Draft Contracts for Difference (Definition of Eligible Generator) (Amendment) Regulations 2026

Michael Shanks Excerpts

Tuesday 7th July 2026 General Committees

[The Chair]

Before I call the Minister, I invite Gentleman Members to yourselves of your jackets if you feel so inclined in this hot weather. I call the Minister.

[The Minister for Energy (Michael Shanks)]

I beg to move,

That the Committee has considered the draft Contracts for Difference (Definition of Eligible Generator) (Amendment) Regulations 2026.

Thank you, Mr Wishart. Not willing to be half jacket on, half jacket off during my speech, I will continue as I am at the moment, but it is a genuine pleasure to serve under your chairship for the first time.

The contracts for difference scheme is the Government’s primary way to incentivise low-carbon capacity in the electricity system. The draft regulations change the scheme’s eligibility criteria to include the lifetime extension of nuclear plants. Nuclear power is expected to play a key role in the UK’s future energy system. By generating baseload power in the UK, nuclear energy can complement renewable sources, helping to maintain price stability for consumers and reduce our dependence on fossil fuels. It also lessens our reliance on imports from overseas, strengthening our energy security. However, the UK’s present operational nuclear fleet, including the four advanced gas cooled reactors and Sizewell B, the UK’s only pressurised water reactor, are due to begin decommissioning in the coming decades; this means that around 15% of our current electricity generating capacity could be lost by 2035. While the Government continue to take forward the wider nuclear programme through Sizewell C and through the Great British Energy nuclear small modular reactor programme, we should also make sure that suitable mechanisms are available to support continued generation at existing nuclear stations, where financial support is necessary and likely to represent value for money. In the absence of that support, nuclear power plant operators may choose not to make the investment necessary to extend the operational lifetime of the stations.

Before speaking to the provisions in more detail, I will set out some background to the contracts for difference scheme. As I said, that is the Government’s main mechanism for supporting low-carbon electricity generation across Great Britain. Under a CfD, the generator is paid a fixed price for electricity generated across the lifetime of the contract. It sells the electricity it produces into the wholesale market, and when the wholesale price falls below the strike price the difference is received in payments from the Low Carbon Contracts Company. Where wholesale prices rise above the strike price, the generator is required to make up the difference in payments to LCCC. Where the LCCC makes difference payments to the generator, these are funded through a statutory levy on licensed electricity suppliers, and are therefore passed on to households and businesses through electricity bills.

The CfD mechanism is central to delivering the Government’s objective of a fully decarbonised power system while securing value for money. It protects consumers when electricity prices are high and gives generators income stability over the duration of the contract. For example, had Hinkley Point C been operational during the last energy crisis, consumers would have saved around £5 billion.

The draft instrument before us today amends the Contracts for Difference (Definition of Eligible Generator) Regulations 2014 so that the Government have the option to use the CfD mechanism to support the continued generation of electricity at existing nuclear power stations. Nuclear energy is already eligible for CfD support for new-build capacity, with a CfD having been taken forward for the construction of Hinkley Point C, but nuclear stations seeking to undertake refurbishment in order to extend their operational lifetime are not currently eligible. Broadening the eligibility criteria in this way allows existing nuclear capacity to continue to generate low-carbon electricity over extended operating lifetimes, with support under the CfD where it is judged safe and economical to do so. The Government’s assessment is that nuclear lifetime extensions can provide value for money for consumers, given that lifetime extensions will be considerably cheaper than building new generation. Modelling indicates that extending nuclear plants lowers overall electricity system costs compared with other low-carbon routes to net zero.

It is important to state that the draft instrument does not in itself commit any support; nor does it guarantee a CfD for any particular project. Its purpose is instead to allow the Government to consider CfD support for lifetime extension projects for nuclear. Any decision to award a CfD will be subject to all relevant approvals, including value for money tests, and will be announced in due course.

The draft regulations widen the eligibility criteria for contracts for difference, so that existing nuclear plants can qualify for support for lifetime extensions. It strengthens our security of supply by enabling access to financial support where needed to sustain electricity generation from existing nuclear infrastructure. That means low-carbon baseloads can remain on the grid without the higher costs and longer delivery times associated with new build. I commend the draft regulations to the Committee.

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[Michael Shanks]

I repeat these points regularly, but the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, often talks about his party’s “intention to do”, “ambition to do”, “we aimed to do”, but in 14 years the Conservatives did nothing to build any new nuclear, and that is the record he has to defend. Intention is all well and good, but delivery is what this Government are focused on.

We have not ruled out new gigawatt-scale nuclear, but we want to look at it in the context of the future system. That is partly about what the strategic spatial energy plan looks like, but it is also about learning from the deployment of small modular and advanced modular reactors, which we will roll out in due course, and things like the measures we have taken to produce a new regulatory framework, so that we get private sector interest in building nuclear—the Centrica X-energy project in Hartlepool being a good example. It is possible we will have a much more developed approach and innovation in shaping the future nuclear fleet; it might not require a gigawatt-scale project, but we have not ruled it out and it continues to be something we will consider.

The hon. Gentleman asked about the CfD itself. As I said, this set of regulations before us today does not agree to any particular CfD, but he is right to point out the value for money point. Any specific contract we looked at would be subject to subsidy control regulations, assessing first of all whether that support is absolutely necessary for the lifetime extension to continue, whether it is proportionate, and the value for money for consumers point which is really important. We will look at that very closely, but as he rightly says there are examples around the world of really significant lifetime extensions to fleets which could give us decades’ more nuclear power at much lower cost than the cost of rebuilding.

To the Liberal Democrat spokesperson, the hon. Member for South Cambridgeshire, I will just say that I agree completely that the future of our energy system in terms of security and value for money is a mix of nuclear and renewables, as well as everything else we are doing around storage and investing in the grid. This instrument is a hugely important step in maintaining the fleet we have at the moment for a bit longer while we build the generation that comes next, and I commend it to the Committee.

Question put and agreed to.