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UK government to invest £1.7bn in Sizewell C nuclear power station

UK taxpayers will face a bill of up to £1.7bn to help get the planned Sizewell C nuclear power station project to a final investment decision in the next three years, as the government looks to reboot its struggling efforts to replace the nation’s ageing reactors.

The funding was included in Wednesday’s Budget and follows an announcement by ministers this week of an overhaul of the financing model for new nuclear plants that will see households paying an upfront levy through their bills to help lower overall costs.

Prime Minister Boris Johnson has made it clear that nuclear energy must play a key part in reaching the UK’s net zero goals. Despite commitments by successive governments over the past decade to build a new generation of atomic power stations, most of the projects have collapsed as the private sector was unwilling to fund them.

Most of the UK’s existing fleet of ageing reactors, which supply 16 per cent of the country’s power, are being retired this decade, with the last one due to close in 2035.

France’s state-backed EDF is currently building Hinkley Point C in Somerset, the only new nuclear plant in the UK. Other projects including Wylfa in Wales and Moorside in Cumbria have been cancelled in recent years.

EDF also leads the Sizewell C project, which would be built on the Suffolk coast, next to the existing nuclear power plant.

Chancellor Rishi Sunak did not mention Sizewell C in his Budget speech on Wednesday. But accompanying Treasury documents stated that there were “active negotiations” with EDF over the plant and that it had allocated “up to £1.7bn of direct government funding” to help reach a final investment decision before the next election “subject to value for money and approvals”.

The state funding is a substantial proportion of the estimated £20bn overall cost of construction and is likely to lead to the government taking a stake in the project, according to people familiar with discussions.

The government hopes that its financial involvement in Sizewell C will help encourage outside investors to provide additional funding as it looks to oust China’s CGN from the project, as part of a wider push against Chinese involvement in key UK infrastructure.

Ministers hope to attract investors from the UK, US and elsewhere to help finance the nuclear revival before existing reactors retire by 2035, but analysts have questioned how keen pension funds and others will be to invest in nuclear given the history of cost overruns in the sector.

EDF is itself struggling with few projects in the pipeline outside of the UK and has a heavy debt burden. Emmanuel Macron, the French president, wants to give the company, which is almost 84 per cent state-owned, additional financial firepower to invest in both nuclear and renewable energy in the coming decades.

A spokesperson for the Sizewell C project declined to comment on the £1.7bn funding, but said that if the project went ahead “70 per cent of the construction value” would go to British companies and that the project “could be majority owned by British investors”.

Critics have warned that under the new funding model households could be left shouldering the cost of any overruns, which are common on nuclear projects, through their energy bills.

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