The RAB model explained

To meet Net Zero needs by 2050, there needs to be rapid, significant changes in the energy sector: total UK electricity supply will need to double by 2050 and electricity from low-carbon sources will need to quadruple, in order to deliver the UK’s commitment to become a Net Zero emissions economy by 2050.

Nuclear Power will play an important part in this, delivering continuous, reliable and low carbon electricity.

With the UK’s existing Nuclear generation reaching the end of their life the Governments analysis highlights the need for nuclear generation beyond Hinkley Point C. 

A number of approaches were considered to secure private finance to fund the construction and following consultation with industry experts, the Regulated Asset Base (RAB) model was selected.

Under the UK’s nuclear RAB model, developers and investors are given secure returns on investment during a nuclear project’s construction, commissioning and operation. This offers greater investment certainty, attracting investors and reducing the costs of private finance, thereby lowering the cost to the consumer.

According to the UK Government, the lower cost of financing a nuclear project is expected to result in savings for consumers of at least £30 billion on each project.

Low Carbon Contracts Company will perform the role of revenue collection counterparty, channeling funds between electricity suppliers and relevant license nuclear companies. 

The Office of Gas and Electricity Markets (Ofgem) will confirm to us (as the revenue collection counterparty) what payments we should make to (or receive from) the relevant licensee nuclear company in accordance with their revenue collection contract (i.e. ‘RAB payment’).

LCCC's role in RAB

With expertise in performing similar functions across the Contracts for Difference (CfD) and Capacity Market (CM) schemes, we has been designated by the Department for Energy, Security and Net Zero (DESNZ) to set up and run this process.

The allowed revenue will be paid to the licensee nuclear company through a Revenue Collection Contract. The Secretary of State for DESNZ has designated us to perform the role of revenue collection counterparty as the counterparty for revenue collection contracts.

We will channel funds between electricity suppliers and relevant licensee nuclear companies. 

Ofgem will confirm to us (as the revenue collection counterparty) what payments we should make to (or receive from) the relevant licensee nuclear company in accordance with their revenue collection contract (i.e. ‘RAB payment’). 

The Nuclear Regulated Asset Base Model (Revenue Collection) Regulations 2023 page sets out the payment mechanics for Suppliers. 

To support the Nuclear RAB scheme, Suppliers are required to make the following payments: 

  • Interim Rate payments 
  • Reserve payments 
  • Reconciliation payments 
  • Operational Costs Levy 

Suppliers are required to provide Credit Cover in a similar way to the CFD scheme. 

Electricity Market Reform Settlement (EMRS) will be providing settlement services for the Nuclear RAB scheme, they also deliver these functions for the CfD and CM schemes.

The Stakeholder Support for Supplier – Nuclear RAB page helps Suppliers understand the interactions and processes with EMRS.

This page brings together Nuclear RAB Working Practices and guidance documents documents to support Suppliers.