corporate bodies. On the Government’s own estimates this could mount to the best part of a £1000 per energy consumer (assuming 26 million energy consumers).
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