Addressing the challenges to funding and financing could help to boost investor confidence. The government needs to provide more clarity on the future of the industry, including funding support.
The government should take a clearer stand and scale up funding support significantly to revive the UK nuclear industry, as also referenced by the Mission Zero report and the Spring Budget 2023.
This support must take several forms:
- increase equity funding of future nuclear projects – in line with the new Subsidy Control Regime. The government already announced it would invest £679 million in the development phase of the Sizewell C project, making it a 50 per cent shareholder in the development company. Initially, GBN will focus on completing its SMR technology competition and co-funding the winning technology or technologies. To increase market confidence, the government needs to consider how it will build on its investment for future projects and provide more clarity on funding SMRs
- provide specific risk protection, if necessary
- provide grants to stimulate technology development and innovation. This is in addition to existing grants such as the £385 million Advanced Nuclear Fund (for small and advanced modular reactors), the £120 million Future Nuclear Enabling Fund, the £75 million Nuclear Fuel Fund (to preserve the UK front-end nuclear fuel cycle capability) or the over £400 million that has been pledged for nuclear fusion
- provide clarity on approaches to attracting new developers and operators as well as UK site strategy
- create an integrated nuclear programme/pathway to show how government policy will support the delivery of 24 GW by 2050. The last strategy was published in 2013, followed by the nuclear sector deal five years later that was refreshed in 2021. Given the UK’s new capacity target, these need to be updated to provide the policy certainty and transparency necessary to build trust and confidence among investors.
It is key that, with the establishment of GBN, an integrated nuclear programme is created to bring clarity in several areas, including:
- a pipeline of nuclear projects. How achievable is the 24 GW ambition?
- the balance between tried-and-tested designs and new ones (such as SMRs versus advanced modular reactors and fusion). Choosing mature, standard designs, along with experienced project development, management and construction teams, and their established supply chains can help implement lessons learnt, reduce costs and risks, and make investors more comfortable about investing in nuclear projects
- the balance between large scale and modular reactors in the target capacity
- the government investing in the development phase of Sizewell C. Will this model be replicated in future development projects (either large scale or modular)?
How to make RAB or other financing models more easily transferable to other projects and technologies?
Given the effort it took for the government to negotiate the RAB framework for Sizewell C, it needs to establish a more streamlined and competitive process to allocate RAB funding to multiple projects at the same time.
Elements of cluster sequencing for carbon capture and storage (CCS) could be used to design a process to allocate funding to nuclear new build projects.
Figure 2 shows how this sequencing process could look. Track 1 and Track 2 could target to deliver a specific capacity (for example 5 GW each) by a specific date (for example by 2035 and 2040, respectively).
Track 1 could prioritise projects with higher technology maturity levels to deliver a specific carbon budget target, whereas Track 2 could take a longer-term view and support less mature technologies that have wider system benefits. These could include dispatchability, higher temperature heat and affordable hydrogen production.
Track 2 could be adjusted based on learnings from Track 1 and subsequent Tracks can be run to deliver further capacity in the future if the process is successful.
The government may also want to continue to engage with companies that were unsuccessful in Track 1 leading up to Track 2. This could include providing feedback on why the application was unsuccessful, highlighting additional areas for improvement and encouraging continued engagement. This could ensure the applicant builds on its submission and is better positioned for the next Track rather than being discouraged.
Each Track could start with the publication of a range of documents to bring clarity to the process:
- entry criteria guidance – covering technology readiness level (mature versus novel technology); progress on design, licensing and regulatory engagement; progress on development consents, permits and stakeholder engagement; cost estimates; technical expertise; potential socioeconomic benefits and procedures for managing specific risks. The criteria need to be set appropriately to attract the right balance of feasible projects that will deliver the target in line with the UK’s decarbonisation ambitions and desired electricity mix at the proposed date
- roadmap – this could cover the submission deadline, the timeline and the various milestones for the process
- parameters for RAB negotiations – this could cover the level of government funding (DEVEX and CAPEX, government support package and revenue support) in sufficient detail to give applicants enough clarity on the funding available before they enter the process.
Communicating the entry criteria, the roadmap and the parameters for RAB negotiations could give project developers and investors clarity and confidence in the process. Announcing the shortlisted projects on time, giving regular updates on RAB negotiations and concluding the negotiations within the timeframe specified in the roadmap would strengthen confidence and reduce regulatory uncertainty in the nuclear sector.
A prerequisite to setting Track negotiations would be for the government to have a site strategy.
Figure 2. Project sequencing for nuclear new build