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.
Business
Energy minister says ‘there’s no shortcut’ to bringing down bills – as price cap rise announced
Households and businesses will have to wait for energy bills to fall significantly because “there’s no shortcut” to bringing down prices, the energy minister has told Sky News.
Speaking as Chancellor Rachel Reeves considers ways of easing the pressure on households in next week’s budget, energy minister Michael Shanks conceded that Labour’s election pledge to cut bills by £300 by converting the UK to clean power has not been delivered.
It comes as Ofgem announced the average annual energy bill will rise by 0.2% in January, despite wholesale costs falling.
Major forecasters Cornwall Insight had predicted a 1% drop – but the energy regulator has moved in the opposite direction. Between January and March, the typical annual dual fuel bill will be £1,758 – up from the current £1,755 cap.
The UK has the second-highest domestic and the highest industrial electricity prices among developed nations, despite renewable sources providing more than 50% of UK electricity last year.
“The truth is, we do have to build that infrastructure in order to remove the volatility of fossil fuels from people’s bills,” Mr Shanks said.
“We obviously hope that that will happen as quickly as possible, but there’s no shortcut to this, and there’s not an easy solution to building the clean power system that brings down bills.”
His comments come amid growing scepticism about the compatibility of cutting bills as well as carbon emissions, and growing evidence that the government’s pursuit of a clean power grid by 2030 is contributing to higher bills.
While wholesale gas prices have fallen from their peak following the Russian invasion of Ukraine in 2022, energy bills remain around 35% higher than before the war, inflated by the rising cost of reducing reliance on fossil fuels.
The price of subsidising offshore wind and building and managing the grid has increased sharply, driven by supply chain inflation and the rising cost of financing major capital projects.
In response, the government has had to increase the maximum price it will pay for offshore wind by more than 10% in the latest renewables auction, and extend price guarantees from 15 years to 20.
The auction concludes early next year, but it’s possible it could see the price of new wind power set higher than the current average wholesale cost of electricity, primarily set by gas.
Renewable subsidies and network costs make up more than a third of bills and are set to grow. The cost of new nuclear power generation will be added to bills from January.
The government has also increased so-called social costs funded through bills, including the warm home discount, a £150 payment made to around six million of the least-affluent households.
Gas remains central to the UK’s power network, with around 50 active gas-fired power stations underpinning an increasingly renewable grid, and is also crucial to pricing.
Because of the way the energy market works, wholesale gas sets the price for all sources of electricity, the majority of the time.
At Connah’s Quay, a gas-fired power station run by the German state-owned energy company Uniper on the Dee estuary in north Wales, four giant turbines, each capable of powering 300,000 homes, are fired up on demand when the grid needs them.
Energy boss: Remove policy costs from bills
Because renewables are intermittent, the UK will need to maintain and pay for a full gas network, even when renewables make up the majority of generation, and we use it a fraction of the time.
“The fundamental problem is we cannot store electricity in very large volumes, and so we have to have these plants ready to generate when customers need it,” says Michael Lewis, chief executive of Uniper.
“You’re paying for hundreds of hours when they are not used, but they’re still there and they’re ready to go at a moment’s notice.”
Michael Lewis, chief executive of Uniper
He agrees that shifting away from gas will ultimately reduce costs, but there are measures the government can take in the short term.
“We have quite a lot of policy costs on our energy bills in the UK, for instance, renewables incentives, a warm home discount and other taxes. If we remove those from energy bills and put them into general taxation, that will have a big dampening effect on energy prices, but fundamentally it is about gas.”
The chancellor is understood to be considering a range of options to cut bills in the short term, including shifting some policy costs and green levies from bills into general taxation, as well as cutting VAT.
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Tories and Reform against green energy
Stubbornly high energy bills have already fractured the political consensus on net zero among the major parties.
Under Kemi Badenoch, the Conservatives have reversed a policy introduced by Theresa May. Shadow energy secretary Claire Coutinho, who held the post in the last Conservative government, explained why: “Net zero is now forcing people to make decisions which are making people poorer. And that’s not what people signed up to.
“So when it comes to energy bills, we know that they’re going up over the next five years to pay for green levies.
“We are losing jobs to other countries, industry is going, and that not only is a bad thing for our country, but it also is a bad thing for climate change.”
Claire Coutinho tells Sky News net zero is ‘making people poorer’
Reform UK, meanwhile, have made opposition to net zero a central theme.
“No more renewables,” says Reform’s deputy leader Richard Tice. “They’ve been a catastrophe… that’s the reason why we’ve got the highest electricity prices in the developed world because of the scandal and the lies told about renewables.
“They haven’t made our energy cheaper, they haven’t brought down the bills.”
Mr Shanks says his opponents are wrong and insists renewables remain the only long-term choice: “The cost of subsidy is increasing because of the global cost of building things, but it’s still significantly cheaper than it would be to build gas.
“And look, there’s a bigger argument here, that we’re all still paying the price of the volatility of fossil fuels. And in the past 50 years, more than half of the economic shocks this country’s faced have been the direct result of fossil fuel crises across the world.”
Housing Secretary Steve Reed wants Britain to “build, baby, build” towards the government’s flagship 1.5 million homes target by the next election. But housebuilding in England has slowed to its lowest level in nine years, with the number of homes built falling by 6% to 208,600 in the year to March 2025.
A combination of rising building costs and weakening house prices has left “half of the country unviable (for development projects) and the other half of the country unaffordable”, Steve Turner, executive director of the Home Builders Federation (HBF), told Sky News.
Ambitions for affordability are competing with high safety and design standards, which have been pushing up costs.
The government acknowledges housing delivery has not reached required levels – but maintains building will ramp up as their policies come into effect.
Since the election, 275,000 homes have been delivered to date, compared to the 400,000 that would have needed to be on track for 1.5 million homes.
“Additional housing is now at around 200,000 homes a year and is at best flatlining. We’re still some way away from where the government wants to get to, to meet the nation’s housing need,” Mr Turner said.
The rising price of materials and labour have contributed to the increase in the cost of building homes in recent years – for example, the cost of bricks and clay products increased by over 26% in the year to August 2023.
At the same time, higher interest rates since 2022 have increased the cost of financing development, in addition to weakening buyer demand, as mortgage rates have soared.
As a result, the sales value of homes has not kept pace, eating into profit margins in a trap described as the “jaws of death” by housing developers.
While the cost of building homes has increased by just under 13% on average since September 2022, house prices have increased by less than 3% on average across Britain, while flat prices in London have decreased by 0.5%.
The government is currently consulting on emergency measures to “get spades in the ground” in London after the number of new homes starting construction in the capital plummeted to just 4,000 in the latest year to June 2025 – a fraction of the area’s 81,000 building target.
These include a funding package and temporary reductions in affordable housing targets from 35% to 20%, as well as relief from some levies.
Housebuilders have also faced increased costs from updated building design standards introduced from 2022 onwards, including fire safety rules mandating a second fire escape stairwell for tall buildings, and regulations to improve energy efficiency, ventilation, and electric vehicle infrastructure.
The greatest impact is in London. High-rise housing is more common, and additional Greater London Authority regulations require more affordable housing and additional requirements such as “dual aspect” design.
A recent report by Savills estate agency and property developers Ballymore estimates that delivering homes in Greater London now costs 10-15% more than elsewhere, thanks to these requirements.
Property developers told Sky News that new building and fire safety regulations add costs of around £21,500 per home for a two-bedroom flat in London, while community infrastructure levies add £12,000 on average and can be as high as £50,000 in some areas. New costs – a 4% residential development tax and a building safety levy costing between £1,500 and £3,500 per home – are expected to be added in the near future.
“The viability of sites is very, very strained and is snuffing out general supply of new homes from the UK’s housing pipeline,” Nick Cuff, managing director of real estate advisory and development business Urban Sketch, told Sky News.
“We’re just not funding these things properly, and we’re asking the private sector to pick up the bill in almost all cases. We are effectively seeing a cessation in development activity because it cannot support the requirements that government is placing on it now. And that’s why the numbers have dropped off a cliff in the last two years,” he added.
Affordable social housing is mostly built by private developers through a cross-subsidy model, which requires private housebuilding to be viable as well.
While some are hoping for emergency measures in London to be made permanent, others are wary of a race to the bottom.
“If at the first test, you pull back on the [affordable homes] target, what message are you sending? It must be temporary – we need to see if it does then move the market,” Rachael Williamson, director of policy, communications and external affairs at the Chartered Institute of Housing (CIH), told Sky News.
“We’ve got to manage the tension [between safety and costs] without saying ‘let’s cut corners’. History tells us where you get to with that,” she added.
Outside of London
Though these issues have been particularly fraught in London, the rest of the country also faces significant challenges.
Analysis by online property portal Zoopla finds it is now not viable to build in just under half of England, on the basis that the sales value of homes is less than the total cost of delivering a new home.
The analysis excludes figures for London, though research firm Molior separately found that housebuilding in half of London would be unviable even if housing and infrastructure contribution requirements were completely removed.
They also found that those areas where building is viable are the areas where people were less likely to be able to afford to buy, creating a mismatch between supply and demand.
The viability to develop new homes is better in the south of England, where new build prices are among the most unaffordable for buyers.
Although planning reforms have been “very positive”, Mr Turner said it only addresses one side of the equation, and that the government “needs to find a way to support buyers, which will then create confidence with house builders that ultimately they can sell the product they deliver”.
There is currently no suggestion that the government intends to revive a version of the Help to Buy scheme, which critics have argued contributed to increasing house prices and reducing affordability in the long run.
Long-term planning needed
Speculation around the upcoming budget has also added to uncertainty, and developers have called on the government to rethink proposed landfill tax changes, which would further add to building costs.
“We’ve definitely seen an increase in regulation over the last few years. Often very well-meaning regulation, but which can hinder the viability of sites and developments,” a spokesperson for the homebuilder Barratt Redrow told Sky News.
“We buy land on the basis of the costs of construction, including the regulatory burden, at the time, and obviously, if four years later, when we’ve got planning permission, it’s more expensive to build, then that is going to have an impact on whether it makes financial sense to go ahead with the development,
“As an industry and also as a business, we’re not against the right sort of regulation, but it’s important we’ve got long-term certainty because the process of buying land and building houses is so long and involves such risk,” he added.
Secretary of State for Housing, Communities and Local Government Steve Reed. Pic: PA
Housing Secretary Steve Reed said: “Today’s statistics show, in the clearest terms yet, the extent of the housing crisis we inherited and are now fixing.
“We took over a planning system that blocked rather than built, and high inflation and soaring construction costs that created a perfect storm holding back housebuilding.
“Our 1.5 million homes target is not just a number – it’s a way to give children a secure home, for young people finally to move out and enjoy independence, and for working families to have a place to call their own.
“We have already taken down the barriers that stopped this country from building, overhauled the planning system and pumped record investment into social housing. This will bring about the change we need to end the housing crisis by getting spades in the ground wherever homes are needed most.”
Development ‘hit by a perfect storm of costs’
A spokesperson for the Mayor of London said: “Through the London Plan, the mayor has been able to set the highest housing design standards relative to other parts of the country, and these standards have supported the delivery of high-quality homes in London
“However, London needs more sites coming forward to meet the capital’s housing needs, and development has been hit by a perfect storm of costs from national policy and wider economic conditions that disproportionately affects London.
“Through our proposed changes to London Plan design guidance, we are hoping to reduce the barriers to housebuilding and introduce flexibility so that planning policies are applied in line with their original intent – helping to bring developments forward. These measures will help to unblock stalled building sites, giving the mayor stronger levers to approve homes and bring forward thousands of homes more quickly.”
The Data x Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.
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