Government has limited ‘scope’ to directly invest in nuclear

The government’s scope for directly investing in nuclear projects is limited by the public finance rules, a government minister has said.

Greg Clark, secretary of state for business and energy, said in June that he is considering a recommendation by the National Audit Office that the government could cut the cost of Horizon’s Wylfa plant by taking an equity stake in the project.

However, more than four months later, the government is still locked in discussions with nuclear developers about how their new build projects can be financed without either tax or bill payers taking a heavy hit.

Richard Harrington, junior ministerial in the Department for Business, Energy and Industrial Strategy (BEIS), told a fringe meeting at the Conservative party conference in Birmingham that the battered public finances are a hurdle to the government taking a stake.

He said: “The government is reluctant to do anything that will badly affect the public sector borrowing requirement (PSBR). Taking equity stakes, irrespective of the merits or demerits, is literally adding to the PSBR.”

However, he highlighted as a “clever funding mechanism” the regulated asset base (RAB) model used to finance the Thames Tideway super sewer. This provides investors with a return while the project is under construction and not just once it is generating revenues.

Referring to the RAB, he said: “We are seriously considering this. Discussions are going on about that as there are about other systems of funding.

“It’s very complex but the government would not be sensible if it ignored this as a model for future funding.”

Nuclear is potentially a good bet for private investors, he said: “When we get going with our new nuclear policy we will find the markets because there is a fortune to be made by stakeholders in this.”

And he confirmed the government’s commitment to nuclear generation as essential to reducing emissions.

“The gap will not be filled by renewables: it’s not enough.”

Jamie Reed, head of development and community relations at Sellafield Ltd, said there is no conflict between nuclear and renewable energy.

“This will be absolutely essential if we are serious about decarbonising our economy and we are and if we are serious about maintaining security of energy supply in the country.

“We need to stop pontificating about this: there is no fight between renewables and nuclear, we need them both.”