This regulatory update provides an essential overview of the Nuclear Regulated Asset Base (RAB) model, its purpose in driving crucial low-carbon generation, and the implications it holds for businesses shaping their long-term energy strategies.
Regulatory updates Summary:
As the UKโs progresses towards its net zero targets (2050), there needs to be significant changes in the energy sector, as a result total UK electricity supply will need to double by 2050. A significant development in this journey is the governmentโs commitment to new nuclear power generation, underpinned by the Regulated Asset Base (RAB) funding model.
An RAB model is a tried and tested method, typically used in the UK, to finance large scale infrastructure assets such as water, gas and electricity networks.
What is the Nuclear RAB model?
The Regulated Asset Base (RAB) is a financing model designed to attract private investment into large-scale infrastructure projects, such as new nuclear power stations. In an RAB model, investors receive a predictable revenue stream from consumers via their energy bills during the construction phase of the project, as well as once it is operational.
The UK Government designated the Sizewell C project A New Nuclear Power Station for Britain - Sizewell C, the sister project of Hinkley point C, which was granted a nuclear site license by the office for Nuclear Regulations (ONR) in 2024, as the first to use the RAB model.
Key features include:
- Reducing investment risk: By providing revenue during construction, the RAB model reduces the financial risk for developers and investors compared to traditional financing methods. This in turn encourages substantial investment in new projects.
- Lowering cost of capital: Reduced risk typically translates to a lower cost of capital, which aims to lead to lower overall costs for consumers over the lifetime of the power plant.
- Consumer contribution: A portion of consumer energy bills contributes to the funding of these projects, in return for the benefits of long-term energy security.
- Government oversight: The model involves robust regulatory oversight to ensure costs are transparent and value for money delivered.
What Nuclear RAB means for customers?
The implementation of the Nuclear RAB model will have specific implications for businesses consuming electricity in the UK and this means:
- Impact on energy bills: The RAB Levy will be new charge on your energy invoice and will be a consumption-based rate. Revenue will help fund the construction and operation of new nuclear power stations. The levy will be implemented through Supplier Obligation Mechanism, which also funds the Contracts for Difference (CFD) scheme.
- The Department of Energy Security & Net Zero (DESNZ), announced last week that the Low Carbon Contracts Company (LCCC) will provide details of the levy rate within the coming weeks, following a final investment decision.
- Contribution to national decarbonisation: By contributing to the funding of new nuclear, businesses, indirectly supports a key pillar of the UKโs net zero strategy. This provides a tangible link to the national effort to reduce carbon emissions, complementing each companyโs own decarbonisation initiatives, particularly if there are significant, continuous energy demands.
- Diversification of low-carbon supply: As nuclear power provides a non-intermittent, low-carbon energy source, it offers a crucial component to variable renewable generation (like wind and solar), contributing to a more balanced and resilient low-carbon energy portfolio for the UK.
- Less Reliance on Imported Energy: once in place, UK nuclear power will replace the need to import energy from Europe, because of this, UK power pricing will stabilise and pricing no longer be influenced by geopolitical events outside of the UK.
What will it cost consumers?
The RAB model will require consumers to pay an additional levy on their bills during the construction of a nuclear project. These payments will avoid the build-up of interest on loans that would lead to higher costs for consumers once the plant is in operation.
When will the charges commence?
The Low Carbon Contracts Company (LCCC) LCCC determines the ILR and TRA for the Nuclear Regulated Asset Base scheme for Q4 2025 - Low Carbon Contracts have just announced for Q4 2025 the Obligation levy from 1st November 2025 will be ยฃ3.455/MWh & the Operational Levy from 1st October 2025 will be 0.0028/MWh. Rates have come in significantly higher than expected due to the sharp increase in costs for Sizewell C, which has risen from an initial ยฃ20bln to ยฃ37bln.