UK government allocates up to $7.22 billion to support Sizewell C nuclear plant

The UK government's Department for Energy Security and Net Zero has allocated up to GBP5.5 billion ($7.22 billion) in subsidy funding to assist in reaching a final investment decision on construction of the proposed 3.4-GW Sizewell C nuclear plant in eastern England.

While DESNZ said that it was making the funding available with the goal of reaching an FID in 2024, the funding is available for spending on the Sizewell C project for a total period of 676 days, or until June 30, 2026, according to an Aug. 30 DESNZ document detailing the support program. The document says that the funding can be spent on "construction, electricity, gas, steam and air conditioning supply, and real estate and other technical activities."

Sizewell C is the follow-up project to the delayed, 3.4-GW Hinkley Point C plant being built in western England, and which is currently scheduled to enter service in late 2029. Both Sizewell C and Hinkley Point C will use French EPR reactor technology.

DESNZ said in a statement released late Aug. 30 that the funding would be awarded under the government's Development Expenditure Scheme, a government funding mechanism that will be used to finance "pre-FID measures designed to fund development and some initial construction works expenditure up to an FID" at the proposed plant. It added that the GBP5.5 billion cost was the "current best estimate of development costs to be incurred in getting to the current projected FID date, with a contingency in case of delay allowing the project to be funded until FID."

The document said that the "main beneficiary of the Devex Scheme will be Sizewell C Limited, although other specified categories of beneficiaries may benefit" from the program, including owners of land taken to the project, and EDF Energy Generation in case early work at the Sizewell C site adversely impacts the ability of the adjacent nuclear unit, the 1,250-MW Sizewell B, to generate power.

A spokesman for DESNZ said Sep. 2 that, subject to "all the relevant approvals, we aim to reach a final investment decision [on Sizewell C] before the end of the year, and we have established a new subsidy scheme to provide certainty and ensure the project has access to the necessary financial support to remain on track."

The UK government, as of June 30, owns 76.1% of Sizewell C Ltd., the project subject company that will own and operate the plant, with French state-owned nuclear power company EDF owning the remaining 23.9%, documents released July 26 along with EDF's first-half 2024 financial results showed. EDF Energy has repeatedly said that it does not intend to own more than 20% of Sizewell C at the time an FID to start construction of the plant is made. The UK government has been steadily increasing its equity stake in Sizewell C following a purchase of 20% in the project from China General Nuclear Corp. Nov. 29, 2022, for GBP679 million.

The Devex Scheme was referred to the Subsidy Advice Unit of the UK's antitrust regulator, the Competition and Markets Authority, for a non-binding consultative opinion May 22. Following an investigation into the legality of the financial aid, the SAU in a June 17 report said the financial aid was compatible with the UK's Subsidy Control Act 2022.

The SAU report noted that the "package of measures [contained in the Devex Scheme] will be finalised using market feedback received in the course of the ongoing equity and debt raise processes, designed to bring private investment into the project alongside the existing shareholders EDF and HMG, backed by the Regulated Asset Base (RAB) model for nuclear" construction.

The government has said that it intends to use the RAB model to pay for the construction of Sizewell C. The RAB model involves a company or entity investing in a major project and in return being given permission to collect a levy on electricity suppliers, who may pass on costs to consumers during design, construction and operation of the nuclear plant. The developer of the plant would be subject to regulatory scrutiny to ensure it complies with obligations such as set investment levels and financial returns.

Scheme only for pre-FID funding, DESNZ emphasizes

DESNZ also said in the document that any funding provided under the Devex Scheme will "only be made available" for Sizewell C's "costs pre-FID, including in the event an FID is not taken by the current projected date. Such costs would be subject to review, and are subject to assessments of "appropriate proportionality and value for money." DESNZ added that the funding remained subject to further approvals, including a wider review of UK government expenditure that will be undertaken by Chancellor of the Exchequer, or treasury, Rachel Reeves, prior to her 2024 Budget that will be delivered to Parliament Oct. 30.

“Any investment from the scheme will be subject to approvals and in line with the project’s spending plans, as agreed by the government and its co-shareholders” in Sizewell C, the DESNZ spokesman said.

"Support granted under the Devex Scheme will mainly be comprised of equity injections by the UK Government," DESNZ noted in the document.

However, the "Devex Scheme also provides for additional support through other mechanisms where appropriate and proportionate, such as letters of credit, indemnities and guarantees," the document added.