GAD Supports Power Station Development At Sizewell C

3rd August 2024

Government Actuary's Department - GAD is supporting the government in the development of Sizewell C. We have applied our experience of funding models to advise the government.

The Government Actuary's Department (GAD) is working with the Department for Energy Security and Net Zero (DESNZ) on the development of Sizewell C.

The government is the majority shareholder in the project alongside the energy company EDF, having made available £2.5bn to support Sizewell C's development. Work is continuing at pace to secure a Final Investment Decision.

GAD has applied its experience of long-term funding models to advise DESNZ as it works with the Sizewell C company and its stakeholders.

Power for millions
Sizewell C power station in Suffolk would generate low carbon electricity for the equivalent of 6 million of today's homes. It would be a close copy of Hinkley Point C which is under construction in Somerset. This is expected to give greater certainty of the project's design, costs and schedule, de-risking overall delivery.

Unlike Hinkley, Sizewell C will be funded by the Regulated Asset Base model. Under this model the operating company receives a licence from an economic regulator.

The operator can then charge that regulated price to consumers in exchange for providing electricity and the required power generation infrastructure. This is expected to reduce the cost of project financing (one of the biggest drivers of nuclear project costs) compared to the Contract for Difference model.

Obligations and risks
Sizewell C’s operational period and eventual decommissioning is expected to last more than 100 years. Detailed plans have been made for each stage. However, for such a long-term project uncertainties and technical risks which could have significant impacts on future funding will have to be considered.

At GAD we are experts at considering:

long term payment and funding obligations
risks that may lead to changes in future financial amounts
mitigations to manage that uncertainty
Consultants and civil servants.

Alex Jones, Head of Policy Resilience, Nuclear Projects and Development Directorate at DESNZ said: "We worked with GAD to develop policy on the Regulated Asset Base funding structure. This relationship then naturally followed to using their support on Sizewell C.

"They operate as consultants and are also civil servants. They understand government’s mission, we work as one team."

Understand and monitor
GAD has helped DESNZ to consider the structure of the decommissioning fund, potential risks and what alternate funding options there may be if required. We have experience from sitting on the boards of large insurers and pension funds, developing processes to help understand and monitor areas such as:

the expected sufficiency of the fund.

the possible impact of changing economic conditions
robust operational procedures.

maintaining policies such as in respect of conflicts of interest and dispute resolution.

GAD’s work on long term funding risk spans other government departments and other projects. Other infrastructure projects include carbon capture, utilisation and storage and the development of public and private sector funding models for new projects.