The government’s cash injection is designed to “maximise investor confidence” in the project while French state-owned power company and nuclear operator EDF works towards setting out a funding plan which satisfies investors and ministers.
In return the government will have rights to an equity stake in the development company behind the project and over the land on which EDF plans to build it. If EDF is able to secure enough investor backing to make a final investment decision on Sizewell it would reimburse the government with a stake in the project or in cash.
“The funding commitment from business and energy secretary Kwasi Kwarteng will be used to continue the development of the project which will aim to attract further financing from private investors and, subject to value for money and relevant approvals, the UK government,” the Department for Business, Energy and Industrial Strategy said in a statement.
The department said the two EPR nuclear plants planned for Sizewell C would produce 3.2 GW of electricity powering the equivalent of around six million homes, and providing increased longer-term energy resilience. “Nuclear power has a key role to play as we work to strengthen Britain’s energy security and reduce our exposure to volatile global gas prices,” it said.
Mr Kwarteng said the government’s funding would add support to the development of Sizewell C “during this important phase of negotiations as we seek to maximise investor confidence in this nationally significant project”.
“In light of high global gas prices, we need to ensure Britain’s future energy supply is bolstered by reliable, affordable, low carbon power that is generated in this country,” he said. “New nuclear is not only an important part of our plans to ensure greater energy independence, but to create high-quality jobs and drive economic growth.”
The UK government resumed talks with EDF over the nuclear project in late 2020, focusing on whether the company could prove it had learned lessons from its Hinkley Point C nuclear project in Somerset, and that a successor plant would offer the public value for money.
EDF has since embarked on a hunt for investors to help to drive down the cost for bill-payers. It is understood that EDF and the government also hope to secure enough new investment to replace Chinese state-controlled CGN, which has a 20% stake in the critical national infrastructure project. Reports have said the government is looking to push out CGN because of concerns over security.
Prime minister Boris Johnson said recently that he is against “undue influence by potentially adversarial countries” in national infrastructure such as Sizewell C, but does not want to exclude all Chinese investment from the country.
The latest support has emerged months after the government put forward legislation to create a new funding regulated asset base (RAB) model to help the project attract investment at a lower cost than the Hinkley Point C project.
The RAB model will see will see households paying an upfront levy through their bills to help lower overall costs. Press reports in the UK have put this at between £10 and £15 a year on the average energy bill for 35 years.
These payments from the start of construction will avoid the build-up of interest on loans that would otherwise lead to higher costs to consumers in the future.
In October, the government announced funding of £1.7bn in Sizewell C as it pushes to replace the country’s aging reactor fleet.
Most of the UK’s existing fleet of 11 reactors, which supply about 15% of the country’s electricity, are being retired this decade, with the last one due to close in 2035. Earlier this month, Hunterston B-2 in Scotland became the latest to be permanently shut down. Hunterston B-1 was shut down in November 2021.
EDF is building Hinkley Point C in Somerset, the only new nuclear plant in the UK. Three projects – Wylfa, Moorside and Oldbury – have either been cancelled or shelved, largely because of financing problems, while Bradwell remains in the early technical stages.