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

David M Newbery

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

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 CO 2 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 £ 2019 36.2/tonne CO 2 abated and £ 2019 43.3/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 £ 2019 9-19 billion.

Keywords: Cost of CO2; Nuclear power; RAB; WACC; Cost Benefit Analysis (search for similar items in EconPapers)
JEL-codes: C54 D61 E43 H23 H54 L94 Q54 (search for similar items in EconPapers)
Date: 2020-05-21
New Economics Papers: this item is included in nep-ene, nep-env, nep-mac and nep-reg
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Working Paper: The cost of CO2 abatement from Britain's only PWR: Sizewell B (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2047

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