Treasury ‘still unconvinced about RAB model for nuclear’

The Treasury has “not been enthused” by the new mechanism for financing nuclear power stations, which was put forward by the Department for Business, Energy and Industrial Strategy, according to the government’s chief infrastructure adviser.

Speaking at an online event, which was organised by the Parliamentary Renewable and Sustainable Energy Group (Praseg) , National Infrastructure Commission (NIC) chair Sir John Armitt commented on the regulated asset model (RAB) model consulted on last year.

Under this model, which is already used for other types of infrastructure such as the Thames Tideway tunnel but has never before been used for financing nuclear projects, investors are allowed to recoup revenues before their assets are operating.

Referring to the ongoing debate about whether to extend the RAB to nuclear power development, Armitt said: “The Treasury has not been enthused about that.”

“A simpler answer would be for government to bear the construction risk and sell it to the private sector.”

And pointing to new figures in recently published planning documents, which show that the cost of EDF’s proposed Sizewell C plant has risen to £20 billion, he expressed concern about the nuclear industry’s ability to stick to its budgets.

“Despite all of the promises and hopes from the nuclear lobby, when you look at the track record it is not good at getting costs down, especially compared to renewables.”

Armitt also admitted that the NIC had got into “hot water” with the BEIS department over its decision to recommend only one more new nuclear power station before 2025 when its National Infrastructure Assessment was published in 2018.

But he expressed confidence that the ebbs and flows in demand for electricity could be evened out by then, thus reducing the need for more nuclear generation.

“Hopefully by 2025, we will be able to rely on much smarter systems and we won’t have to rely on nuclear.”

“At the moment, it’s not possible to get another big nuclear power station off the grid. It’s a key area of government policy that has to be resolved, otherwise nuclear will not be part of the mix so it will be an academic discussion.”

The former 2012 Olympics supremo also warned that the government must get on with publishing its long-awaited heat in buildings strategy, which business secretary Alok Sharma has already admitted to the BEIS select committee would miss its promised summer publication date.

“It’s important that we get to the mid-2020s with a clear direction. If we don’t, zero carbon is not going to be a tenable option because heat is so important to decarbonisation.”