Why taxpayers will share the pain of cost of building Sizewell C nuclear power plant
It was as long ago as 1982, back in the pre-privatisation days of the Central Electricity Generating Board, that the idea of building a new nuclear power plant in Suffolk – Sizewell C – was first mooted.
At that time, construction had yet to begin on the neighbouring Sizewell B, which for now remains the youngest of Britain’s operating nuclear power plants.
The first planning application was filed as long ago as 1989 and there have been countless false starts since.
The theoretical cost of construction was pushed up when Margaret Thatcher‘s government insisted that any company building a new nuclear power station would also have to have funding in place for not only its construction but also for the disposal of waste and the eventual decommissioning of the plant.
That proved a major obstacle to new nuclear build which was then further held up by Tony Blair’s reluctance to take on opponents of new nuclear build in his own party – although, in 2006, he eventually committed to the cause, as did his successor, Gordon Brown.
Hinkley Point C, the UK’s first new nuclear power station in a generation, was the upshot.
New financing key to unlocking nuclear
Yet the construction of the Somerset plant is years behind schedule. EDF, the French energy giant building it and which will construct Sizewell C, originally envisaged it opening in 2017. Hinkley Point C is also billions of pounds over budget.
And the coalition government’s decision to guarantee EDF a fixed price for the energy generated at Hinkley Point C, which was necessary to persuade the French company to go ahead with the project, was subsequently heavily criticised.
The National Audit Office (NAO) said the agreement had locked consumers into a “risky and expensive” project – although, ironically, the deal now looks good value following this year’s spike in wholesale electricity prices.
The NAO’s report did, though, make subsequent governments wary, once more, of new nuclear build.
Theresa May immediately demanded a review of Hinkley Point C on becoming prime minister and, even though her government ultimately approved the project, she also took note of a suggestion in the NAO’s report that new funding models be considered for subsequent new nuclear power stations.
That, in a nutshell, is why it has taken so long for Sizewell C to finally get off the ground. These plants are so monstrously expensive to build that no private sector company is willing to bear all of the risks themselves without some support from government. It is also why the likes of Japan’s Hitachi and South Korea’s Kepco have reluctantly walked away from building new nuclear plants at Wylfa on Anglesey, Oldbury in Gloucestershire and Moorside in Cumbria.
So key to unlocking the project has been coming up with a new way of financing it.
The solution
The government’s solution is the funding model known as Regulated Asset Base (RAB) – the means by which other major infrastructure projects, such as the £4.3bn Terminal 5 at Heathrow Airport, have been financed.
Under this arrangement, rather than guarantee whoever builds Sizewell C a set price for the electricity it generates, taxpayers will be taking risk alongside other investors.
This is why the government is investing an initial £700m in the construction of the plant although, with the total cost likely to come in at between £20-£30bn, that will only go so far.
The other elements in the RAB model include electricity consumers – households and businesses – paying for the plant while it is still under construction through their bills.
This is how, for example, the £4.13bn Thames Tideway tunnel now under construction is being financed. A share of the cost of the project, which is aimed at preventing sewage spills into the Thames estuary as well as future-proofing London’s sewerage system for expected population growth, is being met by customers of Thames Water on their bills.
The arrangement means taxpayers share in the pain of any cost-overruns. Other crucial aspects of the RAB model include an ‘economic regulatory regime’ (ERR), overseen by an independent regulator, who determines the extent to which investors and taxpayers will share the risks by setting the amount of revenue that EDF will be allowed as it builds Sizewell C.
Unknown sums but less risk
The government has yet to make clear the sum that billpayers will have to contribute towards the new power station but newspaper reports have suggested it will be in the region of an additional £1 per month per customer.
The Department for Business, Energy and Industrial Strategy said today that the lower cost of financing a large-scale nuclear project through this scheme was “expected to lead to savings for consumers of at least £30bn on each project throughout its lifetime” compared with the existing arrangements governing the financing of Hinkley Point C.
Big Carl, the world’s biggest crane, in action at Hinkley Point C nuclear power plant near Bridgwater in Somerset
So in theory, while there is a risk attached to building Sizewell C, the funding model proposed appears to be less risky than the way in which Hinkley Point C has been financed. The ultimate cost to electricity consumers in the latter case was dictated simply by a decision made a decade ago on the price that EDF would be promised for its power. It currently looks good value but, for much of the last decade, it has not.
Yet the RAB model does have its critics.
Less incentive to control costs
Steve Thomas, emeritus professor of energy at the University of Greenwich, has argued that, by removing construction risk from EDF, the company has less of an incentive to control construction costs. With Hinkley Point C, EDF has had to bear the cost of any over-runs. With Sizewell C, taxpayers would be on the hook.
Professor Thomas argues that this is particularly worrying because he believes EDF’s cost estimates are too optimistic. He has also argued that the £1-a-month levy on household bills, should it come to pass, is also potentially flawed because of assumptions it is making about borrowing costs.
Less risky, for now, appears to be the ownership of Sizewell C. Objections to the involvement of the Chinese state-owned company China General Nuclear, originally raised by the May government, have resulted in the company now being bought out of its interest in Sizewell C. The project will instead be jointly owned by EDF and the UK government – although there has been speculation that new investment could also be brought in from the sovereign wealth fund of the United Arab Emirates.
There are, though, some other objections. The idea of building small modular reactors by companies like Rolls-Royce has won support on the basis that the technology could be cheaper and more scalable than big projects like Sizewell C. They would also, in theory, involve less cost in adapting the national grid.
Prime Minister Boris Johnson during a visit to EDF’s Sizewell B nuclear power station in Suffolk.
The EDF question
Another risk concerns EDF itself. The company recently had to be bailed out and fully nationalised by the French government following the spike in wholesale prices.
But this means EDF is now effectively run at the behest of the French government. France is also anxious to build new nuclear power plants. Should EDF become cost-constrained it is perfectly plausible that the French state would direct it to focus on its domestic projects rather than its ones overseas.
There have already been hints of this.
EDF’s former chairman and chief executive Jean-Bernard Levy, who was effectively fired by President Macron after opposing nationalisation, was a strong supporter of Sizewell C but was hampered by the French government’s constant demands for more information on the project.
One final risk is that electricity demand does not increase in the way that the government is assuming and that Sizewell C’s output may not be needed.
However, with electricity demand projected to double as the UK decarbonises, that feels less worrisome than some other factors – and particularly now Vladimir Putin’s war on Ukraine has highlighted the importance of the UK having more indigenous sources of energy.
Piers Morgan, the broadcaster and journalist, is raising tens of millions of dollars of funding from heavyweight investors as he seeks to turn Uncensored, his YouTube-based venture, into a broad-based global media business.
Sky News can exclusively reveal that Mr Morgan is in the process of finalising a roughly $30m (£22.5m) fundraising for Uncensored that will give it a pre-money valuation of about $130m (£97m).
The new investors are understood to include The Raine Group, the New York-based merchant bank, and Theo Kyriakou, the media mogul behind Greece’s Antenna Group, owner of a stake in London-based digital venture The News Movement.
Michael Kassan, a marketing veteran, is understood to be advising the business on advertising-related matters and may also invest in a personal capacity, according to insiders.
A number of family offices from around the world are also said to be in talks to become shareholders in Uncensored.
Joe Ravitch, the prominent American banker and Raine co-founder who has advised in recent years on the sale of Chelsea and Manchester United football clubs, is said to be joining the Uncensored board as part of the capital-raising.
The move comes nearly a year after Mr Morgan announced his departure from Rupert Murdoch’s British empire through a deal which handed him full control and ownership of his Uncensored YouTube channel.
Allies of Mr Morgan said this weekend that some details of the fundraising were likely to be confirmed publicly in the coming days.
While the size of his personal stake in the business was unclear this weekend, insiders said the crystallisation of a $130m valuation would mean that Mr Morgan’s economic interest was, on paper, worth tens of millions of pounds.
“The ambition is to grow this into a billion dollar company within a few years,” said one person close to the discussions with investors.
“With the scale of audiences now being driven to digital channels and the commercial opportunities there, that is definitely achievable.”
The former Mirror editor, whose career has also encompassed stints at ITV, with CNN in the US and Mr Murdoch’s global media conglomerates News Corporation and Fox, is now drawing up plans to transform Uncensored into a more diverse digital media group.
This is expected to include the launch of a series of ‘verticals’ attached to the Uncensored brand, including channels dedicated to subjects such as history, sport and technology.
Mr Morgan is already said to be in talks with prominent figures to spearhead some of these new strands, with a chief executive also expected to be recruited to drive the growth of the overall Uncensored business.
His appetite to establish a YouTube-based global media network has been driven by the scale of the global audiences he has drawn to some of his recent work, including interviews with the footballer Cristiano Ronaldo and the former world tennis number one Novak Djokovic.
Piers Morgan interviewed Ronaldo. Pic: Reuters
Both of those athletes have collaborated with Mr Morgan by posting parts of their exchanges on social media platforms, attracting hundreds of millions of views.
Mr Morgan’s access to President Donald Trump, whom he has interviewed on several occasions, is also likely to be a factor in the timing of Uncensored’s expansion strategy.
While many ‘legacy’ news and media networks remain hamstrung by inflated cost bases, Mr Morgan’s decision to go it alone and focus on developing the Uncensored brand reflects his belief that the news and media industries are ripe for disintermediation by channels tied to prominent, and sometimes controversial, individual journalists and presenters.
The Piers Morgan Uncensored YouTube channel has 4.3 million subscribers, roughly half of whom are from the US.
Of the remaining 50%, however, only a minority are British, with a significant number based in the Middle East, South Africa and parts of Asia.
Novak Djokovic at Flushing Meadows. Pic: AP
This has fuelled Mr Morgan’s view that there is journalistic and commercial mileage in creating content on issues which historically might have struggled to generate a significant international audience – such as ongoing military and political tension between India and Pakistan, and the white farmer ‘genocide’ furore in South Africa.
Under the deal he struck with Mr Murdoch in January this year, Mr Morgan has a four-year revenue-sharing agreement that involves News UK receiving a slice of the advertising revenue generated by Piers Morgan Uncensored until 2029.
Mr Morgan had returned to Mr Murdoch’s media empire in January 2022 with a three-year agreement that included writing regular columns for The Sun and New York Post, as well as presenting shows on the company’s now-folded television channel, Talk TV.
He also recently released a book, Woke Is Dead, which was published by Mr Murdoch’s books subsidiary, Harper Collins.
As part of his new arrangements, Mr Morgan also signed a deal with Red Seat Ventures, a US-based agency which partners with prominent media figures and influencers to help them exploit commercial opportunities through sponsorship and other revenue streams.
Among those Red Seat has worked with are Megyn Kelly, the American commentator, and Tucker Carlson, the former Fox News presenter.
While many well-known American news media figures are followed because of their partisanship and affiliations to either the political left or right, Mr Morgan has positioned himself as a ‘ringmaster’ who is not ideologically hidebound.
His plans come at a time of continuing upheaval in the global media industry, with Netflix agreeing a landmark $83bn deal this week to buy the Hollywood studio Warner Bros.
In the UK, Sky, the Comcast-owned immediate parent company of Sky News, is in talks to acquire ITV’s broadcasting business, while the Daily Telegraph newspaper could soon find itself as a stablemate of the Daily Mail if a proposed £500m deal is successful.
Meanwhile, Reach, the London-listed newspaper publisher which owns the Daily Express and the Daily Mirror, now has a market valuation of just £176m – less than double that of Mr Morgan’s new standalone digital media company.
When Sky News revealed Mr Morgan’s move to separate from News UK earlier this year, he said: “Owning the [Uncensored] brand allows my team and I the freedom to focus exclusively on building Uncensored into a standalone business, editorially and commercially, and in time, widening it from just me and my content.
“It’s clear from the… US election that YouTube is an increasingly powerful and influential media platform, and Uncensored is one of the fastest-growing shows on it in the world.
“I’m very excited about the potential for Uncensored.”
This weekend, he added: “I am very excited that some of the most experienced and successful players in the global media industry, like Joe, Michael and Theo, share my ambitious vision for Uncensored.
“This is the future of modern media.”
It’s a debate that has raged since the end of the COVID pandemic but, despite regulatory scrutiny, it’s fair to say there’s been no clear answer to accusations that UK drivers pay over the odds for fuel.
What was once a promotional loss leader for supermarkets desperate for drivers to fill their car boots with groceries, unleaded and diesel costs have been unusually high for years.
Fuel retailers say there is a simple explanation: rising costs being passed on to motorists.
But critics argue there is a reason why the Competition and Markets Authority (CMA) has consistently found that we’re paying more than we should be – and that the disparity between wholesale costs and pump prices has got worse in recent months.
So: who’s right?
What the oil data tells us
Oil prices are well down on levels seen in January (between $75 and $82 a barrel) but fuel prices are clearly not.
In recent weeks, Brent crude has traded in the range of $62 to $64 per barrel and yet drivers are currently, on average, paying £1.37 a litre for petrol and £1.46 for diesel.
The average pumps costs in January stood at £1.39 and £1.45 – despite the significantly higher oil costs seen at the time.
Prices can be affected by all sorts of factors including the value of the pound versus the oil-priced dollar, but that disparity is notable.
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Trump’s ambassador tells UK to drill for oil
There is another, emerging, factor to consider
It might surprise you to learn that the UK now has only four operational refineries to produce petrol and diesel after two major sites shut this year.
The decline has sparked an industry warning of a crisis due to high UK carbon charges, imposed by the government, that have made domestic fuel producers uncompetitive versus imports.
The loss of the refinery at Grangemouth this spring has been particularly acute as it left Scotland without domestic production and at the mercy of a more complicated and expensive delivery structure.
Fuel retailers say the impact has been minimal so far, mainly due to remaining UK refineries raising production.
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‘Drill baby drill’
The case for the prosecution
Quite simply, fuel price campaigners and motoring groups have long accused the industry of raising its profit margins.
Supermarkets focused price investment elsewhere as the cost of living crisis took hold but the days of Asda (before it was bought by the fuel-focused Issa brothers and private equity) leading a sector-wide fuel price war are long gone.
Reports by both the AA and RAC this week highlight price spikes despite a 5p slump in wholesale costs a fortnight ago.
The AA said: “At the height of the spike, it matched what had been seen in mid June. Then, the petrol pump average reached a maximum of 135.8p by late July.
It said that government data had since shown pump prices at levels not seen since March.
The body questioned the reasons behind that disparity and also pointed towards, what it called, a postcode lottery for pump costs with gaps of up to 9p a litre between towns only 10 miles apart.
The RAC declared on Thursday that pump prices rose at their fastest pace in 18 months during November, with diesel at a 15-month high.
The critics have also included regulators as monitoring of fuel retailers by the CMA since its original market study has consistently found that drivers have been excessively charged.
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‘It’s either keep warm or eat’
What’s the fuel industry’s position?
It pleads “not guilty”.
The bodies representing retailers make the point that the CMA and its wider critics fail to take into account huge rises in costs they have faced over the past four years – costs which are being/have been passed on across the economy.
These include those for energy, business rates, minimum wage, employer national insurance costs and record sums arising from forecourt crime.
The Petrol Retailers’ Association (PRA), which represents the majority of forecourts, told Sky News that average margins across the sector are the same today as they were a year ago at between 3% to 4% after costs.
It suggests no fuel for the fire surrounding those profiteering allegations but that rising costs have been passed on in full.
Pic: iStock
What has the regulator done?
The CMA’s road fuel market study committed to monitor the market and recommended a compulsory fuel finder scheme to help bolster competition. That was two-and-a-half years ago.
Limited data has been widely available via motoring apps ahead of the start of the official scheme, expected in spring next year, which will bring real-time pricing into a driver’s view for the first time.
The CMA hopes that by forcing each retailer to divulge their prices in real time, customers will vote with their feet.
In the regulator’s defence
The CMA could argue that government has dragged its heels in implementing its fuel finder recommendation.
While the Conservatives accepted it, Labour is now pushing it through parliament.
The regulator can only act within the powers it has been given. It would say that it can’t threaten or hand out fines until its recommendations are in play and they have been clearly flouted.
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What next for the UK economy?
So who’s right?
This is a debate all about transparency but we clearly don’t have a full view on the complicated, and shifting, supply chain which can influence pump prices.
The CMA hopes that postcode lotteries for pump costs will ease once more drivers are aware of the ability to compare and shop around.
But the main reason why this issue remains unresolved is that the CMA’s findings have been incomplete to date.
Its determinations that pump costs have been excessive have all been made without taking retailers’ operating costs into full account.
Pic: Reuters
Why we are closer to an answer
The CMA’s next market update is expected within weeks and will, for the first time, take more extensive cost data into account.
A spokesperson told Sky News: “We recommended the Fuel Finder scheme to help drivers avoid paying more than they should at the pump, and the government intends to launch it by spring 2026.
“The scheme will give drivers real-time price information, helping them find the cheapest fuel and putting pressure on retailers to compete.
“We looked closely at operating costs during our review of the market, and they formed a key part of our final report in 2023.
“As we confirmed in June, we’ve been examining claims that these costs have risen and will set out our assessment in our annual report later this month.”
The hope must be that both sides involved can accept the report’s findings for the first time, to bring this bitter debate to an end once and for all.”
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