Newbery, D.

The cost of CO2 abatement from Britain’s only PWR: Sizewell B

CWPE2047

Abstract: This paper argues that the cost of decarbonising depends critically on the Weighted Average Cost of Capital (WACC), illustrated with a case study of Sizewell B (SZB, the nuclear station commissioned in 1995). It calculates the cost per tonne of CO₂ abated with prices set as for transmission assets by the regulator under the Regulatory Asset Base model. The cost depends critically on the WACC set in comparable utility price controls. At a low WACC the cost is £₂₀₁₉36.2/tonne CO₂ abated and £₂₀₁₉43.3/t. CO2 at the high WACC, compared with the roughly £40/t. CO2 paid by GB generators in 2019. Moving from the social discount rate of 2.5% to a hurdle rate of 8% increases the cost from £15-20/t. to over £60/t. Had Britain continued building replicas of SZB the cost saving compared to the current programme might be £₂₀₁₉9-19 billion.

Keywords: Regulatory Asset Base, carbon cost, nuclear power

JEL Codes: D61 H23 L94 C54 E43 H54 L94 Q54

Author links: David Newbery  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2047.pdf

EPRG Paper Link: 2013

Open Access Link: https://doi.org/10.17863/CAM.57988

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