The UK government is putting together a revised funding plan in a last ditch attempt to revive the suspended Wylfa Newydd nuclear power project, on Anglesey, North Wales.
Chancellor Philip Hammond confirmed that the government is working on a new financing model in an attempt to persuade Hitachi to reconsider its decision to freeze work on the £21bn project.
Hitachi “paused” the project earlier this month, citing funding issues.
“Obviously we are disappointed by the decision of Hitachi to suspend work on the Wylfa project, but we haven’t given up hope,” Hammond told the House of Commons. “They retain the site and we hope that the work that we’re doing on a possible alternative financing model may yet allow the project to go ahead.”
Ministers could now accelerate plans to introduce regulated asset base (RAB) financing into nuclear sector projects, to help boost investor confidence in the sector.
RAB was first developed in the 1990s for use in water projects regulated by Ofwat. Funding is released based on predictions of costs and profits across the lifetime of an asesst, allowing investors to earn a carefully calculated set return across the life of the entire project.
This type of financing is already being used to construct the Thames Tideway super sewer and was used on Heathrow Terminal 5.
Financing nuclear power projects using the RAB model is more complex due to the enviromental and technoloically specific risks, as well as the military/security risks linked to such projects.
In June, business and energy secretary Greg Clark told Parliament that the government would assess the “viability” of the RAB model for the nuclear projects.
“[The government] will be reviewing the viability of a regulated asset base model as a sustainable funding model based on private finance for future projects beyond Wylfa, which could deliver the government’s objectives in terms of value for money, fiscal responsibility and decarbonisation,” he said.
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