Yahoo Finance Energy bills to rise to pay for nuclear plants, says Kwarteng
Kwasi Kwarteng has told households to prepare for energy bills to rise further as part of plans to fund the cost of new nuclear power plants.
The Business Secretary has said the government's bid to boost Britain's nuclear output will have a "small effect" on energy bills as ministers replace Chinese investment with a new funding model.
The Business Secretary told the BBC that bills would rise in the short-term but that nuclear power was key to ensuring Britain's energy security.
Households were stung by a 54pc increase in the energy price cap in April, pushing the average bill up to £1,971, with analysts warning they will climb by several hundreds of pounds more when the cap is reset in April.
The Government announced plans to boost nuclear supply to 24 gigawatts by 2050 in its energy security strategy, published in April.
Ministers are pledging to build eight new nuclear reactors by the end of 2030 and deliver 25pc of Britain's energy from the plants.
But the plans require a funding overhaul amid a government push to end Chinese investment into Britain's energy infrastructure.
China General Nuclear has provided substantial investment for Britain's nuclear power stations alongside France's EDF.
The two companies are funding Hinkley Point C in Somerset but the project has been beset by cost overruns and delays.
EDF is expected to announce more delays to Hinkley C within weeks and will have to raise billions in extra finance for the project. The company has warned CGN is not likely to increase its funding for the plant.
Ministers have drawn up a so-called Regulated Asset Base funding model to replace Chinese investment for nuclear plants in future and incentivise other private investors to put forward funding.
The RAB model would see consumers start paying indirectly towards the costs of a new power project during the construction phase. They would fund the project through a small rise in their energy bills.
The model replaces the current Contracts for Difference scheme used for Hinkley Point C whereby the developer finances the construction phase and only receives revenue when the plant generates electricity.
EDF has also warned that separate plans to build the Bradwell nuclear power plant in Essex are likely to fall through because of political opposition to Chinese investment.
In its annual report, EDF said: “There is great uncertainty around the development perspectives of the Bradwell Project, mainly related to the political opposition to a Chinese company leading a critical UK infrastructure project and from the lack of local stakeholder support.
"“The risks of not being in a position to carry out the Bradwell project are high and have increased in 2021."
The government is also exploring options for squeezing China out of the plans to build the Sizewell C plant in Suffolk.
A government spokesman said: “A large-scale project funded under this scheme will add at most a few pounds a year to typical household energy bills during the early stages of construction and on average less than £1 per month during the full construction phase of the project.”
