Incentives for nuclear communities

17 July 2013

Financial incentives are on offer to British communities hosting new nuclear power plants, in common with measures to encourage new wind farms and shale gas development. The government's announcement was warmly welcomed today.

The UK Department of Energy and Climate Change (DECC) said today that local governments would receive a 50% share of business taxes from a new plant for the first ten years of operation, and then £1000 ($1520) per MW of installed capacity annually for a further 30 years.

For Sedgemoor District Council, which is hoping EDF Energy will go ahead with the construction of two 1650 MWe EPR units at Hinkley Point, the overall package could be worth £128 million ($194 million) over a nominal 40 year plant lifespan. Such a large and longlasting development would also result a range of other development opportunities and investments for the local area, as well as direct community investment by the utility.

Sedgemoor said "The money would be used for a range of local projects for those who will not see any direct and tangible benefits themselves, such as facilities for the elderly and measures to address fuel poverty." It called the arrangement "a fair settlement." Somerset County Council member David Hall said the money would "help create jobs and apprenticeships, provide essential improvements like affordable housing and regenerate areas that could really do with financial help."

Nuclear power's £1000 per MW incentive is far lower than the £5000 per MW offered for wind farms, but would come at a greater scale and continue for a longer period - fixed over 30 years instead of the 15-20 year lifespan of a wind farm. Exploration for shale gas is also being incentivised: local governments will receive £100,000 ($152,000) for each new well, plus 1% of the revenue from any eventual production.

Chief executive of the Nuclear Industry Association Keith Parker welcomed DECC's announcement: "Large scale investment in electricity infrastructure is urgently needed to replace existing plants, ensure security of supply and meet our climate change targets. It is absolutely right that the local communities hosting these projects of national importance should receive long term incentives to promote investment in their areas."

In total the UK is preparing for the construction of 18,600 MWe in new nuclear capacity. EDF Energy is planning two Areva EPR units at Hinkley Point C and another two at Sizewell C; Horizon Nuclear Power is developing a plan for Hitachi-GE ABWR units at Wylfa and Oldbury; NuGen has proposals for two units at Moorside, near Sellafield. However, the economics of these plans rely on strike prices for their output individually negotiated with DECC - a drawn out process for EDF Energy thus far. 

The smallprint

DECC's announcement noted that the £1000 per MW figure was not set in stone. The exact figure would be negotiated closer to the time when payments begin, in around 2030.

In addition, the sharing of business tax income only applies to developments in England and not Wales because this is a matter devolved to the Welsh government. This means London and Cardiff must negotiate a suitable parallel arrangement should nuclear development occur as proposed at Wylfa.

Researched and written
by World Nuclear News