The UK government needs to make up its mind whether it is serious about nuclear and prepared to do it properly, which means it has to make key strategic decisions, stick to them over the long term and allow a supply chain to be developed and sustained over decades, an economist specialising in energy infrastructure has said. In an article published on his website, Prof. Dieter Helm of the University of Oxford said Hitachi’s recent decision to suspend work on plans to build two UK Advanced Boiling Water Reactors at the Wylfa Newydd nuclear site in north Wales “has been a long time coming and is not at all surprising”. It comes at a crossroads for the energy sector, he said. Hitachi said it had suspended the Wylfa project because of rising construction costs and a failure to reach an agreement on financing with the UK government. Prof. Helm said one option for nuclear policy is for the government to use the regulated asset base (RAB) model for EDF’s planned two-unit Sizewell C project. RAB financing would transform nuclear economics because it is a well-tried model and should produce a lower cost of capital and a very different risk sharing profile, Prof. Helm said. RAB financing is essentially a type of contract drawn up with the backing of government, which calculates the costs and profits of a project before it is started, and allocates an investor’s profits from day one. A government regulator sets a fixed number, the RAB, which attempts to account for all the future costs involved in the completion of a project. The regulator then also sets a fixed rate of return for the investors based on those costs. Prof. Helm criticised the contract the contract for differences model used for Hinkley Point C, saying it assumed ministers knew what future fossil fuel prices would be and knew what the relation between fossil fuel prices and the wholesale electricity price would be.
Nucnet 29th Jan 2019 read more »