RAB model may have saved Wylfa Newydd nuclear project

Access to the regulated asset base (RAB) financing model may have helped to save Hitachi’s plans to build a new nuclear plant in north Wales, an executive who worked on the project has told MPs.

The opening session of the Grand Committee, which has been set up by the House of Commons to scrutinise the government’s new legislation to allow the use of the RAB model for new nuclear projects, took place on Tuesday (16 November).

The mechanism, which has already been used for other large infrastructure projects such as the Thames Tideway Tunnel, enables developers to start receiving revenues before they are completed.

Last year, the Hitachi-backed Horizon consortium announced that it had withdrawn from the project to build a new nuclear power plant at Wylfa Newydd on the Isle of Anglesey after ploughing more than £2 billion into its development.

David Powell, vice-president for GE Hitachi’s nuclear power plant business in the UK that would have supplied the reactors for Wylfa Newydd, was quizzed by shadow energy minister Alan Whitehead on whether the company would have taken a different view if it had been offered support under an RAB-style model.

Powell said: “One of the big issues was the project’s financing aspects. It takes considerable time and a lot of effort to build two large-scale reactors and I think that the RAB model could have helped.

“Obviously that is history now, and we would have to go back and look at that, but I think it would have helped at least in being able to move forward with the project.”

Julia Pyke, director of financing for EDF’s Sizewell C nuclear project, told the committee that “fleet effect” cost reductions – touted as a major benefit of rolling out a string of nuclear plants – cannot be achieved unless the RAB model is introduced.

She said: “We have to make nuclear financeable, like offshore wind, and look for that fleet-build, cost-minimisation approach. The offshore wind industry has done a great job through being able to predict the opportunities to build more wind farms. We want that same fleet approach.”

Pyke also said the £1.7 billion of direct investment in a large-scale nuclear plant announced by the government in last month’s budget has not been explicitly linked to Sizewell C.

Plans for the Suffolk plant are the most advanced for a nuclear project in the UK following the withdrawal by Horizon and Toshiba from their respective Wylfa Newydd and Moorside schemes.

Pressed by shadow climate change minister Matthew Pennycook on Chinese nuclear company CGN’s controversial 20% stake in the Sizewell project, Pyke said that “whether CGN chooses to invest at financial close, and the extent to which it chooses to invest, is a matter for CGN itself and the UK government.

“The RAB model is designed to bring in a lot more British financing and reduce reliance on overseas investors.”