Energy & Infrastructure Insight - Issue 2

Issue link:

Contents of this Issue


Page 16 of 23

17 HOW HAS INDUSTRY RESPONDED? The Government believes that the RAB model will enable new nuclear to be built at scale by both enabling access to lower cost capital and ensuring greater value for money to consumers than the FiT CfD model. The question is: does industry agree? Initial responses have been broadly positive. The industry has welcome the apparent simplicity of the model. The industry has also acknowledged that the RAB model has the potential to significantly reduce the cost of capital. As always, however, the devil will be in the detail— particularly as this model has never been applied to projects as complex and costly as new-build nuclear. Further, it is still to be considered whether the nuclear RAB model offers sufficient value to money for consumers and taxpayers. On one hand, if the model reduces the cost of capital this should also generate a welcome reduction in new-build nuclear electricity prices. On the other hand, given consumer sharing of liability for cost overruns, and the fact that Allowed Revenue is payable to the Project Company from day one (i.e. whether or not the relevant plant is ever completed), both consumers and taxpayers would also bear some significant risks. While the UK's Nuclear Industry Association (NIA) believes BEIS has identified a viable funding model in the RAB, it notes that the model is still very "high level". The NIA has also noted that flexibility will be required if the model is to be adapted to different nuclear technologies, including small modular reactors. FOR MORE INFORMATION PLEASE CONTACT: THOMAS COLES Senior Associate London T +44 20 7655 5122 thomas.coles@ NICK BUCKWORTH Partner London T +44 20 7655 5085 nbuckworth@ GEORGE BOROVAS Partner Tokyo/ London T +81 3 5251 0214 T +44 20 7655 5000 george.borovas@ NEXT STEPS The consultation phase has now closed and BEIS is considering the responses. This is the first step along what is likely to be a long road. Still, the industry response to date has shown that the RAB Model may well be the Government intervention which is needed to revive the U.K.'s nuclear new-build program.

Articles in this issue

Links on this page

view archives of Energy - Energy & Infrastructure Insight - Issue 2