Japan’s Ministry of Economy, Trade and Industry (METI) is considering the introduction of a new surcharge paid by power retailers on top of electricity rates to fund the construction and operation of new nuclear power plants, The Asahi Shimbun reported on July 24, 2024.
The report is citing sources close to the matter that indicated the new surcharge would be based on the United Kingdom’s ‘RAB model.’ According to the UK’s Department for Business, Energy & Industrial Strategy, “The model enables investors to share some of the project’s construction and operating risks with consumers, significantly lowering the cost of capital which is the main driver of a nuclear project’s cost to consumers.”
Should the model be introduced, the surcharge is eventually expected to be passed on to consumers in the form of higher retail rates.
In addition to potentially introducing the new funding model, the government recently also revealed its plans to add a nuclear-specific category in its second Long-Term Decarbonization auction, which is part of the country’s capacity market.
A model to ‘RAB,’ which requires the payment of a renewable power promotion surcharge on top of electricity rates, is already used in Japan to fund the development of renewable assets through the feed-in-tariff and feed-in-premium schemes.
