Sizewell C could add £19 to yearly bills, spending watchdog says, but private investor may fail to keep costs down
The UK’s £38.2 billion (c $51 billion) Sizewell C (SZC) nuclear reactor is set to offer investors high rewards for little exposure
to risk, while the consumer will see a £19 ($25.50) annual hike to their bills, according to a public sector spending watchdog.
A report from the National
Audit Office on plans for building the second in a new generation of nuclear
power plants — Sizewell C in Suffolk — finds that the current estimated impact
on consumers “relies on some big assumptions” about chance of further cost
increases.
Gareth Davies, head of
the NAO, said: “Sizewell C forms a significant part of the government’s plan
for a secure and affordable clean energy supply. There has been a concerted
attempt to learn from the problems of previous nuclear power construction
projects and other large infrastructure schemes. This has resulted in a novel
financing structure and DESNZ will need to monitor the risks to taxpayers and
billpayers closely.”
Construction started
in April 2024, although the Department for Energy
Security & Net Zero (DESNZ) did not finalize its deal to complete the build
with French energy firm EDF until July 2025. The government chose to create
a joint venture company — Sizewell C Ltd — with DESNZ taking a minority stake
and private investors, including EDF, taking the lion’s share. The government’s
National Wealth Fund will provide £36.6 billion (c $49 billion) in finance, while £5 billion will
come from commercial lenders.
The project plans to keep costs down by
learning lessons from Hinkley Point C (HPC), which is expected to start
generating electricity in 2030 after originally targeting 2025. In addition to the delays, cost have climbed to £35 billion from an initial estimate of £18 billion.
The mammoth building
project is part of the government’s plans to meet rising demand for electricity
— not least from datacenters and electric vehicles — while achieving its targets
for reducing greenhouse gas emissions and reaching net zero. The government
expects SZC to power the equivalent of 6 million homes for
at least 60 years.
Even though the Sizewell
C company claims its build plans benefit from delays to Hinkley Point C, and
will cost less to build, consumers may still end up
paying more for the electricity the new plant produces because Hinkley Point C’s “price was set
before its cost overruns and SZC is affected by the rise in borrowing costs
since then,” the NAO said.
Part of the build cost
will come from an increase in household electricity bills of £4 in the current
financial year, rising to a peak of £19 to £21 a year in the first decade of the
plant’s operation.
The government admits that electricity from
SZC will be more expensive compared with other forms of renewable generation, but it argues there is an overall benefit in the mix of supply. Solar and wind
power are cheaper on the face of it, but they are also unreliable, creating hidden
costs in balancing the energy grid.
“DESNZ’s modelling shows lower total system
costs with SZC. This is because intermittent renewables require additional
transmission infrastructure, reserve generation capacity, and other balancing
services, which those standard generation cost metrics do not capture,” the
report said.
The NAO points out that the current estimated costs rely on some “big assumptions.” At the same time, private investors’ exposure to risk is not balanced with their
rewards.
A “government support package” provided by
DESNZ includes contractual commitments that limit risks to private investors of
cost overruns and certain unlikely but high-impact risks. This means private investors
share construction risk with consumers and taxpayers but are exposed to “tail‑end”
scenarios above the higher regulatory threshold, in a deal designed to attract
private investors.
“The sharing of risk with the taxpayer and consumer appears to have
reduced the cost of financing the project, but the rewards for investors
still appear high, given their limited exposure to project risk. The
extent to which investors will be incentivized to control project costs in the
way DESNZ assumes is unclear,” the report said.
Only future generations may discover whether
the project is worth it in the end. “The modelled benefits only start to
outweigh those costs after 2064,” the NAO said. ®