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Great British Energy, the government’s flagship state-owned energy company, has been handed the £2.5bn bill to support a new generation of small nuclear power plants, cutting the amount it has to spend on wind, solar and other technologies.
Rolls-Royce’s efforts to develop Britain’s first small modular reactors will be funded by GB Energy’s £8.3bn budget over this parliament, according to measures announced in Wednesday’s spending review.
Until now it had been unclear which part of the government’s budget would cover the funding for the small modular reactor programme.
One senior government official said the moves amounted to “reprofiling” of spending commitments into GB Energy’s budget that might have previously been funded by the Treasury or energy department.
It follows months of negotiations between the Treasury and the energy department, led by Ed Miliband, over whether the cash Labour pledged to GB Energy in last year’s election manifesto would be cut, given the tight public finances.
Earlier this week Rolls-Royce won government backing for its small modular reactor technology, a contest announced by the former Conservative government in May 2024.
Tory energy minister Grant Shapps said at the time that up to £20bn of public funds could be spent on supporting the development of SMRs, although this money was never officially allocated.
The extent to which GB Energy’s budget was originally meant to cover nuclear is unclear. In May 2024, a Labour document said the company would “help scale and accelerate the roll out of mature technologies like wind, solar and nuclear”.
However, in its manifesto Labour said GB Energy would receive £8.3bn during this parliament “to install thousands of clean power projects, through a combination of onshore wind, solar and hydropower projects” — with no mention of nuclear in that document.
Government figures said that since the general election, ministers had made clear that nuclear power would play some role in GB Energy’s activities. For example, in a “founding statement” for GB Energy in late July last year, the government said it would work closely with what was then Great British Nuclear to deliver new nuclear projects.
The state-owned body set up to provide nuclear power plants, GB Nuclear has also been rebranded, as Great British Energy — Nuclear, to reflect what the government described as a “joint mission” to deliver clean energy.
“Great British Energy and Great British Energy — Nuclear will together invest more than £8.3bn over the SR in homegrown clean power: two allied publicly owned companies with a shared mission,” according to spending review documents.
The £2.5bn allocated for SMRs in the spending review will support the Rolls-Royce-led consortium in developing its technology, and the sites where the reactors will be built.
SMRs typically generate 300 megawatts or less — supporters hope they will be cheaper and faster to roll out than larger-scale plants. Rolls-Royce’s model is relatively large for an SMR, at 480MW.
Speaking to the Financial Times on Tuesday, Simon Bowen, the interim chair of Great British Energy — Nuclear, said he would have liked to have been able to back more than one developer, but the money wasn’t available.
“It’s an affordability issue,” Bowen said in an interview with the Financial Times. “I’ve made no secret of the fact that I’ve always said we should do two for resilience and competitive tension, but the reality is we’re in a constrained fiscal environment.”
