The UK will take a £5bn-plus stake in a new nuclear power station in Wales in a striking reversal of decades-long government policy ruling out direct investment in nuclear projects.
Ministers said they had reached an initial agreement with the Japanese conglomerate Hitachi to back the Wylfa plant but emphasised that no final decision had yet been made and negotiations were just beginning.
The business secretary, Greg Clark, announcing the Wylfa agreement in the Commons, said: “For this project the government will be considering direct investment alongside Hitachi and Japanese government agencies.”
The Wylfa project is expected to create thousands of jobs and generate low carbon power for around 5m homes, or around 6% of UK demand.
However, the use of billions of pounds of taxpayer money will be highly controversial at a time when there is pressure to increase NHS funding and alternatives such as solar and wind power are falling in cost.
For decades, ministers have opposed the idea of taking a direct stake in new nuclear projects, to avoid exposing public finances to the risk of budget overruns.
In 2010, the Conservatives insisted there “must be no public underwriting of construction cost overruns” on new nuclear plants. However, the Wylfa deal overturns that position.
The power station is expected to cost in the region of £16bn, financed equally by the UK government, the Japanese government and Hitachi.
Onshore wind and solar developers believe they could build for even cheaper contracts but have been barred by government from competing for subsidies.