The cost of building the new nuclear power station at Hinkley is estimated to increase by between £1.9 billion and £2.9 billion.
French energy giant EDF said the plant in Somerset will now cost between £21.5 billion and £22.5 billion.
The company said the cost increases reflect "challenging ground conditions"which made earthworks more expensive than anticipated.
Action plan targets have been revised and extra costs are needed to implement the completed functional design, which has been adapted for a "first-of-a-kind application in the UK context", said EDF.
The company said that under the terms of the so-called Contract for Difference, the increased costs will have no impact on UK consumers or taxpayers.
A statement said:
The management of the project remains mobilised to begin generating power from Unit 1 at the end of 2025.
Stuart Crooks, managing director of the Hinkley project, said in a message to workers: "We are delivering on our milestones and although the risk of a delay has increased, the schedule is unchanged and we remain focused on delivering the first power in 2025."
Greenpeace UK chief scientist Dr Doug Parr said:
The new Hinkley nuclear plant looked like a bad idea when it was first proposed, and it's got worse ever since.
Justin Bowden, national officer of the GMB union, said:
The important message from today's announcement is Hinkley Point is still on schedule to be generating desperately-needed electricity by 2025.
Stop Hinkley spokesperson Allan Jeffery said:
This project would be rapidly becoming an enormous joke if it wasn’t such a tragedy for those of us who have to live next to it.