The government’s decision to back these projects with substantial subsidies will significantly impact UK energy bills. According to official figures, EDF will receive around £1 billion annually for Hinkley Point C, once it begins generating power in 2030. A separate £1 billion levy will be added to bills for the ongoing development of Sizewell C, a nuclear plant in Suffolk. These additional costs, totalling £2 billion, are set to be passed on to consumers as the government seeks to revive the country’s nuclear energy sector.
The Financial Impact of Nuclear Subsidies on UK Energy Bills
The introduction of these substantial subsidies comes under a government-backed mechanism called the contracts-for-difference (CfD) system, which guarantees fixed prices for the electricity generated by low-carbon sources. Hinkley Point C, a massive 3.2 GW project in Somerset, is expected to generate enough power to meet the needs of approximately six million homes. From 2030, EDF will receive £1 billion per year under the CfD arrangement, with the company able to claim the difference if the wholesale price of electricity falls below a guaranteed strike price.
The strike price for Hinkley Point C was set at £92.50 per megawatt hour (MWh) when the agreement was signed in 2013, but it has since risen due to inflation and is expected to reach £150 per MWh by 2030. This guaranteed price will allow EDF to cover its costs and generate a return, but it also means that consumers will pay the difference between the lower market price of electricity, currently about £80 per MWh, and the higher strike price. The UK government has justified these subsidies, citing the role of nuclear power in ensuring a stable, low-carbon energy supply to the country.
Similarly, the £1 billion levy imposed on energy bills to fund Sizewell C, another 3.2 GW nuclear project, is expected to gradually increase over the coming years. This levy will help support the construction costs of the plant, which is expected to reach a staggering £100 billion. In the short term, this will mean an additional £10 per year on household energy bills, with the full impact expected to be felt as the project progresses. Although the government insists that this increase is temporary, it raises concerns about the long-term financial burden on consumers.
Government’s Long-Term Strategy and the Promise of Stable Energy
The government has defended the nuclear subsidies as an essential step towards ensuring the UK’s energy security and meeting its climate targets. A government spokesperson stated that the UK is reversing the “legacy of no new nuclear power” in order to unlock a “golden age” for nuclear energy, which could secure thousands of skilled jobs and attract billions of pounds in investment. EDF’s projects are central to this vision, offering a steady, “baseload” source of energy to balance the intermittent nature of renewable energy sources like wind and solar.
While the immediate impact on bills is expected to be a modest increase, the government hopes that the stable output from nuclear power will help offset the rising costs of balancing renewable energy sources, which fluctuate according to weather patterns. It is projected that nuclear power could eventually reduce the cost of this balancing, which currently stands at £2 billion per year. Proponents argue that nuclear energy could provide long-term benefits, including lower energy prices and a more reliable grid.
However, critics remain cautious about the financial risks of such large-scale projects. Hinkley Point C, originally expected to cost £18 billion, has seen its budget balloon to £46 billion due to delays and cost overruns. With Sizewell C’s final cost projected to surpass £100 billion, many are questioning whether the expected benefits will outweigh the financial burden on consumers. The long construction timelines for both plants, coupled with rising construction costs, mean that the financial risks remain significant.
