Government to discuss part-funding new Wylfa
The new nuclear power station at Wylfa could be part-funded by government, according to a report.
Concern over the cost of the project to consumers is driving a consideration of alternative financing models, the Financial Times reported yesterday. It comes in the wake of criticism of the subsidy agreement for Hinkley Point C, which guaranteed a price of £92.50 per megawatt hour over 35 years.
This has been compared to the £57.50 over 15 years agreed for two major offshore wind projects in the latest round of contract for difference auctions this autumn.
Last month the Commons public accounts committee criticised the Hinkley Point subsidy, saying it represented a bad deal for consumers.
And in June the National Audit Office (NAO) said that delays and a fall in the wholesale price of electricity meant the lifetime cost to billpayers of the Hinkley Point subsidy had mushroomed from £6bn to £30bn.
The NAO said the Government should have considered alternative funding models such as taking a 50% equity stake in the project, which could have almost halved the strike price to £48.50 per megawatt hour.
According to the FT, an injection of equity by the UK and Japanese governments is one of the funding options being considered for Wylfa Newydd, along with using their financial strength to lower the cost of debt finance.
The paper also quotes the chief executive of Wylfa developer Horizon, Duncan Hawthorne, as saying that Treasury officials are “fully engaged” with Horizon and “committed to finding a solution” that would allow the new power station to be built more cheaply.
But Mr Hawthorne also said that Horizon’s owner, Hitachi, wanted to see agreement with the Government on heads of terms “by the middle of next year”, suggesting that otherwise the Japanese company might walk away from the project.
He added: “There is definitely a point at which the Hitachi board is going to say, ‘this is too much exposure’.”
A spokeswoman for Horizon said the company could not comment on discussions about finance except that the company was “working hard in discussion with the Governments of Japan and the UK to get the right solution that delivers an affordable price for our power, and an investible project.”
She added: “We have also made clear from the point at which Hitachi acquired Horizon that we expect to find additional sources of funding prior to the construction phase.”
Last week Wylfa Newydd passed an important milestone when the design for its reactors was approved by regulators. The Office for Nuclear Regulation, Environment Agency and Natural Resources Wales said the UK advanced boiling water reactor (UK ABWR), designed by HitachiGE, meets regulatory expectations on safety, security and environmental protection.
A BEIS spokesperson said: “The government recognises the vital role new nuclear has to play as part of our energy mix as we transition to a low-carbon economy.
“In our Clean Growth Strategy, we committed to progress discussions with nuclear developers about how future projects will be financed. This is so that we secure a competitive price for projects in the pipeline and ensure the UK benefits economically from them.”
The possibility of alternative financing models being explored for Wylfa Newydd will also be of interest to the developers of Swansea Bay tidal lagoon, whose own discussions with Whitehall have made slow progress this year.
In his review into tidal energy published earlier this year, former energy minister Charles Hendry said alternative structures should be investigated for providing financial support for lagoons, which recognised the long lifetime of such schemes.
On Monday the FT reported that ministers had “gone cold” on the lagoon because of the high subsidy costs – averaging £89.50 per megawatt hour over 90 years – being sought.