Public auditor emphasizes the need to monitor the risks associated with the new financing model for Sizewell C.

Investors' initial financial returns on the Sizewell C nuclear power plant could cost UK consumers as much as GBP4 billion (USD5.4 billion), but in the long run, benefits could reach GBP18 billion for energy bills, according to the UK's National Audit Office.

The estimated GBP38 billion Sizewell C plant is designed to include two EPR reactors generating 3.2 GW of electricity, sufficient to power around six million homes for over 60 years. It will have a design similar to the Hinkley Point C plant currently under construction, with the intention of faster and less costly building due to lessons learned from the first new nuclear project in the UK in nearly three decades. Sizewell C's construction costs are projected to be 22% lower than the lowest cost estimate for Hinkley Point C. A definitive investment decision for Sizewell C was made in July of last year, with construction expected to conclude by 2039.

Sizewell C is utilizing the Regulated Asset Base (RAB) funding model, which means consumers will contribute to the cost of new nuclear plants during their construction. Previously, under the Contracts for Difference system, developers would finance construction and only start earning revenue once the plant began generating electricity.

France's EDF announced in November that it would invest up to GBP1.1 billion during the construction phase, holding a 12.5% stake. The UK government, through the Department for Energy Security and Net Zero (DESNZ), will own 44.9%, with La Caisse at 20%, Centrica at 15%, and Amber Infrastructure at 7.6%.

Consumers will begin funding Sizewell C starting in November 2025. DESNZ anticipates that Sizewell C will raise electricity prices for the average household by GBP4 in 2025-26, increasing to between GBP17 and GBP19 when it becomes operational.

The National Audit Office has released a report evaluating the deal's impact on taxpayers, electricity consumers, and investors while providing a framework for measuring progress.

Once construction is finished, DESNZ's models suggest that net benefits for consumers could total up to GBP18 billion, mainly from energy bill savings and lower electricity costs compared to other net-zero approaches. The NAO indicated that these benefits will not exceed consumer costs until after 2060 and are subject to significant uncertainties, including the possibility that alternative net-zero technologies could be cheaper or more effective.

The NAO noted that while the government is financing most of the project, DESNZ maintains only a minority stake, intentionally limiting its control to prevent governance issues seen in prior government mega projects.

The department believes that had the project been fully public, construction costs would rise to the higher regulatory threshold of GBP47.7 billion and that private investors' involvement is essential to mitigate costs and expedite completion. Financial returns for investors could cost consumers between GBP4 billion and GBP4.5 billion unless those investors also contribute to cost savings and quicker delivery.

Investors might earn returns up to 13% (post-tax equity internal rate of return) assuming baseline construction costs, dropping to a minimum of 10.8% at the higher threshold. These rates consider that investors will sell their equity once Sizewell C is operational.

The report questions how effectively the deal motivates investors to keep construction costs down. Investors claim they are incentivized to avoid exceeding the higher regulatory thresholds, losing up to 1.6 percentage points on returns for any overruns. Yet, if costs rise just below this threshold, investors could still achieve returns similar to those in other utilities.

The NAO highlighted that despite Sizewell C being less expensive to construct than Hinkley Point C, consumers might face higher energy prices from Sizewell C due to the fixed pricing established before Hinkley's cost overruns and increased borrowing costs.

Gareth Davies, head of the NAO, remarked that Sizewell C is crucial for the government's strategy for secure and affordable clean energy. Efforts have been made to learn from previous infrastructure challenges, leading to a unique financing structure that DESNZ will need to oversee closely for taxpayer and billpayer risks.

In response to the NAO's findings, Nuclear Industry Association Chief Executive Tom Greatrex stated that the assessment recognizes Sizewell C as a generational investment that will provide reliable, clean electricity well into the next century. He emphasized the necessity for governments to make decisive investments in national interests and criticized the idea of delaying action in hopes of cheaper alternatives, especially given the recent energy crises and geopolitical instability. He stressed the need for secure, domestically produced energy unaffected by global fossil fuel fluctuations.