The United Kingdom (UK) is throwing its weight behind nuclear energy amid spiking natural gas prices and an effort to generate more carbon-free power.
The UK will provide 100 million pounds of funding to back the development of the Sizewell C nuclear project, according to a government statement.
The project, located in Suffolk and led by French electric utility company EDF, is intended to produce 3.2 GW of power for around 6 million homes. The UK seeks greater energy security as prices continue to grow, the statement said.
“In light of high global gas prices, we need to ensure Britain’s future energy supply is bolstered by reliable, affordable, low carbon power that is generated in this country,” said Business and Energy Secretary Kwasi Kwarteng. “New nuclear is not only an important part of our plans to ensure greater energy independence, but to create high-quality jobs and drive economic growth.”
Nuclear power provides a largely carbon-free means of electricity generation. It is becoming increasingly more attractive, as governments and investors chart long-term plans to reduce emissions that cause global warming. However, the EU remains split on whether nuclear power and natural gas can be labeled as sustainable, due to potential leaks and problems with waste disposal.
Prices on electricity from nuclear generation are much less dependent on input fuels. By contrast, power generation from natural gas increasingly follows fluctuations in gas prices.
The UK funding for Sizewell C will support ongoing project development. The UK additionally hopes to attract further financing from private investors and to maximize investor confidence that Sizewell C is a nationally significant project, according to the statement.
The decision comes as ministers seek a final investment decision on at least one large-scale nuclear power station during the current parliament session.
The details are such: The funds represent an option fee that will be invested by EDF into the project to push it to maturity, lure investors, and move on to the next phase in negotiations.
In return, the government will take some rights over the land of the Sizewell C site and EDF’s shares in the Sizewell C company, providing opportunities to continue to develop nuclear or alternative low carbon energy infrastructure on the site should the project not ultimately be successful.
If Sizewell C reaches a final investment decision, the government will be reimbursed the £100 million option fee with a financing return, either in the form of cash or an equity stake in the project.
If the project does not reach this important milestone, then the government would ask for either the Sizewell C Company shares or the Sizewell C site. If EDF is unable to provide these assets as requested by the government, the money will be refunded by EDF together with a financing return.
This is not the first time the UK has used the option investment mechanism.
Last year, £210 million was also invested into a Rolls-Royce venture to design the UK’s first Small Modular Reactor (SMR), pioneering the next generation in advanced nuclear generation.
The appearance of guaranteed support – both financial and from a government body – should provide investors greater confidence to move forward with the project.