Boris Johnson’s flagship energy strategy has been held up over a row with Rishi Sunak about funding a new generation of up to eight nuclear power stations costing the public more than £13bn.
The strategy, which has been delayed for a month, was due to be published this week but has now been pencilled for 5 April after disagreement about the multibillion-pound cost of new nuclear plants and amid ongoing tensions between the prime minister and his chancellor, as well as the wider cabinet.
Johnson has told the nuclear industry that he wants 25% of electricity generation to come from nuclear power by 2050, up from 16% now. Whitehall sources told the Guardian this shift could require the building of about eight new nuclear power stations.
Draft targets suggest ministers are looking at 30GW of nuclear power capacity, meaning a huge building programme would be needed, as capacity is due to fall to 3.6GW as plants are decommissioned. Of the eight UK plants currently in operation, all but one are due to be switched off by 2030.
Each new plant would require the government to take a minority stake in the project to reduce the risk to developers, and substantial cash outlay to encourage investment.
Despite Johnson’s keenness for new nuclear power, Sunak is concerned about the cost to the taxpayer, or extra costs added to soaring energy bills.
The Treasury has already promised £1.7bn of direct cash for a single large-scale nuclear project – the £20bn Sizewell C – as well as £120m for a new Future Nuclear Enabling Fund, which aims to address barriers to entering the sector.
Building eight plants could cost more than £13bn in initial investment costs from the government if the same amount of investment were to be put in, according to a Whitehall source. However, the government is also pushing for the nuclear industry to reduce its build costs.
Officials also expect No 10 will approve an energy bill to set targets and strategy for energy security, which would be unveiled in the Queen’s speech in May.
A nuclear financing bill is already due to get royal assent next week, allowing new nuclear power station owners to get more stable returns and aimed at getting institutional investors to put money in, but the government is still expecting to have to take stakes in new projects. It also allows the cost of new nuclear power stations to be loaded on to household bills – a move that is politically unpalatable given the rising cost of gas and electricity bills.
Downing Street sources denied any “showdown” between Johnson and Sunak, who are due to sit down and “talk calmly” through energy strategy issues in the next few days. A Treasury source said negotiations were ongoing and were complex because they involved funding far beyond the current spending round.
If an agreement cannot be reached by 14 April then the strategy may have to be delayed until after the May local elections because major announcements cannot be made during the “purdah” period beforehand.
There is separately understood to be a disagreement over the Treasury resisting extra money for energy efficiency measures. No 10 is pushing for a big expansion of offshore wind and is “open-minded” about more onshore wind, which would need a loosening of current planning laws.
There is less controversy with the Treasury on this issue as renewables do not need additional subsidies. However, many Conservative MPs with rural constituencies are opposed to more turbines in their seats.
Under draft plans, there is a move to give communities near onshore wind turbines a discount on their bills and more of a collective say over the projects, rather than permitting them to be blocked by just one individual under current rules.
One government source said it was “all about cost” and that the Treasury also seemed keener on battery storage for renewables than on the government taking big stakes in renewable projects.
The UK has struggled to build new nuclear power stations in recent decades, with the Japanese conglomerate Hitachi in 2020 pulling out of plans to build a new reactor at Wylfa, north Wales, and a move against allowing Chinese investment to Sizewell C on the Suffolk coast.
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