Nuclear Energy (Financing) Bill
Wednesday 3rd November 2021
(2 years, 5 months ago)
Commons ChamberRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts
18:36 - The House divided: - Ayes: 319 / Noes: 44 - Question accordingly agreed to.
18:52 - The House divided: - Ayes: 256 / Noes: 80 - Question accordingly agreed to.
Mr Speaker
I inform the House that I have not selected either of the reasoned amendments.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I beg to move, That the Bill be now read a Second time.
I want to start by apologising the House for the fact that I will be unable to stay for all of the debate as I am taking the train to Glasgow to be there for energy day at COP and will therefore miss the wind-ups. I have informed Mr Speaker of this, and those on the Opposition Front Bench. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Mid Norfolk (George Freeman), the Minister for Science, Research, and Innovation, will be here for the debate and he will respond for the Government.
Two weeks ago, on 19 October, the Government published their net zero strategy. It is our vision for a decarbonised economy in 2050 and the policies and proposals that will keep us on course to reach net zero emissions through our five-year carbon budget. It is a strategy that puts the UK on a trajectory to meet carbon budget 6, a 78% reduction in emissions compared with 1990 levels by 2035, as the Prime Ministers reminded us earlier today. These kinds of ambitious goals are vital as we host COP26. Integral to achieving carbon budget 6 is our new ambition to fully decarbonise the power sector by 2035. This will mean that the UK is entirely powered by low-carbon electricity, subject to security of supply. Of course our electricity system must be resilient and affordable, as well as low-carbon. It will predominantly be composed of wind and solar but, as last year’s energy White Paper made clear, a low-cost, reliable system means that renewables will be complemented by technologies that provide power when the wind is not blowing or the sun is not shining. Large-scale nuclear power plants are the only proven technology available today that is deployed at scale to provide continuous, reliable and low-carbon electricity. Our electricity system needs nuclear power.
Greg Hands
Of course I will give way. Perhaps the hon. Gentleman could explain why the SNP is so resolutely opposed to continuing the strong nuclear tradition in Scotland.
Alan Brown
I will do so later, but the Minister knows nuclear waste is a key issue. On proven technology working alongside renewables, he will be well aware that pumped storage hydro can provide that. Why will the Government not give the go-ahead for Coire Glas in the highlands, which has been progressed by SSE?
Greg Hands
The hon. Gentleman is right, and we are looking at that technology, but I stress what I just said about deployment at scale. We need something that can be deployed at scale to provide the bulk of our electricity when the sun is not shining or the wind is not blowing. We are always open-minded on other new technologies, but the most important thing is what can be deployed at scale. The measures in this Bill are critical for ensuring we have the option to bring forward further nuclear capacity.
Twelve of the UK’s 13 current nuclear reactors, representing approximately 85% of our nuclear capacity, are scheduled to close by 2030. Although Hinkley Point C is under construction, additional nuclear is likely to be needed in a low-cost 2050 electricity system. That is why we have committed to bring at least one further large-scale nuclear project to final investment decision by the end of this Parliament, subject to value for money and all relevant approvals.
John Redwood (Wokingham) (Con)
Does that not mean much more nuclear is needed if it is the preferred means of backing up wind? The new nuclear the Minister is talking about will not even replace the nuclear that is closing.
Greg Hands
I have good news for my right hon. Friend, which is that the regulated asset base model that we are introducing here can be used for further nuclear power plants, including small modular reactors and other key nuclear innovations. He will also know that, in the net zero review, we launched a £120 million fund for new nuclear innovations, which will allow us to increase our nuclear commitments and capabilities beyond the existing commitment to one new plant having its investment case in this Parliament.
Neil Parish (Tiverton and Honiton) (Con)
Further to the question from my right hon. Friend the Member for Wokingham (John Redwood), Hinkley Point C will produce between 7% and 8% of the nation’s electricity needs once both reactors are up and running. A further plant of the same size would perhaps take it to 16%, but surely we need at least 25% to 30% if we are to make sure we have enough power to keep the grid going when the wind stops and there is no sunlight.
Greg Hands
My hon. Friend makes a good case for supporting this Bill, which will allow the financing options to expand our nuclear power base. I appreciate his support for Hinkley Point, as the MP for a nearby area.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
Is not the problem with the Government’s proposals that the new financing model, which is very favourable, goes towards only one technology? Are the British Government not therefore picking a winner from the available technology options? Does that not go against Conservative ideology?
Greg Hands
No, actually. In fact, the ability to add levies or extra payments on to bills is already in place for multiple technologies. It is not there for nuclear alone. The broad concept exists for other technologies, too.
Greg Hands
I will make a bit more progress.
The Chancellor’s spending review backs this commitment by providing £1.7 billion to enable the investment decision, alongside a new £120 million future nuclear enabling fund to tackle barriers to deploying new nuclear technology.
Greg Hands
I will make a bit more progress.
However, it is clear that we need a new funding model to support the financing of large-scale and advanced nuclear technologies. Under the existing mechanism to support new nuclear projects, the contracts for difference scheme, developers have to finance the construction of a nuclear project and only begin receiving revenue when the station starts generating electricity. That was the right model to use for Hinkley Point C, given that it was the first nuclear project to be built in the UK for a generation.
Greg Hands
I am going to make more progress.
But the lack of alternative funding models has led to the cancellation of recent potential projects, such as Hitachi’s project at Wylfa Newydd in Wales and Toshiba’s at Moorside in Cumbria. We have digested the lessons from Hinkley Point C; it is time to provide these alternatives.
Greg Hands
I am going to make some more progress.
This legislation will facilitate financing of additional nuclear capacity through implementing a regulated asset base model and additional measures to mobilise private capital into new projects. At this point, I will give way to the very patient Member from north Wales.
Mark Tami
I thank the right hon. Gentleman. Does he agree that since the advanced gas-cooled reactor programme, we have not had a programme of new nuclear reactors? We have had very drawn out processes for one-off plants, whether at Sizewell or Hinkley. We need to plan and have new reactors, preferably with the same build. If we look at what the French have done, we see that they can take one part of one reactor and put it in another one. We have always tinkered with reactors, rather than see this as a long-term project.
Greg Hands
I think the right hon. Gentleman is a supporter of the Bill and the approach being taken by the Government, because exactly this new financing model will allow us a greater diversity in our nuclear projects. It will allow us to bring in more private sector finance. I know he is a long-standing Labour MP, so perhaps he might want to reflect on Labour’s role in those lost opportunities over the years.
Greg Hands
Let me finish responding to the first intervention first. I was reading the 1997 Labour manifesto the other day. We remember those days when they came in as “new Labour”, and their manifesto said:
“We see no economic case for the building of any new nuclear power stations.”
The right hon. Gentleman has been here a long time, so perhaps he would like to say why he was a backer of the 1997 Labour manifesto.
Mark Tami
I actually came here in 2001, but I will leave that there. I have been a long-time supporter of nuclear power. I think that the problem, on both sides of the House, is that we have energy review after energy review, we identify what all the problems are and we do absolutely nothing about it. We need a long-term plan, and I am talking about both sides of the House here. I will certainly be supporting this Bill tonight.
Greg Hands
The right hon. Gentleman said he was first elected in 2001, but my guess is that he was a supporter of the 1997 manifesto. What says supports what the Government have been doing here for some time, which has been to increase our nuclear capacity and make sure the financing models are in place to support the funds. I am surprised he voted against the Budget last week, with its £1.7 billion made available for new nuclear. Perhaps he might explain to his constituents why he was against that Budget.
Mark Jenkinson (Workington) (Con)
Just to carry on the point about Labour’s involvement in this, I should point out that at his final party conference Tony Blair said:
“10 years ago I parked the issue of nuclear power. Today, I believe without it, we are going to face an energy crisis and we can’t let that happen.”
For the first time in my life, I am going to say that Tony Blair was right. The French are reaping the rewards of Messmer’s nuclear legacy. Will my right hon. Friend commit today to his Messmer-style nuclear legacy for the UK?
Greg Hands
I, too, do not often agree with Tony Blair, but it was good to see his conversion in the end, albeit that it took him 10 years. I have always been a passionate supporter of nuclear power, right since I was first elected in 2005, which was round about the time of that Labour volte-face. I was a strong supporter of Labour’s changing its view at that time; it is just such a pity that there was a lost decade before it came to that view.
Let me move on—
Greg Hands
No, I am going to make some progress. I have already given way to the hon. Gentleman.
The Bill could help to get new projects off the ground throughout Great Britain, including, potentially, the Sizewell C project in Suffolk, which is the subject of ongoing negotiations between EDF and the Government, as well as potential further projects, such as on the Wylfa site in Wales.
Jill Mortimer (Hartlepool) (Con)
I congratulate my right hon. Friend on this landmark Bill, which will help us to reach our net zero targets by 2050. Does he agree that it creates an incredible opportunity to replace the soon-to-be-decommissioned reactor in Hartlepool with a new advanced modular reactor, which could create the high-quality, high-temperature steam that we need for hydrogen production in Teesside?
Greg Hands
I visited my hon. Friend’s constituency with her two or three weeks ago—in fact, it was my first ministerial visit under my new portfolio—and I was impressed by the commitment to hydrogen in the area and to our new approach to energy overall. The most important thing to understand about this Bill is that it enables future nuclear projects and a diversity of financing models, with greater access to private sector finance in particular, so that we are less dependent on overseas developers as we go forward. That is the most important thing to take away. I would of course be delighted to come back to Hartlepool to see what it has to offer in this policy space.
Sir Desmond Swayne (New Forest West) (Con)
When will I be able to get one of these little modular, Rolls-Royce reactors?
Greg Hands
I think my right hon. Friend is referring to small modular reactors, the technology behind which the Government have put their support. The ability to finance them will start to come in, and I would hope to speak further on that with my right hon. Friend.
David Morris (Morecambe and Lunesdale) (Con)
My understanding is that eight sites around the UK currently have planning permission for new nuclear power stations. I have two nuclear power stations in my constituency and we would welcome a third; will the Bill help in some way to speed up the planning process so that we can get investment into communities? My local nuclear power stations are supposed to be decommissioned within the next 10 years.
Greg Hands
The Bill does not change the planning process, but it does change the investment case and the ability to bring in private sector investment, particularly institutional funds, including British pension funds, that are currently put off or find it difficult. It also affects the ability to bring in private institutional investors from overseas—we have seen the difficulties at Wylfa and at Moorside. In that sense, my hon. Friend will find the Bill of great encouragement in respect of future nuclear builds in his constituency.
Greg Hands
I am going to make a bit more progress. I have taken a lot of interventions, and the time for this debate has been a little curtailed.
The Government are introducing this Bill at a time when the cost of energy is on all our minds. We are committed to making the transition to low-carbon power affordable to households and businesses. Nuclear is part of a low-cost future electricity system and helps to reduce our exposure to volatile global gas prices. The measures in the Bill mean that we can keep nuclear in the mix at a lower cost than would otherwise be the case.
Under the Bill, the Secretary of State will be able to designate a company to benefit from a RAB model, provided that it satisfies certain criteria. This will empower the Secretary of State to insert new conditions into the company’s electricity generation licence to permit the company to receive a regulated revenue in respect of the design, construction, commissioning and operation of a nuclear project. A RAB model allows a company to charge consumers to construct and operate new infrastructure projects. It allows the company’s investors to share some of the project’s construction and operating risks with consumers, overseen by a strong economic regulator. That in turn significantly lowers the cost of capital, which is the main driver of a nuclear project’s cost to consumers.
Greg Hands
I will make a little more progress.
RAB is a tried and tested method that has successfully financed other large UK infrastructure projects. The introduction of a special administration regime will prioritise the plant’s opening and continuing to operate in the unlikely event of a project company’s insolvency. That will protect consumers’ investment in the plant and ensure that they realise the plant’s benefit. Members should know that this legislation is not specific to one project, as I have already said, and could be applied to nuclear projects across Great Britain.
Greg Hands
I will make progress.
The RAB model could open up opportunities for British companies and our closest
partners to develop new projects and technologies, including the Wylfa Newydd site in Anglesey and small modular reactors, as well as the Sizewell B project.
Greg Hands
I will make more progress. I have taken a lot of interventions.
The legislation will also make technical changes to the regime of funded decommissioning programmes, removing barriers to private financing of nuclear projects in support of our nuclear energy ambitions. That section will not apply in Scotland.
Members will be pleased that this new funding model will reduce our reliance on overseas developers for financing new nuclear projects. It will substantially increase the pool of potential private investors to include British pension funds, insurers and other institutional investors.
The funding model will require consumers to pay a small amount on their bills during the construction of a nuclear project. These payments from the start of construction will avoid the build-up of interest on loans that would otherwise lead to higher costs to consumers in the future.
Greg Hands
I have given away enough.
Members will be reassured that a project starting construction in 2023 will add only a very small amount to the average dual-fuel household bill during this Parliament, and, on average, less than £1 per month during the full construction phase of the project.
Greg Hands
I will give way to the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) because I have not given way to him yet in this debate and I miss him from the International Trade Committee.
Angus Brendan MacNeil
I am very grateful to the right hon. Gentleman. We had many a good exchange at that stage, but I want to take him back a little further to when I was Chair of the Energy and Climate Change Committee. It was pointed out in representations that were made to me that, sometimes, the Government ask the wrong questions. When they say they want nuclear, what they really need are 6 GW baseload. That might be achievable with a mix of technologies and at a cheaper strike price. Hinkley, for instance, is £92 per megawatt-hour, index linked to, I think, 2012 prices. Had that question been asked differently, not stipulating nuclear but asking for 6 GW, the price achieved might have been around £70, saving bill payers, taxpayers and everybody an awful lot. I caution the Government against going down one route and prescribing the technology—the Minister did mention technologies. Perhaps he should say what he needs, which is 6 GW baseload.
Greg Hands
As I have outlined, the Bill is about nuclear. Creating a more diverse potential finance base is exactly what it is about. It is not biased in favour of one technology vis-à-vis another, but, as a Government, we have been absolutely clear about the important, growing role that nuclear will play. On Hinkley Point C, we think that that was the right model for the decision at that time. I think the hon. Gentleman’s problem is with nuclear as a whole rather than specific problems at a nuclear plant. The United Nations Economic Commission for Europe said:
“International climate objectives will not be met if nuclear power is excluded”.
I think his policy is to exclude nuclear power in its entirety.
Members will be reassured that a project starting construction in 2023 will add only a very small amount to the average dual-fuel household bill during this Parliament—on average less than £1 per month during the full construction phase of the project. I believe that these bill impacts are proportionate, given the benefits that nuclear offers our electricity system. Ultimately, nuclear power will deliver a lower-cost system for consumers compared with reliance on intermittent power sources alone. The RAB model will make new nuclear projects cheaper. Our analysis has shown that using this funding model for a nuclear project could produce a cost saving for consumers of more than £30 billion, compared with funding projects through a contract for difference.
Greg Hands
No, I am going to make more progress.
That saving equates to more than £10 a year for an average domestic dual-fuel bill throughout the life of a nuclear power station, which can operate for 60 years.
The UK has a pioneering history in nuclear energy. We were the first country in the world to set up a civil nuclear programme, back in 1956. There are proud communities—I see many Members who represent them here today—who have been working in the industry for more than 60 years. Creating new nuclear projects will support this important sector and help to level up the UK. The civil nuclear sector is already a major provider of high-value, high-skilled jobs across the entire country. It employs approximately 60,000 people, with nearly 90% of those jobs based outside of London and the south-east. New nuclear projects will be important sources of economic opportunity for the whole country. Hinkley Point C has already created well over 10,000 job opportunities. Future nuclear projects bring with them significant opportunities for training the future nuclear workforce through apprenticeships and training schemes to increase skills.
This legislation will vary in application across the UK. The Government are undertaking close joint work with other stakeholders on the potential options for nuclear at the Wylfa site. The RAB model could play a key role in funding any future project there.
Greg Hands
No; I am going to have to finish.
Members will know that the Scottish Government have a different position with regard to new nuclear projects. To be clear: this Bill will not alter the current approval process for new nuclear, nor the responsibilities of the devolved Governments. Nothing in this Bill will change the fact that Scottish Ministers are responsible for approving applications for large-scale onshore electricity-generating stations in Scotland. The steps taken in this Bill will mean that Scottish consumers will benefit from a cheaper, more resilient and lower-carbon electricity system, so it is right that Scottish consumers should contribute towards the construction of new projects.
Northern Ireland is part of the single electricity market with the Republic of Ireland. As such, energy users in Northern Ireland will not pay towards nuclear projects financed through the RAB.
Taken as a whole, the Bill will ensure that consumers across Great Britain will benefit from a cheaper, more resilient and lower-carbon electricity system that is funded in a fair and affordable way. I hope that Members will agree that this is an important and timely piece of legislation. Recent increases in gas prices have demonstrated the key role that reliable low-carbon power through nuclear has to play in our transition to net zero.
The Bill is a unique opportunity to deliver a trinity of benefits, as it will: help us to create a resilient low-carbon energy system; deliver value for money for consumers; and deliver and create thousands of well-paid jobs across the country. I hope that Members will take the next step towards net zero and levelling up the whole UK. I commend the Bill to the House.
Dr Alan Whitehead (Southampton, Test) (Lab)
Labour believes that new nuclear has an important supporting role to play in the energy mix, alongside the decisive shift to renewables that we need to deliver the climate transition and secure our energy security. As set out by the Climate Change Committee, we need all the low-carbon power sources at our disposal to deliver the rapid and fair transition that is required.
I am sorry that the Minister, in presenting the Bill, has chosen the partisan knockabout route, rather than giving it the serious consideration that it deserves. If we want to go down that path, we can reflect on the decade of dither and delay on the Government’s part, with mixed messages from the Conservative Government on new nuclear. The result is that, after 10 years, we have one half-finished nuclear plant, which is funded by a mechanism that, as the Minister himself accepts, is quite disastrous in terms of future prices. The record of this Conservative Government on new nuclear is frankly very poor. At last we have a Bill that might rectify some of that poor performance over the last 10 years. We need to support the need to finance new nuclear. We will scrutinise this Bill to guarantee fairness for bill payers, including protecting consumers against any potential cost overruns, protecting the poorest households, and scrutinising the balance between public spending and bill payers.
It is welcome that at long last we are coming to the key issue in nuclear power, which is how we build the power stations that we seek to place in the mix of low-carbon energy for the future. We know how not to do it, as I mentioned. We have already seen from the passage of building Hinkley C, and the disappearance of many nuclear projects and programmes, that the model that the Government have long stood for—that power stations should be built entirely by the private sector, and that private-sector security can be bought by price mechanisms that grossly inflate the cost of energy to the customer in the end—is highly flawed.
We are facing a last-chance saloon for new nuclear build that requires us to throw away those principles and start again, because most of the programme of new nuclear power stations that the Government have been envisaging over the past 10 years has been washed away. As late as 2018, there were possibly three consortia actively pursuing an interest in building five new nuclear power stations. These have progressively fallen by the wayside. Consortia have fallen apart, companies with an interest in financing projects have pulled out, and we are now left with one proto-consortium—effectively just EDF—building Hinkley C and with active plans to build a new power station at Sizewell. It is not only an active interest. Sizewell is designed to be effectively a clone of the plant that is currently being built so that it can start to build as Hinkley completes its construction phase and the workforce currently undertaking construction at Hinkley can transfer to the building of its clone at Sizewell.
We ought to add two other factors that will have a substantial bearing on how we proceed with building plants—or in this instance, a plant, because that is all we have under consideration right now. First, the consortium proposing to build Sizewell is not exactly champing at the bit to finance it. EDF has effectively mortgaged itself to the hilt in financing 65% of Hinkley C and has stated unequivocally that it is not about to do the same with Sizewell C. Secondly, we still have the arrangement in place concluded by the then Chancellor George Osborne to arrange a fast track into the heart of our nuclear programme for the China National Nuclear Corporation via a Secretary of State’s investment agreement to help fund Hinkley C power station to the tune of 35% of the upfront capital; 20% of the second in the EDF consortium’s programme, Sizewell C; and the big prize for the Chinese—control of the financing, build and running of a third nuclear power station at Bradwell in Essex, which is now unlikely, to the point of impossible, to happen.
It is likely that the Chinese will not be able to get their hands on a real nuclear power station all of their own and they will not be investing into 20% of Sizewell—indeed, the Government seem to have set aside £1.7 billion in the Budget to buy out their interest in Sizewell C. Labour has long warned that the Government are playing a dangerous game when they outsource the funding of critical national infrastructure to foreign Governments. We are now seeing the results of a decade of Conservative Governments doing exactly that, and mostly failing to get anywhere. There we have it in terms of the UK’s nuclear programme for the foreseeable future—only one plant in prospect for a start before the late 2020s.
John Redwood
The shadow Minister is very thoughtful on these matters. How much standby capacity does he think we need to back up the wind and solar that will be the majority of our generation in due course?
Dr Whitehead
Interestingly, the Climate Change Committee, which has looked into this matter in great depth, considers that in the overall long-term future make-up of our energy mix, about 8 to 10 gigawatts of standby power—therm power—is likely to be required in the shape of new or existing nuclear power stations. That is about the size of the difference with an overwhelmingly renewable but variable economy, with elements of firm power backing it up.
I have mentioned that one plant only that would be included in the suggested 8 GW to 10 GW is in prospect for a start before the late 2020s, because every other proposal has fallen away. However, it is not financed and is probably not financeable by private capital. It is only part financeable by a state financer, with which we do not now want to do business. Let us be clear before we go any further: this Bill is about finding a formula to fund and build Sizewell C power station. Whatever its generic pretensions, that is the issue we should be concentrating on. Even so, getting that plant going would cover most of what the Climate Change Committee considers is the presence in the mix needed.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
Before the hon. Gentleman moves on from discussing the financing for Sizewell C, does he agree that it is important, when we are talking about financing, that the financing is not just in place for the build of the power station itself, but for the necessary infrastructure and mitigation measures for the local communities in the area, who will be suffering from construction traffic and the like for potentially a 12-year period?
Dr Whitehead
The hon. Gentleman is right to say that the build cost and financing of a nuclear power station has to include not just the obvious things that we think are associated with a nuclear power station, but all the other infrastructure around that nuclear power station and contributions to decommissioning costs. That is what we are talking about in terms of an overall financing package, and that is why a financing package has to last over the whole life, effectively, of that nuclear power station. I do not intend to move on from the financing of Sizewell C, because that is essentially what this Bill is all about. It is about all those things that the hon. Gentleman mentions, so far as that particular project is concerned.
This plant, if it goes forward—we hope it will go forward with something like this kind of financing—would cover a substantial part of what the Climate Change Committee considers necessary in the mix of low-carbon energy to drive power towards net zero by 2050. I have mentioned that it thinks about 8 GW to 10 GW of new nuclear power would be needed to complement a predominantly renewable power line-up so that firm power considerations are met, without being in such numbers that it puts the development of renewables into jeopardy. That 8 GW to 10 GW includes new nuclear power, but also the one existing power station that will probably last beyond the 2030s in Sizewell B.
Hinkley and Sizewell C together therefore would go a long way towards meeting that assessment by the end of the decade, with two 3.2 GW power stations with reactors in each, and the remaining Sizewell B power station continuing in action. It is not surprising then that we are talking about nuclear financing, which is pretty much all the Bill covers. Exam question: how do we finance an unfinanceable nuclear plant when we know we have got to do it because there is no other option? Even if we did decide to repeat the frankly disastrous device of providing a CfD for the plant at Hinkley, which is likely to produce power at twice market cost, it still would not work, because that does not solve the problem of getting investors into the plant for the lengthy period before production starts. There are ways in which nuclear finance can be sorted out.
Jonathan Edwards
I thank the hon. Gentleman for the very considered manner in which he is presenting his case. Is there anything in his mind that would stop the UK Government using this new financing model for other technologies, such as the tidal lagoon in Swansea, or is it blatantly unfair that one technology has a very favourable financing scheme, while another technology that could provide many of the solutions that he seeks is stuck on contracts for difference?
Dr Whitehead
The hon. Member mentions tidal power. Of course, a regulated asset base system can be used for any sort of major infrastructure project—and indeed has been already, as I will come to. I do not see the discussion on that system as being about just nuclear power, but a method of funding a large infrastructure project that has certain requirements that must be met by continuous funding throughout its operation. He is right that infrastructure projects other than nuclear in the energy sector could and should be funded by that system.
The National Audit Office discussed those options when it reviewed the decision making and value for money that the CfD process for Hinkley entailed. The route adopted by the Government, after much internal wrangling and delay, is a regulated asset-based model that is essentially constructed along the lines that it has been used for already in capital projects such as Heathrow terminal 5 and the Thames Tideway project. That is, the whole project is part-funded by the proceeds of a levy on bills. The levy varies in size during different phases of the project and, in the latter phases of production, lowers or even goes negative if the project’s income exceeds the ceiling of allowable costs under RAB.
There are substantial advantages to the RAB model for making the project investable. It provides returns for investors as the project proceeds rather than at the end of it, as does the CfD model, which allows investment to be brought into the frame for the project from sources that might otherwise baulk at the timetable between investment and return. It also reduces the hurdle rate for investment in the project, thereby in theory substantially reducing the overall cost of financing the project and likely resulting in cheaper prices for the energy produced by the plant.
There are also substantial risks with RAB that need to be managed. It places the cost and risk of financing the project on the shoulders of customers, in this instance electricity bill payers, which adds to bill costs through a levy on their bills before anything has materialised. In the event of the plant not being completed, it lumbers them with bill costs without the benefit of the plant for which they have paid producing relatively cheaper electricity.
RAB also adds to the burden of bills unpredictably if the project overruns on cost or time—both of which, as we know, nuclear plant development is rather prone to. The extension of the construction period for a project, when the highest effect is felt on bills, lengthens that higher take period. An increase in cost may also cause revisions to be made to allowable costs ceilings, and hence cause heavier costs on bills.
We are in somewhat uncharted waters with a project such as Sizewell C because of its size, complexity, timescale and investment costs compared with the more modest sums and shorter timescales involved in existing RAB projects. Nuclear power stations elsewhere in the world have been funded along RAB lines, but have simply not been completed, which has left consumers with a huge bill and no benefit.
In short, we need to go into this kind of arrangement with a clear eye about the advantages and risks of a RAB model for nuclear. As far as we can, we should attempt to mitigate the risks and play up the advantages. It is workable, but only if the Government have a serious plan.
The Government have sought to alleviate at least some of the disadvantages by introducing to the Bill a special administrative regime for the project in the event of a failure of the company involved during construction. We will look carefully at those provisions, but they seem to be a useful commitment to ensure the robustness of the overall project, even if its prime developer fails to deliver. We also accept that provisions in the Bill on who may be involved in legacy and decommissioning costs will help to clarify the risks for security trustees and secured creditors.
There is much to agree with in the Bill, given the evident need to secure a mechanism that enables Sizewell C to be developed and come into production at a reasonably early date. There are measures to lower the overall cost of the project so it is investable and less price inefficient than its immediate predecessor, and to ensure that the project stays on track and delivers at the end of it. However, there are still many questions to be answered, particularly on the robustness of the RAB model under circumstances where the inevitable “optimism bias” of project costings—that candid acknowledgement comes from the Bill’s impact assessment—proves to be disadvantageous and costly to consumers who, after all, are supposed to be paying up for a benefit later on. It is important that we look at such matters carefully, with a clear eye on consumer protection, and do not just assume that the mechanism will milk customers for whatever it takes to produce an outcome in the end.
We need much greater clarity about the Government’s intentions on the difficult situation concerning Chinese investment in Sizewell. That may not be central to the Bill and the RAB model, but it is indirectly affected. The project’s overall shape will be affected by whether the Government take over the Chinese share, offer it to other investors or even calculate that RAB is a sufficiently powerful tool to enable investors easily to come in and scoop it up once the Secretary of State’s investment agreement provisions are untangled. We need to know in the Bill’s early stages what the Government will do about that and through what mechanisms.
As the Bill progresses, the Government can expect Labour’s overall support but also a proper, critical eye on aspects of the mechanisms they are adopting and a particular emphasis on protecting the people, who will either stand to benefit from a reliable power station producing needed energy at reasonable cost if it goes right or suffer grievously if it goes wrong. In other words, the customer must be first in our minds in taking such decisions, and we will stand up for them as the Bill progresses.
Chris Skidmore (Kingswood) (Con)
I welcome the Government’s action to introduce the regulated asset base funding model for the financing of new nuclear power plants. As a former energy Minister, and indeed a former science Minister twice, I was fortunate enough to have the opportunity to see at first hand the brilliant services that our nuclear energy industry provides, despite the many compounding hardships that it faces.
Nuclear power currently provides just under 20% of the UK’s energy needs, but almost half that capacity will be retired and lost by 2025. For the UK to achieve its net zero obligations and beyond, expanding our nuclear energy fleet will be paramount as it provides emission-free energy without the need for the wind to be blowing or the sun to be shining. The case for nuclear energy as a clean source of power should be evident. It may have done more for decarbonisation and reducing carbon emissions in the past 70 years than any other industrial sector.
Deidre Brock (Edinburgh North and Leith) (SNP)
The right hon. Member speaks of the baseload and the constant flow of energy from nuclear. Does he support the tidal energy efforts being made in Scotland? Would he support far more investment in that?
Chris Skidmore
I believe that we do not have a choice. We must look at every form of renewable energy, nuclear energy, carbon capture and storage and hydrogen to reach net zero. We cannot make the perfect the enemy of the good. Equally, in looking at how to decarbonise, there are no good and bad actors; the most important thing is outcomes. We have a target set for 2050 but cannot ignore that we wish to reduce our carbon emissions now. I therefore welcome any technology that can achieve that sooner rather than later.
Bob Stewart (Beckenham) (Con)
My right hon. Friend knows a lot about these things. What percentage of our energy does he estimate will be produced by nuclear power stations by 2050?
Chris Skidmore
That depends on the potential for innovation for the future. We have an energy crunch coming down the line with perhaps just a single nuclear plant open by 2030 and, at the same time, we will move from existing nuclear fission reactors through to small modular nuclear reactors, advanced modular nuclear reactors and, ultimately, fusion.
As science Minister, I assigned Government investment for the spherical tokamak for energy production units. We need certainty and a clear strategy for where the nuclear pathway is going beyond the existing reactors and to front-load that investment now. I will come to why the RAB model is so important as it allows that front-loading.
As I mentioned, nuclear power has resulted in an annual saving of 22.7 million tonnes of CO2, the equivalent of taking one in three cars off the road. The Government’s proposal to adopt the regulated asset base funding model for nuclear power is bold and ambitious, but it is also needed. The beauty of the funding model is that it inherently encourages a wider range of private investment in new nuclear projects, reducing the UK’s reliance on overseas funding.
As it stands, developers are forced to provide the finances for construction up front and begin receiving revenue only when the station starts generating electricity. Even in the best of times for energy markets, which we certainly are not in now, that lack of certainty diminishes how investable nuclear power projects are. As we have seen, sadly, with the nuclear projects at Moorside and Wylfa, our current funding model is simply not fit for purpose; 5.8 GW of nuclear energy, just over half our current supply of nuclear power, was lost directly because funding could not be secured. Those locations have both been described as highly desirable sites for new nuclear power plants, but even after the Government offered to take the equity, provide all the debt finance and back a revenue-stabilising mechanism, private investors still had to walk away.
Jonathan Edwards
I do not question the hon. Gentleman’s expertise or knowledge on this issue, but perhaps he can help me out. From the Minister’s letter, and from what the hon. Gentleman himself has said during the debate, we know that 12 of the UK’s 13 current nuclear reactors are scheduled to close by 2030. The main argument for large nuclear is the baseload protection it gives that other technologies cannot provide, but it seems to me that it is highly unlikely, even with this new financing model, that a large new nuclear plant will be built before 2030. The question that arises from that for me—I admit that I am not an expert—is, how will that baseload be covered while we are waiting for the new large nuclear plants to be built?
Chris Skidmore
That is a very important question. It is not just 2030 that I am concerned about, but 2025. Nuclear currently accounts for 18% of electricity generation. The current closure rate of plants means that by 2025, nuclear will go from 18% down to 10%, so we will lose 8% of energy supply in the next three years alone. We will not be able to cover that gap; the hon. Gentleman is absolutely right. We are behind the curve here, which is why the Bill is vital. No one should vote against it tonight, because to do so would simply be to kick the can further down the road.
Nuclear also provides a fantastic opportunity to level up. Think of the jobs that it can provide: no one who lives near an area in which there is a nuclear power plant is against nuclear. Hinkley C in Somerset, relatively near my constituency, provides 30,000 jobs, of which 70% are local. It offers enormous potential for creating a sustainable pipeline of skill and talent for the future.
On the RAB funding model, others have asked during the debate, “What about other technologies?” The RAB model has also been established and received strong support from investors in other large infrastructure projects. Indeed, RAB-based funding has provided the funding mechanism for numerous financings of offshore wind transmission cables and infrastructure, as well as Legal & General’s financing for Mutual Energy’s Gas to the West gas network expansion project in Northern Ireland.
Yet the real advantages of this new funding system will come in relation to emerging innovative nuclear energy technologies. As anyone who is interested in reaching net zero will be aware, plans to develop third-generation nuclear reactors are well under way, with British companies such as Rolls-Royce leading the way. Some of those innovations—I have mentioned small modular nuclear reactors—have been designed to be able to be mass-manufactured at one site, powered by an SMR nuclear power plant, and then shipped domestically or internationally, massively reducing the cost. That brilliant technology will have the added benefit, I believe, of helping to power hydrogen electrolysers, which are highly more efficient if they are given a supply of heat. In turn, those will be able to decarbonise sectors that are the most difficult to decarbonise—the hard-to-abate groups that energy cannot touch, which need liquid fuel. The potential for nuclear heat and energy to generate hydrogen I think has the potential, in turn, to generate a clean energy revolution.
Those exciting technologies look to radically shake up the international energy supply system, but it is only through an adequate and appropriate funding model that we can take full advantage of their possibilities. As we have seen with the recent rise in global energy prices, energy security must be at the forefront of all our minds when debating policy. One of the best ways to avoid the situations that the world currently faces is by having a diversified energy supply, nuclear included. Additionally, it is only through the correct development and deployment of innovative technologies that we can both secure our energy supply system and achieve our net zero obligations. Net zero by 2050 is the ultimate mission for our generation and one that we must achieve as quickly, efficiently and effectively as possible. The RAB funding mechanism provides a clear path for nuclear to play its part in that mission.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Not for the first time I think I am going to express a minority view in the Chamber, but I am sure everyone will listen carefully and, once I present my arguments, change their minds and agree with our point of view.
The real debate is whether we need new nuclear or not. I intend to spell out why we do not need new nuclear and, therefore, why we do not need the Bill. Before doing so, I want to highlight the UK Government market failures that have led to the Government scrambling to bring forward the Bill.
We know that Hinkley Point C is currently under construction, but it is under construction as the most expensive power station in the world. There are several reasons for that and how it came about. First, successive Governments seem to have developed a groupthink, following lobbying from the nuclear industry, that somehow nuclear is a prerequisite for our future. Then came the rationale that building a suite of new large-scale nuclear power stations would lead to competition and cheaper costs. However, that philosophy was flawed in that there were not enough competitors to start with and then a piecemeal approach was taken by nominally awarding sites to different preferred bidders. For Hinkley Point C, that meant EDF was the only game in town, so there was no competition when negotiating the contract. EDF had already been beset with problems with its EPR prototypes in Finland and France, so it had to be more cautious in its pricing. It is little wonder then that the UK Government ended up with such a bad deal. They have since tried to tell us that the eye-watering strike rate of £92.20 per megawatt hour for a 35-year contract, while the cost of offshore wind dropped to £40 per megawatt hour for just a 15-year concession, meant that the nuclear deal was a good deal.
In a letter last week, the Minister of State, Department for Business, Energy and Industrial Strategy, the right hon. Member for Chelsea and Fulham (Greg Hands), was effectively saying, “By the way, the Hinkley Point C deal was actually rubbish and poor value for taxpayers, so now we have an alternative funding model and we’re bringing that forward.” Interestingly, it was stated in the letter that the new funding model could potentially save the taxpayer £30 billion to £80 billion. How much money do the Government estimate has been wasted on Hinkley? How many billions of pounds are the Government willing to commit bill payers to if they say they can save up to £80 billion? Logic says that hundreds of billions of pounds would have to be spent to be able to argue that there could be a saving of £80 billion. I will happily give way to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Mid Norfolk (George Freeman), if he can tell me how much money that £80 billion saving is estimated on? The right hon. Member for Chelsea and Fulham would not give way, but I am happy to give way if the hon. Gentleman can tell me how much the Government estimate—[Interruption.] I take it that he will not give us a figure. The Minister will not come forward and give a figure. That does not add confidence. The Government are saying the saving could be between £30 billion and £80 billion. That is a huge range and that does not give confidence to the estimating proposals either.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)
Just to correct the record, it does not at all mean I am not going to answer the hon. Gentleman’s question. It means that I will do it in the usual way, when I wind up at the end of the debate.
Alan Brown
I was so hopeful that I was getting an answer there on the hundreds of billions of pounds that are being committed.
Returning to Hinkley Point C, we hear how advanced the project is and how well it is going, but the reality in terms of cost is that it is £4.5 billion over the initial estimates, which is 25% over budget. On progress, the commissioning date for unit one has now been put back to June 2026, instead of the anticipated 2025, but they also admit there is a programme risk of up to 15 months on top of that. That means that it could be September 2027 before unit 1 of Hinkley is operational and unit 2 will then follow a further year behind. So it is realistic to say that Hinkley Point C will not be fully operational until 2027-28, which is 10 years after we were initially told that Hinkley Point C was required to stop the lights going out. Given that the lights have not gone out, that undermines the original case for Hinkley.
We have to bear in mind that the EPR system has still not been shown to be successful. Flamanville in France is expected to start generating to the grid in 2024, 12 years late. Finland’s project has been delayed yet again, until next year, and it is 13 years late. Both have been crippled with spiralling cost increases.
Deidre Brock (Edinburgh North and Leith) (SNP)
Further to those costs, we know that the permanent safe disposal of radioactive waste from nuclear power plants has not yet been achieved by any country. A 2018 study from the department of geology at the University of Kansas recently suggested that nuclear waste disposal would be two and a half to four times more expensive than has been estimated. Those costs will be passed on to those who come after us. Is my hon. Friend satisfied that these possibilities have been fully taken into account in the financing model?
Alan Brown
It will be no surprise to hear that I have no confidence that the true costs of nuclear waste disposal are actually included. We hear that this is rolled up in the strike rate for Hinkley, but if something happens and EDF goes out of operation, who will pick up the additional costs? It will clearly be the bill payers or the taxpayer. We hear about the fact that nuclear is supposed to be clean energy, but how can it be classed as clean energy when we are burying radioactive waste and having to store it for up to 1,000 years? That, to me, does not mean clean energy.
Taishan in China was held up as an exemplar EPR project when it was commissioned, but it has been offline since June this year due to safety concerns and rod damage. It is clear that the design and construction of EPR nuclear stations has still not been bottomed out properly. As the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), said, a reliance on French state-owned EDF and the Chinese state company China General Nuclear kind of undermines the argument about having sovereign energy security. It makes no sense.
Despite the cost and programme issues at Hinkley, we are told that Sizewell C will somehow be different. There will be cost savings from learning on Hinkley. The design will be replicated, saving more money, but the reality is that the site at Sizewell C is bound to have different ground conditions, different environmental considerations and different logistics and site constraints, which affects methods of working, and that means that we cannot build an exact duplicate station the same way.
Even if savings are realised on Sizewell C compared with Hinkley, what does that mean cost-wise? If Sizewell C saves 25% compared with Hinkley, that is still a capital cost outlay of £18 billion. Surely there are better ways to spend £18 billion. We heard from the right hon. Member for Kingswood (Chris Skidmore) about the number of jobs being created. If I was given £18 billion to £20 billion, I am sure that I could create 30,000 jobs —by the way, that is £730,000-odd a job in capital costs alone. That is not a good return.
On costs, we are told that a new deal signed under the proposed new funding model in the Bill will cost consumers only £1 a month during construction, but if we look at a 10-year construction period for Sizewell C, we see that that means that bill payers in 28 million households will pay £3.4 billion before it is operational. That is a further £3.4 billion in expenditure when that money could be better invested elsewhere.
We still do not know with this Bill what the long-term pay-back options will be. Will there be a further agreement on the strike rate or a minimum floor price on the sale of energy? What length of contract will bill payers be tied into once a RAB model for an agreement is signed off?
What else could we do with that amount of money? We could upgrade all homes to energy performance certificate band C. We could have wave and tidal generation. The UK Government are willing to introduce the Bill and commit hundreds of millions of pounds to nuclear—the Budget has £1.7 billion just for developing nuclear to a negotiation stage—but they will not even ringfence £24 million for wave and tidal in pot 2 of the forthcoming contracts for difference auction. The disparity is clear.
It is time the Government took their blinkers off. It will be a real disgrace if they do not provide a pathway for wave and tidal projects to scale up. Scotland is currently leading the world on the issue; the O2 tidal generator is operational and grid-connected in Orkney. I hope that the Minister will reconsider the request to ringfence a small amount of money in pot 2 of the forthcoming contracts for difference auction.
Mark Jenkinson
I am a huge supporter of tidal energy, but is it not the case that nuclear, given its energy density, is the most environmentally friendly and low-carbon technology that we have, while tidal has the potential to significantly damage marine ecosystems? I am a big supporter of tidal energy, but we have to be really careful about where we deploy such things. We have a ready-built, proven technology here—the most environmentally friendly and low-carbon technology that there is.
Alan Brown
I completely agree with the hon. Gentleman about nuclear being clean—oh, wait, apart from the radioactive waste that we still do not know what to do with. We will ignore that point, but he has a valid point about the need for clear environmental considerations with respect to where we site any marine project. That should be part of a robust, up-front planning process, working with the likes of Marine Scotland. There are regulatory bodies that have oversight of these projects, so it is important that they be involved in the planning process. I agree with the hon. Gentleman that there is still a huge future for wave and tidal.
Richard Graham (Gloucester) (Con)
The hon. Gentleman highlights the value of marine energy in Scotland and elsewhere; he and I are absolutely on the same page on that. Does he agree that one thing it would be very helpful for the Minister to take away is the need to clarify the precise size of the pot that will be available specifically for marine energy in the next contracts for difference auction round, CFD AR4? There is a danger that unless there is a specific pot, the marine energy providers will be rather crowded out by other forms of renewable energy.
Alan Brown
I completely agree. I was happy to co-sign the cross-party letter from the all-party parliamentary group on marine energy, which I fully support. I hope that the Minister is listening, because this is a matter that we agree on across parties.
Looking at other technologies that we should be spending money on, I compliment the UK Government on seeing the opportunities that floating offshore wind can bring, but let us start deploying it much more quickly and investing more money, because that is where the real future is. Clearly, the further out to sea the turbines are, the greater the reliability of wind and subsequent generation.
There needs to be much greater investment in carbon capture and storage. The Government need to reverse their disgraceful decision not to have a Scottish cluster as part of their track 1 CCS projects. A Scottish cluster would also deliver hydrogen production, which is vital on the pathway to net zero.
We heard earlier, as we always do, the argument that nuclear is required for when the sun does not shine and the wind does not blow, but as I have tried to point out to the Minister, there is an existing technology that can address that issue: pumped storage hydro, a renewable energy source that utilises surplus grid energy to fill the reservoirs and can then dispatch electricity when required. Pumped storage hydro is the perfect foil for intermittent renewables, rather than big, inflexible nuclear power stations that invariably pump energy to the grid when it is not required. An Imperial College report suggests that there could be system savings of £700 million a year from using pumped storage hydro technology instead of nuclear.
SSE has all the necessary permissions in place, right now, to progress a new pumped storage hydro scheme at Coire Glas in the Highlands. It is progressing the design at its financial risk, and all that it needs is agreement with the Government and a minimum floor price for electricity—not a strike rate and not direct funding, just a minimum guarantee on the sale price of electricity. Then the development can reach the construction stage, and can be commissioned in the same timeframe as Hinkley. I ask the Government to reconsider, and to get round the table with SSE and other developers.
Mark Jenkinson
I thank the hon. Gentleman for allowing me to intervene again. I am a big supporter of pumped hydro, which is great for storage, but we cannot neglect the fact that we require a surplus of electricity to pump the water in the first place, up to the point of that storage. It is great to be in control of when we release the water and use the energy, but we have to think about how we get it up there in the first place.
Alan Brown
Absolutely. That is my point. This is about utilising spare energy and then filling the reservoirs. That is much more productive than, with nuclear, putting additional electricity into the grid and then making constraint payments to wind farm developers to turn the turbines off. Those turbines could be used to much greater effect for the likes of pumped storage hydro, or generating green hydrogen.
It is clear that there are alternatives to nuclear. The Government have rightly pointed out that the existing nuclear fleet is coming to an end, but they have wrongly concluded that that means we need new nuclear. Dungeness went offline earlier this year, seven years early, because of safety concerns. Hunterston B is about to go offline, and Hinkley Point B will close next summer. Hartlepool and Heysham will follow in 2024. That means that Hinkley Point C will not even replace the lost capacity, and by 2024, 5.3 GW of nuclear capacity will have been lost to the grid.
If the grid can operate successfully without that 5.3 GW of nuclear for three or four years until Hinkley’s 3.3 GW comes on line, that in itself confirms that new nuclear power is not required. In all likelihood, Torness and Heysham 2 will not last until 2030, so all but one of the existing stations will be offline before Hinkley comes online. By not replacing the existing nuclear fleet as it comes to the end of its life, the UK Government are themselves proving that we do not need a nuclear baseload, because the grid can operate without it, unless an energy security crisis arises when all the other stations go offline. The Minister can address that later if he wants.
Although here in the Chamber it is just me saying that we do not need new nuclear, plenty of experts agree. Back in 2015, the then chief executive officer of National Grid, Steve Holliday, said:
“The idea of large power stations for baseload is outdated”.
In the 2019 World Nuclear Industry Status Report, Mycle Schneider, who was the lead author of the report, said that nuclear power
“meets no technical or operational need that low-carbon competitors cannot meet better, cheaper and faster.”
A recent study by Good Energy and the Energy System Catapult demonstrated that carbon emissions from the power sector could be eliminated as early as 2030 without the need to develop new nuclear power. Sarah Darby, associate professor of the energy programme at Oxford University’s Environmental Change Institute, has said:
“Nuclear stations are particularly unsuited to meeting peak demand: they are so expensive to build that it makes no sense to use them only for short periods of time. Even if it were easy to adjust their output flexibly—which it isn’t—there doesn’t appear to be any business case for nuclear, whether large, small, ‘advanced’ or otherwise.”
It is clear that there is not a case for new nuclear—and, as my hon. Friend the Member for Edinburgh North and Leith (Deidre Brock) pointed out earlier, we have yet to address the nuclear waste issue. It will cost £132 billion to deal with the existing nuclear waste legacy. Why do we want to create another waste legacy for future generations to deal with?
So we do not need nuclear, and we do not need this Bill. Even if we consider what it aims to achieve, the fact remains that there is market failure, given that Hitachi has walked away from Wylfa and Oldbury and Toshiba has walked away from Moorside. So there is no competition to drive down cost, and EDF and China General Nuclear are still the only show in town. As the hon. Member for Southampton, Test (Dr Whitehead) asked, while the RAB model may might bring down costs, what protections are there in the event of project overruns?
Clause 2 puts all the powers of negotiation and contract award into the hands of the Secretary of State, and allows the Secretary of State to determine what is value for money. We all know how good the Government are at direct negotiations, so how can they guarantee value for money in a transparent manner?
As I touched on earlier, we have been told for five years that Hinkley is good value for money, but now the Government have come back to the House to say that actually that is not the case and they have a new plan for how to deliver nuclear. I therefore cannot possibly support this Bill, especially as the electorate of Scotland have consistently voted to elect a Government on a “no new nuclear” manifesto. Why should Scottish bill payers be forced to pay for nuclear energy that they do not want or require? This is another democratic deficit for Scotland, especially when so much of our renewable energy is not being supported at the moment and we are stuck with the highest grid charges in Europe. It really is time that Scotland had control of its own energy decisions, but in the meantime I will be proud and pleased to vote against this Bill.
David Morris (Morecambe and Lunesdale) (Con)
It is an honour to be called to speak in the debate and to follow the excellent speech from the hon. Member for Kilmarnock and Loudoun (Alan Brown). In my constituency we have two nuclear power stations, whose output going into the national grid at any given time makes up about 10% of our national energy. They are the largest employer in my constituency, and I have extended family members who work in the nuclear power industry. In fact, it is hard to find anybody in my constituency who does not. We do not just have nuclear, however; we have other forms of energy from wind all the way down to biomass and also, out to sea, what I believe is the largest offshore wind farm in Europe.
The initiatives that the Government are now bringing forward are long overdue. I remember, back in 2010, when the then Energy Secretary Chris Huhne delivered his first speech to the House under the coalition, in which he said that nuclear power would be funded by private enterprise. Afterwards, I had a chat with him about that and he told me that, in his opinion, nuclear was old technology and an outdated form of energy. Anybody in this House who knows me well, as you do, Mr Deputy Speaker, will know my sense of humour. At that point, I said to Chris, “I think the wind has been blowing too hard between your ears, my old son.” He did not find that funny at all. The point I was trying to make to him was that we have an eclectic energy mix in this country of ours, from the great top of Scotland all the way down to the bottom end—and, dare I say it, we also get energy from the continent.
It is about time that we addressed how we are going to fund our future energy needs, especially nuclear. What has not been mentioned so far is that we are trying to get fossil fuels eradicated in one form or another within the next 40 years and that there will be more electric cars on the road. How are we going to power those electric cars? How are we going to meet that demand and keep the economy moving in an electrified form? It can only be done with nuclear power.
Nuclear power is the only form of energy we have that is constant. It is produced 24/7. The Walney wind farm produces a huge amount of energy for this country, but every one of those windmills would have to be producing energy at the same time to match the input into the grid of the two nuclear power stations in my constituency at that moment, whereas those two power stations are pumping energy into the national grid 24/7. It defies belief that we have not invested in nuclear power before now and that we have waited until this point to come up with a funding formula to do so.
Richard Graham
My hon. Friend is making some good points about the incredible efficiency of nuclear power operating 24 hours a day. On the specific point of how to finance new nuclear power, does he agree that, when the financing for Hinkley Point was being developed almost a decade ago, it would have been impossible to do a regulated asset-based proposal because, having not built a new nuclear power station for a generation, the risks to the taxpayer would have been enormous? Now that Hinckley Point is being done, however, we can take that same model on to Sizewell C and then hopefully on to Wylfa and elsewhere, gaining experience, expertise and reductions in cost as we go along. Does he agree that this is therefore the right model at this time?
David Morris
I totally agree with my hon. Friend. We can take forward this model of heavy lifters, which is how I refer to the bespoke power stations at Hinkley Point. Rolls-Royce has talked at length about a factory in which it would build modular nuclear power stations akin to the power plants on nuclear submarines, which are built not far from my constituency—we see them across the bay.
There are different models coming forward, and we are looking at and accelerating different types of approval because of the need for the low-carbon efficiency of nuclear power. Hinkley Point is a bespoke model, just like the huge heavy lifters we have at the Heysham 1 and 2 configurations in my constituency.
I agree with the hon. Member for Southampton, Test (Dr Whitehead) that there are lots of jobs in the nuclear power industry. It is not just the people working in the power stations; it is the vast supply chain. The hon. Member for Kilmarnock and Loudoun, who is my friend outside the Chamber, raised his valid concern about the processing of nuclear waste, but at the old Sellafield site across the bay from my constituency there is a laboratory that converts used plutonium into forms we can use. Americium, for example, is a by-product of decaying plutonium and uranium, and it can be used to power satellites for 100 years—it cannot be used clandestinely. Plutonium is like a wine that gets better with age, and as it decays it produces something that can be used in a different context.
Other industries spin off from nuclear, and the reality is that we have to meet our energy demands. It is brilliant to see the new Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Mid Norfolk (George Freeman), in his place, and he is an old friend of mine. I am glad the Bill has been introduced, and I believe the whole House will back this initiative because we are a great nation collectively and this is how we will power our future industries, transport and economy.
It is good to see the Bill because nuclear is important to my constituency. We have one of eight footprints in the country on which we can build a nuclear power station, and my whole community welcomes this initiative.
Sarah Olney (Richmond Park) (LD)
Thank you, Mr Deputy Speaker, for the opportunity to speak in this debate.
If we did not already know that decarbonising our energy supply is one of the most urgent challenges facing not just this country but the whole world, the ongoing discussions in Glasgow at the COP26 summit have certainly informed us. There is now worldwide consensus on the need to phase out the use of coal and other fossil fuels in energy production, transport, heating and industry, and it is encouraging to hear some of the commitments made by delegates towards that goal. We have quite a good story to tell already on that in this country. In the UK, energy production accounts for approximately 15% of all carbon emissions. One significant challenge we face is how to replace the role of coal and fossil fuels in energy production with carbon-free alternatives, but we have already made great progress in decarbonising our energy supply. Carbon dioxide emissions from power stations were 75% lower in 2020 than in 1990, and this change has come about largely from the introduction of new energy sources, particularly renewables, such as wind and solar. The use of coal in our power supply fell sharply from the mid-2010s onwards, after which the use of renewables expanded rapidly. Wind power is now the cheapest form of electricity generation, and it was Government policy that made the substantial difference to this change, notably the decision of the then Secretary of State for Energy and Climate Change to introduce contracts for difference to incentivise private sector investment into the renewables sector. That Secretary of State was my right hon. Friend the Member for Kingston and Surbiton (Ed Davey), whom, I gather, went on to more exalted roles.
The legislation has strong precedents. Unlocking the barriers to private sector investment into carbon-free alternatives in our energy market has catalysed the changes we need to see. We need to go further to make sure that we can completely decarbonise our energy sector, supporting renewables and household and community energy.
Mark Jenkinson
Does the hon. Lady not prefer France’s decarbonised electricity model to Germany’s model of ever-increasing emissions and air pollution because of its decisions to close down nuclear power stations and go back to burning lignite, the dirtiest form of coal there is?
Sarah Olney
My remarks are about the UK power sector, but I take the hon. Gentleman’s point about Germany. Clearly, as I think I have clearly stated, we want to move towards carbon-free alternatives to coal. I also want to make it clear that it is not our position that we should be closing down nuclear power stations; we support the ones that are currently operational and where contracts have been signed to open new ones. As I want to go on to make clear, our position is very much that there should not be new nuclear power stations. We need to go further to make sure that we can completely decarbonise our energy sector. We want to support renewables and household and community energy. It will create jobs. To pick up on the point made by the hon. Member for Morecambe and Lunesdale (David Morris) about jobs in the nuclear sector, let me say that the advantage of jobs in the renewables sector and in other alternative energy supplies is that they can be spread over a much larger area of the country. I believe he said that there are probably 18 viable sites for new nuclear power stations, many of which are concentrated in his part of the world. I am interested in job creation right across the country, and renewables offer much better opportunities for us on that.
Of course, we want to cut fossil fuel imports. On that basis, I strongly back the Government in what they are trying to achieve here, but not for nuclear. I wish to reiterate the Liberal Democrat position: there is currently no economic or environmental case for the construction of any further nuclear stations in the UK. The hon. Member for Kilmarnock and Loudoun (Alan Brown) set out, in his extensive and detailed speech, very much what we believe: there really is not a case for such construction.
A further point I wish to make is that it will take 20 years to build a new nuclear power station, however it is funded. We have very ambitious net zero targets. As the Minister said, we want to be net zero in our power sector by 2030, which is much sooner than in 20 years. We need to move considerably faster than that, and we already have the tools and technology to cut carbon significantly in our power sector in a much shorter period, so we need to accelerate the deployment of renewable power. We need to remove restrictions on solar and wind. We need to build more interconnectors to guarantee the security of supply. If we did that, we could reach at least 80% renewable electricity by 2030, which would be consistent with the Government’s aims to achieve net zero.
Notwithstanding the points made by other Members about the growth in demand for electricity from electric cars, we can do much more to reduce demand for electricity from existing sources.
Anthony Browne (South Cambridgeshire) (Con)
The hon. Lady is making a strong case against nuclear power. Is she aware that it was her own party leader who signed off the Hinkley Point C deal?
Sarah Olney
I thank the hon. Gentleman for his intervention. I am fully aware of that; I just want to reiterate that Liberal Democrat policy is that we are against any further nuclear power stations. We want to redouble our efforts on renewables, and I think I have probably said that several times now. We believe there is no economic or environmental case for further nuclear power stations.
Richard Graham
The position that I think the hon. Lady is taking is that the Liberal Democrats believe that all our future energy needs can be covered entirely by wind, both onshore and offshore, and possibly a bit of marine energy. What happens when the wind is not blowing and the sun is not shining? That is precisely when the base contribution of nuclear energy is so vital. By not increasing nuclear capacity, the hon. Lady would not allow us to be able to produce the energy demanded by consumers, who include her constituents as well as those of all Government Members.
Sarah Olney
The current issue with renewables is one of storage, but the technology to address some of the problems is being developed at speed. It is clear that by putting our energies, investment and ingenuity into answering some of the questions in relation to storage in particular, but other things as well, we can achieve net zero much faster through renewables. It would be much more productive to invest in storage solutions than to invest in nuclear power.
Let me return to my point about the need to address electricity demand. Currently, households are a key source of demand, but a lot of that demand comes from inefficient buildings. We need to do much more to insulate the existing housing stock and to ensure that we have much better building standards for new builds. The Government need to do much more on that. I am a member of the Public Accounts Committee, and we have released a report on the green homes grant, which was a total failure, and the report goes into a fair amount of detail as to why. I urge the Government to redouble their efforts to get Britain’s homes insulated, because it is key that we use that as an opportunity to address the demand for power. We need to look at both sides of the equation.
If we can unlock more private sector investment, we can support investment in innovation and cutting-edge technologies, including tidal and wave power, energy storage, demand response, smart grids and hydrogen. My personal belief is that those things are much better uses of our time, energy, ingenuity and private sector capital than investing in more nuclear power stations.
In her intervention earlier the hon. Member for Edinburgh North and Leith (Deidre Brock), who is no longer in her place, highlighted the grave risks of nuclear power. I urge the Government not to ignore, in their enthusiasm for nuclear, the considerable downsides of nuclear waste. As a member of the Public Accounts Committee, I visited Sellafield last year, and I hope that every Government Member who promotes this Bill will also take the opportunity to do so. I found it so eye-opening in respect of the consequences of dealing with nuclear waste and the considerable time, effort and money that is still now being spent to dispose of nuclear waste that was generated in the 1970s, before I was born. It was just extraordinary and really brought home to me the literally toxic legacy that we leave for future generations when we create nuclear waste. I am not confident in some of the proposed solutions to deal with it, which could have grave environmental consequences. We cannot be confident that in 50 years’ time people will take nuclear waste seriously and that the right procedures will be in place.
I urge the Government to take nuclear waste very seriously indeed. We spend billions every year to dispose of it, which is why it is of interest to the Public Accounts Committee. The issue dates back to the fuel crisis in the ’70s, when the Government prioritised keeping the lights on. The costs are an ongoing liability for future generations and divert Government spending from other purposes. We need to be very careful before we propose to increase the existing legacy of toxic waste. I feel very strongly about that and urge the Government fully to consider the downsides.
In summary, we do not need new nuclear power stations. We want more private sector investment in innovative solutions and to spread the jobs bonus throughout the country. We cannot afford the legacy of nuclear waste that the Government propose to leave to future generations. We will vote against Second Reading.
Chris Green (Bolton West) (Con)
It is a pleasure to follow the hon. Member for Richmond Park (Sarah Olney). It was interesting to hear the contrast between the position of the Liberal Democrats a few years ago and their position now, but we have to respect those views, which do change with time.
Part of the context of this debate is the concern over energy security, which is so important. Obviously, there have been spikes in gas demand and gas prices, but we need only look at the situation in Texas and California a little while ago to see how energy supplies can be affected, which is why we in the United Kingdom need to ensure that we have energy security. As with other European countries, we ought not to be as dependent on energy supplies from countries that are not as friendly as they might be to our national interests. We need only look at random events across the globe, such as the one that happened in the Suez canal, to see how supply chains can be so dramatically affected. We therefore need that secure energy supply, and nuclear is a key part of that for the United Kingdom.
We also need firm energy, or that baseload energy. We hear a great deal of discussion about solar panels and wind turbines, whether at sea or on land, but those provide intermittent energy. We cannot rely on that energy, although it does have an important contribution to make; that is why nuclear energy ought to form a key part of our reliable energy production.
There is a great deal of interest in this area in the north-west of England. Many of our skills are centred there, whether it be Sellafield, Warrington or Heysham, and that huge wealth of talent needs to be maintained. We also have the important Springfields site near Preston, which produces our nuclear fuels. We need to ensure that the site is secured. I ask my hon. Friend the Minister to ensure that, when future contracts are given for nuclear power stations, the future viability of the Springfields site in the short, medium and long term is secured within the context of those contracts. Springfields does a huge amount of good for the local economy. It is also a wonderful source of apprenticeships. These are often very high-skilled and very well-paid jobs that we ought to be promoting and certainly protecting.
Hinkley Point C is at an advanced stage of construction. We need to look at the skills being developed at that site, and ensure that they are retained within the nuclear sector, so we need to be looking at when Sizewell C will be funded and brought online.
Siobhan Baillie (Stroud) (Con)
That is exactly the point that Vulcain Engineering in Stroud has been explaining to me. We have a fusion bid in at the moment, which is an amazing opportunity, but the company is very clear that if we do not have another nuclear project in play we will lose so many of those jobs and skills—not only from the south-west, but from the whole UK. They will go abroad and will not come back.
Chris Green
I agree entirely with my hon. Friend. We need to secure those jobs and we need, as early as possible, to give that reassurance to engineers and others and say to them, “Your future is in the nuclear industry.” In that way, people can be focused on sticking with the industry and looking for that next job. It is about building that fleet of nuclear power stations. Whether it is Sizewell or further power stations down the line—there are already eight sites that have been identified for future nuclear—we need to give workers the reassurance that their skills are needed within the sector.
Richard Graham
My hon. Friend rightly referred to the phrase “a fleet of nuclear power stations”. Of course, in that context, Hinkley Point C and Sizewell C would be the aircraft carriers, as would anything in the future in Wylfa, but there are also opportunities for the smaller frigates. That is where the small modular reactors being proposed by Rolls-Royce could come as an extremely useful addition to those aircraft carriers. Does he agree?
Chris Green
That is such an important point. I agree entirely that we already have the larger-scale nuclear reactors and the established technology. It is so important that we look at SMRs and AMRs, and at the leadership that can be provided in a consortium by Rolls-Royce. If we get in early and develop that technology in the United Kingdom, we can export it around the world and create more wealth in the United Kingdom from this incredibly important source of energy and the power stations.
Bob Stewart
As I listen to discussions on the expansion of nuclear capability in this country, it slightly worries me that we have not talked about the security of those assets. My worry is that they could be interfered with by some foreign power in a cyber-attack. That must be part of all the planning for these places.
Chris Green
My hon. Friend makes a really important point. The physical security is one aspect, but the cyber-security, including firewalls and other protections, is immensely important to the sector. This energy provision is a key strategic interest and we cannot allow anything to interfere with it, but I am sure that the Minister and the experts in the sector are well aware of those threats.
Alan Brown
On security, I presume that the hon. Gentleman shares my concerns about China General Nuclear being involved at Hinkley and still being in the mix for Sizewell C.
Chris Green
I am concerned about the strategic national interest, but I think that most people at home would need to have reassurance on this: the security risk of the technical aspects, to which people might be more sensitive, is different from the financial aspects, which is what the Chinese involvement is at the moment. Those are two very different things. However, I do acknowledge the hon. Gentleman’s concerns.
Mark Jenkinson
On security, the Office for Nuclear Regulation is considered to be one of the best nuclear regulators in the world. I certainly have faith in its being able to do its job, but is not the reason why state-backed companies are involved in nuclear construction that they have the money to put in up front? Is not this legislation exactly what we need to remove the need for them to be involved?
Chris Green
I agree entirely that there are huge challenges for the private sector to come up with the cash for the nuclear sector, because of providing the money up front; it takes such a long time to build a power station before energy or electricity can be produced, and people can get returns for their money. That is why the regulated asset-based model is key. It has been used in other areas successfully, so it is now seen as a reliable way of financing large projects.
Now is the time to make progress in this area. We have the skills base, the national need and the national security questions. All these things come together at the same time to make a compelling argument, so I am pleased that the Government are bringing this legislation forward, whether it is for the larger-scale nuclear reactors or the smaller-scale nuclear reactors. Let me finally say to my hon. Friend the Minister—I know that he has an interest in this—that, in the slightly longer term, if we do develop the fusion reactors, perhaps this funding model could be used there.
Anthony Browne (South Cambridgeshire) (Con)
It is an honour to follow my hon. Friend the Member for Bolton West (Chris Green). I speak wearing my hat as the chair of the all-party parliamentary group on the environment, and I want to touch on some of the environmental issues addressed by some Opposition Members.
Three Mile Island, Chernobyl, Fukushima: the names of the world’s nuclear accidents haunt people around the planet to this day. Fears of lethal invisible radiation killing thousands of people and laying waste swathes of the planet—these are very audible concerns. But then there are the facts. No one died from Three Mile Island, and studies afterwards showed that there was no measurable increase in cancer rates. One person died from Fukushima. Again, post-accident studies showed no measurable impact on cancer rates.
Then there is Chernobyl. I have been to Chernobyl—to Chernobyl village itself. I went with the United Nations, which spent a long time studying the medical impact of the world’s worst nuclear accident for 15 years after it happened. There I saw the alarming sight of happy villagers who had refused to leave after the accident and were taking the opportunity to restore the beautiful Chernobyl village church; they took a delight in showing me around it. I met a mother in Chernobyl village who had conceived and given birth to a totally healthy baby. Yes, 41 rescuers died of acute radiation sickness in the immediate aftermath of the accident, and there was a measurable increase in childhood thyroid cancer, which is, luckily, vanishingly rare, but otherwise the UN scientists found no measurable negative medical effects from the nuclear accident itself and concluded they had been vastly exaggerated.
We have now had nuclear power around the world for nigh on 70 years, and it has proven to be just about the safest and greenest form of energy. Safety is measured in the industry in terms of deaths per terawatt-hour of energy production, taking all direct and indirect deaths into account, including through the supply chain. For coal, it is 24.6 deaths per terawatt hour; for oil, 18.4; for biomass, 4.6; and for gas, 2.8. For nuclear, it is 0.07. Yes, that is a bit higher than wind, solar and hydropower, although in roughly the same ballpark, but several orders of magnitude lower than other forms of power, and in terms of CO2 emissions, nuclear produces less than hydropower. It is about the cleanest and safest form of energy in the world, and it is, as we have heard today, massively scalable.
So why have we not embraced it? I will tell you why:
“Opposition to nuclear energy is based on irrational fear fed by Hollywood-style fiction, the Green lobbies and the media.”
Those are not my words but those of James Lovelock, one of the most eminent environmental scientists, who founded the whole Gaia thesis. As a former environment editor of The Observer and The Times, and as chair of the all-party parliamentary group on the environment, I believe that the environment movement has been one of the most important and positive movements of the last half century. The fact that we are all environmentalists now—including the Queen, I note—proves the positive impact the movement has had. However, the environment movement made a major strategic error by campaigning so hard against nuclear power. Increasingly, many environmentalists agree. Even as Fukushima was still smoking, George Monbiot, the environmental leader, had a damascene conversion and started making the moral case for nuclear power.
If we believe that climate change is the biggest threat to the planet, we have to use every tool in the toolbox to combat it. We have a moral obligation not to campaign against the one technology that can probably help more than almost any other to get to net zero.
Chris Green
Does my hon. Friend share my concern that with nuclear we have existing established technologies that can be used and rolled out, even though the timescale in the Bill is reasonably long, but other technologies that we would desire to come down the line in the future are not established and currently cannot work at the scale we need?
Anthony Browne
I absolutely agree. As I said, we have had nuclear for 70 years and we know that it works. The point I was about to come to, which my hon. Friend touched on earlier, is that the French have 70% of electricity produced by nuclear and they have a very well-established industry. It is not politically controversial at all. They have made it work and made it cost-effective. That is one of the reasons why France has far lower carbon dioxide emissions that we do in the UK. We should change to other technologies. We heard mention of tidal power earlier—yes, absolutely. However, there have been many projects to try to make tidal power work over the past few decades and none of them has yet quite succeeded, although we should still carry on trying.
As I have said many times in this House, the UK has had a really good track record in reducing carbon dioxide emissions, roughly halving them. Our per-capita emissions are now lower than those of many other countries, including green icons such as Denmark and Norway, but France has had lower emissions than us for decades because of nuclear power. I used to live in Belgium and got my electricity bills from France, and they used to have to say where the electricity came from: “nonante-neuf pour cent nucléaire”, which is—in Belgian French, not French French—“99% nuclear power”. That was always a delight for me. Driving around France, nuclear power stations are all over the place. It is not a political issue; people are very comfortable with it.
The environment movement has been very successful in demonising nuclear power beyond any scientific justification. That in part is why UK Governments have been so nervous, and it has meant as a country we have gone from being a world leader in nuclear power and one of the first to introduce it to being a straggler with a semi-clapped-out sector, as we have heard, with all these power plants going out and without much expertise, so that we end up depending on foreign companies and foreign Governments to be able to do anything. We have to build up our capacity again as a country. As we move away from nuclear fuels, we need a strong nuclear sector more than ever.
Alan Brown
The hon. Gentleman is talking about demonising nuclear, but is having a £132 billion waste legacy to clean up demonising nuclear, or pointing out a harsh reality?
Anthony Browne
I thank the hon. Gentleman for raising that point, which I was going to come to. Clearly nuclear has to be cost-effective throughout the whole lifecycle, and there is a burden of responsibility on the Government to ensure that is the case, although I must admit I do not recognise the £132 billion figure.
As we move away from fossil fuels, we need nuclear power more than we did in the ’50s, ’60s, ’70s when we were developing it. As we start using electricity to heat our homes and power our cars, we need more production capacity that is resilient and secure. The hon. Member for Richmond Park (Sarah Olney) made a point about energy efficiency, and I completely and utterly support that, but as we move away from fossil fuels across other areas of the economy and our lives, the demand for electricity will go up rather than down, whatever we do with efficiency. That is inevitable, so we need to ensure we have more production and more secure production.
The recent spike in gas prices has shown our national vulnerability if we do not have resilient energy suppliers, and we must guard against that happening to electricity suppliers. We cannot risk windless days and dark days leading to blackouts in future. Wind, solar and hydrogen power are wonderful. We have done great in rolling them out—wind power produces more energy than any other source and that is great—but they are not the sole solution. We need every tool in the toolbox. We need to ensure that we can provide the stable, resilient base-load that we will increasingly need as we move away from fossil fuels.
In the various debates I have had about nuclear power over the decades, anti-nuclear campaigners normally pipe up at this point with, “Nuclear power is not a good use of taxpayers’ money.” That is when I know they have largely run out of other arguments. Obviously nuclear has to be value-for-money. I am an economic, fiscal Conservative. We want to go for the best value forms of energy, not the expensive ones. It needs to be financially sustainable, and we need to look at the whole lifecycle costs of nuclear power. Clearly the Government have a duty to do that, and that is what the Bill is about. The Government have to ensure we have the right financial framework to ensure that the nuclear industry can survive and thrive and in the most cost-effective way possible. If companies are to invest multiple billions of pounds to build nuclear reactors, they need to do it in the lowest risk way, otherwise the cost of capital becomes prohibitive and the projects are not viable.
I used to work at Morgan Stanley, the US investment bank, and we had a big infrastructure fund investing in projects around the world—not nuclear, I have to say, but many other different sectors. When assessing new infrastructure investment, we have to factor in many of the risks. There is construction risk: can we build the thing? There is technology risk: if it is a new technology, will it work? There is political risk: what if there is a new Government who change their mind and say no? Then there is demand risk or volume risk: will there be enough demand for the product and will it be at the right price to generate the revenues to pay for the cost of capital being put up front to build it?
The trouble with the previous financing regime is that it did not deal with the first risks and expected companies to bear all those risks up front at cost to themselves. That meant that many companies found they had just too much risk to make the projects viable. It is not surprising that some companies ended up pulling out of nuclear power stations they had been planning to build.
The regulated asset base model that the Bill brings about is a far better model for financing the building of nuclear power stations, because it properly shares construction risk, political risk and technology risk between the public sector, consumers and companies. The RAB model is a completely standard model that has been widely used in other areas of infrastructure for decades and is well understood, as various Members have pointed out. The Government and companies have experience of the RAB model. We know it works well and we know how to make it work well in the interests of both parties. I am delighted that we are on the front foot again with nuclear power as a country. As we progress and improve our expertise as a nation, as we have heard we need to do, nuclear power will get more standardised, easier to build and better value for money. The Government must continue to have courage in their convictions with nuclear power. I fully commend the Bill to the House.
Alun Cairns (Vale of Glamorgan) (Con)
Thank you, Mr Deputy Speaker, for calling me to speak in this important debate. I declare an interest as the chairman of the all-party parliamentary group for energy security.
The development of new nuclear power stations in the UK is long overdue. Right hon. and hon. Members have made excellent points about the need for energy. The period of outright objection more than 20 years ago, and the stop-start nature of progress in the last decade, have largely stemmed from the funding challenges faced by new nuclear power stations.
The Bill is a major positive and significant step to help to meet our net zero carbon agenda and to secure our energy supply, which has come into clear focus in recent weeks. The challenge of the gas supply and the variability in renewable sources have led to a sharp rise in energy costs, the bankruptcies of many providers and an alarming worry for constituents. Some businesses have even been forced to operate at reduced capacity because of energy supply challenges. Europe as a whole has been exposed as vulnerable to other states’ decisions.
New nuclear diversifies the supply, delivers energy from within the UK, and offers a reliable, stable and clean source of energy that can form a major part of our baseload electricity needs. As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) said, diversification is important and nuclear is fundamental to providing the necessary energy security.
The argument in favour of nuclear power has been won among the public for some time, yet until now, we have not been able to develop projects that minimise the financial risk to the public as taxpayers and as consumers. The regulated asset base financing model is therefore a significant positive step that I strongly support, because it has the capacity to reduce the cost of capital to allow projects that would otherwise remain on the drawing board to move forward.
Much of the policy’s success will focus on assessing risk. RAB has been used successfully in other major infrastructure projects around the world, and there is no reason it cannot be used for new nuclear, but its evolution will not be straightforward. The challenge will come in assessing and costing the risks faced by developers. New nuclear is different from some of the more predictable models that RAB has been used for, so we will have to be open and candid about the challenges as we develop the policy.
The biggest challenges of developing new nuclear come in the early construction stages when operation is typically 10 years or more away and when design problems and implementation faults emerge. They often lead to significant cost overruns and the need for changes at a huge cost financially and with long delays. Those uncertainties have hampered the development of new nuclear through more traditional financing models for so long. RAB will help, but the risks and costing the risks will remain.
I was closely involved in Wylfa Newydd, the Horizon proposal by Hitachi on Anglesey, and along with my right hon. Friend the Member for Tunbridge Wells (Greg Clark), developed a third-third-third finance plan between the UK taxpayer, Hitachi and the utility companies to bear the risks of the early stages in particular. Despite the Government offering a third of those capital costs, including covering the financing costs in the proposal, the project stalled. I pay tribute to my hon. Friend the Member for Ynys Môn (Virginia Crosbie) who is working tirelessly to keep the project alive. I am optimistic about its future. That highlights the challenges, but does not negate the risk or the assessment of the risk. RAB certainly overcomes the challenges of financing costs, which is welcome, but I ask the Minister to recognise that central to the policy’s success is assessing the risk and, therefore, the costing of the risk. Any further detail as the Bill passes through the House and the other place will be helpful in reassuring investors, policy makers and operators in the process.
The RAB policy is an excellent fit for SMRs and AMRs, and will be even more so once the first concept has been proven. The repeat structures of SMRs and AMRs will allow such projects finally to get off the ground significantly. I gently remind the Minister that when the nuclear strategy was launched, my right hon. Friend the Member for Tunbridge Wells and I visited Trawsfynydd in north Wales to highlight how it and Wylfa on Anglesey were both perfect sites for small modular reactors. I hope that he will recognise that as policy initiatives develop.
I want to support the Minister and the Bill’s proposals. This is a welcome, major and positive step in satisfying our energy demand, achieving our climate goals and securing our energy needs and supply. Assessment of the risk is central. As I mentioned, despite challenges we sought to overcome with fair and generous offers, challenges will remain, but RAB will play a big part in overcoming them. The detail of how we assess and cost the risk as part of the RAB model will be fundamental to giving confidence to investors and the nuclear industry.
Mr David Jones (Clwyd West) (Con)
It is a great pleasure to follow my right hon. Friend the Member for Vale of Glamorgan (Alun Cairns). As the hon. Member for Richmond Park (Sarah Olney) pointed out, all the events of COP26 are proceeding in Glasgow as we speak, which reminds us forcibly of the need to reduce still further greenhouse gas emissions from our energy-generating sector. While recent years have seen a notable increase in energy from renewable sources such as wind and solar, it must be recognised—as many hon. Members have—that such forms of generation are intermittent, so other sources must be pursued to produce the reliable, predictable baseload of generation that a modern economy needs.
Hon. Members have pointed out other technologies that can produce reliable baseload generation. The hon. Member for Kilmarnock and Loudoun (Alan Brown) mentioned pumped storage, and of course the Dinorwig pumped storage scheme in north Wales is an exemplar of such technology. Similarly, there are proposals for a large-scale tidal range lagoon in Colwyn Bay in my constituency, which, with a projected installed capacity of more than 2 GW, would be a major generating station by any standards. However, we must recognise, as my right hon. Friend the Minister did in opening the debate, that the most proven technology is nuclear, and we should certainly pursue that, too.
While I was at the Wales Office, I devoted much of my personal energy to trying to secure the construction of the Wylfa Newydd nuclear station on Anglesey. I echo my right hon. Friend the Member for Vale of Glamorgan in paying tribute to my hon. Friend the Member for Ynys Môn (Virginia Crosbie) for all her efforts in trying to revive that project. It was a happy day in November 2012 when Hitachi announced its purchase of the Horizon operating company. There was no doubt about its enthusiasm for the project. I visited the Hitachi construction factory in Hitachi city in Japan and spoke to a senior nuclear engineer. He told me that Wylfa was the very best location he had seen anywhere in the world for a nuclear power station, so it was not anything wrong with the site that saw off Wylfa Newydd; it was the contracts for difference financing model. The strike price that was offered was too low and, as my right hon. Friend the Member for Vale of Glamorgan pointed out, even an equity deal between the British Government, the Japanese Government and the operators could not make it work. The Government are therefore entirely right to look for a different funding model.
The regulated asset base model has a good track record of funding major infrastructure projects; it was successfully used to fund both Heathrow terminal 5 and the Thames tideway tunnel. Importantly, as other hon. Members have pointed out, it is a model that can be used to attract private funding, making the need to rely on foreign sources of funding less likely and, it is to be hoped, obviating the need to look to companies directly or indirectly controlled by foreign Governments, some not entirely friendly, to develop our new nuclear fleet.
The Bill will be welcomed in north Wales. I mention north Wales in particular because it has a long history of expertise in the nuclear industry. Not only does the Bill put the potential of developing Wylfa back on the agenda, but it offers hope of providing a funding model for a new fleet of small modular reactors. There has for some time been a call for a pathfinder SMR project at Trawsfynydd, where the old reactor has for many years been in a state of decommissioning. The local authority, and the Welsh Government too, support the development of SMRs at Trawsfynydd. This is the opportunity for Her Majesty’s Government to take the lead in an exciting new project that could establish the United Kingdom as a leader in the technology, as well as provide a new centre of excellence in a location that has established nuclear expertise.
I welcome the Bill, which provides the opportunity for a new funding model and the prospect of a revived nuclear industry in north Wales. However, I wish again to echo the points made by my right hon. Friend the Member for Vale of Glamorgan. The question of potential cost overruns is a significant issue. It is important that the Government make a very careful assessment of the likely costs. It has been pointed out by commentators that pension funds may be reluctant to invest in such projects unless they can be assured that the costs will be kept under control, so that is key. Otherwise, I fully welcome the Bill and look forward to supporting its Second Reading.
Peter Aldous (Waveney) (Con)
I am pleased to speak in support of this Bill, which facilitates the provision of a secure energy supply, will ultimately keep down consumers’ bills, and is crucial to achieving our net zero obligations. Specifically, along with the announcement in last week’s Budget, the Bill paves the way for the construction of Sizewell C in Suffolk, which can bring enormous benefits to the county, to the Waveney area and to Lowestoft.
We need new nuclear, as it provides energy security. It is the only proven technology that can supply low-carbon baseload at scale. It complements, rather than competes with, the growth of renewables—in particular, in an East Anglian context, offshore wind. It also promotes the development of other clean technologies, such as hydrogen, which is planned at Sizewell, direct air capture and, in due course, small modular reactors.
The funding mechanism presented in the Bill is the regulated asset base model, which, with the right safeguards, has the advantage of driving down the cost of capital for such large infrastructure projects, acts as a catalyst for private sector investment and, according to Government analysis, can lead to savings to consumers of at least £30 billion.
Along with offshore wind, Sizewell C can bring great benefits to the local Suffolk and East Anglian economy. It is estimated that during the 12-year construction period, £2 billion will be put into the Suffolk economy. During that period, there will be three apprenticeship cycles and 1,500 apprenticeships can be created. This is an opportunity to leave an enduring legacy of knowledge, skills and infrastructure which in the long term, once construction has been completed and Sizewell C is operational, can make Lowestoft and Waveney an attractive location in which to set up and grow a business.
There is much work to do, but a good start has been made, with Sizewell C and East Coast College signing a memorandum of understanding to deliver the skills needed for this and other major projects in the area. It includes support for a civil engineering campus at Lound, to the north of Lowestoft; engagement with the Energy Skills Centre in Lowestoft itself; and collaboration on welding and fabrication capacity and capabilities.
The Bill and the hive of activity over the past 10 days are extremely welcome, although some might say 20 years too late. Subject to the development consent order being approved, let us get on with it and, in doing so, enhance our energy security, help to propel us along the road to net zero, and bring enduring jobs and prosperity to local people in Suffolk and in my constituency.
Virginia Crosbie (Ynys Môn) (Con)
It is a pleasure to follow my hon. Friend the Member for Waveney (Peter Aldous), who is so erudite and passionate, and to speak on Second Reading.
My constituency of Ynys Môn is known as “energy island”: we have wind, wave, solar and tidal. We are soon to have hydrogen, and we have a long history in nuclear. Back in 1963, construction began on an £80 million nuclear power station at Wylfa head, near Cemaes on Anglesey. It was chosen for its strong rock foundation and its access to sea water. Its two nuclear reactors went live in 1971. At the time, Anglesey was considered to have
“leapt dramatically forward into the space age”.
The station was described as
“the nation’s biggest and most powerful…yet interfering as little as possible with the beauty of the Anglesey scenery”.
Some 3,000 people were involved in its construction and in 1964, 20 local 16-year-olds became the first apprentice intake. They trained to become
“the youngest engineers to take charge of an atomic power station in the world”.
At its height, Wylfa employed around 500 people. Just along the coast, an aluminium smelting works, employing a similar number of people, was built in Holyhead to be able to access cheap electricity direct from Wylfa.
In 2006, however, as the lifespan of Wylfa power station was drawing to an end, the Isle of Anglesey County Council voted to support the construction of a second plant. Wylfa B, now known as Wylfa Newydd, was intended to take over from Wylfa as it came to the end of its working life. Employment was a key factor. Losing so many jobs would be tough on any part of the UK, but on Anglesey there simply was not any comparable industry on the island for people to move to. It is estimated that at the height of construction, Wylfa Newydd, or new Wylfa, would employ around 9,000 and in steady state production would have a workforce of around 900.
The old Wylfa ceased generation in 2015. The aluminium works closed shortly afterwards and just under 1,000 jobs disappeared almost overnight, yet Wylfa Newydd is still on the cards. The people of Anglesey have been on a 16-year rollercoaster journey, with the prospect of quality new careers constantly just over the horizon. The majority of Anglesey residents actively support Wylfa Newydd, but they feel forgotten. They have had enough of being offered carrots only to receive disappointment. That is why the Bill is so important to my constituency of Ynys Môn.
When Hitachi withdrew the development consent order for Wylfa Newydd at the start of this year, it cited programme financing as the main factor. I am co-founder and chair of the nuclear delivery group, which I set up with my fellow atomic kitten, my hon. Friend the Member for Copeland (Trudy Harrison), who is a passionate advocate for nuclear. Over the past 18 months, we have regularly raised new-build financing as a significant concern. I am delighted to see BEIS respond to this issue and bring this Bill to the table. Companies such as Bechtel and Rolls-Royce are already keen to establish new nuclear at Wylfa Newydd, so this proposed regulated asset base model offers significant hope to Anglesey.
The Bill could be the starting point for regenerating an area that desperately needs levelling up. It could finally lead the people of Anglesey over the horizon into a whole field of carrots. With that in mind, I appeal to my constituents and the people of north Wales, who would also benefit: now is the time for us to come together as a community and embrace the opportunity that the Bill offers us. We cannot afford to stay in our partisan corners, we cannot afford to stay silent, and we cannot afford to let this opportunity slip through our fingers.
In 2015, the Welsh Government described Wylfa Newydd as a “once in a generation opportunity” and estimated that it could be worth £5.7 billion to the Welsh economy. Ten years on, this project will be a game changer locally, regionally and nationally. Nearly two decades of waiting for Wylfa Newydd may finally be coming to an end. Wylfa Newydd is rightly described as the best nuclear site in the UK. The Prime Minister has said that he is a “fervent supporter”.
I welcome the Bill and, for the sake of our young people and future generations, we must put aside our political differences and work together. Diolch yn fawr, Mr Deputy Speaker.
James Daly (Bury North) (Con)
It is a pleasure to follow such a powerful, articulate, passionate speech, as I think everybody would agree, and I want to develop some of the points that were made by my hon. Friends the Members for Ynys Môn (Virginia Crosbie) and for Waveney (Peter Aldous).
I wanted to take part in this debate not because of any great knowledge of the nuclear industry, but because of the impact that it has on my region and the people in it. I am the chair of the all-party group on youth employment. We constantly strive to find new industries—new technologies—or developing existing industries to provide the high-skilled, high-paid jobs that people want in my constituency, in the constituency of my hon. Friend the Member for Bolton West (Chris Green) and in the whole of the north of England. The north of England has a great legacy in nuclear. It was the home of the first nuclear power station 65 years ago and now houses close to half the country’s 60,000 employees in the civil nuclear workforce. They are all based in our region.
Therefore, what opportunities are we talking about? What opportunities does new nuclear present to the north of England? There is support for investment in businesses in the north in line with the Government’s levelling-up agenda. Jobs and skills were mentioned in various speeches by my hon. Friends. There is the preservation and growth of an expert, 60,000-strong supply chain, which includes Sillavan metals in my constituency, a company that is expanding, developing technology and giving young people opportunities through apprenticeships. All these industries are related to this Bill.
It is also fair to say that many jobs in the north of England have been revitalised by Hinkley Point C. Those jobs, skills and investment across the supply chain in the north of England come from investment in nuclear, but we also have clean growth, with low-carbon, always-on power to support renewables and facilitate the development of other clean tech such as hydrogen, direct air capture and small modular reactors to accelerate clean growth and new industries across the region, including decarbonisation clusters in Teesside and in Yorkshire and the Humber. There is energy security, with firm, clean base-load power to the grid that will support renewables and give us greater control in our transition to net zero while helping to wean Britain off its reliance on energy imports.
This truly is a Bill that is at the heart of the north of England and can have an impact on many, many lives. The regulated asset base that the Bill introduces has been articulately covered by other hon. Members, so I will speak about Sizewell C, about which I agree with every point that my hon. Friend the Member for Waveney made. I also agree with the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead): essentially, I interpret the Bill as finding a way to finance Sizewell C and its positive impact.
Hearing of the developments happening in Waveney bring joy to my heart as chair of the APPG on youth employment, but there is no reason why those opportunities cannot be spread more widely, including in the north of England. Sizewell C is the only nuclear project that is ready to start construction and realise the benefits of new nuclear for the north of England, hopefully within this Parliament.
More than 90% of the UK’s civil nuclear workforce is based outside London and the south-east, with nearly half in the north of England. More than 500 businesses based in the north of England are currently involved in the construction of Hinkley Point, so Sizewell C presents a huge long-term opportunity for the north of England.
I am sure that many MPs have been contacted by the consortium that is involved and wish to take the project forward. We cannot ignore the fact that the consortium has pledged £2.5 billion of private sector investment and 13,000 jobs just in the north if Sizewell C goes ahead. There is a downside if it does not go ahead: there could be up to 10,000 losses due to the failure to properly transition workers from the Hinkley Point project.
Sizewell C is a legacy project that will generate 3.2 GW of clean, low-carbon electricity—enough to power 6 million homes, including across the north. What is there not to like about the Bill? As ever, the Government are levelling up, creating opportunities and ensuring that we have a clean, reliable, resilient source of the power that our country needs.
Mr Deputy Speaker (Mr Nigel Evans)
We now come to the wind-ups, but the shadow Minister is slightly detained.
Mr Deputy Speaker
What do you want to say, Mr Goodwill? You have only just come in.
Mr Goodwill
Well, I could say a few words if we have time. [Interruption.] Oh, he’s here now.
Mr Deputy Speaker
None the less, thank you for your consideration. Seamlessly, we now move on to the wind-ups. I call Matthew Pennycook.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
My apologies, Mr Deputy Speaker; I thought that another contributor was waiting to speak before me.
It is a pleasure to wind up the Second Reading debate for the Opposition. Notwithstanding the somewhat overly partisan opening from the Minister of State, who came along, as he often does, with a set of pre-scripted remarks that were in danger of being as old as some of the nuclear plants that are presently being decommissioned, it has been a considered and well-informed debate in the main. I thank each right hon. or hon. Member who has taken part.
I will pick up on three points that have featured prominently. First, as my hon. Friend the Member for Southampton, Test (Dr Whitehead) argued convincingly, although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C; I believe that the hon. Member for Bury North (James Daly) has just conceded that. Sizewell C is a project that EDF has no intention of financing from its own balance sheet and that we know has failed to entice the necessary private investors, as the right hon. Member for Kingswood (Chris Skidmore) mentioned in relation to Moorside and the fact that the current funding model is not fit for purpose.
It is vital that we bear that point in mind as the Bill progresses, because unfortunately for some, and much as the spin might suggest otherwise, it does not herald the dawn of a new nuclear fleet. It is simply a necessary means of resolving the issue of whether Sizewell, the last potential nuclear project that could conceivably begin to generate by the end of this decade, is constructed or not, and—this was referred to by the hon. Member for Morecambe and Lunesdale (David Morris) and, in an intervention, by the hon. Member for Gloucester (Richard Graham)—the issue of whether the cost reductions that will flow from the plant being a clone of Hinkley Point C, and its ability to draw on the skills and workforce associated with that site, are secured.
Several Members, including the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Richmond Park (Sarah Olney), argued that nuclear should not form any part of the UK’s future low-carbon energy mix. We on this side of the House respect their strongly held views on the subject, but we take the view, as does the Committee on Climate Change, that a limited amount of new nuclear is required to achieve the decarbonisation of the UK’s electricity system within the next 14 years, and to meet our longer-term net zero target. Since Sizewell C is the only power station that can now feasibly come online within that timeframe, we want to ensure that it does, in order to provide the necessary amount of firm power to support a predominantly renewable energy mix.
Alan Brown
As I pointed out earlier—and the hon. Gentleman is well aware of this—much of the existing nuclear fleet is going offline before Hinkley even comes online. Does that not indicate that the grid could operate safely and we could have energy security without relying on a new nuclear station?
Matthew Pennycook
I listened carefully, as I always do, to what the hon. Gentleman said in his speech. I think what he misses is the fact that the demand for electricity will double, so I do not think that his argument about the amount of baseload or firm power that is required necessarily follows.
Matthew Pennycook
I will, but then I must make some progress.
Mr Goodwill
Does the hon. Gentleman also appreciate that we may need to generate large amounts of hydrogen, or indeed use nuclear energy for direct carbon capture, and perhaps synthesise jet fuel in that way?
Matthew Pennycook
I think we will need a range of technologies. Let me return to a point that has been made by several Members. I think we must take a lead from the Committee on Climate Change, which made its view very clear in its balanced pathway scenario for the sixth carbon budget. It estimates that we will need 10 GW of nuclear power by 2035. We will have a predominantly renewable energy system, but we do need the firm power that comes from a limited degree of nuclear to support that.
My second point relates to what has been the elephant in the room today, namely China’s involvement in UK nuclear power. As we debate the principle of the Bill today and scrutinise its provisions in the weeks to come, that issue cannot be set aside. Members in all parts of the House want to understand more fully precisely where the Government now stand on the deeply flawed deal that they struck with China General Nuclear in relation to Sizewell, which has been mentioned several times in the debate.
The CGN stake in Sizewell was without doubt a sweetener for the far larger prize of unfettered Chinese ownership and operation of a nuclear plant at Bradwell, but while it seems certain that the very notion of a Chinese-run UK nuclear plant is now dead, we have yet to hear Ministers say so explicitly, or tell the House how the Government intend to disentangle themselves from the 2016 investment agreement signed by the then Secretary of State, the right hon. Member for Tunbridge Wells (Greg Clark). We deserve to be told, and I hope that the Minister will at least make some reference to that issue in his closing remarks. We also need to know how the Government plan to divest CGN of its minority stake in Sizewell C, and what the estimated impact of that divestment will be on the overall financing of the project, because that issue has very real implications for the mechanism that the Government have chosen to enable Sizewell to progress, namely the RAB model.
That brings me to my third and final point. A number of Members, including the hon. Members for South Cambridgeshire (Anthony Browne) and the right hon. Member for Kingswood spoke clearly and forcefully about the advantages of the RAB model. It is not in dispute that the proposed model will lower the cost of capital on nuclear projects—I fully accept that—and it is also not in dispute that it would lower overall costs, although Labour Members take issue with the frankly heroic assumptions that underpin the claimed £30 billion to £80 billion in long-term savings vis-à-vis coal-fired financed projects. However, it is also undeniably the case that these advantages would be secured as a result of shifting a proportion of risk on to consumers.
It is worth emphasising not only that the RAB for which the Bill would provide, and the risk therefore entailed in it, are of a different order of magnitude from RAB arrangements utilised on other infrastructure projects, but also that when it comes to the yearly surcharges levied on customers on those projects financed via RAB arrangements—for example, the Thames tideway tunnel, which has been mentioned
several times today—there is an inherent degree of uncertainty about the level at which those charges might peak. That is why it is important that the right hon. Members for Vale of Glamorgan (Alun Cairns) and for Clwyd West (Mr Jones) and the hon. Member for Waveney (Peter Aldous) rightly emphasised the need to scrutinise the precise arrangements that will be brought forward and the need for safeguards when doing so.
While we on this side of the House acknowledge the advantages of the RAB model for new nuclear compared with contracts for difference financing, we have concerns about the potential exposure of customers if costs rise significantly or if serious overruns take place. We do not oppose the principle of the Bill, and we have no intention of voting against it this evening, but we intend to look very carefully in Committee at precisely how the Government intend to implement the RAB model in question, at whether its benefits are as significant as has been claimed, and at how many investors the Government expect to return to the UK market if this legislation passes. Most importantly, we want to work with the Government to explore ways in which consumers might be better protected from escalating costs in the event that things go wrong. New nuclear must provide secure and affordable low-carbon energy, but it is still by no means clear that the Bill stands to deliver in both those respects. It is imperative that it should do so.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)
It is a pleasure to follow the hon. Member for Greenwich and Woolwich (Matthew Pennycook), and I want to thank him and all hon. Members who have spoken in this important debate. We have had more than 15 speeches and a number of important interventions. I also want to thank the right hon. Member for Doncaster North (Edward Miliband) for his constructive approach to this important piece of legislation.
In the seven minutes available to me to wrap up the debate, I want to try to deal with as many of the points that have been made as possible. First, I would like to remind the House of what the Bill really signifies and what it does. The net zero strategy, published earlier this month, sets out our vision for a decarbonised economy by 2050. This will see the power sector fully decarbonised by 2035, with nuclear power playing a key role alongside renewables. As the Prime Minister set out from the Dispatch Box earlier today, he and the Cabinet are putting every effort at COP into delivering that international leadership to that end.
This Bill creates a new funding model for future nuclear projects that will support our transition to a secure, resilient and affordable low-carbon electricity system. The measures in the Bill are critical to ensuring that we have the option to bring forward further nuclear capacity, delivering a system that is lower in cost for consumers than if we relied on intermittent power sources alone. While consumers will contribute to the cost of new nuclear projects during their construction, analysis shows that lowering the cost of financing new nuclear will save roughly £30 billion over the life of this refinancing, compared with relying on existing mechanisms.
It is good to hear that the Opposition will, sensibly, not vote against the Bill tonight. I would be surprised if any Member decided to vote against it—
George Freeman
No, I will not give way. I am under time pressure and I need to deal with all the points that have been raised—[Interruption.] I have at least half an hour of questions to answer, not least from the hon. Member himself.
The Bill will make it easier to attract, and reduce the cost of, capital. However, a number of points have been raised by hon. Members. I pay tribute to my right hon. Friend the Member for Kingswood (Chris Skidmore), who raised the urgency of tackling the downscaling and ending of the existing nuclear fleet, the urgency of getting this new financing in place and the role of nuclear in levelling up in Somerset and elsewhere in the country. My hon. Friend the Member for Gloucester (Richard Graham) powerfully set out the importance of tidal. My hon. Friend the Member for Morecambe and Lunesdale (David Morris) set out the importance of the nuclear cluster in his constituency and the importance of the 24/7 supply of nuclear for reliability, resilience and baseload.
My hon. Friend the Member for Bolton West (Chris Green) highlighted the role of nuclear in developing apprenticeships and skills, and the role of this model in funding fusion. My right hon. Friend the Member for Beckenham (Bob Stewart) and my hon. Friend the Member for Workington (Mark Jenkinson) raised the question of security. My hon. Friend the Member for South Cambridgeshire (Anthony Browne) made a very powerful speech on the failures of the environmental movement, which has put such irrational fear in the way of the nuclear industry, setting us back two decades.
My right hon. Friend the Member for Vale of Glamorgan (Alun Cairns), the former Secretary of State for Wales, powerfully made the case that Wales stands to benefit substantially but we need to get the cost and the risk assessment right. He also highlighted the role of small modular reactors. My right hon. Friend the Member for Clwyd West (Mr Jones) highlighted the role of the Welsh cluster, and my hon. Friend the Member for Waveney (Peter Aldous) highlighted the role of Lowestoft in this industry in tackling coastal regeneration. I should also like to thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie), who has been a formidable campaigner for energy in her constituency and the whole of north Wales, and my hon. Friend the Member for Bury North (James Daly).
Given the extraordinary benefits of this extraordinary sector—60,000 people employed in the UK, with 90% of those jobs not in London and the south-east but across the country; each worker in the nuclear sector contributing an average of £96,000 gross value added to the economy, 73% higher than the rest; and a median salary of approximately £45,000—it is extraordinary why anyone would oppose it, particularly hon. Members from Scotland, which has huge potential. The local economic impacts are huge: look at Hinkley Point and its well over 10,000 job opportunities and more than 3,600 British companies in its supply chain. Overall, the project is on course to create 25,000 jobs.
It is even more extraordinary to hear Scottish nationalist party Members when it is not just Conservatives, not just the nuclear industry and not just Her Majesty’s Opposition who favour it. Sir David Attenborough himself said:
“I do not question the use of nuclear energy as a way of solving our energy problems in the short term”
until we can solve
“the problems of storage and transmission of power.”
The UN Economic Commission for Europe said:
“International climate objectives will not be met if nuclear power is excluded.”
If that is not good enough for SNP and Liberal Democrat Members, Zion Lights, former Extinction Rebellion activist and founder of Nuclear for Net Zero, said:
“renewables alone would require unfeasibly massive amounts of storage”—
which we do not have—
“to keep the lights on… we are in a climate emergency and need all the clean energy we can build right now”.
That includes nuclear.
The GMB, Unite and Prospect trade unions are all strongly in favour. I could not put it better than Charlotte Childs, the GMB national officer:
“Our environment, our economy and our communities need Ministers and MPs to back new nuclear.”
I hope all will tonight. Even a member of the Green party, Josh Stringfellow of the Kingston Green party, said:
“As Greens we trust the science on climate change. As Greens we should also trust the science on nuclear”.
Across the board, there is recognition that we will not hit net zero unless we accelerate our investment in new nuclear. This Bill provides the framework for reducing the cost of capital and increasing our options for private investment, which makes it all the more extraordinary that we have had the opposition we have. The hon. Member for Southampton, Test (Dr Whitehead), in a thoughtful speech, mentioned a decade of dither and delay. I assume he means from 1997 to 2007, when the then Labour Government completely turned their back on the nuclear industry.
Interestingly, the Scottish nationalists like to have their cake and eat it. The hon. Member for Kilmarnock and Loudoun (Alan Brown) is opposed to nuclear power but, of course, Scottish consumers will benefit from being on the grid. They will benefit from the baseload, resilience and security it gives us. I hear loud and clear his call, and the call of others including my hon. Friend the Member for Gloucester, for more investment in tidal. I reassure the House that we are looking at making sure contracts for difference provide strong support for that sector.
The hon. Member for Richmond Park (Sarah Olney), in a thoughtful speech, set out the importance of supporting net zero, which makes it all the more strange that the Liberal Democrats seemingly have an almost religious objection to nuclear energy. I was a Parliamentary Private Secretary in the Department of Energy and Climate Change when both the right hon. Member for Kingston and Surbiton (Ed Davey) and Chris Huhne were Secretary of State, and it was they who put in place the contracts for difference funding mechanism for nuclear, which did not work and which we are now having to sort out. It is easy to oppose with the benefit of hindsight, but the truth is that this is urgent and the Bill provides the basis for it.
The hon. Member for Richmond Park is right that household insulation is important, which is why we provided an additional £1.75 billion in the Budget to upgrade the homes of those on low incomes through the social housing decarbonisation fund and the home upgrade grant. The Government are consulting right now on raising the standards for home insulation in new houses that are built.
A number of Members mentioned wave and tidal, and I am delighted to confirm that not only is this Department funding great science and research in tidal, wave and other renewables but that at the global investment summit last week I visited wind and tidal technologies and we secured nearly £9 billion of private investment in the international renewables sector. We are actively considering whether we should ringfence tidal technologies in the next round of CfD, and it will be eligible under pot 2.
The hon. Member for Kilmarnock and Loudoun challenged the £30 billion cost saving. The full analysis and methodology is set out in the impact assessment accompanying this Bill, and I confirm the current contract ensures that consumers will not pay for any overruns at Hinkley Point C.
The hon. Member for Edinburgh North and Leith (Deidre Brock) mentioned radioactive waste, and the truth is that we have been producing and managing radioactive waste perfectly successfully, without accident or danger to health and safety, for decades. Some 94% of the waste is very low level, and the Government, like previous Governments, have a strong plan for a geological disposal facility.
A number of colleagues raised the issue of national security. I want to make it clear that the Bill is not concerned with making it difficult for any particular country or company to apply. The quality of the bids will be considered in due course by the Secretary of State, with full accountability to Parliament. The Bill does not determine any future nuclear project’s ownership structure; it simply creates a new financing model that broadens our options for new nuclear.
As a package, the legislation before Members will help to end our reliance on overseas developers for finance, which has led to the cancellation of nuclear projects in the UK. Instead, the Bill ensures that our new nuclear power plants can be financed by British pension funds and institutional investors. However, this is not about shutting out individual companies or countries, and the Government have already taken significant powers through the National Security and Investment Act 2021.
A number of colleagues have raised the issue of the scrutiny of risk assessment, and I want to reassure Members that the Secretary of State will be required to act transparently and with full disclosure to the House. I close by thanking Members from across the House for their contributions, highlighting that I hope very much that the Scottish nationalists will not divide the House tonight on something that Scottish voters will benefit from. I strongly believe that this new funding model acts in the interests of the whole of this country, and I commend this Bill to the House.
Question put, That the Bill be now read a Second time.
Nuclear Energy (Financing) Bill (First sitting)
Tuesday 16th November 2021
(2 years, 5 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 16 November 2021 - (16 Nov 2021)
The Chair
Before we begin, I will start with a few parish notices. You all know the points about social distancing and the wearing of masks, which Mr Speaker has asked us to do when we can. We will consider the Bill point by point and the rules of behaviour in this Committee are really identical to the rules of behaviour in the main Chamber. Date Time Witness Tuesday 16 November Until no later than 10.25 am Sizewell C Company; Westinghouse Electric Company; GE Hitachi Nuclear Energy Tuesday 16 November Until no later than 11.25 am Prospect; Unite The Union; GMB Tuesday 16 November Until no later than 2.30 pm Citizens Advice Tuesday 16 November Until no later than 3.30 pm Atkins Global; Doosan Babcock Ltd; Jacobs Engineering Group Inc.; Rolls-Royce Holdings plc Tuesday 16 November Until no later than 4.15 pm The Confederation of British Industry; The Nuclear Industry Association; Energy Industries Council Tuesday 16 November Until no later than 5.00 pm Mycle Schneider, Convening Lead Author, The World Nuclear Industry Status Report; Professor Stephen Thomas, Professor of Energy Policy, University of Greenwich; Greenpeace UK
We first agree the programme motion in private. This is a rather strange piece of procedure, which allows the Chair to ask the witnesses to leave and then to ask them back in again. I overrule that. As a member of the Procedure Committee, I keep meaning to tell us to change that properly. We now come to the programme motion, about which we met yesterday to agree. I call the Minister to move the motion formally.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 16 November) meet—
(a) at 2.00 pm on Tuesday 16 November;
(b) at 11.30 am and 2.00 pm on Thursday 18 November;
(c) at 2.00 pm on Tuesday 23 November;
(d) at 11.30 am and 2.00 pm on Thursday 25 November;
(e) at 9.25 am on Tuesday 30 November;
(2) the Committee shall hear oral evidence in accordance with the following Table:
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 42, the Schedule, Clauses 43 to 45, new Clauses, new Schedules, remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 11.25am on Tuesday 30 November.—(Greg Hands.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication. —(Greg Hands.)
The Chair
Copies of written evidence which the Committee receives will be circulated to Members by email and also made available in the Committee room on each day that we meet.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted. —(Greg Hands.)
The Chair
Welcome to our three witnesses. Before I call on them to give evidence, I remind all members of the Committee that the questions that we ask today and, indeed, the contributions that we make during the detailed discussion of the Bill from Thursday onwards must be strictly on what is written down in the Bill and may not be on anything else. They may not be about things that you wish were in the Bill but are not; they must be simply about those things that are in the Bill, and nothing beyond that. The other thing is that we must stick to the timings given in the programme motion, which the Committee has agreed. That means that when we get to 10.25 am, no matter who may be speaking, I will require you to stop speaking and the first witnesses to leave. That may seem harsh, but we stick firmly to the timings agreed in the programme motion. No discourtesy is meant to any of you.
Will any member of the Committee who has an interest to declare please do so?
Mark Jenkinson (Workington) (Con)
I would like to draw attention to my entry in the Register of Members’ Financial Interests. It is a matter of public record that I was employed in the nuclear sector prior to my election.
The Chair
Thank you. I will now call the first panel of witnesses, all of whom are appearing here in person, I am glad to say. We have Julia Pyke, director of financing at the Sizewell C company; David Powell, vice-president of nuclear power plant sales and head of UK business development at GE Hitachi Nuclear Energy; and Michael Waite, director of new plant market development at Westinghouse Electric Company. I thank all three of you very much for taking the time and trouble to be here. Could you briefly introduce yourselves?
Julia Pyke: Hello. I am Julia Pyke, the financing director for Sizewell C.
David Powell: Good morning. I am David Powell, vice-president for GE Hitachi’s nuclear power plant business in the UK.
Michael Waite: Good morning. I am Mike Waite, director of new plant market development for Westinghouse Electric Company.
The Chair
Before I ask the Committee for relevant questions, are there things that the witnesses would particularly like to say about the Bill? Have you particular views about the Bill that you would like to get across, or are you content simply to answer questions that may be put to you?
Julia Pyke: I am very happy to answer questions.
The Chair
In that case, let us start with Her Majesty’s official Opposition, represented by Alan Whitehead.
Dr Alan Whitehead (Southampton, Test) (Lab)
Q
Julia Pyke: I think the emergence of the RAB model is very welcome. We obviously believe that the country very much needs nuclear, to support the growth of renewables and to produce electricity when the wind is not blowing and the sun is not shining. It is very important that we deliver nuclear in a way that reduces the cost to consumers to the greatest extent it can, and we believe that the RAB model is a way of doing that and enabling private finance.
A point that is not always made about the introduction of private finance is that if we want a nuclear fleet, which, you will not be surprised to hear, I believe would be a good thing, then always relying on taxpayer funding for that fleet is not necessarily going to promote the growth of a fleet, whereas getting nuclear on to a financeable footing means that the country can size the fleet to need rather than to the availability of taxpayer funding from time to time.
Dr Whitehead
Q
David Powell: Just to make things clear, I represent GE Hitachi, which was helping with the technology supply for the project that Horizon and Hitachi was taking forward. Hitachi was one of the main participants in trying to push forward the project at Wylfa, and I think that one of the big issues was the project’s financing aspects. It takes considerable time and a lot of effort to build two large-scale reactors, and I think that the RAB model could have helped. Obviously that is history now, and we would have to go back and look at that, but I think it would have helped at least in being able to move forward with the project.
Dr Whitehead
Q
Michael Waite: That is correct.
Dr Whitehead
Q
Michael Waite: As you say, Springfields has been fuelling the majority of the UK’s nuclear fleet for almost 75 years. It is the exclusive supplier to the advanced gas-cooled reactor fleet, which will all have retired by the end of this decade. Whether Sizewell C moving forwards under a RAB would mean a supply of fuel from Springfields has yet to be determined. From a Westinghouse perspective, we see RAB as part of the solution for enabling further nuclear projects after Sizewell C. Certainly, the 2035 zero-carbon targets for the electricity generation sector require there to be further projects., If we could start a project at Wylfa and deliver our AP1000 technology under RAB, that would absolutely take its fuel from Springfields for the life of the facility and secure the life of the plant.
Anthony Browne (South Cambridgeshire) (Con)
Q
Julia Pyke: The first thing I would say is that, of course, it is very important that the developer remains incentivised to minimise construction spend consistent with building safely and to time. The introduction of the RAB model will enable Sizewell to move ahead, so, primarily for consumers, not only will they need the electricity that Sizewell can produce but electricity bills will reduce when it comes on, because the alternatives to nuclear as the producer of electricity when the wind is not blowing and so on will cost more. Overall it will reduce consumer bills. It is, as you say, very important that we get the incentive regime right so that, although risk is shared with consumers, developers are always incentivised.
Anthony Browne
Q
Julia Pyke: Because the cost overruns will be shared, so the developers will take a significant proportion of cost overruns.
Anthony Browne
Q
David Powell: Yes. I think it needs to be fair. Clearly, what we are trying to do from a GE Hitachi perspective is really focused on driving down the cost of capital of our plants. The capital cost is a key part of that, of course, and clearly that part of the development that we are working on at the moment is to develop small modular reactors, with a key focus on reducing those costs by making the construction as simple as we can through modular build and using as much of the factory environment as we can. That obviously helps to reduce the costs of construction, as well as the risks of construction and the schedule of those. Like all technology developers, we have a reputation that we want to uphold, so our focus is trying to minimise the cost of that electricity for consumers by managing the projects very well.
Anthony Browne
Q
Julia Pyke: One of the reasons that we are so keen to go ahead with Sizewell is that it is a copy of Hinkley, and it is in copies—fleet builds—that you get down construction risks. Hinkley has two units, and you can see how much easier it is to build unit 2. Common sense tells you it is because you are doing it again. We are very much hoping that Sizewell will be treated as units 3 and 4, and we believe—consistent with ideas about fleets of SMRs—that it is in repeat build where you get down costs. Nuclear in the UK has suffered from a considerable series of ones of a kind, followed by an extremely lengthy gap in construction. Nothing has been built since Sizewell B was turned on in 1995. It is by copying, the fleet effect, making sure that we learn all the lessons and using the same experienced team.
In terms of the proportion of risk sharing, it is not fixed yet, but around 50:50 is not an improbable outcome.
Anthony Browne
Q
Michael Waite: I missed out on the last question so I am happy to answer this one. On the designation process, there is not a huge amount of detail in the Bill about what the requirements are for a company project to be designated. In the 2019 RAB consultation process, we entered some fairly detailed feedback which suggested that RAB, as well as being a very positive way forward for construction and operation financing of nuclear power, could also be very effectively utilised for the development phase of a nuclear power plant project. That development phase for a technology that was mature, preferably generic design assessment-licensed, could enable the de-risking of a project under the watchful eye of the regulator, where they are learning about the project, such that when it enters the construction phase, there is a significantly lower risk profile. From a Westinghouse perspective, I would say that that designation process could take place prior to the construction phase and benefit both the project company, of course, and also ultimately the ratepayer and Government through lowering the risk profile of the overall project.
Anthony Browne
Q
The Chair
I am sorry. Maybe I am just getting old, but I cannot hear what you are saying. Could you speak up a bit?
Anthony Browne
Sorry. I am also interested in the point about who should actually do the designation. Julia, you made the point earlier that you would have a system that responds to need, as it were. Could you see this becoming just an ordinary function of the regulator, or should it always be the Secretary of State who does it?
Julia Pyke: I think that is very much a question for the Government, and it will partly depend on which organisation has invested the time and money in doing due diligence on the readiness and maturity of the project.
Anthony Browne
Q
David Powell: I agree with Julia: clearly, that is a decision for the Government. As Mike said before, it is quite important that we look at where the designation actually starts from as well, because there is a huge part of developing nuclear projects prior to getting to construction. With the Horizon project, we saw the amount of money that Hitachi had spent—over £2 billion—and it did not get to that final investment decision, so that is an important consideration as well.
Michael Waite: If I could address the same point, I absolutely think it should be the Secretary of State who has that final authority, predominantly because there are such a large number of moving parts of the project. It is not just about maturity: it is about value for money, and is that value for money just in terms of pence per kilowatt-hour, or is it UK content? There are a very large number of very broad aspects that can be assessed.
Anthony Browne
Q
Michael Waite: None of us is in the investment community.
Anthony Browne
I know, but you have relations with the investors and you know what they are looking for.
Michael Waite: Indeed.
Julia Pyke: And it is my job to raise the money.
Michael Waite: Absolutely, the pension funds historically are great supporters of operating nuclear power plants, because those are some of the most consistent returns on investment possible. The construction phase and development phase are something different, so it is all about the risk profile for them. As I said, the more you can de-risk a project, the more it can become investable by those institutions.
Anthony Browne
Q
Julia Pyke: A consumer prices index-linked investment stream is likely to be very attractive to people with CPI-linked liabilities, such as British pension funds. Increasingly, the financial investment community is very much interested in environmental, social and governance issues, and whether or not their investment is making a difference. I think that nuclear has a fantastic track record of making a positive difference: not only does it produce low-carbon electricity, but it is a great leveller-up. It has got a great track record of offering well-paid, highly skilled, unionised jobs. It also has a very good track record with the environment itself, and the land outside the power stations. Those three things coming together will make it an investment that can fit very well into the portfolio of companies that want to make a difference with their money.
Anthony Browne
Q
Anthony Browne
I do not know whether the microphone is working. I agree with the levelling-up point, although that is more a political thing rather than, presumably, one of the criteria that the investors would use.
David Powell: Just one operational point. Julia has spoken of the confidence that the Government will bring to the investment community, and we have seen that there are companies that want to invest in projects, but we would very much like that to be operational. Getting the investment early on is quite hard to do, so the confidence from the Government’s approach on the RAB model would help to provide that confidence to the investment community.
Anthony Browne
That is the whole purpose of the RAB model. That is all my questions. Thank you.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Ideally, the Bill is supposed to facilitate Sizewell C going ahead. Julia, you said that you view Sizewell C as units 3 and 4 of Hinkley Point C. Given that we are consistently told that the learning from the design of Hinkley Point C went on to Sizewell, why has the taxpayer committed £1.7 billion in the Budget to take Sizewell C to a final investment decision?
Julia Pyke: The £1.7 billion and its use is not published and not available to us. I think there is an assumption that it is for a Government investment in Sizewell C. Whether or not that money is for spending before you reach a final investment decision, or is a Government investment, is the type of investment decision for the Government and not for us.
Alan Brown
Q
Julia Pyke: There has been no express discussion about the use of the £1.7 billion in the Budget as pre-development funding for Sizewell C, no. The Government do discuss how it is that we may get from where we are now to a final investment decision, but there is no explicit linking of the £1.7 billion and that discussion.
Alan Brown
Q
Julia Pyke: We believe that the regulated asset base model—David and Michael will want to comment—is designed to come into place at financial close. The question of how nuclear projects get from where they are now—in the case of Sizewell the project is very mature, with a design and a team, and we have applied for consents; projects that are further behind obviously have a lot further to go and need a lot more money—is its own question. The regulated asset base model is designed to give the private investment community sufficient confidence in investing in nuclear that nuclear can go ahead and take its place in the electricity mix, which benefits consumers. The model is not necessarily designed to be a solution to the period from conception to financial close.
Alan Brown
Q
Julia Pyke: If you look at the roughly £200 billion of regulated assets in the UK across the national grid transmission lines, distribution lines, water companies and airports, the regulated asset base model will track the lifetime of the asset. In the case of a UK European pressurised reactor, the operational lifetime is around 60 years.
Alan Brown
Q
Julia Pyke: I think nuclear is unique among electricity-generating technologies in pricing in the cost of decommissioning and waste disposal up front. In the gas price, you do not see the cost of dealing with climate change. In the price for other forms of electricity generation, you do not see waste disposal priced in, but in the case of nuclear, the cost of decommissioning and waste management and disposal is priced in to the electricity price.
Alan Brown
Q
Julia Pyke: It is priced into the CfD for Hinkley, and it will be priced into the contractual arrangements for Sizewell.
Alan Brown
Q
Julia Pyke: A regulated asset base model will tend to pay for the asset to be available. We expect the electricity to be sold at market price and for the regulated asset base model to either provide a top-up, in the way the CfD does, if the costs under the RAB are above the then electricity price, or to pay back in if we see spiking electricity prices, in the way we have done recently, during low wind speeds and the gas price spike. It is two-way.
Alan Brown
Q
Julia Pyke: You would expect the regulated asset base to work in the way the existing £200 billion of regulated assets work, which is essentially to pay for availability.
Alan Brown
Q
Julia Pyke: I believe that the Government have done its calculations very carefully and cautiously, so I believe they are very realistic. They are comparing the cost of money under a contract for difference with the cost of money under a regulated asset base model. It is important to remember that the cost of money is by far the dominant cost to consumers. We need nuclear, and we need to get the cost of nuclear down. The dominant cost of nuclear to consumers is the cost of money, so it is entirely plausible that the Government’s figures have been carefully calculated and are right.
Alan Brown
Q
Julia Pyke: We have, of course, looked at the savings. The most important saving to consumers is that, in building nuclear, consumer bills will go down. Models without nuclear are more expensive—I think the Secretary of State himself has said that in Parliament. That is a major reason to go ahead with nuclear, and it is a major reason to introduce the most cost-effective way of financing nuclear, which the Government has concluded is the RAB.
David Powell: If I can help with that question, from the perspective of GE Hitachi, we are focused on small modular reactors in the UK. While the cost of those is considerably less than the cost of the Hinkley plants, the output is of course a lot less, at 300 MW or so. If you are going to build a fleet of those, which is where we would like to go in the UK—using that repeatability model and a standard licence design, so that once it is designed and licensed it can go through being built repeatedly, which is very much a factory output-type of approach—you very quickly get to the capital cost of something similar to a Thames Tideway project, which was £4 billion. I know that the RAB model is focused around large-scale nuclear projects, but we would also like to see that applied to small reactors or at least be considered. As yet, we have not done any analysis—all our focus has been on looking at costs, and the models have been on the contract for difference approach—but we would like to look at how that RAB model would apply, from the Government’s perspective as well.
Julia Pyke: If you look at the Tideway savings, when Tideway was first conceived of, before it was decided to do a RAB, I believe it was estimated that consumers would have to pay around £80 a year on their bills, and the RAB reduced that to around £25.
Alan Brown
Q
Julia Pyke: I cannot recall the length of the Tideway contract, but it is quite long.
Alan Brown
Q
You are hoping that RAB will facilitate the small modular reactors as well. Would that be a 60-year operational contract you would be looking for?
David Powell: That is a matter for discussion with the Government and BEIS, but our plant design life will be 60 years, in a similar way to the Hinkley and Sizewell reactors. So, yes, potentially. That really depends on what the developers and investors would like to see.
Alan Brown
Q
Julia Pyke: I do not know what plans the Government has to explain the arrangements, but I imagine it will be in line with the principles of transparency. There is a lot information available about Hinkley. Michael made the great point earlier that value for money is around many things; it is the electricity price including the price of decommissioning, but it is also around UK content and around jobs. We will have 70% UK content; we will give rise to around 70,000 jobs. We give work to over 3,000 British businesses. So value for money is a wider metric than just the cost. There is a lot of information available on our supply chain plans and UK content, and I think there will be a lot of information available around the calculation of the RAB price.
Alan Brown
Q
Julia Pyke: Jobs in construction, using the National Audit Office metric, are around 70,000. Permanent jobs to operate the plant would probably be around 900 in ordinary state, plus several thousand more when there are maintenance outages, which are approximately every 18 months.
Virginia Crosbie (Ynys Môn) (Con)
Q
Michael Waite: In the Bill, there is not currently a clear apportionment of risk between the constructor, the developer, the investors and the consumers. It is clear that if we are developing and constructing a project, there are two approaches to ensuring there are no overruns and minimising the chances of cost and schedule difficulties. You can either take a carrot or a stick approach. If the stick is applied to the developer and the constructor, there is necessarily a larger contingency applied from day one. If I remember correctly, in the Hinkley point original negotiations there was a £2 billion contingency for potential problems and cost overruns for a first-of-a-kind project in the UK. That sort of contingency allocation can be minimised by taking more of a carrot approach, where fees and profits can be at risk but a developer and constructor is not risking losing money on the job. There are many mechanisms in place that can incentivise on-time and on-budget operation without apportioning too much risk to the construction community.
Virginia Crosbie
Q
David Powell: Clearly, based on the information that the Government have put out on the RAB model, it is designed to help lower the overall cost of nuclear by lowering the cost of capital and the cost of financing. From the information I have read and discussions before, there is potentially a significant saving on large-scale projects such as Sizewell. We would hope that from building a fleet of SMRs you would be able to gain the same benefits for consumers. As I said, we have focused on trying to reduce the capital cost of the plant through simplifying the design. Add that to the benefits of the RAB model, which can help to reduce the cost of that capital through the reduction in financing, as well as increasing the incentive to deliver on schedule, there is an ideal way to try to reduce the overall costs of nuclear for consumers. We need more nuclear in the UK in order to meet the decarbonisation targets by 2035.
Virginia Crosbie
Q
Julia Pyke: Yes. I think it a brilliant question, and the answer is that in the contract for difference the construction cost overrun risk is priced in up front, so consumers pay regardless of whether you incur a construction cost overrun. That makes the capital expensive and, because it does not pay until the station turns on, you run up interest for the long construction period of nuclear. In the RAB model, the construction cost overrun risk is not priced in up front, which reduces the cost of capital. The consumer, in paying £92.50 for Hinkley, is prepaying for the risk of construction cost overrun; in the RAB model there is a possibility, which we will do everything we can to minimise, of a construction cost overrun.
An example of how the RAB model will give people more certainty to get on with repeat build is that they have put in 46% more steel at unit 2 than at unit 1 in the same timeframe. It is a combination of not pricing in the construction cost overrun risk up front, and introducing more predictability into nuclear new builds, so we stop having huge gaps between construction in which the workforce has to relearn every time you start again.
Virginia Crosbie
Q
Julia Pyke: No, I do not believe that we can. We have to make nuclear financeable, like offshore wind, and look for that fleet-build, cost-minimisation approach. The offshore wind industry has done a great job through being able to predict the opportunities to build more wind farms. We want that same fleet approach, and we want predictability so that people can have careers, and the workforce can learn and keep getting down the costs.
Virginia Crosbie
Q
Michael Waite: With AP1000, we can benefit from a global fleet effect. We have four operational reactors, which are breaking national and industry records. Two are approaching completion of construction, commissioning and fuel load in the US, and will bring a tremendous number of lessons learned and fleet benefits to the UK. Certainly, a potential AP1000 construction project at Wylfa and other sites can be enabled only by RAB being part of the financing solution.
Virginia Crosbie
Q
David Powell: It is pretty much the same, but we are clearly developing our BWRX-300 to be a global SMR technology. We are already working with several countries, looking at the first deployment of that. We also see the UK very high in that priority list—again, bringing that fleet-build mentality and 60 years of designing these types of reactors. We are able to bring a lot of experience and know-how to that. Part of that is to try to reduce the costs of nuclear overall. We are very encouraged by seeing the RAB model, and hope that it can be applied to fleets of SMRs in the UK.
Virginia Crosbie
Q
David Powell: I think it provides more opportunity for UK investors to come forward. We have spent a lot of time and money developing our reactor design, so we are quite well ahead now in developing projects, which is really the next stage. I think the Government funding that was announced will help the development of UK SMRs, and one of the big things that RAB does is help the development of projects. You need investors for those projects.
Virginia Crosbie
Q
Julia Pyke: I think that having a stable CPI-linked project will make it possible for UK financial investors. That is a great thing; you can create a virtuous circle with the money of British pension funds investing in apprenticeships, skills and jobs for younger people in Britain, as well as in the production of electricity of course. I am confident that the RAB model will bring forward a lot more British investment and, exactly as you say, reduce our reliance on overseas investors.
Virginia Crosbie
Q
Michael Waite: We are currently very active in the Czech Republic, Poland, Ukraine and so on. Those nations predominantly have either majority Government-owned utilities developing nuclear projects or Government financing for up to 100% of the project. They are reducing the cost of capital by fully leveraging Government financing, which is the cheapest financing. Those are absolutely all regulated approaches. No projects that we are doing currently rely just on market forces to develop nuclear; it is too much of a long-term project, with massive long-term benefits, to leave it up to the market.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
I have a series of questions relating to—
The Chair
Before you start, Mr Pennycook, I should say that we have five people asking questions and 12 or 13 minutes left, so can everyone be swift in their questions and answers?
Matthew Pennycook
Q
Julia Pyke: CGN currently has a 20% shareholding in Sizewell C. No material supply chain contracts are in place or intended to be in place with the Chinese supply chain or CGN. Whether CGN chooses to invest at financial close, and the extent to which it chooses to invest, is a matter for CGN itself and the UK Government. As Virginia’s question elicited, the RAB model is designed to bring in a lot more British financing and reduce reliance on overseas investors.
Matthew Pennycook
Q
Julia Pyke: That is absolutely a question for the Government.
Matthew Pennycook
Q
Julia Pyke: I think that Sizewell C can raise money under the RAB model. How CGN intends to go forward with a financial investment in Sizewell C is a matter for CGN and the Government.
Alun Cairns (Vale of Glamorgan) (Con)
Q
Julia Pyke: I think that the Bill is a great framework under which there is a lot of detail to be developed, and we would expect more detail to be developed in relation to designation and the conditions of eligibility. While I could hardly deny that the cost of nuclear builds has had some uncertainty in some cases, what is not uncertain is whether nuclear works and the technology works. I think there are no cases worldwide of nuclear projects that have been abandoned for technical reasons. The industry knows how to make nuclear power stations work. So I think that there is a degree of uncertainty about the exact cost, but the whole point of building a replica of Hinkley is to minimise that uncertainty, benefit from all the lessons learned and get nuclear on to a stable, repeat-build footing.
David Powell: We designed our SMR BWRX-300 on the basis of proven technology. So we know very much the cost base for that technology, and it is really in our interest and that of investors to ensure that we can deliver to time and to budget on that. With respect to the build, we would obviously want to try to minimise any impact and risk of cost and schedule overruns, because we see this as building a fleet of smaller reactors out of a more modular-type approach.
Alun Cairns
Q
Michael Waite: I do not think it is implicit, actually. We have heard about fleet benefits. What I think RAB does do, though, is ensure accessibility to the UK market for non-foreign-sovereign-owned entities. Under a CfD approach, frankly only large foreign Government-owned entities can stand that up-front cost. Then you are potentially delivering electrons, but you are delivering a foreign Government’s objectives and strategies rather than benefiting from the UK Government’s objectives.
Dr Whitehead
Q
Julia Pyke: RAB is designed to attract low-cost capital, and the cost of capital will be set competitively. We anticipate a competition, which should drive down the cost of capital, between equity investors. We also anticipate that the cost of debt, which will actually be the majority cost of the project, will be set competitively. We do not have a hurdle rate, and deciding that hurdle rate will obviously be in part a matter for Government in terms of what will offer value for money. The Government’s impact assessment talks about example hurdle rates and we anticipate that the return will be somewhere in the region of the Thames Tideway tunnel rate, plus possibly some premium for it being nuclear, which is a novel asset class for private sector money in the UK.
Dr Whitehead
Q
Julia Pyke: We think the relevant rates to look at are the rates that are currently determined by Ofgem for investors in the £200 billion of existing UK regulated assets. That is the range that we anticipate will be relevant.
Dr Whitehead
Q
Julia Pyke: As the Government have put in their impact assessment, you can run this at percentages over inflation that equate to the existing market in investing in RAB. I do not want to suggest a particular number—that would not be appropriate, because we are going to set the cost of capital competitively—but you can see the ranges that the Government have used, which they have based on the evidence of what is invested today in RAB assets.
Dr Whitehead
Q
Julia Pyke: Do you mean whether I think the Government have been overly optimistic in assessing the likely cost of capital to be derived through competition? Is that your question?
Dr Whitehead
Q
Julia Pyke: I think we are talking about two things here. There is optimism bias in relation to the outturn capital costs. The Government have taken a cautious approach to applying optimism bias to the capital costs, given that we are replicating the Hinkley design, using the experienced team, and we can see the savings made in unit 2 compared with unit 1. In relation to the cost of capital, it is entirely sensible for the Government to have based their calculations on the existing market of investment in regulated asset base industries in the UK. I do not think there is an optimism bias issue around their evaluation of existing investment rates.
Dr Whitehead
Q
Julia Pyke: I would conclude no such thing. What investors choose to bid will be a function of how attractive the product is to the equity, what else is available in the market—it will be a whole range of considerations, but essentially it will be in the area of the existing investments in regulated assets in the UK, which are publicly available.
Dr Whitehead
Q
Julia Pyke: Indeed, it does depend on the hurdle rate, but—
Dr Whitehead
But you are not able to help us this morning.
Julia Pyke: I do not think anybody is questioning the assumption that, in moving to a RAB from a contract for difference model, the cost of capital will come down, so it will save money compared with a contract for difference model.
Dr Whitehead
Q
Julia Pyke: We cannot know how much, because it will be set in the future through competition.
The Chair
Unless any other of our colleagues have a one-minute question, we are at 10.24 am and that very neatly brings us to the end of our time. [Interruption.] I am afraid we only have one minute, Alan; one yes or no question, perhaps?
Alan Brown
Q
Julia Pyke: The construction period is about 10 years, so it will take about 10 years.
The Chair
Thank you very much. I thank all three of our witnesses, who have had a gruelling session. It has been very useful; a lot of information has been gleaned from your evidence and we are most grateful to you for taking the time to come and speak to us. Thank you very much indeed. Would you mind vacating the hot seat? You will be replaced by only one person in the room. Incidentally, you are more than welcome to stay and listen to the subsequent session. I invite the next panel to join us.
Examination of witnesses
Sue Ferns, Charlotte Childs and Simon Coop gave evidence.
The Chair
I welcome all three of our witnesses to this evidence session of the Bill Committee. Rather than me introducing you, it might be more sensible if you introduce yourselves in a moment. We have until 11.25 am for this session, and at 11.25, even if you are speaking, I will close the session at that moment, through no discourtesy but because the rules of the House state that we must stop at precisely 11.25. Starting with Mr Coop, as he is here, will you kindly all introduce yourselves? And if you have any introductory remarks about the Bill, that is always very helpful.
Simon Coop: My name is Simon Coop. I am acting national officer for energy and utilities at Unite the union.
Sue Ferns: My name is Sue Ferns and I am the senior deputy general secretary at the Prospect trade union.
Charlotte Childs: I am Charlotte Childs. I am national officer for the GMB trade union.
The Chair
Thank you all very much for being here. We will start with Her Majesty’s loyal Opposition and Dr Whitehead.
Dr Whitehead
Q
Sue Ferns: Certainly. At the moment, Springfields nuclear fuels faces a bit of a crisis, primarily due to the earlier than expected rundown and closure of the AGR—advanced gas-cooled reactor—fleet, which has been its major component of fuel manufacture, not the only but the major one. The effect of that is that from January of next year it will be producing only 55 tonnes of AGR fuel, compared with a normal load of about 200 tonnes. That obviously has implications for the workforce and it means that that plant will be operating in deficit as from January of next year.
There have been protracted discussions over the course of the year. We have seen two rounds of redundancy notices issued to the skilled and specialist staff on the site, and there is a danger, in the face of continued uncertainty, that more of those specialist skills and expertise will be lost.
I should say that fuel manufacturing is the key function of Springfields nuclear fuels but there is also much wider expertise. It provides a range of other services to the nuclear industry and is seen as a key part of the UK’s nuclear expertise. We very much fear for the future and are in active discussions with the company and Government about that.
There is both a short-term and a longer-term challenge, and a longer-term opportunity. If more nuclear power stations are constructed in the UK, we can see a good fuel load for Springfields from about 10 years’ time onwards, but the problem is that unless we solve the short-term hiatus in fuel orders, those skills and expertise will be lost and will not be easily recovered, if at all. The opportunity is for Springfields, as it was recognised in the nuclear sector deal, to continue as a centre of nuclear excellence and expertise as our unique UK fuel manufacturing capability, able to provide fuel to reactors in the UK of all types, and potentially to plants in other parts of Europe as well.
Dr Whitehead
Q
Charlotte Childs: The conversations that we have had with EDF in terms of building a nuclear supply chain, and the skills required to build both of those projects, and further projects, mean that the decision on the RAB funding model, hopefully leading towards a final investment decision in the near future, creates a really great opportunity for the timelines of those projects to line up, and for the skilled workforce who are needed at Hinkley Point to just about finish what they are doing there in time to move over to Sizewell. It creates certainty for the nuclear supply chain and for those who have gone through a training programme with Hinkley.
We have negotiated some industry-leading processes to ensure that people from the local area can go from low to no qualifications into qualified trades and apprenticeships. It creates an ongoing opportunity for those people and job security that we do not generally see in the construction sector. Time is of the essence. To maximise the benefit for the nuclear supply chain and drive down costs, because it is already in place, it is imperative that those decisions are made sooner rather than later.
Simon Coop: I reiterate those points. With regard to Hinkley Point C, it is really a no-brainer to adapt those transferrable skills and move them into Sizewell C in order to ensure that costs do not spiral out of control. There is a clear model already in use that we can learn from to move into Sizewell C. The timing of that transfer is of the essence in ensuring that we do not lose the skills from one project and that we develop and move them forward into Sizewell C. Urgency is needed to move that project forward as soon as possible in order to maintain the skills from Hinkley Point at Sizewell C. Any kind of developments have to be in line with industry standards, and we also have to make sure that any misgivings or fore learnings that we establish from Hinkley Point C are clearly ironed out as we move forward to Sizewell C. The replica gives us the opportunity not just to learn from what we have done but at Sizewell C to improve and iron out any problems that we have had to maximise value for money for all vested parties.
Dr Whitehead
Q
Simon Coop: The UK workforce are absolutely flexible and they are highly skilled. In construction, the same key workers with the key skills have moved to projects. I do not see that being a major problem in future construction projects. As a result of talking to the company, there are already plans to transfer the operational skills at Hinkley Point B to Hinkley Point C. Those operational skills are currently transferring and people are keen to move on and use those skills at the Hinkley Point C project. There should be no difference in terms of transfer to future construction projects.
Alan Brown
Q
Charlotte Childs: We are a member of that organisation, so the letter you received and the policy that we have set is based on a wide-ranging discussion with our members. In response to your suggestion about investment in manufacturing, it is not a this or that situation, is it? Scotland in particular has benefited greatly from the current nuclear civil generation, and the zero carbon generated by Torness and Hunterston B have contributed to southern Scotland consistently hitting the 2030 target, working alongside other renewables like wind to provide green energy. Without heavy investment in new nuclear projects we will not reach our net zero targets, and Scotland has set itself an even more ambitious target of 2045 to reach net zero. That simply will not be possible without having a consistent and reliable baseload that is net zero in its production of energy.
Alan Brown
Q
Charlotte Childs: Those alternates do not exist yet and will not do so for a long time. The technology is not there in the short term to reach the targets that have been set in the near future. It is also about investing in UK skills and jobs, and the existing nuclear supply chain—Sue spoke of Springfields and the nuclear supply chain in place to deliver Hinkley Point C. As Simon and I have said, we need to ensure that the decisions are taken decisively and quickly to protect those supply chain jobs. The supply chain for wind, for example, which you have suggested in the past is a viable alternative to nuclear, is not within the UK. We have the skills and the capability, but we are currently importing turbine parts and steel from China to create the wind turbine fields that are currently being constructed. The £20 billion is a lot of money, but it will create an inordinate number of skills, prospects and social changes for the local area around Sizewell, as well as for the wider UK workforce and supply chain.
Alan Brown
Q
Sue Ferns: If you do not mind, I just want to add to what Charlotte has said. Our analysis shows that investment in nuclear is more jobs-rich than investment in other low-carbon technologies. We have done some work, based on Office for National Statistics data, that shows that each installed megawatt of nuclear capacity supports roughly 4.7 direct and indirect jobs, compared with 1.5 in offshore wind and 1.1 in solar. I would be happy to share that analysis with you if it is of interest.
Alan Brown
I have seen that—I know some of it is up for debate. It is also about operational jobs. I will happily discuss that further.
The Chair
Great. Unless there are any further questions from Members or our witnesses have anything particular to say that they have not said—I see no indication that that is the case—I thank our three witnesses very much indeed for their time before the Committee. Their evidence will be useful in our deliberations over the next couple of weeks, when we will consider the detail of the Bill. I call the Whip to move the motion to adjourn.
The Lord Commissioner of Her Majesty's Treasury (Craig Whittaker)
I beg to move—[Interruption.]
The Chair
Q
Charlotte Childs: Apologies, but while I have this audience I want to touch quickly on the industrial relations model that we have in place at Hinkley Point. The benefit that it is creating for the workforce there could be transferred to Sizewell C, and amendments could be made to the Bill to entrench that within the process. We have a joint project board set up at Hinkley Point B, and the unions have an influential voice within it. A committee was also set up on site to deliver results for our members in industrial relations and health and safety, and we are putting agreements in place for the terms and conditions of those building the plant, and agreements are under discussion for those who will be operating the plant once it is finished.
It would be prudent for those who make the decisions to make amendments that require the nuclear company, as it were, to recognise established sector trade unions, and to embed union access—or the requirement for union access—into the Bill, not just for the client and the tier 1 contractors, but for second and third-tier contractors, as we have on the HS2 project. The nuclear company should have regard to the security of its supply chain, and figures on UK content should be published.
The access that we have on Hinkley Point has created an environment where the GMB in particular is able to have really in-depth discussions with the client and tier 1 contractors on things such as equality and diversity and inclusion. We are currently working on projects to encourage women into the construction sector at Hinkley Point and to create an environment that will be welcoming and encouraging to women who want to come into the sector. Given the skills gap the construction sector currently faces and is heading towards, it is important that that work is done with both employer and trade unions to ensure that we get that right for the workforce. While I had the floor, I wanted to suggest that union access was put into the Bill.
The Chair
Q
Simon Coop: On the investment question, which I did not respond to at the time, it does seem significant, but in order to have balanced UK energy security moving forward, that investment has to be put in place. There is no doubt, as we look at the streams of nuclear energy, that a fleet of nuclear energy is needed, and this Bill should not be just in line with Sizewell C; it should be a Bill that moves forward a nuclear fleet. We are in a position where, by 2025 and 2030, there will be clear problems in nuclear generation, as six stations will be coming off stream at that point in time. For a clear, balanced energy policy, nuclear, along with renewables, solar and wind, has to be a part of that—not just as a back-up situation, as some people state, but as an integral part of the UK’s energy moving forward. That has to be key.
On collective bargaining and union agreements on sites, there is no doubt that unions build clear relations and the highest health and safety standards, which in turn will definitely mean that any project has more chance of succeeding within budget because of the clear integrity of the health and safety situations through joint agreements.
The Chair
Thank you very much.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Nuclear Energy (Financing) Bill (Second sitting)
Tuesday 16th November 2021
(2 years, 5 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 16 November 2021 - (16 Nov 2021)
Mark Jenkinson (Workington) (Con)
Chair, I would like to bring to the Committee’s attention my entry in the Register of Members’ Financial Interests. It is a matter of public record that I worked in the nuclear industry prior to my election.
The Chair
We will now hear from Richard Hall, chief energy economist, Citizens Advice, who is appearing via video link. We have until 2.30 pm for this session. Welcome, Mr Hall. Would you like to introduce yourself?
Richard Hall: Good afternoon. My name is Richard Hall. I am the chief energy economist at Citizens Advice. Citizens Advice has a statutory role to act as a consumer representative in the electricity and gas sectors. That comprises a research and advocacy function in terms of trying to understand the issues consumers face and propose better solutions for them; an advice function in terms of helping consumers to understand their rights and options that is provided through our bureaux, our website and a telephone consumer advice service; and providing advanced support to consumers with difficult complaints or issues through an extra help unit that is shared between ourselves and Citizens Advice Scotland based in Glasgow.
Dr Alan Whitehead (Southampton, Test) (Lab)
Q
Richard Hall: Yes, certainly, Alan. There are good reasons to think that a RAB model could reduce the cost of capital associated with bringing forward new nuclear projects, but it is important to be mindful that consumers are not simply exposed to the cost of capital; they are also exposed to the volume of capital. That is relevant in the case of nuclear because nuclear projects have a track record of coming in over budget and behind schedule.
If you look at the impact assessment that the Department for Business, Energy and Industrial Strategy published alongside the Bill, it highlights that, on average, new nuclear projects of the nth of a kind—not the first reactor of a particular model to be built, but an iteration of it—have come in 20% over budget within Europe and 100% over budget worldwide since 1990. It also highlights that nuclear projects within Europe have suffered construction time overruns averaging 40% following the final investment decision. The average is 90% on a worldwide basis since 1990. This matters to consumers because, under a RAB model, unlike a contracts for difference model, they are exposed to the cost overruns and to the time overruns if they occur in a different way.
Perhaps to unpack what we mean by that, I should point out that under the CfD model that was adopted for Hinkley Point C a price is guaranteed to the developer for every megawatt-hour of output it produces, and that is inflation-linked, but consumers do not become liable to start paying those costs until the plant is operational. Those costs are pay on delivery. Consumers are not expected to pay in advance of the plant being there. Under a RAB model, consumers would start paying towards the cost of the plant from the time the construction commenced. Indeed, the Bill as it is drafted allows for that. If there are construction cost overruns, consumers will essentially be paying for a benefit in terms of a production facility that is not actually being delivered yet. That is the point about construction time issues.
On cost overrun issues, while the strike price that was agreed for Hinkley Point C appears to some commentators to be quite high, it has the advantage to consumers of being, in effect, an all-in price. If the cost of the build project escalates over time, those escalating costs will have to be met, but they would be met by the developers; they would not be met by consumers. Essentially that risks sits with investors. Under the RAB model, however, it is likely that any cost escalations would be shared between the consumers and investors. At this stage, we do not know exactly how. The BEIS consultation from the autumn of 2019 suggested that it might look at putting in place mechanical sharing factors between the developer and consumer. That means if the construction were to run under or over budget, a proportion of the benefits or additional costs would be borne by the investors and the developers, but a proportion would also be borne by consumers. On that, it is important to be aware that although the developers have some control over construction because they are in control of the overall project, consumers do not have any control over the risk. Essentially, they are the passive recipient of the risks.
In a nutshell, the concern that we have is that if a project were to come in on budget, RAB looks like a very good model potentially, but there is a strong historical track record that suggests that projects may not come in on budget. Under the RAB model, consumers may be exposed to significant cost overruns as a consequence.
Dr Whitehead
Q
Richard Hall: There is a lot in that question. I will try to unpack it if I can—there was something about methods of financing, and something about cost caps too. Regarding cost caps, the Bill envisages that there would be a funding cap essentially—a point at which, if costs escalated significantly above the expected spend, the Secretary of State would be prompted to take a decision on what should happen with those additional costs. I do not believe that the face of the Bill actually stipulates what that materiality would be, and I think it also leaves that decision very much at the Secretary of State’s discretion, so there is the potential that they could simply acknowledge that there was a problem, but continue to put those costs on to consumer bills. That seems to be fairly vague: it leaves room for ambiguity on what a Secretary of State might do in that type of scenario in future.
A couple of things could be done to try to mitigate consumer costs. The first is that the sharing factors that are set out—they are not set out in the Bill; they are to be agreed between the Department and the developer, as to who bears the costs if there are significant cost overruns—should be slanted towards the developer facing most of those costs. Again, that is because consumers have no ability to control those costs whatsoever, whereas the developer does have the ability to control some of those costs. Effectively, that risk needs to be borne as much as possible by the developer. It should be borne in mind that, obviously, that creates some interactions with the cost of capital: effectively, the more you de-risk the developer, the more you reduce the cost of capital, but given that you are only doing that by pushing those risks on to consumers, we think it is probably better to ensure that the developers are subject to as sharp incentives as possible to build it on time.
Turning to the other areas that I think would be of assistance, the Bill envisages that the developer would have a right to appeal any decisions that Ofgem made on the price control that had been agreed for the developer. Intuitively, those appeals are only going to go in one direction—that is, if the developer feels that a settlement is not generous enough to it. It is hardly going to appeal if it feels a settlement is too generous. I notice that elsewhere, in terms of many aspects of energy governance, where appeals processes exist, they are bidirectional: they allow for someone to appeal that a settlement is too tough, but they also allow for people to appeal that a settlement is too weak. We think that type of approach should be followed here: if the developer has the right of appeal to basically ask for more money, other interested parties should have the right of appeal to argue that there should be less money, so there is bidirectional scrutiny and tension there.
A second area in which I think we could help to bear down on costs is that it is quite important that some form of independent third-party impact assessment is made of the key terms of any deal that is agreed under this Bill, and published before that agreement becomes legally binding. I would also like parliamentarians such as yourselves to have an opportunity to see the headline terms of any agreement and that independent third-party impact assessment, and to be able to scrutinise those costs before the agreement becomes legally binding. If that seems like it might be quite an unusual thing to do, because obviously Parliament does not micromanage individual infrastructure purchases, we would argue that it is justified in this case, because we are talking about building assets that will—even at the most conservative estimate—cost consumers tens of billions of pounds, and those costs will be recovered from consumers for potentially 50 or 60 years.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
Q
Richard Hall: On those two specific projects, Heathrow and Thames Tideway, I cannot give any insight. I am not particularly close to those individual cases. It is fair to note that in both cases the cost of capital brought forward by the model seems to have been low, in particular in the case of Thames Tideway. On nuclear, I simply go back to the point that there is a large base of literature looking at historical cost overruns and the extent to which things come in on budget. That tends to display fairly consistently that these types of projects are very likely to be subject to optimism bias at the time that they are procured—a belief that they will be cheaper than they actually will be.
In addition to the costs and dates I mentioned from the BEIS impact assessment suggesting the average levels of cost overruns, look at a couple of other examples from academia: Sovacool et al. looked at a global example of 180 new nuclear plants and found that 97% of them came in over budget and that the average cost overrun was 117%; and Flyvbjerg et al. found that in a sample of 194 nuclear plants, the median cost overrun was 68% and the median schedule or construction-time overrun was 40%. That is a fairly large sample set of projects, and the analysis tends to suggest considerable optimism bias for new nuclear—it tends to come in late and over budget.
Matthew Pennycook
Q
Richard Hall: I think potentially it could, simply because of the scale of the project. The cheapest cost estimate in the impact assessment is that, for a Hinkley Point C-sized plant put forward on the RAB model, it would cost about £24 billion. That is the cheapest estimate, so we are talking about extremely chunky consumer spend.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Richard Hall: It is hard to see a case for this being the most cost-effective way to spend money on generation. A lot of the argument for whether we need new nuclear or not comes down to whether it is perceived as being useful to provide a balanced generation mix, so that it is available when other forms of low-carbon generation are not available. On that point, I note that the Government are more confident on the need for new nuclear than some of their advisers are. The Committee on Climate Change’s sixth carbon budget work from last December shows a range of pathways to net zero by 2050, some of which involve new nuclear. It talks about it being “possibly” needed, not definitely needed.
The National Infrastructure Commission’s 2018 national infrastructure assessment recommended that the Government consider bringing forward one new large-scale nuclear plant in the 2020s—but only one, suggesting that in general terms the cost reductions in renewables were so sharp and likely to continue that a pivot to renewables appeared a better bet than backing nuclear more forcefully.
The case for whether new nuclear is needed is ambiguous at this stage. Could you get better value for money from investing in other things? I think the challenges of making our homes energy-efficient so that we stop spending so much on energy and reduce emissions should be tackled as a priority.
Alan Brown
Q
Richard Hall: I certainly think that the risk of it being brought out of service earlier than expected has to be borne by the developers rather than by consumers. There is no way in which consumers can forecast or manage that risk.
On affordability over 60 years, we are talking about a 60-year lifespan, but there may be another 10 years in addition for construction, so we are talking about a payback period that, if we had the decision now, might continue until 2091 or towards the end of the century. It is extremely hard to know what options will be available to consumers 10 or 20 years out, let alone 70 years. It is hard to forecast whether it will offer consumers good value for money over that period.
One can only note that the cost of alternatives—renewables, storage and so on—has fallen rapidly over time. There is some risk of buyer’s regret: an option that looks cost-competitive today might look quite cost-uncompetitive quite rapidly.
Alan Brown
Q
Richard Hall: That is a good question. If the special administration regime were to be used, I understand that effectively it would mean that the special administrator would be taking on that risk. That may mean that it became a public liability. I do not know how a special administrator would sell on that risk to others.
In terms of where it would be borne if the special administration regime were never used, I think that would come down to the terms of the contract agreed between the Government and the developer. In its current form, the Bill basically enables the Government to enter into negotiations with a developer to agree a contract based around the RAB model, but the details of that contract are not contained in the Bill. Earlier, I said that I thought it very important that an independent third-party impact assessment be laid before Parliament after a deal is struck but before it becomes contractually binding. That would provide the opportunity to understand where the liabilities would sit in that type of situation.
Mark Jenkinson
Q
Richard Hall: We do not have an anti-nuclear stance; we are technology neutral. In terms of the options between bringing forward new nuclear or leaving catastrophic climate change unchecked, there is no question that nuclear is an option that can help us to reduce our emissions and tackle the climate change crisis. We do not have concerns on the technology itself, and whether it can be done safely and so on. Our concerns are simply around cost. It looks like a costly option compared with others.
On whether we have a preferred approach, because we are technology neutral we do not have a preference for any particular technology over others. I would simply highlight such things as the analysis of the Committee on Climate Change, which showed a range of possible pathways to 2050 that it considered to be affordable. Some of them involved nuclear and some of them did not. It appears that there is a choice to be made.
Dr Whitehead
Q
Richard Hall: Yes, certainly. Paragraph 4.2 of the impact assessment sets out a range of tables showing what the estimated construction and financing costs would be for a Hinkley Point C-sized power station in a range of scenarios: under a CfD with 20% cost overruns, or with 100% overruns, or under the RAB model at various different costs of capital—
The Chair
Order. I am afraid that that brings us to the end of the time allotted for the Committee to ask questions. On behalf of the Committee, I thank you very much, Mr Hall.
Examination of Witnesses
Chris Ball, Dawn James, Cameron Gilmour and Alan Woods gave evidence.
The Chair
We will now hear from Chris Ball, managing director of EMEA nuclear at SNC-Lavalin, and Alan Woods, director for strategy and business development at Rolls-Royce, both of whom are giving evidence in person. We will also hear from Dawn James, vice-president of nuclear at Jacobs Engineering Group, and Cameron Gilmour, vice-president of nuclear at Doosan Babcock, who are both giving evidence via video link.
We have until 3.30 pm for this session. Could the witnesses please introduce themselves for the record?
Chris Ball: I am Chris Ball, managing director of the Europe-middle east business at Atkins SNC-Lavalin.
Alan Woods: I am Alan Woods, director of strategy and business development for Rolls-Royce SMR.
Cameron Gilmour: Good afternoon. I am Cameron Gilmour, and I run the nuclear business at Doosan Babcock.
Dawn James: Good afternoon. I am Dawn James, the vice-president responsible for the nuclear power business at Jacobs.
The Chair
Thank you very much. Are there any questions for these witnesses? I call Virginia Crosbie.
Virginia Crosbie (Ynys Môn) (Con)
Q
Chris Ball: We talk about the RAB model, from the numbers that I have heard, probably putting about £1 on to consumer bills on a monthly pay-in. To put that into the context of some of the price increases that we have seen through the energy sector over recent weeks, we are probably talking about an 80% increase from some of the figures that I have seen. I have been looking at this with elderly relatives as well.
When you look at the RAB model in terms of the impact on consumers, there is a cost associated with that—of course there is. It is very limited compared with many other models, and we have to take the long-term view in the energy sector. That is something that the energy sector has been sadly lacking for many, many years. We have to take that 2050 view. It represents very good value for money in the big scheme of things.
Alan Woods: We welcome any model that helps the deployment of new nuclear. From a Rolls-Royce SMR perspective, if we were to deliver our power plant under a RAB, we estimate that it would be capable of getting in the order of £35 a megawatt-hour, whereas a CfD mechanism would be in the order of £60 a megawatt-hour. That is the different that we would forecast.
In terms of one against the other, it comes down to a question of risk. Our whole programme is designed to eliminate risk, particularly construction and build risk, and to move away from what we would call a one-off infrastructure project to a factory-repeatable product that means we can build certainty into the design. We believe that we can use the CfD mechanism for our plants. We believe that we can raise the private capital to fund that, and that is something that we will be exploring in the coming weeks and months.
Dawn James: The way that I look at this, large gigawatt-scale nuclear power stations require a huge up-front investment. Under the CfD model, looking fundamentally at the costs over time, there are a huge number of hidden costs associated with financing these projects, and those costs over time will essentially all be passed on to the consumer.
Under the RAB model, by driving down the uncertainties associated with financing costs because of risk, we are able to actually—
The Chair
Ms James, I am afraid your evidence is not very clear. Could you move nearer the microphone?
Dawn James: I do apologise. I will do that. Is that clearer?
The Chair
Thank you.
Dawn James: The costs associated with the CfD model are passed on to the consumer over a much longer period of time. Because the capital investment is so much greater due to financing, ultimately the cost to the consumer is much greater than it would be under the RAB model.
Cameron Gilmour: I largely echo the points made by all three of my colleagues. When we look at the Hinkley Point C case, the financing cost within the CfD is the largest amount within the rating—over £82.50. The cost of construction at Hinkley is actually a small element—£11—of that CfD price. The more we can introduce a more economical financing model, that is obviously of benefit to the consumer down the line, so we welcome that.
The Chair
Thank you. Anthony Browne or Virginia, did either of you have a follow-up question?
Anthony Browne (South Cambridgeshire) (Con)
Q
Alan Woods: We believe we can, yes. It is worth noting that our plant is an order of magnitude different to the larger ones in terms of the capital. It is also different in terms of the time it takes to build and in the fact that we have completely changed the risk profile. As I say, this is a factory-built product and it is something we are used to.
Anthony Browne
Q
Alan Woods: We have removed a lot of the construction risk. We have what is called our fourth factory, so we actually assemble our modules on site in a controlled factory environment. This allows us to remove and reduce that risk profile. It is a completely different ball game.
In that regard, we believe that we can attract private capital. We spent some time at COP26 last week and there is an appetite in the financial markets for investment in projects that can demonstrate an acceptable risk profile, which we believe we can. It is up to us to demonstrate that and to attract that private finance, but we think that is doable.
Anthony Browne
Q
Alan Woods: I am referring there to the CfD model. If we have the CfD, which is essentially providing some certainty of returns, then that certainty of returns, coupled with the fact that the risk profile of our product is completely different, represents an attractive financial investment.
Anthony Browne
Q
Alan Woods: Well, look, if RAB is available then RAB is great. If you have got that high-risk profile, it will provide even better value to the consumer. From our perspective, the pace is also important and RAB is not legislated for yet. CfD is an available mechanism that is tried and tested, and we believe we can make it work. Therefore, to operate at pace, our preferred route at the moment would be to move forward with the CfD approach.
Anthony Browne
Q
Alan Woods: Yes, sure. There is nothing stopping you.
Anthony Browne
Change horses.
Alan Woods: Yes, it is no secret that SMRs work by building a fleet. How you finance each SMR does not mean they all have to be financed the same way. We are also looking at models for the future, looking at the net zero challenge. The scale of energy or electricity generation that we will need to decarbonise things like heat and transport, or for synthetic aviation fuel, hydrogen and so on—it will take an enormous amount of electricity to make those new fuels. We see a world where you might need to do that on energy campuses that operate in an off-grid manner to maximise that value. In that kind of a regime in the future, we may be able to build these under a separate, more simplified PPA model.
Anthony Browne
Q
Chris Ball: Yes. I would take it back a step, actually, because we cannot let this conversation become either/or; it has to be both. I say that because, if you look at the future net zero world, the general view is that we should electrify as much as possible and then decarbonise the electricity supply industry. The electrification will probably double our demand on the grid and will probably lead to a tripling of our capacity on the grid, because a large amount of it is intermittent renewables.
There are various studies out there and everyone has a different view, but broadly speaking a quarter of the grid should be—will have to be—firm power, for a host of reasons, not least the storage costs escalating almost exponentially with increased of renewables penetration. We are talking around 50 GW of firm power, or 50 large plants; Hinkley is 3.2 GW. You have two main sources for that. The first is gas with carbon capture and sequestration. By the way, that energy sector has risks; there is no large-scale carbon capture and sequestration plant in the UK, but some of the modelling suggests that we would have to capture and sequester in the UK alone four times the current world capacity of carbon capture and sequestration. The other source is nuclear. This should not become an either/or conversation. This should be a conversation about how we make sure that the CCS market starts moving, the SMR market starts moving, and the large-scale nuclear market starts moving.
For context, we need to build something like 9 GW a year across all technologies—firm power and renewable power—between now and 2050. If you go back over the last 60 years, our peak output is of the order of the construction of 6 GW a year, averaging at 3 GW, so we have to treble the average output every year for the next 30 years, working to the 2050 timescale. This has to be a conversation about all. There is no doubt that, to push large-scale nuclear forward, the RAB model seems to the most appropriate method.
Anthony Browne
Q
Chris Ball: This is not really my area of expertise; I suggest you are better off asking other people about that. The big piece for me is the risk allocation within that model—where risk sits. There is a balance there. From listening to some of the earlier evidence, clearly the more risk that is transferred to the developer, the more attractive that might become to some investors. The flipside of that is that you are starting to move to a scenario where risk is priced in through the delivery vehicle. That is a trade-off that I would be very careful of. I will limit my comments to that area.
Anthony Browne
Q
Dawn James: I hope you can hear me okay now. I am not an expert in the field of investors, but building on what Chris said, it would certainly bring more developers into the UK. As I think you are all aware, a number of programmes have started then stopped, including at Wylfa and Moorside, and that is largely down to issues around financing. So yes, I believe that the RAB model will definitely attract more investors and developers, which, as you just said, is critical to our meeting our net zero target.
Anthony Browne
Q
Cameron Gilmour: Looking at some of the detail and how the Bill has been written, it seems to be designed to encourage that investment. Again, I am not a financial expert, but it is encouraging to see that nuclear is recognised as playing a key part in our journey towards net zero. From an investment perspective, it becomes something that the Government want to invest in and commit to, so you would say that has to be an encouraging sign for any potential investors.
Anthony Browne
Q
Alan Woods: I notice I keep getting questions first, so I have less time to think of the answer, but—
Anthony Browne
I can ask Chris first if you want.
Chris Ball: No, that’s fine. [Laughter.]
Alan Woods: Look, clearly there needs to be a regulator, and a regulator is needed to regulate the way RAB is deployed and managed. From our perspective, Ofgem is as good a point to start as anywhere.
Chris Ball: Clearly this creates a new demand, and there is a need for additional capacity somewhere to oversee the management of the RAB model. I think the question is whether Ofgem is best placed to do that, and the answer is: possibly.
The other piece that I would look at is, ultimately, where our country’s energy system architect is now. Who is defining the way in which our energy system should look and operate in 2050? Is there benefit in establishing a new energy system architect who takes decisions on the future power mix, and actually putting into that system architect the capability to oversee investments in all sectors? I think that is one of the reflections that I would have about the controlling mind in how we reach that 2050 net zero energy system.
Anthony Browne
Q
Chris Ball: It may well be within Government and BEIS, absolutely. But I think we do need that capability firmly established in one place. I am not suggesting it should necessarily sit outside of Government or BEIS, but we should have a clear collection of people under that title as the controlling mind.
Alun Cairns (Vale of Glamorgan) (Con)
Q
Alan Woods: Let me break that down in terms of the proven part. Our design and our plant use proven technology. At the base of the reactor island, there is a pressurised water reactor. It is the same as what Rolls-Royce has designed, built and operated for the past 60 years in the submarine programme. We do not have the same set of requirements as the submarine programme, but it is the same core technology. Is it proven? Yes, it is absolutely proven. We know it works and that we can build it. We are building them today.
The rest of the turbine island plant is designed to use products that are already available in the market today. We are not designing a power plant that requires us to invent a specialist product here or a specialist product there and that has never been made before. It is designed to use products that exist in the market. Even though it is a steam turbine, it is a commodity product we can buy. All the constituent parts at our plant are proven technology. Our civil module approach has been proven by our partner, Laing O’Rourke, which is making modules of this nature today at Worksop. We will expand that facility to replicate and grow that module manufacturing capacity. The constituent parts are all proven. There is no technology innovation at the plant that is questionable as to whether it will reach the right technology-readiness level.
Then we come to our ability to manufacture and join the modules together. Again, this is not a technology challenge. It becomes more of a logistical challenge and there is plenty of evidence in other industries—in fact, inside Rolls-Royce—where we manage those logistics from the supply chain to the module facilities to the delivery to site and to the installation and commissioning of them.
I do not accept that we are not proven technology; we absolutely are. As I said, we have built into the design, intentionally from the outset, technologies and features that remove the risks associated with traditional construction. It is no longer a very large construction project; it is a factory of products. For example, when we build the power plant, we assembly the modules on site where an average of 500 people are assembling the parts. We do that to move those jobs into the module facilities and the supply chain and into the factory environment where we are manufacturing the same products over and over again in a production line environment.
The Chair
Do any of the other witnesses want to answer the question?
Chris Ball: There are two aspects to the question. First is the one about proven technology, which Alan has covered. Secondly, there is taking the lessons learned and leveraging the skills and capability within the UK nuclear industry. If we look at Hinkley Point C from unit 1 to unit 2, we see broadly in the order of a 20% reduction in time scales and costs as we take the lessons from unit 1 on to unit 2. Clearly, if we carry on with that same trajectory at Sizewell C, it will be 40%. I am not suggesting that it would necessarily get to 40% but one would assume it would be in excess of 20%. That is a benefit. Going back to the RAB model, leveraging the experience of Hinkley Point C affords good protection against the risks of cost and schedule overrun. Equally, leveraging those lessons into the SMR programme and from the skills and capability that have been built up on existing nuclear programmes is the benefit from all programmes.
My big fear for us as an organisation, which has several thousand engineers in the UK, is that disruption to workflow means that we lose the lessons learned from the industry. That is not to the benefit of the UK, job creation and the cost of our energy.
The Chair
Dawn, do you wish to comment?
Dawn James: I merely wish to echo Chris’s point that intelligence replication will drive down risks and costs significantly. I really wish to impress on everyone the need for pace in getting the Bill through. A huge number of jobs are at risk across the whole UK.
Can you not hear me very well?
The Chair
Not very well at all, I’m afraid. If you’d like to speak up.
Dawn James: I have never been accused of this before. I was echoing Chris’s point about the benefit of intelligence replication and how it will reduce risks and therefore drive down costs. I was also pressing the need for pace in moving the Bill through so that we retain the skills and the knowledge as we move from Hinkley to Sizewell. That is where a huge amount of value can be realised.
The Chair
Cameron, do you have anything to add?
Cameron Gilmour: I will be brief. The thing to remember is that the Sizewell C project is global European pressurised reactor Nos. 7 and 8, so the core technologies are proven and operational in a civil nuclear power plant right now. The important thing for the industry is that we generated the continuity and recreated our nuclear expertise in the UK when we started on Hinkley Point C. We have learned a huge number of lessons and we have created a lot of energy in the industry and on the programme. I echo the points made about pace and moving forward. If we give people continuity of employment and the long-term horizon, we will retain the skills and the knowledge. Those skills will be there not just for the gigawatt plants that we can build but for SMRs. For me, this is a crossroads not just for the engineering and construction industry but for the nuclear industry. The skills have been hard earned, and the lessons have been hard learned, so we have to capitalise on that and move forward quickly.
Alan Brown
Q
Alan Woods: That would depend on a number of factors, including the expected rate of return that the investors were looking for and the value of the CfD itself. In the previous session you were talking about having a requirement for 60 years to pay back on. It would not be that long for an SMR because the capital cost is that much lower and the speed we can build them that much quicker, particularly once we have reached that nth unit and we are rolling them off the production line. The payback period will therefore be a lot quicker, and that will reflect what is available on the CfD. It becomes a balancing act.
Alan Brown
Q
Alan Woods: There are two things to say on that. First, it is not just about repetition to get down the costs of SMR; there is a core reduction in the capital cost per megawatt purely driven by that factory approach. Taking jobs off an external site environment and moving them to a factory delivers immediate portable efficiencies anyway in terms of the efficiencies that we get out of the people and the product. The method of manufacture and build reduces the capital cost to start with. What was the second part of the question?
Alan Brown
Q
Alan Woods: We need to have a pipeline of orders, mainly for us to underpin the investment in the factories, and for the supply chain to underpin the investment that it is looking for in its own facilities and capability capacity. They do not all have to be in the UK. Certainly, we are equally looking at export markets to deliver that order book and line of sight to orders.
The other critical point is that to take advantage of the reduced capital of an SMR, it is beneficial to look, in certain circumstances, at an SMR as a single product. If we start grouping them together in chains of four, five or six as a single project, all of a sudden the capital goes higher and you have a similar position, in some respects, to raising large amounts of capital for single projects. There is a benefit to be had from treating SMRs in smaller multiples, but we need line of sight to orders off the back of the first order or two for us to get the confidence to build the factories, and for the supply chain to invest behind us.
Alan Brown
Q
Alan Woods: We have a very detailed schedule to get us to the first of the fleet, as we call it, operating by 2031. The first one has a number of activities that are unique to the first unit. For example, we have to go for generic design assessment, which we entered last week. We have to build those factories and the supply chain. That puts more time into building the first unit. Coupled with that, we know that the first unit will take as long, because it is that first one, and that is in our plan.
The Chair
Q
Dawn James: The only thing that I would add is that, as I think Chris said before, we have an ever-increasing demand for electricity in the UK. Our current suite of nuclear power stations bar Sizewell B will all be off the bars by 2030, so we really need to be investing in those big gigawatts and in SMRs, using whichever models are appropriate.
The Chair
Q
Cameron Gilmour: I am largely in agreement. I will reinforce Alan’s point about the need for certainty, where any developer or investor needs a programme. When we create a programme, whether it is gigawatt-sized or SMRs, we create that confidence, the continuity of resources, and then we start to see the efficiencies flow through in the programme as we deliver them, whether it is factory or site construction.
Dr Whitehead
Q
Alan Woods: We actually challenged the IAEA on its definition. The response we got was that, at the time it defined an SMR, that was halfway between what it classed as a medium reactor and a small reactor. There was no set rationale for why it classified, and it was many years ago, that 300 MW. The simple reason that ours is 470 MW is that we set a requirement on the design to be road transportable. Each module has to be transportable to site by road. That gives us maximum site flexibility. It also removes the need for expensive additional infrastructure, such as new port facilities or new roads, to get the parts in.
Having set the size for the biggest module to be road transportable, the biggest limitation across Europe is about a diameter of 4.5 metres for the biggest module. If we set that as the maximum size for our reactor pressure vessel, that gives us an internal diameter and an internal volume for that pressure vessel. Using conventional available fuel that is made today in the UK and elsewhere, that sets the power that we can get out of that pressure vessel, so we need to design around that power.
The objective that we had, which was set by the utility partners we have worked and continue to work with, was that they want the maximum power for the least capital cost. We are therefore delivering that within the constraint of road transportability.
Dr Whitehead
Q
Alan Woods: Yes; all new plants that come to the UK have to go through the generic design assessment process. We put in our application to enter that process last week.
Dr Whitehead
Q
Alan Woods: Our next phase of the programme is for the next three and a half to four years, which will get us to the end of GDA step 2. That is the point at which we have completely de-risked it—not that we see any risk to going through the regulation, because as I said, this is proven technology power plant. We have already been working with the regulator for some time. At that point, we move to the final step, which is step 3, and that will take about another 18 months.
Dr Whitehead
Q
Alan Woods: We would actually start building ahead of that, because the GDA process allows us to prioritise the longer-lead items, the critical items, up front. We validate those with the Office for Nuclear Regulation early, on the basis that we can then get a release to order to accelerate the manufacturing process. We can do some of that activity in parallel by the way that we sequence the assessment through the GDA activity.
Dr Whitehead
Q
Alan Woods: No, it is eminently possible by the 2030s; it is very doable.
Dr Whitehead
Q
Chris Ball: If we work on the basis that Hinkley C is on line in let’s call it five years from now, we would have an issue if we held back over that time and thought that we then just move across. Naturally, within any project there is a phasing—there is a phasing of skills which means that we need to maintain a continuity almost at a lower level in terms of the breakdown of those skills. In my own organisation we currently have of the order of 600 people mobilised on Hinkley Point C. At this point in time, that is largely connected with civil engineering, civil design, design of structures, and that positions us quite clearly in a good position for future export markets. Those skills start to demobilise 12 months from now. Naturally in any major project such as this, civil engineering design is one of the earlier phases of the project. We will start to demobilise those skills 12 months from now, if not sooner, and you would probably say that we would demobilise three quarters of that skills base over the course of the subsequent 18 months. We are talking of a one year to two and a half year period over which we would be demobilising three quarters of our workforce, and taking skills out of the industry.
We would look at other neighbouring industries that have a demand on common skills bases to ensure that we maintain employment where possible, but it still represents a loss of capability from the industry that we may or may not be able to bring back in at some future point. That 12-month period from now is what is high on our mind.
Virginia Crosbie
Q
Alan Woods: Chris made the point earlier that net zero is such an enormous challenge. We often think about decarbonisation in the context of the grid, but the grid in the UK in particular represents about 20% of the total energy we use. The rest of it is heat and transport. As we look to decarbonise heat and transport, there are not that many routes available, certainly in some of them. Hydrogen is one, synthetic fuels is one and of course more electrification, but the common denominator among all of those is that you need more clean electricity. The scale is enormous. We therefore welcome any financing mechanism that will help any industry, not just the nuclear industry, bring forward those clean technologies, because the reality is that we have to have them if we are going to meet net zero.
The implications if we are not innovative with how we approach financing both in nuclear but also in other industries mean that we become dependent on other sources of technologies—imported technologies financed from overseas, which bring with them the whole dependency on other nations for our critical energy infrastructure. Increasing that dependency puts our ability to meet net zero at more and more risk.
Chris Ball: I will take a step back here. Earlier, I mentioned that there is a need for about 9 GW a year of construction to take place each year for the next 30 years. We need to find a way of building everything we possibly can in a way that is most cost-effective for the consumer. In every single area, there will be challenges for us to overcome.
People talk about offshore wind at £40 per megawatt-hour strike price. Actually, when it comes to the last two offshore wind farms—one up in East Anglia and one in Hornsea—one was at about £120 and one at £140 a megawatt-hour initial strike price. I recognise that offshore wind prices have been coming down; that is because of consistent underpinning Government policy. We have to replicate that in each and every one of these areas.
Just because offshore wind prices have come down, does not mean that they will continue to do that; they will reach a plateau and companies will start to go to deeper waters and floating offshore wind prices will pick up. We are also judging things on an old-fashioned measure of the levelised cost of electricity, but for renewables we need to start building in the cost of energy storage as well. That does not come cheap. There is a lot of talk about hydrogen, but that requires a lot of power. For every electron that goes into generating hydrogen, we might get 0.3 electrons back out again; it is not a one for one. That is quite often lost in the debate. Actually, I am a supporter of all these technologies; what I am saying is that we need to look at how we manage those risks.
Net zero will not be achieved without nuclear. From an engineering perspective, the system requires firm power on the grid. The RAB model is a good way of driving forward large-scale nuclear for the benefit of the consumer. Look at the levelised cost of electricity at, let us say, £40 per megawatt-hour for wind, noting my earlier comment, and add the storage costs; if you compare that with nuclear and the RAB model, the prices are very similar. Obviously, Alan also knows the SMR nuclear market very well and would say that, yes, it is similar there.
It worries me that if we do not find a way of pushing all these technologies forward, including carbon capture and sequestration and the technical challenges around that, the risk of failure for the 2050 net zero system is very high.
The Chair
Q
Dawn James: Yes, please. There is a risk of not having financing models for UK electricity prices. We have seen some evidence of it this year. Earlier this summer, the wind was not blowing—I know it is a trite phrase, but it is so true—and the sun was not shining very much. We were having to fire up gas plants and to bring coal plants back on to meet the needs that we had then and to use our current fleet of nuclear power stations that, as I said before, had come offline.
Not having the financing model so that we have control of our energy supply here in the UK would mean that we would be held hostage by other nations. We have seen what has happened with gas prices. I am sure that you have heard all these arguments from other people; maybe it has even been quite emotional. It is a huge risk to every type of taxpayer in this country if we do not take control of our electricity generation, and not just from a net zero point of view. But actually, we will not achieve what we need to from a net zero point of view without nuclear.
Cameron Gilmour: I can reinforce that. Our baseload generation comes to the end of its life in this decade; if we do not replace that and add to it, we will not continue our net zero ambitions with the current technologies on the table.
Dawn made a really good point about security of supply. We have seen what has happened to gas prices over the last few months. Baseload nuclear gives us confidence around pricing and supply. It is very complementary with renewables as well, with a mixed system of gigawatts, SMRs and future technologies being very complementary with all the renewables that we have on the grid and planned.
Virginia Crosbie
Q
Chris Ball: I would observe that it is about making sure that companies come together as one, and that there is leadership in the industry. If a RAB model supports and encourages that, fantastic. Looking at nuclear nations around the world, those that have been successful in the decades since—the 2000s and ’90s onwards—we tend to find a clear industry lead. Sometimes that is the operator, and sometimes it is a reactor vendor, behind which everyone else is corralled. It is probably that leadership that we used to have in the UK in decades gone by, and behind which everyone corrals, that has aided a successful industry, particularly in overseas exports. That is the piece that is missing at the moment, but that does not mean that industry should not come together and do something about it itself. It probably should, and I include myself in that comment. If RAB encourages that, all the better, but that is an observation that I would make.
Alan Woods: I would say that for us to be seen as a global leader in nuclear again we need to own the technology as a nation. We need to own the intellectual property; we need to export it; we need to be the country that other countries come to when they are thinking about wanting to deploy and exploit nuclear solutions in their home markets. I think that we will get there. With SMR, we will definitely get there. I think that that is what differentiates us.
You only need to read the news—there is an awful lot of noise around SMRs. There are a lot of vendors out there, and there is a lot of confusion about what is near-term and what are future technologies. I can speak at first hand, as I was in the Czech Republic yesterday, and they said that there is one thing that differentiates us. They believe that we can and will do it—and that is not true for everyone they look at. Having our own technology, coupled with the heritage that we have as a nation, we can and will grow back our position of being seen as a global leader in nuclear technologies around the world, without a doubt.
Dawn James: I think your question, Virginia, is about the magic key to unlocking or getting back to that fabulous heritage that we have in the nuclear industry. At this moment in time, yes, it is, and we really welcome the legislation that is moving forward. I cannot begin to tell you how excited I am finally to see my industry moving forward at pace. I started in the nuclear industry when Sizewell B was commissioned—at the back end of the construction of the last power station in the UK—yet we still have a really thriving nuclear industry. This is the key to unlocking and creating an industry that will thrive for many years to come.
Cameron Gilmour: A couple of points. I think that it is probably a question for the developers about gigawatt plants—could they raise the capital required without RAB? Probably the answer is no. There is a bigger issue at stake, which is sustaining the advantages in the ’60s and ’70s that Virginia talked about, and being able to have a new build programme that is both gigawatt and SMRs—EMRs in due course. That helps us to sustain expertise and knowledge, and help people with the careers that Dawn and I have had, for apprentices and for graduates in modern history. Without that funding we do not have a programme, and without a programme we do not have an industry with a future.
Anthony Browne
Q
Chris Ball: Again, that is probably not my area of expertise. The way I have looked at this is to look at every technology, and where the challenge is around enabling mass deployment of that technology. With CCS at this point in time, the key issue is not necessarily about the financing but about how the market is going to be structured and the quality of demonstrator projects.
There are different models, of course, but if you believe some of the modelling out there, we would need to capture and sequester within the UK four times the current world capacity. That is not without its challenges. So in answer to your question, I would suspect that, of course, it can be applied to that, but I actually think there are other key focus areas that need some attention to start that market moving—not least the deployment of demonstrator projects in the near term hopefully as well.
Virginia Crosbie
Q
Chris Ball: I think that is absolutely right, if you look at the RAB modelling. You have got to look at this from the concept of managing risk. How do we manage risk in the best possible way? You manage that risk through commonality and through ensuring that capability remains within the industry. We might deploy that commonality as pressurised water reactors. It might be a fleet of a couple of different designs, for instance, instead of one. From a risk perspective, it starts to consolidate down to a smaller number of different designs, with a level of commonality, where we can really drive risk and take the lessons from more projects to the next as well.
Alan Woods: A fleet clearly drives cost benefits. That is absolutely true of SMRs, despite the fact that they are factory produced anyway. We need that throughput in the factories. I would go back to the point I raised at the start. We welcome RAB. It is a mechanism that helps reduce cost of capital, but from our perspective we see there are alternative mechanisms, such as leaning on the CfD mechanism, and pace is important for us. We need to start thinking about delivering this fleet now, and that is what we are doing. Therefore, we have to look at mechanisms that are available for us now. We believe we can do this from a CfD to start with.
Dawn James: A fleet approach, without a shadow of doubt, drives down costs to the consumer by driving up our ability to replicate and driving in lessons learned from one station to the next. That security of work allows us to develop our workforce and to bring more people in. The more people you bring in at the bottom end, the more you drive down your costs, because you can spread the workforce across a number of different projects. It drives down costs in so many ways that, ultimately, that does get passed on to the consumer.
Cameron Gilmour: Yes, I agree with that. I will just bring a people angle to this as well. When I talk to some of the amazing, talented young apprentices and people in our business and we talk about this exciting future, there is no question that, without RAB, we will not have that opportunity to create that future for them, which would be a huge waste of talent. RAB is the enabler to getting that certainty and continuity for that next generation.
The Chair
Thank you. If there are no further questions from Members, I thank the witnesses for their evidence. I am sorry about some of the technical issues that we have had—that happens. We can move on to the next panel.
Examination of witnesses
Tom Thackeray, Tom Greatrex and Rebecca Groundwater gave evidence.
The Chair
We will now hear from Tom Thackeray, director for decarbonisation, Confederation of British Industry; Tom Greatrex, chief executive officer, Nuclear Industry Association; and Rebecca Groundwater, director of external relations, Energy Industries Council, all of whom are giving evidence by video link. We have until 4.15 pm for this session. Could the witnesses please introduce themselves for the record?
Tom Thackeray: I am Tom Thackeray, the programme director for decarbonisation at the Confederation of British Industry. We are the UK’s largest business representative organisation, representing small, medium and large businesses right across the country. My role is aiding businesses’ decarbonisation efforts and pursuit of sustainability. Part of that is influencing Government policy to enable them to invest, and part of it is working with businesses directly to drive down their own carbon footprints.
Tom Greatrex: Good afternoon. I am Tom Greatrex, chief executive of the Nuclear Industry Association, which is the trade association for the UK civil nuclear industry, representing companies throughout the supply chain.
Rebecca Groundwater: I am Rebecca Groundwater, and I am responsible for external affairs at the Energy Industries Council. We are a supply chain energy trade association. We represent all the energy sectors, not only in the UK but internationally, and we have five other offices in Houston, Kuala Lumpur, Dubai, London and one other that always escapes me—apologies.
The Chair
Thank you very much for attending, all of you. Could Members please indicate to me whether they have any questions to the panel? Dr Alan Whitehead.
Dr Whitehead
Q
Tom Greatrex: Apologies, but I missed part of the question; it cut off partway through, but I think I got the gist in relation to Chinese investment in UK nuclear. I think that is what you were asking about—is that correct?
Dr Whitehead
Yes, basically.
Tom Greatrex: You will recall, I am sure, the original arrangements that were made to facilitate Chinese investment in UK nuclear. China General Nuclear, who are currently the minority financial shareholder in Sizewell C, are also a member of the Nuclear Industry Association and have a potential project at Bradwell. In terms of technology, it is very clear that any reactor technology has to go through the same process to be approved, and that is done independently by the Office for Nuclear Regulation. I do not think there is any difference in the thoroughness of that approach, wherever the technology comes from.
However, making decisions on the larger geopolitical issues is, I am afraid, way above my current—or ever anticipated—pay grade. As far as I am concerned and as far as the industry is concerned, Chinese companies have significant expertise in nuclear capacity and have built quite a lot of nuclear capacity, working with different reactor designs in China. Whether, and to what extent, they should be involved in the UK is not really for me to express a view on.
Dr Whitehead
Q
Tom Greatrex: In terms of that funding being available, for a number of years, the Nuclear Industry Association and companies that we represent have made representations to Government about the costs associated with large-scale projects prior to getting to final investment decision. Significant amounts of money were spent on projects that have not happened during that process, and that pre-development funding is something that needed to be considered.
As to what that announcement covers, we have asked Government for further information on that. At the moment the information we have is that that is funding that could be available to a range of different projects and opportunities, but nothing specific. In relation to what I think was your implied question, on whether this is instead of buying out the CGN stake in Sizewell, it has not been made clear to us that that is what it is for.
Dr Whitehead
Q
Tom Greatrex: Yes, we have had the announcements and spoken to officials about the announcements, but we do not have any more detail than is currently available.
Dr Whitehead
Q
Tom Greatrex: Well, I hope that there will be clarity on that and other aspects of what has been announced by the Government in recent announcements as we proceed.
Anthony Browne
Q
Tom Greatrex: The Bill sets out a framework for a mechanism that we as the industry welcome. We think it is very important to be able to facilitate development of new projects. There are levels of detail that are not covered in the primary legislation, and I think you have touched on some of those in relation to exactly how aspects of risk sharing will be undertaken and the role of the regulator, which will be Ofgem—the expertise available to that body, and the fact that transitioning into being able to undertake what is effectively a new role is going to be significantly important. I am not sure those would necessarily be in the primary legislation, but there are aspects of this where there will need to be further information and development before a regulated desktop-based model can be used for nuclear development.
Anthony Browne
Q
Tom Thackeray: From the CBI’s perspective, we do not have any significant concerns around what is included in the Bill, but as has been noted previously, there is a framework for the establishment of a regulated asset base model, and the details around designation and the risk-sharing profile are things that will be worked out on an individual project basis further down the line, which should be the case when legislating in this way.
Anthony Browne
Q
Tom Thackeray: Yes, from our members’ perspectives, they are comfortable with that way of operating.
Anthony Browne
Q
Rebecca Groundwater: I would echo what previous panellists have said. We have engaged with our members on this and, although the Bill is a framework and there will be more detail going forward, they are happy with how things are at the moment. There are no big gaps for them as the Bill currently stands.
Anthony Browne
Q
Tom Thackeray: I think that the Bill recognises the particularities of the nuclear sector and the state that we are in, in terms of having built the first of a kind at Hinkley and the next stage of that process, with the RAB being the apt model for this technology at this time. The RAB has potential in other parts of the energy mix. Carbon capture and storage is one of those areas where we might look to expand it, although we are probably not at that stage of development just at the moment. Across the energy mix, others have tried-and-tested routes to market through the contracts for difference regime. So this adds another piece to the puzzle in providing the diverse energy mix that businesses want to see. The Bill provides a useful framework that could be replicated if we wanted to use the RAB model in other forms of energy generation in the future.
Rebecca Groundwater: I think the funding model here works for nuclear because of the investment required. At the moment, the other energy sectors are working in their own areas and they have the strategies, the legislation and the sector deals that are working for them and helping them to get to the point where they need to be. The Bill is very sector-specific, and it works for nuclear. I agree with Tom that, if and when it gets to that stage, it can be rolled out further. If you look at this in terms of the nuclear energy system, it works, and it is okay to look at each one in silo while having a holistic view of how all energy systems work together to get us to net zero.
Anthony Browne
Q
Tom Greatrex: This is a really important part of it. We have had policy under successive Governments for a while now for new nuclear capacity. It should not be a surprise to anyone that our current fleet is coming towards the end of its generating life, even after life extensions. The barrier that has existed to a number of different projects that were cited in the Second Reading debate, for example, has been about the financing regime, given the long lead time to develop an asset that then lasts for a very long time. So this is the biggest single thing.
I think that what needs to go alongside it—to be fair to the Government, we have seen this in recent times—is a commitment in words of the need for nuclear to be part of that future mix. All those things help to give investors, potential investors and developers confidence that this decision will not be changed on a whim. That clarity of purpose is important. The financing framework has been the thing that has scuppered various projects, and I think it will be vital in getting our capacity levels back up again.
Anthony Browne
Q
Rebecca Groundwater: This model provides certainty, and I know that the supply chain needs that certainty. We have been speaking to our members, and we engage with them. We know that they are diversifying out of energy. They are just not sure, despite what is needed, where the actual pipeline of projects coming down is from. They are not entirely sure what to go into. A lot of work has been done around the nuclear sector and with the supply chain. It is there and it is viable, and this commitment towards investment, and showcasing that it is seen as part of reaching net zero and part of that commitment to getting there, provides the stability for the industry to commit properly to it and to drive not just the local capability but the export capability, which UK businesses are very good at doing. I think this is a very welcome piece that we can move forward with.
Anthony Browne
Q
Tom Thackeray: I think this is a really important step for the nuclear industry and could establish our credentials as world leaders once again. From the business customer side of this, obviously, the bulk of the CBI’s membership are people who are concerned about energy from an energy bill perspective, and they are all setting net zero targets for their own operations. That is not going to be achieved unless we decarbonise the energy supply, and that cannot be achieved unless we have the roll-out of nuclear over the years ahead, and in quick time. From the point of view of UK credibility towards net zero and business leading the way generally, outside and inside the nuclear industry, it is a really important step.
Matthew Pennycook
Q
Tom Greatrex: I am sorry, but you cut out slightly. I think you were referring to clause 1 and designated companies, but I missed the question.
Matthew Pennycook
Sorry, Tom. From what you have seen, is there enough detail and clarity in the Bill about who designates a nuclear company and whether that is appropriate, and is there enough in there to be clear about whether we are designating the appropriate type of company?
Tom Greatrex: Thank you; I understand the question now. The detail of the designation process is set out in subsection (3) of clause 1, on procedure. I am not absolutely sure that it necessarily gives the full, detailed approach to the designation and who the designation will be of. As this is a framework Bill, we work on the assumption that the detail of that will be set out in regulations subsequently. We are quite comfortable with that being the approach. The broad principle is set out in the Bill, and I think that gives us enough to go on for now.
Rebecca Groundwater: The transparency piece and the openness of the process was mentioned by our members, but the assumption is that the detail will follow.
Tom Thackeray: I don’t think we have picked up strong views from our membership worrying about the level of detail in the Bill at present. I note from the previous comments that political statements and backing are really important in this industry, and making sure there is no ambiguity around the backing that the Government provide. Perhaps that leads us to a decision on who should do the designating, with Secretary of State-level backing for it. We can take further soundings from members on that.
Matthew Pennycook
Q
Tom Thackeray: I think we are comfortable that the Climate Change Committee’s analysis in the balance pathway is a reasonable assumption. We think nuclear will be a strong part of the energy mix in the years ahead. Obviously, we will need a much bigger electricity capacity up to 2050. As we learn more about the process and the cost of technology starts to drop, there might be slight adjusting of those assumptions in years ahead, but at the moment we do not diverge markedly from what the CCC has said.
Rebecca Groundwater: We are aligned with the CCC report. I have nothing further to add.
Tom Greatrex: It is important to underline that the CCC scenario is for 2035 and towards the sixth carbon budget. I think it is broadly in the right area. The 2050 net zero modelling that was published alongside the energy White Paper has a broader range to 2050. We have to bear in mind, looking beyond 2035 towards 2050 and net zero overall, that the overall proportion of our energy that will come from electricity will be high. It is reasonable to assume that we will be beyond 10 GW by 2050, although 10 GW by 2035 is probably the right ballpark figure.
Virginia Crosbie
Q
Rebecca Groundwater: I would go back to that stability and the pipeline of opportunities that are viable. The supply chain is ready and equipped with the people, skills and capability. It is world class. We have a brilliant energy sector here in the UK. In the market forces piece, it is unclear which one will take the lead out of all the technologies. It has caused uncertainty, and that is not what the supply chain needs. When we talk about the supply chain, we are talking about the breadth of it. Each organisation has different needs, but they need that investment piece; they need to know where to upskill and when; they need to know the timescales.
That is why this legislation going through quite quickly is helpful, because it showcases that decisions can be made now to drive forward investment in what is needed. That ongoing dialogue and conversation—the message, “This is serious, and we’re taking it forward,”—will give that stability and the ability to the financial markets to come in. We know they are talking about the sustainability goals and we know that parts of the supply chain are struggling with how to implement them and what that will mean for them, depending on their size. That wider conversation now needs to start to break down a little, so that we are looking at how that impacts each of the different sectors. That way, we can drive it forward and bring it all together.
Tom Greatrex: All the things you mentioned have been important, significant and welcome for the sector over the last period. This legislation is key, as I mentioned previously. As for what else we need, we know that development of the taxonomy is ongoing—the Treasury has an expert group leading on that. It is important that the taxonomy is objective and avoids some of the mess the Europe-level taxonomy has managed to get into, in terms of setting a framework for investment in infrastructure that will contribute to a low-carbon future and to net zero. The requirement will be to pace delivery of agreements, to enable projects to go forward—for example, negotiations are ongoing between EDF and Government on Sizewell C, although that goes beyond the scope of the Bill, and with others on the SMR programme; last week’s announcement was very welcome. A number of things are in the purview of Government to deliver—siting, for example. We need all those things to happen. If I were to characterise what is needed in one phrase, it would be: an appropriate sense of urgency, given the urgent situation of our current and future power mix requirements.
Tom Thackeray: I would echo many of the points the others made: detailing objective, sustainable finance taxonomy for the UK including nuclear will be really important over the next few years. More holistically, there is the extent to which the Government can build out their export and skills strategy, taking advantage of the technology developments we are making in a lot of the clean areas. I have a slight concern, not in the nuclear sector but potentially in other green economy areas, that there will be a squeeze on the labour market, with multiple industries going after the same labour pools, which will probably put a brake on our capacity. We need to think really strategically about some of that stuff.
You invited general comments about the 10-point plan. In some areas, there is a need to detail the routes to market for things like the hydrogen economy. That goes back the points the other Tom made about pace of delivery and urgency. However, having just come back from Glasgow, I think it really hit home how far advanced the UK is in some of these plans compared with others. We can always ask for more, but I think we are genuinely world leading in a lot of these areas.
Virginia Crosbie
Q
Tom Thackeray: I think it will be a huge opportunity, particularly if we generate those fleet opportunities in the year ahead. One of the great risks of not moving ahead with the RAB model straightaway is that you lose supply chain capacity, you lose innovation, and you lose the skills you have in the supply chain. There is a fantastic opportunity to build out an industrial strategy approach around the supply chain that we built up through Hinkley and will continue through Sizewell C, and to look at how we can use that in international markets as well. In addition to that, we have the exciting developments around small modular reactors, where UK-developed technology is exciting clients around the world. That will obviously be a huge part of the UK’s potential in the years ahead.
Rebecca Groundwater: I agree. I think this helps to anchor the UK as a model on which the expert piece really comes into play. We have been mapping where the proposed capacity is coming from, looking at new build projects from 2021 to 2080. With the RAB model, if this goes ahead and everything falls into place, we will be one of the top investors in nuclear. That allows us to then export that to the other countries that are coming up behind us. If you want, I can pass on the data that we have from our members on the international market piece.
Tom Greatrex: I underline the point that this mechanism will enable projects to happen. When projects happen, you have a supply chain that is engaged. Just think about some of the announcements made in the run-up to and in Glasgow over the last couple of weeks from other places—France, Canada, the USA and Japan—in terms of restarting. There is a whole load of potential opportunities there. If the UK is ahead on developing and delivering through its supply chain, those export opportunities become real. I echo the point that the other Tom made: if we leave it and do not do it, the danger is that those opportunities will be lost.
Virginia Crosbie
Q
Tom Greatrex: There is a distinction to be made between the technology. Sizewell C is obviously effectively a Franco-German technology by origin, and the amount of UK content in the supply chain at Hinkley is about 65%. That is likely to increase if Sizewell goes ahead. One of the opportunities that a RAB model opens up is interest from a greater pool of investors because of the way in which the returns will accrue. People will have mentioned, I am sure, long-term infrastructure investors, pension funds and various others, who use and have used RAB models in other infrastructure that they have been investors in, and have made it clear that they are interested in potentially doing that with nuclear. It broadens the scope of investment, which may then have some impact in terms of where some of the other financial stakeholders that you alluded to in your question are.
Rebecca Groundwater: Some of our members feel that the RAB model provides more opportunity for the UK supply chain content to increase. With investment coming in, there may be greater options for the supply chain.
Tom Thackeray: I echo the points already made, and note that we have a great history of private investment in infrastructure. Deployment of the RAB in other infrastructure assets has been hugely successful, and the examples are well known. That means that we have a mature investor base here in the UK, who are looking at other opportunities to spend their money. The opportunity to invest in environmental, social and governance is growing. Providing that opportunity in nuclear through the RAB model is a welcome next step.
The Chair
If there are no further questions from Members, I thank the witnesses for their evidence.
Examination of Witnesses
Mycle Schneider, Professor Stephen Thomas and Doug Parr gave evidence.
The Chair
Q
Mycle Schneider: Hi there. This is Mycle Schneider. I am an independent analyst and consultant on energy and nuclear policy based in Paris. I am the co-ordinator and publisher of the annual World Nuclear Industry Status Report, and it is in that capacity that Members have invited me. Thank you very much for the opportunity.
For people who are not familiar with the World Nuclear Industry Status Report, it is a multi-indicator analysis that is elaborated annually by an international team of interdisciplinary experts that I have co-ordinated since 2007. The 2021 edition had a dozen researchers from a number of quite outstanding think-tanks and research institutions, including the Harvard Kennedy School of Government, Chatham House, the Technical University of Berlin, the University of British Columbia, Nagasaki University and so on—just to give a quick overview.
The Chair
Thank you very much. We can also hear from Professor Stephen Thomas. Doug Parr will join us when he can. Professor Thomas, would you like to introduce yourself?
Professor Thomas: My name is Stephen Thomas. I am emeritus professor of energy policy at the University of Greenwich in London. For the past 40-plus years, I have been an independent energy policy analyst, first at Sussex University and more recently at Greenwich University.
Alan Brown
Q
Mycle Schneider: Thank you for the question. I believe that if we are talking about the climate change emergency, it implies two things: to be able to reduce greenhouse gas emissions as quickly as possible and at the largest rate—that is the combination of effectiveness in terms of quantity and time. If we spend, whether it is a pound, a euro or a dollar, we have to see which options give us results that are large and fast.
If we are looking to nuclear power as an option for reducing greenhouse gas emissions, it is pretty much clear today that the options that are available, whether it is efficiency or non-hydro renewables, are more climate efficient than nuclear. That is not only because, if you look at the cost estimates from institutions such as Lazard bank, about a quarter of the cost is needed to generate electricity by solar and wind, for example, compared with nuclear. It is also about five times slower to implement than other options. Again, I am referring essentially to efficiency and newer renewables. Actually, what we hear about possible investment over the longer term will, if ever, provide these services only in the longer term. That means beyond 2030, and far beyond that for some of the options we are talking about. In my opinion, that is much too slow.
The Chair
Stephen, do you have any comments on that?
Professor Thomas: Yes, I would like to pick up on the point about the need for reliable baseload plant. I can see the intuitive logic of that, but the National Grid’s scenarios—I trust the National Grid more than others on what it takes to run a reliable grid—say nothing about reliable baseload plant being needed. It has three scenarios to reach net zero by 2050, and in only one is Sizewell C required; the others do not require it. It seems entirely comfortable with the availability and cost of batteries. If National Grid does not see the need, I am not sure why I would. It is a non-sequitur that you need baseload plants.
Clearly, there is a baseload—in other words, a level of demand that we never go below—but I do not see the reason why we would need a dedicated set of plants to meet that baseload. It is like saying, if you have a factory that operates 24 hours a day, seven days a week, you need a set of workers that will work seven days a week, 24 hours a day. It is simply a non-sequitur.
Alan Brown
Q
Professor Thomas: It is not the right technology. Both renewables and nuclear power are not flexible options. Nuclear power only makes any sense—if it makes any sense at all—if it is operated round the clock, with baseload at the maximum level it can work at. If the wind is not blowing, there is nothing you can do with a nuclear power plant to fill in the gap. Clearly, whichever way you go, nuclear or renewables, you will need flexible plants, which will probably be batteries and perhaps some demand-side response, to fill in those gaps. The worst thing of all would be to mix two inflexible sources, because you will get a time when nuclear is not available and renewables are not available, and then you will be in much worse trouble.
Mycle Schneider: There is this myth about nuclear power providing electricity 24/7. We have done a very detailed analysis of the French nuclear fleet for 2019—the year before covid—and it turned out that, basically, when the operator, EDF, starts an outage for maintenance and refuelling, it entirely loses control over the date and time it restarts. There are cases where there are 40 versions for the restart date and time. That does not really indicate that this is a 24/7 electricity-generating source. On the contrary, it means that even if we stick to the example of 40 revised dates and times, five of those were in the last 24 hours of that period. So not even 24 hours ahead was it possible for EDF to predict when 1,300 MW would be available to the grid or not. On the other hand, I think the whole concept of baseload is flying out of the window. As Stephen has said, what we need is flexibility. If we build up solar and wind massively, it means that a lot of that so-called baseload is already covered by those sources. It therefore becomes a competitive environment for certain times during the year and for certain times during the day. We need to fill in the gaps.
As the court of accounts has shown in its sensitivity analysis of the costs of nuclear power, the highest sensitivity is the productivity of the nuclear power plants. If the production levels go down, you increase costs significantly. We have seen over the past few years in France, but also obviously in the UK, lower production rates and therefore increased costs. That means that these reactors have become much less reliable. We have calculated that the average increase in 2019 over the expected outage time was 44%. It can be a planned outage of a week, and it turns out to be six months. That is not an exaggeration, we have cases like that.
Alan Brown
Q
Mycle Schneider: I think I will pass that one on to my English-based colleagues who are better suited to answer.
Doug Parr: There are certainly opportunities in tidal energy, and, at a minimum, I would hope that the Government would seek to pursue them in the next renewable auction round. I think there are a variety of technologies, certainly including tidal and geothermal. In terms of the subject of the Bill, nuclear energy is seen to be always on, but the overall competition for the grid is going to be between dispatchable and available power, which ideally should be flexible as well, and the provision of storage from cheap renewable power. In that sense, we are talking about green hydrogen, alongside these other renewable sources; but in terms of my personal preference, yes, I would certainly want to see tidal as part of the mix.
Professor Thomas: We cannot prejudge whether tidal would be a useful technology until we have tried it out. We can look at nuclear and see that costs have gone up rather than down, and on the other hand we can look at offshore wind, and see that five years ago the cost was £140 a megawatt-hour and now we are down to £40 a megawatt-hour. I think it is an option that we need to test. Whether it will be a success, I do not know; we cannot judge that in advance. If it was a guaranteed certainty, I guess we would have done it, but we must try out all these options.
Dr Whitehead
Q
Mycle Schneider: Yes, I can briefly comment. I think you are referring to the V.C. Summer plant in South Carolina. It had a similar scheme to RAB, which basically allowed it to pass on cost overruns to electricity customers. Construction started in 2013. Westinghouse was the technology provider. The plants were supposed to come online in 2017. By 2017, the cost estimate had increased by 75%, and I believe that there were nine rate increases for ratepayers up to that point. Finally, in July 2017 the construction was abandoned. Obviously, this was one of the consequences of the fact that Westinghouse filed for bankruptcy, and one of the main reasons for that was the V.C. Summer AP1000 project.
It might be interesting for the Committee to spend some time studying this case because it also involved some very problematic criminal activity. The federal grand jury has charged the former senior vice-president of Westinghouse Electric Company, Jeffrey A. Benjamin, for his role in failing to report accurately the status of the construction of these nuclear sites. It is worth noting that he served as senior vice-president for new plans and major projects, and was therefore directly responsible for all new projects worldwide for Westinghouse during the period of the V.C. Summer project. He has been charged in a federal indictment with 16 felony counts,
“including conspiracy, wire fraud, securities fraud, and causing a publicly-traded company to keep a false record.”
That is a quote from the Justice Department. He is only one of four top managers who had criminal charges filed against them in this affair. The former chief executive officer of SCANA, the utility that was building the plant, pleaded guilty to federal felony charges and was sentenced to two years in jail, which will start in December. The case had major implications.
Obviously, the ratepayer is left with the ruins of concrete and steel, and with no kilowatt-hours. Apparently, reportedly this affair is not over. It has cost the ratepayers billions, and reportedly it will cost more over the 20 years to come.
The Chair
A number of Members want to ask questions, so could we keep them as short as possible?
Professor Thomas: I wanted to add that what marked out the Summer project and a similar project in Georgia from those in all other states of the United States was that they were allowed to recover money from consumers before completion of the plant. That is a central feature of the RAB proposal. The Summer experience shows clearly the folly of making consumers pay for a plant before it is complete.
We have to be careful with the idea that we need to take measures to prevent unfinished plants from being abandoned. We have a very good example in Britain in the Dungeness B plant: it took 24 years to get from start of construction to commercial operation, and over its 32 years of operating life, its availability was well below 50%. It is very clear that the plant should have been abandoned before it was completed.
The Chair
Doug, do you have any comments?
Doug Parr: I am not sure that I have much to add. I read that the Summer plant added 18% to bill payers’ bills in South Carolina at one point, which is obviously a very considerable amount. I am not saying that those numbers are translatable to the UK context. It chose to expose the consumer to those considerable risks.
The Government really need some kind of independent evidence base for their judgments if they are going to enter bilateral negotiations with a plant builder who, on the basis of the plant builder’s word, can expose consumers to very considerable risks; Dr Schneider alluded to that. We see that with the RAB mechanism, the Government have a bilateral negotiation mechanism, and those do not have a happy history in almost any sector, including for the various networks. I am not quite sure how you establish that.
One thing that has been missing from nuclear policy as it applies to renewables and other mechanisms, such as the capacity mechanism, is the element of competition. The information asymmetry is potentially very strong. It gives a lot of cards to the nuclear seller—the nuclear provider—without giving the Government any backstop with regard to understanding what is going on. When there is competition via a reverse auction of the kind that we find in renewables, you factor those risks out, but consistently over the years—decades, in fact—this kind of discipline has not been applied to nuclear policy. With the RAB-type mechanism, those risks potentially land on the bill payer, not the provider of nuclear stations.
Dr Whitehead
Q
Doug Parr: I am not sure that I am across the detail enough to give a good answer to that one, I’m afraid. I would need to come back to the Committee on that, if that is all right.
Dr Whitehead
Q
Professor Thomas: I think the problem is not the need for a special administrative regime to rescue things if it all goes badly wrong in the construction phase. I think the problem is the RAB mechanism that is putting consumers’ money at risk, and if we look at the impact assessment, we are looking at a plant that will not be completed until something like 2037 to 2041, so I will be paying into this plant for quite a long time and I probably will not live long enough to see any power from it. The special administrative regime is a way to try to solve a problem that is better solved by simply not using this RAB mechanism.
Anthony Browne
Q
Doug Parr: I do not think I have ever made any secret of the fact that there are attendant risks that come with nuclear that do not apply to other forms of zero-carbon and low-carbon generation. What I would ask, in the light of the climate crisis—it is not an insignificant challenge that you have put there—is why UK Governments of all colours have continued to emphasise nuclear policy over and above other ways of cutting emissions. For example, the last time I saw figures on Department for Business, Energy and Industrial Strategy civil servants and where they were working, there were more people working on nuclear than on renewables and clean building heat put together, so when it came to two of the big-ticket items that are going to be absolutely essential—lots of renewable power and lots of clean heat for buildings—there were fewer civil servants working on those than on nuclear.
Nuclear is a bit-part player in this. All sensible, cost-effective models show that nuclear will not be a big piece of the pie, in terms of delivering what we need to deliver, and there are considerable problems with delivering heat, as members of the Committee will know. There are some substantial issues with delivering the amount of renewable power that we need, yet what we have is a Bill for delivering nuclear, and more civil servants working on it than on other things. I emphasise that this is a distortion that has been in place over years, and it is becoming quite problematic, because every time people are working on nuclear and not working on these other things—not putting energy and money into other things—we lose our ability to deliver what we need to deliver.
Anthony Browne
Q
Mycle Schneider: The question has to be: if I spend money today, what is the most climate-effective option that is available? There is absolutely no doubt, wherever it is, that it is impossible today to build a new nuclear plant as quickly as many other options, and at a cost that is competitive. Every dollar, euro or pound put into new nuclear is making the climate crisis worse. There is no doubt about that; it is very clear. It is straightforward. Existing nuclear power plants are a bit of another story, because they are there.
Anthony Browne
Q
Mycle Schneider: That is their problem. We have a very precise view about what nuclear power has actually delivered. Nuclear power is not a new technology. It was 70 years ago that construction started on the first nuclear power reactor. We have long experience, but the strange thing is that the nuclear industry always claims a “first of its kind” situation. It is surprising because whether it is Olkiluoto—an EPR in Finland—Flamanville in France or Hinkley Point C, every time the industry claims it is the first of a kind. How many times can it do that? We see that each time, costs skyrocket and the nuclear industry does not deliver.
By the way, the nuclear industry is not delivering on existing reactors, either. It is not a coincidence that Standard and Poor’s downrated EDF Energy to junk last year. For me, as an outside observer, that is a strange situation. Basically, the business as it is run by EFD Energy is judged by the credit rating agencies as not investment grade. In fact, the EDF Group has been downgraded as well. It is still investment grade, but only because they get additional notches from extraordinary state support. The RAB scheme suggests bringing down financing costs—making borrowed money cheaper—but the way EDF runs its business is judged to be so bad by credit rating agencies that it is rated non-investment grade.
All of those things have to be taken into account, and the question for me—having listened to much of the industry’s presentations today—is about how incredibly confident it is about what it will deliver in the future, when what it has delivered in the past is way off its own targets.
Anthony Browne
You are based in Paris and 70% of France’s electricity comes from nuclear. France has consistently lower carbon dioxide emissions per capita than the UK. Presumably you agree that that is because of the size of its nuclear sector.
Mycle Schneider: Of course that is a substantial part of it, at this point. The problem is that in 2020 the production of nuclear power was the lowest it had been in 17 years, and the share of nuclear power in the French system was at its lowest since 1985. That does not sound like a very reliable source of electricity. Basically, the French reactors were down to zero production for 115 days in 2020. That means that for every two reactors you need one in reserve, because they do not generate power for a big part of the year.
Do not forget that France has created a very distorted energy system. The peak load in the winter is historically more than 100 GW, while the lowest load day is about 30 GW. To give you an idea, Germany is about 80 GW at the peak, but it has 20 million more people. France has distorted the system with electric space heating.
The nuclear sector provides just over 60 GW, and those 60 GW are never all available. So what happens in the winter is that France often imports power from Germany. As we know, quite a bit of that peak power from Germany is coal, so one has to look at the carbon footprint and not only the grand gigawatt-hour.
The Chair
Order. We are drifting a little from the scope of the Bill. Can we get back to questions that relate to the Bill, please?
Mark Jenkinson
Q
Professor Thomas: As I said, I do not think there is a case for the need for firm baseload power. If the National Grid Company does not think there is a need for it, who are we to tell it that it does not know how to operate a system reliably?
Mark Jenkinson
Q
Professor Thomas: I would trust the National Grid Company over the Climate Change Committee on matters of reliability of the grid.
Mark Jenkinson
Q
Professor Thomas: Yes, I am saying that it is wrong. If the National Grid Company does not say that there is a need for firm baseload power, I will trust it. If that means that the Climate Change Committee is wrong, so be it.
Mark Jenkinson
Q
Doug Parr: There is a difference between firm and baseload. We absolutely need firm power because there will be spells when we do not have much wind and solar. That is where there is a need for firm power, and I do not believe that anybody who thinks about it for a moment would dispute that. The question is what forms that. As I hinted earlier, on the question about where nuclear fits in the overall system to deliver a cost-effective and secure system, it is now a race between cost-effective storage of renewable power on the one hand and something like nuclear on the other. We can see that the existing deployment of green hydrogen and the money that is flowing into it will bring that cost down sharply. The Climate Change Committee has already assumed that there will be cost reductions. How fast they will go is still not certain, but we know that those costs will come down pretty quickly.
Mark Jenkinson
Q
Doug Parr: No, we are not. We are saying that there needs to be a storable medium for energy, and that is the gas that I would be talking about. There needs to be a firm dispatchable form of power, and that is what it is, because there will be times when there will be an excess of renewable power, which will be convertible. In the first instance, it will be exportable. Then it becomes importable, and usable in the form of stored energy. I take the point about what the committee says is necessary for system security, but as Steve said, the National Grid does not see that as being baseload; it is about something that can be flexible to accommodate the other aspects of the system, and it needs to be looked at as a system.
Mark Jenkinson
I just want to pick up on hydrogen specifically, because we heard that it is incredibly inefficient.
The Chair
Order. Mark, I am going to move on. There are two more people, and you have had a long time. I call Kirsty Blackman.
Kirsty Blackman (Aberdeen North) (SNP)
Q
Doug Parr: I think we need to really get a shift on with deploying renewables as fast as possible. I know it is said that we are already deploying them. Sure, but are we deploying them at the speed we need to? I think the answer is no. We need to get a move on with that. That in itself will not take up a lot of money but, as the previous conversation alluded to, there need to be alterations to the electrical system that allow that to be best accommodated. That is where some of the money goes.
We also need much greater interconnection with the continent, because that allows the flows to be balanced much more easily, and we definitely need a shedload of money going into making our buildings and appliances more efficient, because the best and most secure energy is the stuff that you do not need. Those can all be done at scale in the 2020s, so well before Sizewell will ever get going.
Professor Thomas: I do not think that you can possibly argue that nuclear is the best option to pursue. As Doug said, energy efficiency can be implemented very quickly, and it has the double pay-off that, whereas expensive new power sources will increase bills, energy efficiency measures will reduce both emissions and bills. It will have a welfare pay-off for low-income consumers as well as reducing our carbon emissions.
Mycle Schneider: Most of it has been said. We need to schedule priorities by availability and cost. The combination of time and cost together makes climate effectiveness.
Kirsty Blackman
Q
Doug Parr: I would not be, no.
Kirsty Blackman
Q
Doug Parr: Yes. I have always been very clear that there are particular hazards around new nuclear developments, whether it is waste, the terrorist threat, what to do with them or security issues. That is why I think, as a society, it is worth avoiding those hazards and, if necessary, paying a bit more. In practice, there are models out there by, for example, Imperial College that say that no more new nuclear is on the cost-effective pathway, given the cost of renewables. Theoretically, I can say that. In practice, I am not sure that is the situation we are facing.
Matthew Pennycook
Q
“to enable a final investment decision for a large-scale nuclear project in this Parliament, and the government remains in active negotiations with EDF over the Sizewell C project.”
What is your understanding of what that means and can you comment on potentially the use of that £1.7 billion as it relates to the RAB funding mechanism? It is a very different two sets of scenarios, if we are talking about whether that £1.7 billion is for a buy-out of the CGN minority stake or potentially put in as part of a pot of money alongside the funds generated from RAB.
Professor Thomas: If we go back to the 2016 agreement, CGN agreed to take a third of the Hinkley Point C project: the construction and the operation of the plant. It agreed to take 20% of the Sizewell B/C project up to final investment decision. It has an option to take 20% of the construction and operation of the plant if it goes ahead and for Bradwell, there is the 66% of CGN and 33% of EDF. EDF and CGN have spent about £0.5 billion developing the plans to the point they have reached so far. Let us say it is going to take another £0.5 billion to get to final investment decision—that is at the most. So £1.7 billion seems a bit too much for that. The wording of the £1.7 billion is very vague. Some people have assumed it will be an 8.5% stake, or whatever £1.7 billion works out as.
In terms of how you would get CGN out of Sizewell C, I think it is really dependent on what happens to Bradwell B. It is clear that CGN’s presence in the UK is for only two reasons. First, to build the Bradwell B plant, and the price for that is its involvement in Sizewell C and Hinkley Point C. The other is to get the British safety regulator’s endorsement of its technology. If it is not going to be allowed to build Bradwell B, I cannot see why on earth it would be interested in putting money into Sizewell C. It is not CGN’s technology, it would provide nothing and it would not be particularly profitable. So if Bradwell B is abandoned, the Sizewell C CGN problem will solve itself. Can you briefly repeat me the gist of the second part of your question?
Matthew Pennycook
Q
Professor Thomas: The CGN EDF consortium have spent about £0.5 billion so far, and they have some more money to spend to get to the final investment decision. They would then expect to sell that work to the company that actually builds and operates the plants, so they would get their money back. If Sizewell C goes ahead, it is sort of alone. It seems to make more sense to see it as a stake in the plant, which might encourage institutional investors to go in. If they saw Government involvement, they might think that it will probably not be allowed to collapse, but it is up to the Government to provide a bit more clarity about what they expect the £1.7 billion to do.
Alan Brown
Q
Professor Thomas: I think there is a lot of missing detail in the RAB proposal, and one of the biggest elements of missing detail is how much the surcharge for consumers will be during the construction phase. The Government have said that it will be a maximum of about £10 per year per consumer. That makes no sense, because it would yield about £6 billion. In the context of a project that the Government said would cost between £24 billion and £40 billion, plus financing costs, £6 billion is a nice little present, but it will not be much of a game-changer. We need to see much more clarity about what that cost will be, because if it is to make a big change to the cost of power from Sizewell C, it has to be quite a significant surcharge. We also need to include that in the price of power. At the moment, we are talking about £60 per megawatt-hour and completely forgetting the £6 billion, or however much it will be, that consumers will put in during the construction phase.
In terms of what happens if the plant has to close early, there is a big problem with decommissioning. Decommissioning funds work on the basis of discounted cash flow—in other words, a liability that falls due in 50 years. You have to have enough money in place now, plus the interest it would earn for 50 years, to pay off the debt. If the plant closes early, you do not earn all that income and you have to bring forward the process of decommissioning, so there will be a big hole in the decommissioning funds.
I remind members of the Committee that the decommissioning funds that we have in the UK have continually failed. Consumers have paid three or four times over, only for the money to disappear and not be available for decommissioning. Decommissioning is a very serious issue. It appears to disappear because of the belief that you can invest a sum of money at 2.5% or 3%, in real terms, for 100 years. That is not the case, I am afraid—not on the historical evidence.
Alan Brown
Q
Professor Thomas: The only people who can pay are taxpayers. If the company goes bust, unless you have powers to pursue the companies back to their parents, and the parents are still there to pay off, you will be left with the taxpayers. We are talking about a process that happens something like 100 or 120 years after the plant starts up. The chances of an entity that owns the plant at the start still being around in 120 years’ time seems to be very slight, so I do not think that you will be able to pursue companies and you will end up with taxpayers having to foot the bill, as is the case with the Magnox plants now—that is being funded entirely by taxpayers.
Alan Brown
Q
Professor Thomas: That is a fairly rash decision, to go for 60 years. There are plants that are just about reaching their 50th birthday, but a lot of plants have retired well before that, so 35 years—as for Hinkley Point—is the very maximum I would want to go to.
The Chair
Doug, did you want to come in on that?
Doug Parr: Only as a rejoinder to what Stephen said about the risk of underperformance, if not early closure. Remember that the EPR that was constructed in Taishan is offline at the moment, because of a fuel issue. It has been offline for about three months, I think, and that is only three years into its operation. Underperformance, if not early closure, is a tangible issue even with that model of reactor.
The Chair
If there are no further questions from Members, I thank the witnesses for their evidence. Thank you very much for attending. That brings us to the end of our oral evidence session today. The Committee will meet again on Thursday to begin line-by-line scrutiny of the Bill, meeting at 11.30 am in Committee Room 11.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Nuclear Energy (Financing) Bill (Third sitting)
Thursday 18th November 2021
(2 years, 5 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 November 2021 - (18 Nov 2021)
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Chair
I have a few preliminary reminders for the Committee. Please will you switch all your electronic devices to silent? No food or drink is permitted during sittings of the Committee, except for the water provided. I encourage Members to wear masks when they are not speaking. That is in line with Government guidance and that of the House of Commons Commission. Please give each other and members of staff space when seated, and when entering and leaving the room. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk.
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room and it shows how selected amendments have been grouped together for the debate—there is one change. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments do not take place in the order in which they are debated, but in the order they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which the amendment relates. Decisions on new clauses will be taken once we have completed consideration of the existing clauses of the Bill. Members wishing to press a grouped amendment or new clause to a Division should indicate when speaking to it that they wish to do so.
We will start with amendment 1 to clause 1, but first, Dr Whitehead, did you wish to talk about the change to the selection list?
Dr Alan Whitehead (Southampton, Test) (Lab)
Thank you, Ms Fovargue. It is a pleasure to serve under your chairmanship. I want to say two things before we go into detailed line-by-line discussion: one is on the order in which we are debating the Bill—clause 1, clause 2 and so on. The other is to say to the Committee before we start that Her Majesty’s Opposition voted in favour of the Bill on Second Reading and, therefore, we hope that the amendments before us will be seen and discussed in that light, which is that they seek to strengthen the Bill and to address specific concerns that we have about elements, in particular the RAB—regulated asset base—process.
The Chair
Order. This should just be about the amendments and groupings; there can be no general statements about the Bill. Is everyone content to group amendments 1 and 2 together?
Mark Jenkinson (Workington) (Con)
Ms Fovargue, I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. It is a matter of public knowledge that I worked in the nuclear industry before my election to this place.
Clause 1
Key definitions for Part 1
Matthew Pennycook (Greenwich and Woolwich) (Lab)
I beg to move amendment 1, in clause 1, page 1, line 15, at end insert—
“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”
This amendment is a definition of “foreign power” set out in amendment 2.
The Chair
With this it will be convenient to discuss amendment 2, in clause 2, page 2, line 14, at end insert—
“(c) the nuclear company is not wholly or in part owned by a foreign power.”
This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.
Matthew Pennycook
It is a pleasure to serve with you in the Chair, Ms Fovargue. The amendments you have grouped stand in my name and that of my hon. Friend the Member for Southampton, Test.
Taken together, the purpose of amendments 1 and 2 is to ensure that in enabling nuclear companies to benefit from the RAB model and for the Government thereby to bring a large-scale nuclear project to a final investment decision by the end of this Parliament, as they are committed to do, the Bill nevertheless makes it clear what kind of companies it would be inappropriate for the Secretary of State to designate for that purpose. In moving the amendment, my assumption—Government Members may correct me if I am mistaken—is that the Committee as a whole would accept that it would be inadvisable to allow some nuclear companies to own and/or operate a nuclear reactor on British soil. That is because civil nuclear power is, without question, critical national infrastructure, the compromise of which would have real implications for national security, given that any company owning and/or controlling such infrastructure would have direct access to the national grid.
Conservative Members, or indeed the Minister when he responds, may argue that the amendments are unnecessary, because no Secretary of State would choose to designate a nuclear company to benefit from the RAB model that posed any threat to national security. Yet it is precisely because previous Secretaries of State have been content to allow companies that the Opposition would argue should never have been given the opportunity to own and operate UK nuclear plants that we believe we need such additional safeguards in the Bill.
Put simply, we want to ensure that the legislation is amended so that this Government, or any future Government who might wish to use the RAB model for new nuclear, cannot make the kind of error that was without doubt made in recent years. Namely, a company owned and directly controlled by a foreign state—a state that the integrated review is clear poses a systemic challenge to our security, prosperity and values—was given the opportunity to own and access critical national infrastructure.
I will touch on the way in which the Government might, if they were minded to accept our amendments or table modified versions of their own on Report, differentiate companies owned and directly controlled by a foreign power and those in which a state merely has a majority financial stake. Before that, I will examine the error that I have mentioned and the lessons we might draw from it to improve the Bill.
On Second Reading, we made it clear that our strong view is that although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C, as the last potential nuclear project that could conceivably begin to generate by the end of the decade.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I note that the hon. Gentleman was choosing his words carefully. We all know that it is about the China General Nuclear Power Corporation; many people have concerns about its involvement in the nuclear sector, which I echo. He talked about when a state is a majority shareholder, which includes EDF in France, but surely the amendment says
“not wholly or in part”.
As France is a majority shareholder in EDF, would that not eliminate EDF from participating in the RAB exercise for Sizewell C?
Matthew Pennycook
The hon. Gentleman pre-empts what I will come on to say. We are keenly aware of the need to differentiate different types of companies, which is why, thankfully, the Chair has allowed me to group this amendment with amendment 1, which clearly defines what we mean by “owned by a foreign power”. It is not just owned by in terms of a majority stake, but directly controlled by in the way that I would argue EDF is not.
To return to the involvement of the China General Nuclear Power Corporation in UK nuclear more widely, we believe that the case of Sizewell C illustrates precisely why amendments 1 and 2 are required. Driven by an almost embarrassing enthusiasm for Chinese investment, which was shared and arguably surpassed by the coalition Government that preceded it, the Cameron Government eagerly embraced Chinese involvement in UK civil nuclear energy. As a result, Hinkley Point C, while largely financed by EDF, is underpinned by effectively foreign Government part-financing in the form of a 33.5% interest on the part of China General Nuclear Power Corporation.
When the final investment decision for Hinkley Point C was approved, associated heads of terms were agreed for CGN to take a 20% stake in Sizewell C and to secure majority ownership, complete control of planning and financing, and unfettered operation of the nuclear plant at Bradwell-on-Sea in Essex that would incorporate, subject to generic design approval, a Chinese-designed Generation III Hualong One reactor. Bradwell B was always the ultimate prize for CGN and why it was willing to take a significant stake in the Hinkley plant and a minority stake in the development work to progress Sizewell C toward a final investment decision.
As far as we can ascertain, although the present Conservative Administration have never said as much—I invite the Minister to remedy that if he wishes—there is now a general acceptance that acquiescing in the construction of a piece of critical national infrastructure at Bradwell that would be designed, planned, owned and operated by a subsidiary company of a Chinese state-owned enterprise, and, as all SOEs are in China, controlled ultimately by the Chinese Communist party, was perhaps not the wisest decision that the Cameron Government made.
Furthermore—I do not believe a Minister has said this explicitly, so I urge the Minister to provide greater clarity to the Committee when he responds—I take it as read that the present Government now take the view that such an arrangement is no longer tenable, and that it is their intention to remove the influence of the People’s Republic of China from the Sizewell C project entirely, and, should any new nuclear view on that project prove necessary, the future UK nuclear programme more widely.
The press release accompanying the publication of the Bill stated:
“The RAB model will reduce the UK’s reliance on overseas developers for financing new nuclear projects”.
The Committee will appreciate that that statement is not a clear declaration of intent when it comes to rolling out foreign Government part-financing, ownership and control of civil nuclear power in this country. If it is the Government’s intention to end foreign Government part-financing and ownership of new nuclear projects, the Committee should be told what that means in practice for the October 2016 Sizewell C strategic investment agreement, as well as what the Government’s reneging on that deal would mean for CGN’s 33.5% stake in Hinkley Point C. More specifically, it is right that the Committee is also given a sense of how, assuming it has been determined, the Government intend to remove the CGN minority stake from the Sizewell C company, or, if it has not, the various options being considered.
That brings me to the £1.7 billion committed to nuclear in the recent Budget, the purpose of which, according to the Red Book, is
“to enable a final investment decision for a large-scale nuclear project in this Parliament”—
the very same intention that we are told is the purpose of the Bill. As I am sure Members will appreciate, that statement contained in the Red Book is wilfully obscure. Given that Sizewell C is, as I have said, the last potential nuclear project that could conceivably begin to generate by the end of this decade, and the fact that this Bill creates the funding model that will almost certainly enable a final investment decision on it to be made, the Minister needs to be more transparent with the Committee about the future of the CGN minority stake, because the answer could have real implications for the applicability of the funding model set out in this legislation, and, as a result, the bills that consumers in all our constituencies will pay in the years ahead.
We heard from Professor Stephen Thomas in our evidence session on Tuesday that the cost of buying out the CGN minority stake in Sizewell C is likely to be a tiny fraction of the £1.7 billion allocated to nuclear in the Budget, so what will the rest of that public funding be used for? Will it in whole or in part be used to finance Sizewell C beyond financial closure? If so, how do the Government intend to require the consortium to allow them to participate, and will the investment of direct public funding, if made, have any impact on the amount of RAB financing that will be required for Sizewell C to proceed?
Whatever the £1.7 billion committed to in the Budget is ultimately used for, the involvement of CGN in UK nuclear power over recent years illustrates the risks associated with foreign states, particularly ones of an authoritarian nature, financing and operating critical national infrastructure. We should not only learn the lessons of that, but ensure that clauses 1 and 2 are tightened so that the Bill cannot be used to facilitate such involvement in the future. That is the purpose of amendments 1 and 2. Taken together—this follows on from the point made in the intervention earlier—they would ensure that the Secretary of State cannot designate a given company to benefit from the RAB model provided for in the Bill if the company in question was owned and directly controlled by a foreign power. Their combined effect would not be to prevent the coming together of consortia that are not UK majority-owned. That would almost certainly render future projects unviable or more costly, but the amendments’ incorporation in the Bill would ensure that consortia drawing upon the RAB model could not include investors owned and controlled by a foreign state.
The use of the word “controlled”, as per amendment 1, is critical. This follows on from the point I made in response to the hon. Member for Kilmarnock and Loudoun. We are acutely aware that in attempting to amend the Bill to prevent a company such as CGN from benefiting from the RAB model, we would not wish to prevent all companies in which states have a majority interest—EDF is the most obvious example—from doing so. That is why amendment 1 specifically defines “owned by a foreign power” as one owned and controlled by a foreign state.
I hope the Minister responds to the amendments in the constructive spirit in which they have been tabled and that the Government will see the value of incorporating them into the legislation.
Alan Brown
It is a pleasure to serve under your chairwomanship, Ms Fovargue. In my intervention, I wondered if the amendments would technically preclude EDF under the RAB scheme. I hoped that the amendments were a stalking horse for Labour to come round to our way of thinking regarding a new nuclear power station, but unfortunately, that does not seem to be the case.
That said, I support the amendments. It is crazy that decisions have not been made before now about excluding China General Nuclear from critical infrastructure. The UK Government probably acted on the back of the United States’s actions to remove Huawei from critical telecoms infrastructure, so it makes no sense that a Chinese state-operated nuclear company is allowed to participate and invest in and possibly, if it gets its way, construct a new power station at Bradwell. That makes no sense. I would like to hear what the Minister has say about that. In principle, I support the amendments, although, ideally, I would rather we were not doing new nuclear.
Dr Whitehead
Continuing briefly from my initial remarks, I want to make it clear that the amendments—and all our other amendments—are based on the idea that the Bill should be strengthened, not subverted in any way. I can assure the Committee that the hon. Member for Kilmarnock and Loudoun’s hope that these two amendments are a stalking horse to remove EDF from the project is certainly not the intention. The intention is precisely to ensure that the nuclear programme in this country is sound, robust and integral to our security in all senses of the word.
We do not think the amendments will do anything other than put us in a much better position to ensure that the financing of nuclear is done on a clearer footing and on the basis that we know who is putting money into the project, in this instance Sizewell C. I concur with my hon. Friend the Member for Greenwich and Woolwich that effectively the Bill is pretty much about how Sizewell C gets going, comes to financial closure and gets into its construction period so that it produces electricity in good time for the grid.
It is important that the Committee thinks carefully right at the beginning of its proceedings about how we want to framework that nuclear financing; how we want to framework the arrangements which, after all, will be the umbrella under which we have all our other discussions in Committee. The framework that we have at the moment, particularly for Sizewell C, as my hon. Friend has set out, is a sequence of memorandums and a number of things further to memorandums, which appear to lock our nuclear development into an arrangement with the Chinese General Nuclear Power Corporation, which is very much an instrument of the Chinese state. Although companies have been set up—set up for the purpose of engaging in Hinkley—with one nominated director, given who those nominated directors are and how they go back to China it is very clear that those companies are centrally state-controlled, and are state-controlled vehicles for investment—just as we have stated in our amendment—for the promotion of that particular foreign power’s interests, in this instance in nuclear power.
Given those interests in nuclear power, it is important that we do not lose sight of the overall scheme of things in considering investment or otherwise in Sizewell C. It is important to understand that the deals, as it were, that were made between 2013 and 2016 were very much about that sequence of events leading from investment in a power station with a minority stake, with a reactor that would be built in France, within a framework of a company controlling that, that is a private company but has substantial state connections, but nevertheless is a very different model from what we are faced with regarding the CGN investment.
So there has been a sequence of events that starts with Hinkley C, with a minority stake, a French reactor and a French company with its own investment in the majority of the plant, and then a contract for difference at the end of it for production, moving to the second event in the sequence, which was envisaged at that time to be Sizewell C, with an undefined arrangement at the time for investment elsewhere in the plant, but a clear stake in that plant, beyond financial closure, of the Chinese General Nuclear Power Corporation, coming to 20%. And then would come the prize at the end of the sequence—certainly the prize for the Chinese Government—of the entry into European nuclear development for the first time of a Chinese reactor, the Hualong One. That would be the basis of a Bradwell nuclear plant. That reactor would separately go through a generic commissioning process; the initial moves towards that are being made. That reactor would then be at the core of the Bradwell plant, and Bradwell would be majority-owned, run, controlled and operated by the Chinese state nuclear corporation.
So, leading down the path of that sequence, Sizewell C being a stopping-post in that sequence and the end of it being Bradwell, is obviously the nuclear project that we are discussing at the moment. Therefore, the part-ownership of the nuclear company must be seen as integral to that overall process and that overall agreement; and if we do nothing and say nothing about that involvement, we are effectively condoning that whole sequence of agreements.
Those agreements were initially made in the form of a memorandum of understanding on civil nuclear collaboration in 2013, and effectively those stakes that I mentioned were set out then. George Osborne, the then Chancellor, stated that Chinese companies were taking a stake, including potential future majority stakes, in the development of the next generation of British nuclear power. So, it was pretty explicit, certainly from the UK Government side, what they thought that sequence was going to be about, and it was actually pretty similar to the idea that the Chinese had, as far as their involvement in nuclear was concerned.
That was followed, during Chinese President Xi Jinping’s state visit to the UK in 2015, by a “Statement of Cooperation in the Field of Civil Nuclear Energy”, which welcomed the minority investment and the proposal for a Chinese-led project at Bradwell B in Essex. What is less well known is that that was followed by a very lengthy document, “Secretary of State Investor Agreement”, which was primarily about investment by a number of parties, including CGN, in Hinkley but which also related to the whole sequence. It is arguable, therefore, that there is a substantial lock-on of Chinese involvement not just in 20% of Sizewell but in the whole sequence, as laid out in the various memorandums of understanding and the investment agreements undertaken between 2013 and 2016.
The question is: what are we going to do about it? The proposal is for a RAB scheme to cover the project’s investment costs. A decision will have to be made about how the RAB scheme will work and we will discuss the detail later, including how Ofgem will set out the allowable costs that form the backbone of a RAB agreement. Ofgem will have to assess the overall allowable ceiling for the project costs, particularly in its construction phase but also during its production phase. That will form the basis on which the money to meet those costs will be taken in from the general bill-paying public. The ceiling for those allowable costs will be determined to a considerable extent by how much investment is likely to be required and, therefore, how much of it will have to be underpinned by the RAB arrangement at the Sizewell plant. If a substantial part of the plant is to be financed by the China General Nuclear Power Corporation, then logically the allowable costs would relate to the rest of the required investment, rather than all of it. Crucially, the decisions and discussions that this Committee is going to enter into will be determined by what that 20% consists of.
The Red Book offers a tantalising clue as to what that might be. As my hon. Friend the Member for Greenwich and Woolwich said, a total of three lines focus on the £1.7 billion of new direct Government funding being made available, essentially for the Sizewell C project. He said that the Red Book is possibly wilfully obscure; it is certainly obscure, and for a number of reasons. All the Budget and spending review document has to say about the £1.7 billion Government funding is that it is being provided
“to take a final investment decision this Parliament, subject to value for money and approvals.”
The Chair
Order. We will suspend for a few seconds to enable the sitting to be broadcast more clearly.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
Thank you, Ms Fovargue. It is a pleasure to serve under your chairmanship. I look forward to working with Committee members as we scrutinise this important and timely Bill. To begin, I want to briefly remind Members of the purpose and background of the Bill.
As all Members will agree, it is vital that the UK continues to lead the world in tackling climate change. That is why we have committed to a 78% reduction in emissions compared with 1990, as well as fully decarbonising our power sector by the year 2035, which will mean ensuring that the UK is entirely powered by low-carbon electricity, subject to security of supply. To deliver that, we will need new nuclear power plants, which are the only proven technology deployed at scale to provide continuous, reliable, low-carbon electricity.
Alan Brown
The Bill is mainly about Sizewell C. Can the Minister tell me where any European pressurised reactor is operating at scale connected to the grid at this moment in time? He is talking about proven technology.
Greg Hands
I am speaking in a general sense about nuclear being a proven technology, deployed at scale. That has been the case since 1957 or ’56, with the very first nuclear power plant in the world here in the United Kingdom at Calder Hall just by Windscale.
However, it is clear that we need a new funding model to support the financing of large-scale and advanced nuclear technologies. The Bill will deliver that, in the form of the regulated asset base model. I am sure the Committee will discuss the detail throughout our sittings, so I do not intend to go into the minutiae now, but I want to outline the Government’s position that this is the best way of delivering new nuclear projects while delivering value for consumers.
I am glad that the Opposition recognised that point through their support for the Bill on Second Reading. That support has been reiterated today by Her Majesty’s official Opposition, if not by the Scottish National party. I am grateful for their useful contributions on Second Reading and look forward to further discussions in Committee. Similarly, I recognise the interesting points raised by the SNP in that debate. I recognise that the SNP has a principled—if, in my view, irrational—objection to new nuclear projects. Nevertheless, I am pleased to subject the Bill to the SNP’s careful scrutiny as well.
I hope that as we move through Committee and the rest of proceedings on the Bill, we can work in collegiate and co-operative ways, considering the individual clauses of the Bill to ensure that it can meet its objectives. I think that was the position laid out by Her Majesty’s loyal Opposition at the start of the debate.
I turn to amendment 1, tabled by the hon. Members for Southampton, Test and for Greenwich and Woolwich. It is linked to amendment 2 to clause 2, and I am happy to debate both together. The amendments seek to insert as a criteria for designation that the company is not wholly or partially owned by a foreign country. I want to touch briefly on the implications that the proposed definition could have for the wider policy of financing nuclear projects in this country.
If the definition as drafted could rule in all companies that were seen to be controlled by state sponsors, it could thereby rule them out of eligibility for a RAB. The RAB allows us to bring new sources of financing into nuclear projects and reduce our reliance on overseas developers, but it is not credible to introduce a blanket exclusion on developer participation in RAB companies, many of whom are to some degree state-sponsored, including some of our closest international partners. One has already been named during proceedings on the Bill and in Committee this morning.
I am sure that the intention of the hon. Members does not lie in that direction, as that could make it much harder to bring new, appropriate projects to fruition. We should never forget that the Bill’s purpose is to make it more possible to finance nuclear projects in the future, not less so. However, I welcome the focus on national security in one of the UK’s key infrastructure networks, a point made by Her Majesty’s Opposition. We will no doubt focus on that matter fully in our consideration of all the amendments.
I will take the points raised in turn. The hon. Members for Southampton, Test and for Greenwich and Woolwich both asked what the £1.7 billion in the Budget and spending review is made up of. We had an extensive debate on the Budget—I think it was four days in all—and there was a chance to examine this, but I will now reiterate the purpose of the money.
Alan Brown
The Minister will have noticed in the evidence session on Tuesday when I put the question to the Sizewell C company about the derivation of the £1.7 billion and what discussions the company had had with the Government about that, the lady did not seem to know, or to believe there had been discussions with the Govt. How does this £1.7 billion get defined if the Sizewell C company does not know its derivation?
Greg Hands
To be fair, I also listened carefully to Sizewell C’s evidence, and the company will be as aware as we are that this is an active negotiation. I was not in any way surprised that Sizewell C’s representative did not wish to be drawn on the question of exactly where the £1.7 billion would be deployed. We have outlined in the Budget document the sorts of areas that would be in scope. None the less, this is an active financial negotiation.
Dr Whitehead
Does that mean that the evidence that was given to us in our session with Sizewell C was not correct, or was ill-informed? Or was it informed, but matters have moved on since then? Or was it—
Dr Whitehead
Was it, indeed, as the hon. Member for Bolsover suggests from a sedentary position, diplomatic? If so, was that diplomatic answer given after any sort of instigation from the Government, or was it just diplomatic on the basis that Sizewell C did not want to tell us?
Greg Hands
I do not think the hon. Gentleman is correct. It is not fair to conclude that the evidence from Sizewell C was incorrect, or that it was ill-informed in any other way. This is an active commercial negotiation. We have laid out the parameters of the £1.7 billion, and is in no way surprising that our negotiation partners may not wish to comment on what they think it is likely to be spent on. After all, it is taxpayers’ money, which will be deployed by this Government to move forward a nuclear project.
Alan Brown
The Minister made a key point: this is taxpayers’ money. Surely, we as taxpayers have a right to know, even roughly, what services will be procured from this £1.7 billion. I would still expect the Sizewell C company to have discussions with the Government and say, “We need to do x, y and z in order to de-risk this project and get it to the final investment decision stage”.
Greg Hands
I would say two things in response. First, Sizewell C may not feel it is appropriate to comment on the deployment of taxpayers’ money. Secondly, I know from long experience of Government that often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking. We have laid out in the Budget document, which was quoted by the hon. Member for Southampton, Test, what we think is going to be in scope—what the £1.7 billion might be spent on.
The hon. Member for Greenwich and Woolwich asked a more general question about China. He asked whether this was about sending a message to China, or words to that effect. The answer is no. The UK welcomes foreign investment in our infrastructure, but as we have always said, that should not come at the expense of our national security. It is already the case in UK law that all investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. The National Security and Investment Act 2021 also strengthens our powers to act should we need to.
Matthew Pennycook
I take the point about the National Security and Investment Act. The Minister will know that that was given Royal Assent only in 2021. The strategic investment agreement that applies to Sizewell C was signed off—agreed—in October 2016. I think that I am right in saying that the National Security and Investment Act does not apply retrospectively, so how does it cover the specific arrangements in place as a result of that deal? Can he expand on what regulation is in force to give us assurance about safeguards in relation to foreign states and investment in civil nuclear?
Greg Hands
I thank the hon. Gentleman for that intervention. Of course, the final investment decision has not yet been taken on Sizewell C. All the relevant parts of the NSI Act will be in place—he is right to say that it got Royal Assent this year—but that final decision has yet to be taken.
The hon. Gentleman asked about Chinese involvement at Hinkley. May I be absolutely clear? The Bill is not reopening that decision. Hinkley Point C is vital to reducing our reliance on fossil fuels and exposure to volatile global gas prices. CGN is a partner in financing and building that important project. There is no involvement by any Chinese company in any major contract at Hinkley, including the instrument and control system.
As for Sizewell, to be clear, this Bill does not determine the ownership structure of Sizewell C or any other future nuclear project. That is another really important point to understand about the Bill. The Bill increases our options for financing nuclear projects, ending our reliance on overseas developers for finance—we are not excluding overseas developers—which has led to the cancellation of other nuclear projects in the UK. It will ensure that our own new nuclear power plants can be financed by, for example, British pension funds and institutional investors—often from our closest partners. That is the purpose of it.
Matthew Pennycook
I would like to pick up and press the Minister on the thrust of amendments 2 and 1, which is a consequential amendment. I take what he is saying about the purpose of the Bill being to attract, potentially, more UK investment—we do not know how much, but potentially—and about not wishing to exclude foreign investment. I take the point that he made earlier about the language used in our amendments and how he sees it as meaning a blanket ban. I would argue that it does not have that intent. There are complexities here, but does he not differentiate in his own mind between state-sponsored companies and state-controlled companies—controlled by foreign powers—that his own Government say pose a systemic challenge, and if he does, why does he not think that it is worth putting this in the Bill? Surely there is a need to differentiate and ensure that those types of companies—the latter—are not able to access RAB funding.
Greg Hands
I thank the hon. Gentleman for that intervention. Looking at the amendments, amendment 2 states that
“the nuclear company is not wholly or in part owned by a foreign power”
and amendment 1 states that owned by a foreign power means
“owned by a company controlled by a foreign state and operating for investment purposes.”
To be frank, I have a different interpretation, or at least I am not fully seeing his interpretation as being what he has in the amendment. The amendment strikes me as being worded in such a way that it could, for example, include nuclear operators from some of our closest partners. I look at what I see in front of me, rather than necessarily what Her Majesty’s loyal Opposition say that something might mean.
Matthew Pennycook
If the Minister is unhappy with our language, will he undertake to introduce Government language on Report that satisfies that differentiation?
Greg Hands
As I have made clear, we think that the Bill adequately addresses these issues, particularly in combination with the National Security and Investment Act, so I do not see it as necessary for us to make any further clarification. Ultimately, the Bill is about bringing in more financial options for future nuclear power, not cutting them.
The hon. Member asked about Bradwell. To reiterate, that is not a decision for now. CGN does not have regulatory approval for its reactor, nor has it submitted any applications to build a nuclear plant in Essex. We are in negotiations for Sizewell C, as the most advanced nuclear project in the UK.
Dr Whitehead
I am afraid the Minister cannot have it both ways. Either the Bill is about financing Sizewell C or it is about financing nuclear power more generally, in which case Bradwell surely has to come into the equation. We could be committing today to a RAB model that could, in principle, help to fund Bradwell, if it goes ahead. It is part of the linked sequence that has already been agreed in heads of terms by the UK Government and the Chinese Government, effectively. He says that it is not a discussion for today, but that is true only if the Bill is just about Sizewell C, in which case his statement that the Bill is potentially about other things is not correct. Which is it?
Although the Bill is effectively about financing Sizewell C, it has implications elsewhere. The Minister says that it is not relevant because the Hualong reactor does not yet have generic approval. That is not a question of making a decision about the involvement of foreign powers or anything like that; whether the reactor gets generic approval for use in UK nuclear markets is just a technical issue. I presume that he would want the nuclear authority to take that line and to give approval, or not, on the technical merits of the Hualong reactor, not on who is running it. That is the issue, however, concerning Bradwell. It has nothing to do with generic commissioning or otherwise; it is a much bigger issue, and he needs to recognise that.
Greg Hands
The hon. Member is correct that this is about future nuclear projects, but I stress two things. The original question from the hon. Member for Greenwich and Woolwich was about the future of Bradwell. I am reflecting on the specifics in relation to Bradwell. Of course, nuclear projects going forward are what the Bill is all about, but I will not comment on specific projects potentially going into a RAB process, because that, as we will discover later, is a properly defined process, set out with approvals from the Secretary of State after consultations. The Secretary of State will make essentially two determinations: will the project provide value for money, and is it sufficiently advanced? It would not be proper to comment on whether a specific project that we discuss today will have the ability in future to meet the two most important criteria laid out in the Bill.
Let me say a few extra things about amendment 2. The legislation gives the Secretary of State the power to designate a nuclear company and to modify the company’s licence subsequently to include RAB conditions. The Bill requires the Secretary of State to consider the two criteria that I just mentioned when deciding whether to designate a nuclear project. The two criteria are that the development of a project is sufficiently advanced to justify the designation and that the project is likely to result in value for money.
The amendments seek to include additional criteria for the Secretary of State to consider before designating a project. As I said, amendment 2 requires that a nuclear company may not be owned by a foreign power. I have already raised concerns about the unintended consequences of that for our ability to pursue new nuclear projects in this country.
Matthew Pennycook
The Minister is being incredibly generous in giving way, which I appreciate. On the basis of what he just said, could CGN continue to be involved in a future project as long as those two criteria were met for that project, whatever it might be?
Greg Hands
The National Security and Investment Act is also involved, so I do not think it would be appropriate for me to prejudge that process. I would ask whether the project is at a sufficiently advanced stage, whether it is likely to result in value for money and also whether it fulfils the other criteria set out in the Government’s current legislative approach.
I will not go over the consequences again. It is enough to say that I think the amendments could threaten our ability to bring forward new nuclear projects, even with our closest international partners. I nevertheless appreciate the attention paid by Opposition Members to the protection of the UK’s core infrastructure; we are wholly aligned on its importance and centrality. Although we welcome inward investment to the UK civil nuclear sector, we recognise the need to ensure that that investment is subject to appropriate scrutiny and is in the interests of our national security.
To reassure Members, I will focus on the robust protections that we have in place to control who invests in our critical infrastructure, which gets to the heart of many of the interventions by Opposition Members. Under the National Security and Investment Act, the Government will have significant oversight of acquisitions of control in a nuclear project.
Significantly, the Government will be able to intervene in any qualifying transaction, including an acquisition that would take the holdings to 25% or more of the shares or votes in an entity, or an acquisition of material influence over an entity. Such qualifying transactions would be subject to a national security assessment and would require the approval of the Secretary of State for Business, Energy and Industrial Strategy to proceed. That is a very tough condition on the sort of involvement that is at the heart of the interventions made by Opposition Members.
The Act also provides the Government with the ability to call in any acquisitions for assessment if there are national security concerns. From that assessment, the Secretary of State can order the prevention or alteration of the acquisition. The final funding model of any nuclear project would also be subject to full scrutiny from the UK Government prior to a final investment decision.
As currently drafted, both amendments would appear to violate the commitments we made in article 129 of the trade and co-operation agreement with the European Union, in which we agreed that we would treat investors from the EU no less favourably than UK investors. There may be multiple views within the Committee about that agreement with the European Union—the hon. Member for Kilmarnock and Loudoun voted against it in the hope of no deal—but those of us who support it believe that that article is important. The discrimination that the amendment appears to propose towards some of our closest partners and operatives in the nuclear sector would therefore be undesirable policy-wise and could put us in a difficult position.
I hope that I have convinced Members that the Government take seriously the need to ensure the security of our nuclear energy assets, including who can invest in them, and that the amendments as currently drafted are not workable. I ask the hon. Member for Greenwich and Woolwich to withdraw the amendment.
Matthew Pennycook
I thank the Minister for his response. I also very much welcome his opining on the sanctity of the UK-EU trade and co-operation agreement—a refreshing change.
I agree with the Minister entirely that we are aligned on the importance of national security in our critical national infrastructure, but I am afraid he has not done enough to reassure me. From the argument he made, as long as the two criteria that he spoke to are met, it seems that we could still end up, having passed the Bill, with financing from companies such as China General Nuclear in future UK nuclear projects. Also—this is critical—because of the sequencing agreement that has been spoken about at length and has been agreed already, that would allow China in theory to own, plan, finance and operate a site at Bradwell. We might have not only CGN financing involved, but CGN operation.
I remain unconvinced by what the Minister said about the national security regulation that is in place. In essence, he said, “Trust the Secretary of State when the point of decision comes”, but we do not think that that is enough. We think this should be in the Bill. If he is unhappy with the wording of the amendment, I invite him to propose wording more appropriate to his mind, but that does the job. We will therefore press amendment 2 to a Division—not amendment 1, which is definitional in nature and consequential. I beg to ask leave to withdraw that amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Greg Hands
I think we have already had the debate, but I will say briefly that the clause defines the key terms referred to in part 1 of the Bill. Subsection (2) defines a “nuclear company” as one that holds an electricity generation licence granted by the authority for a nuclear energy generation project. The authority is the Gas and Electricity Markets Authority, the governing body of Ofgem.
The clause goes on to make a distinction between an ordinary licensed company and one that has been designated by the Secretary of State to benefit from a RAB through having its licence modified by the Secretary of State. Subsection (4) defines a “relevant licensee nuclear company”. To become one such, it is necessary for the company to have had its licence modified by the Secretary of State to insert RAB special conditions and to amend the licence terms. It is also necessary for the company to have entered into a revenue collection contract with a revenue collection counterparty, so that RAB funding may flow to the company’s project.
Alan Brown
I appreciate that the Minister has been generous with his time. Will he clarify whether Sizewell C has an electricity generation licence? I could not find that on Ofgem’s website.
Greg Hands
I will write to the hon. Gentleman on that specific issue, perhaps this afternoon. I need to check whether Sizewell C has such a licence. I will get back to him.
Those steps in the clause are necessary to make clear the different stages that a company goes through under the RAB model.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Designation of nuclear company
Amendment proposed: 2, in clause 2, page 2, line 14, at end insert—
“(c) the nuclear company is not wholly or in part owned by a foreign power.”—(Matthew Pennycook.)
This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.
Dr Whitehead
I beg to move amendment 3, in clause 2, page 2, line 14, at end insert—
“(c) the Secretary of State is of the opinion that the nuclear company is able to complete the nuclear project.”
This amendment requires the Secretary of State to give a view that a designated nuclear company is able to complete the project for which it is designated.
I am grateful to you, Ms Fovargue, for grouping amendment 3 on its own so that we can talk about it in its own right. Like the previous amendment, it seeks to add into the clause the designation of a nuclear company. We have not talked about the designation process, although I am sure we will.
The designation process is where a nuclear company that appears to have an interest in a plant, and has at least taken some steps to develop it beyond the conceptual state, is then given a preferential initial contract and a window—again, we will discuss the timescale of the window later—where it goes through the various processes of modifications of its licence to set itself up to take part in a RAB. It agrees to various things relating to the counterparty in the RAB process and agrees the initial ceiling for allowable costs for the project, which it has at the time of designation brought to a position where work can start to proceed. It is therefore on a track, but not in the RAB process at that point.
We attempted to put a third designation criterion in the clause a moment ago, which states that the designation criteria are that
“the development of the nuclear project is sufficiently advanced to justify the designation of the nuclear company”.
In other words, the project is more than just a drawing board idea. As I am sure the Minister will be painfully aware, we have had a plethora of nuclear projects in this country at various stages of advancement that have fallen by the wayside for various reasons. Some of them were relatively advanced and some were just concepts, but they were all reflected in the original planning documentation in, I think, 2011 in terms of consortia and sites and various other things that were given an overall green light in the planning process. The sites were not designated in the sense we are considering here, for nuclear development, but it is certainly true that a number of the projects suggested for those sites would not have passed the designation test before us today on the work having been done to advance the project.
Alan Brown
I understand where the hon. Gentleman is going, but where is the fall-back?. The Secretary of State is desperate to get a nuclear deal signed off, so he just signs it off: “Yes, I am of the opinion that this project will be completed.” Ten years down the line, it all falls apart and the project cannot be completed, a bit like the Californian example. What protection would the amendment introduce? It seems that the Secretary of State can just sign this off based on his opinion. If there are repercussions down the line, they do not come back on that Secretary of State.
Dr Whitehead
The hon. Member makes an important point, at least part of which we will discuss when we come to the procedures under which a potentially failed project might be rescued or transferred to other undertakings so that it can be delivered and completed, or if already operating, can continue to operate.
Dr Jamie Wallis (Bridgend) (Con)
In what circumstances is it conceivable that a nuclear project would be deemed not to have a realistic prospect of completion but at the same time to be value for money?
Dr Whitehead
It is quite possible that the Secretary of State could deem the first two criteria on the basis of work that the company had done to approach designation. However, unless the Secretary of State has in mind the whole picture at the point of designation—in the previous group of amendments, we touched on some of the things concerning the whole picture—it would be possible for him to conclude that, yes, on the basis of the work done so far, the particular mechanisms looked like they might produce, say, value-for-money electricity at a rate per kilowatt-hour that was compatible with market levels of electricity at that point or in the future or with value for money as far as other electricity production is concerned, but he might still not have a handle on whether the undertaking that the nuclear company was about to engage in was sound in the overall, as far as completion was concerned.
The hon. Member for Kilmarnock and Loudoun touched on an important lesson in that respect, which ought to be put before the Committee. He mentioned a case in California—it was not quite in California; it was a little way a way, although it began with the same letter. I am talking about the experience of a nuclear power plant in South Carolina in the United States. When I say the experience of a nuclear power plant in South Carolina, I do not mean that—because there is no nuclear plant in South Carolina; there are a bunch of a concrete foundings, walls and various other things that look like a nuclear power station, but it does not operate, it has never produced a single kilowatt of electricity and it remains abandoned.
More significantly, that project not only was abandoned but was commissioned precisely on the sort of criteria that are contained in the Bill. All those things were gone through by the South Carolina legislature, which put in place something remarkably similar to a RAB. Indeed, the bill payers of South Carolina were required to stump up money for the project as it progressed, and I am sure hon. Members will be interested to know just how much money went from the bill payers of South Carolina to that project and how much they got out of it as a result of introducing a RAB model in South Carolina. The answer is nothing. Some £9 billion of customers’ money went into the project, and they will continue to pay for that lump of concrete for the next 20 years in their bills because of the way in which the thing was constructed, all on the basis of agreements that looked pretty similar to what is in the Bill.
What South Carolina did not do was ask serious questions about the resilience of the various partners and companies involved in the project in the light of changing circumstances in terms of the construction of the project and the health of the companies involved. Among other things, costs went through the roof, the timescale increased substantially and one of the companies that was in charge of the project effectively went bust—it called for chapter 11 protection and was therefore unable to continue with the project. All those things could have been foreseen by the South Carolina legislature, but were not. The project went ahead, with the customers footing the bill, as various reviews subsequent to the collapse of the nuclear programme said, on the basis of something that was extremely unlikely to ever come to fruition as a nuclear power plant, not only because of the dodgy nature of the financing of the project but because it had completely unrealistic timescales—those involved expected to produce electricity within six years from the start of production and so on, none of which was properly overseen.
Alan Brown
I appreciate the hon. Gentleman giving way once more; I am starting to feel like I am on a mission to annoy each contributor—apologies. He makes valid points, and I understand his concerns and what he is trying to do, but I still do not understand how the amendment would preclude such a scenario. Surely, as well as the amendment, the Secretary of State would need to look at a list of criteria, with their sign-off verifying what factors have been considered to reach the opinion that the project is viable. Otherwise, the Secretary of State could just say, “I think this project will be completed—let’s move on.”
Dr Whitehead
Yes, indeed. The hon. Gentleman is right, to the extent that the amendment does not actually guarantee the success of a project as a result of its placement in the designation clauses. Of course, it is not possible to do that, because changing circumstances can mean that projects cannot come to fruition. The difference the amendment would make is that the Secretary of State would be required to look at all those sorts of things in the overall scheme of things as far as the company and the prospects for success of a particular project are concerned, in such a way that he could form an opinion, which he would undoubtedly have to publish, that he was as satisfied as he could be, having done all that work, that the project had a very high prospect of being completed, and he would have to underwrite that.
One thing I did not say about the South Carolina project is that a lot of it is now the subject of legal action, and various state officials are being hauled up before the courts for their lack of diligence in actually looking at the overall circumstances of the project when they gave the go-ahead on a similar basis to that which we are discussing. If the Secretary of State had to sign off, on the basis of the amendment being in the Bill, that it was all okay and could go ahead, and it turned out that it was not okay and could not go ahead, under circumstances that could have been foreseen, he would then be liable. That is potentially quite an important concentration of the mind, ensuring that the work had been done, as much as it could be done—I accept that it would not be a perfect operation—to ensure that there was a reasonable or good prospect that the company involved could complete the project. That is all the amendment says. It would be an important addition to the designation process.
We need to be clear that, as much as we can do the work, we have done the work in getting the designation clearly marked on the basis that the company really can deliver a nuclear plant and produce electricity for customers. As I have said, we are engaged in a RAB process, which ultimately lands on the customers. We absolutely do not want to ever land the customers of the United Kingdom in the same position that the customers of South Carolina are in today, so far as a nuclear power plant is concerned.
Ordered, That the debate be now adjourned.—(Mark Fletcher.)
Nuclear Energy (Financing) Bill (Fourth sitting)
Thursday 18th November 2021
(2 years, 5 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 November 2021 - (18 Nov 2021)
The Committee divided: - Ayes: 5 / Noes: 7 - Question accordingly negatived.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
Welcome back to the Chair, Ms Fovargue.
I believe that the intent of the amendment is already captured in the approvals framework for the regulated asset base. That includes the process for designating a project and then modifying its licence, and wider due diligence on the project. The Government simply would not allow a company to enter into a RAB revenue collection contract if there were cause to doubt the ability of the company to complete construction, a point made slightly more pithily by my hon. Friend the Member for Bridgend in his intervention on the shadow Minister, the hon. Member for Southampton, Test. We expect to say more about how the Secretary of State will make this judgment in our statement on the designation criteria, which we will publish in advance of any consultation on designation.
Before considering the matter of licences, let me return to the question asked earlier by the hon. Member for Kilmarnock and Loudoun. Sizewell C does have a licence, as within the terms of clause 1(2). He said that he could not find the link to the licence on the Ofgem website, so I will commit to write to him, copied to the Committee, with that link.
Designation is very much the first step in the process of amending a developer’s licence to include the RAB conditions. At the point of designation, no commitments have been made; a project will be under development, and further negotiation is required between the developer and the Government. The process is open and transparent and includes consultation at several stages, meaning that a project will be designated only at an appropriate point.
Let me deal with the points raised about various RAB projects in the United States. It is not unreasonable to look at foreign experiences, but it is important to separate the experience of another country in developing and delivering a nuclear power plant from what part of that experience was due to a RAB model. There were several unique circumstances linked to the failure of the South Carolina Virgil C. Summer project, which was referred to, and the parent company, including—[Interruption.] I beg your pardon?
Dr Alan Whitehead (Southampton, Test) (Lab)
Sorry. I was just wondering to myself whether the Minister had looked all this up during lunchtime. If so, I congratulate him on doing so.
Greg Hands
I thank the hon. Gentleman for that intervention—I think it was an intervention—from a sedentary position. As the Energy Minister, I have to be aware of what is going on in the world of nuclear globally, so no, I did not look it up during lunchtime, actually; I have looked into this and other US plants. The failure of the Virgil C. Summer project—I think that is the one he was referring to—and the parent company included arrests and a conviction for fraud. There were also issues linked to design and supply chain immaturity, as well as a lack of experience with the construction of new nuclear projects. Those issues are pretty far removed from its status as a RAB project. I do not think those risks in South Carolina are applicable to the UK.
Dr Whitehead
I fully accept that the Minister did not look that up at lunchtime and that he is fully apprised of the circumstances surrounding the South Carolina project. However, does he not accept that the issues that he has mentioned as relevant to the failure of that project—it was entered into without proper consideration of a lot of things that, as he said, were at least in part responsible for its failure—are precisely the sorts of issues that we would expect him to take into account and sort out before deciding on the designation of a project in this country?
Greg Hands
Broadly speaking, the answer is yes. I think that all of those factors, if known at the time, would be considered when the Secretary of State makes the designation. That is the point. Of course they would be factors, were they to be known. I cannot put myself in the shoes of the governor of South Carolina—if indeed it was the governor of South Carolina who made the decision—but if he were or had been of the opinion that the project could not have been completed, he would surely not have made the designation at that time. I am slightly hesitant to stray into the politics of South Carolina, but doubtless the governor was of the opinion at that time that the project would have been completed. The hon. Gentleman uses South Carolina as an example, but I do not think that his amendment would have helped the governor make that decision.
This is not just a question of the factors, which are already covered in the Secretary of State’s determination of a RAB designation. The timing is also important. A project has to go through many stages and approvals post designation of a RAB. To include the hon. Gentleman’s additional definition at this stage might be premature, though I doubt it is needed at all, for the reasons pithily put by my hon. Friend the Member for Bridgend about the chances of the person making the decision being of the view that the project might not be completed. If that were the case, I think it would be a highly material fact in determining whether to designate a RAB. I do not believe that this amendment is necessary in order to meet the laudable objectives that Opposition Members seek to achieve. I therefore ask the hon. Gentleman to withdraw the amendment.
Dr Whitehead
I hear what the Minister says about the amendment, but I am not entirely convinced that he has made the case that he thinks he has made as to why this addition is not necessary for the designation process. After all, we are not talking here about a particularly adept and alert Minister in a particular Administration taking a decision on Sizewell C. As the Minister has said, this Bill is supposed to deal with decisions that might be taken under other circumstances, for other projects, at other times, with other Ministers, and possibly other Administrations. It is important that we put in legislation everything that we think could go wrong with a project and its designation process, so that the legislation is robust for the future.
On South Carolina, the Minister is right. The project failed as a result of a series of interlocking issues. Those issues were not necessarily associated with the RAB process, which is what we are considering in this Bill, but there were wider concerns that should have been apparent to legislators in South Carolina when the project was commissioned and went ahead. Many of the things that the Minister alluded to that occurred in South Carolina were not unforeseeable events. They were events that could have been analysed out at the time of the designation of the plant. Essentially the amendment seeks to address that issue.
We will not press this amendment to a vote—indeed, we will withdraw it—but we have put on the record our belief that the Secretary of State should have a very substantial hand in ensuring, as far as possible, that the project really can come to completion. I am sure that the Minister is with me on that and agrees that that should be the process by which we conduct designation.
Even if it is not explicitly in the Bill, the fact that the Minister has indicated that he thinks that a number of these issues can be covered within the designation elements is perhaps a step along the path to ensuring that these processes can be carried out properly. I do not wish to proceed with the amendment on that basis, but we need to do a proper job at the point of designation, for the protection of investors, for the project and for the customers who pay for it.
Greg Hands
Just to probe the hon. Gentleman on this, if I may, one of the criteria is whether the project is sufficiently developed to warrant a RAB. At what point does he think that the fact that the person making the decision might not necessarily think it would be completed would mean that they do not think it is sufficiently developed to start the process? Surely, if they did not think it was going to finish, they would not think it was ready to start either?
Dr Whitehead
The Minister puts that as a binary choice, but it is not because there are circumstances. That is essentially what happened in South Carolina. A number of people thought that it was a fine project that would go ahead; they put forward impossible timelines for the project to work on, there were very difficult financing arrangements and the RAB was placed on top of that. Yes, they may have thought that the project could come to completion, but it was not a very well-founded thought, and nor was it arrived at on the basis of the sort of diligence we should expect from the approach to a project the size of, say, Sizewell C.
The amendment’s intention is not to make the Secretary of State make a choice based on a potential view, when designating a project, that it might not be completed. He should do all that work, and indeed be publicly accountable for it, when ensuring that his view is as well founded as possible and that it will stand the test of time as the project progresses. There are points of landing between knowing whether a project is not going to be completed, and being sure that it is going to be completed. When making a designation, the Secretary of State should be held accountable for arriving at an informed position, which can be scrutinised in future, on whether it is reasonable and realistic to say that a project is likely to be completed. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Greg Hands
This clause, through subsection (1), gives power to the Secretary of State to designate by notice a nuclear company to benefit from a RAB. The later provisions of this part mean that the designation power can only be exercised with appropriate protections and transparency of decision making. Subsection (3) sets out the criteria a company must meet to be eligible for designation: that the Secretary of State must be of the opinion that, as previously debated, the nuclear project is sufficiently advanced to justify the designation, and that designating the company in relation to the project is likely to result in value for money. In considering value for money, it is expected that the Secretary of State will take into account considerations such as the cost to consumers and the impact on our net zero obligations. As set out in clause 3, the Secretary of State will be obliged to publish details on the process that he will follow when assessing whether the criteria are met.
The eligibility criteria offer important protections for consumers and taxpayers. A company can have access to a RAB only when the Secretary of State is convinced that it is a good project and sufficiently advanced, and where the likelihood of cost overruns is remote. The Secretary of State will also need to consider whether using the RAB to fund the project is likely to represent value for money.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I will come to this in my own comments, but is it not the case that the Secretary of State gets to sign off whether he thinks a project is value for money and sufficiently advanced, and then a statement is published giving the reasons for that? However, the Secretary of State gets to write the rules for the sign-off. Is it not the case that no clear structure or checklist will be gone through so that the Secretary of State can sign off such projects?
Greg Hands
I disagree with the hon. Gentleman. I think that the process and the checklist is set out pretty well. If he would like, I can run through how the process works when we get to the later clauses and look at the specifics of the process. It might appropriate to take him through that.
When considering value for money, the Secretary of State is expected to have regard to the cost to consumers, future security of supply and our decarbonisation targets. The Secretary of State can designate multiple nuclear companies at any given time, so more than one project can be designated for a RAB at the same time, but the designation criteria, project status and likely value for money will be applied individually to each project.
Alan Brown
Following on from my intervention, I have real concerns about the clause—we will come later to clause 3—and the lack of transparency in what constitutes value for money. In signing off projects, the Secretary of State has to give an opinion on whether they are suitably advanced to justify a designation, but what constitutes “suitably advanced”? What considerations must the Secretary of State be compelled to make to ensure that a project is suitably advanced to give the correct level of detail and analysis for cost definition in sign-off? We should bear in mind that sign-off for a 60-year contract ties up consumers.
I do not see those considerations in the Bill. The Minister said that he would take the Committee through them, but how does the Secretary of State consider how suitably advanced a project is? Does there have to be a working prototype? There is no working prototype of the evolutionary power reactor model generating electricity to the grid. The projects in France and Finland are years late, over cost and still not connected to the grid—and, as I said earlier, the Taishan 1 EPR is now offline due to safety concerns. How can the Secretary of State have any confidence that a project such as Sizewell C is suitably advanced when there is no working prototype?
What other permissions need to be taken into account to determine whether a project is suitably advanced? Does it need to have planning permission? Does it need to have gone through all its environmental appraisals and have all its environmental approvals in place? Are there other things to consider? How far is outline design to be developed? Is there a level of detail to consider to determine whether a project is suitably advanced? How much site investigation work needs to be undertaken before a Secretary of State can have confidence that a project is suitable advanced, bearing in mind the cost of a 60-year contract? Should consideration be given to a company’s track record on deliverability? That takes us full circle to how there is not an EPR up and running. In a way, that touches on what the shadow Minister said about having confidence that a project can be delivered when not one project has yet been delivered successfully.
The Government are in advanced negotiations on Sizewell C, which is the most well developed nuclear project at the moment. Does it come close to the definition of “sufficiently advanced” or does a lot more work need to be done? That takes us full circle back to the discussions earlier about the £1.7 billion allocated in the Red Book. The Minister has still not given us any clarity on what the £1.7 billion is for. Is it to allow the Sizewell C company to develop the project further to get it to a position that the Secretary of State thinks is sufficiently advanced? That would mean that, by default, the Secretary of State knows what “sufficiently advanced” means, so we should be able to understand what the £1.7 billion is going to pay for. Hopefully, all that can be explained.
EDF has claimed it is using Hinkley as a prototype that it will replicate at Sizewell C. It will accrue savings and just move the design almost lock, stock and barrel from Hinkley into the footprint at Sizewell C. I would have thought that, by default, that means the project is sufficiently advanced such that we do not need the £1.7 billion to advance it any further. A bit of clarity on that would be useful.
We need a lot more clarity on subsection (3)(b). What is the process for the Secretary of State assessing and giving the opinion that
“the project is likely to result in value for money”?
What are the intended governance and transparency protocols? We have spoken about the designation in a statement, but there is no clarity on what the Secretary of State will consider and what will be provided in the statement.
In recent months we have had the dodgy covid contracts. How do we ensure good faith rather than backroom negotiations and that there is public trust in what goes on in the signing-off of contracts? When I asked the Treasury a written question about the £1.7 billion and the discussions the Chancellor has had, the answer I was given was:
“Details of any meetings with companies regarding funding are commercially sensitive.”
If the Treasury will not even tell me who it is meeting and when, how can we have any comfort about what goes on behind closed doors in respect of the negotiations and the assessment of value for money? I hope to come back to value for money later in Committee, because I have tabled a relevant new clause.
It seems to me that as it stands, subsection (3)(b) means nothing, other than that the Secretary of State can rubber-stamp something that he believes to be value for money. Let us bear in mind that this is the Government who told us that Hinkley was value for money, even though everybody argued that the strike rate was too high. With this Bill, they are telling us that Hinkley was actually a rubbish deal, so we need the RAB model in the Bill to save taxpayers’ money.
The Government explained on Second Reading that a contract for difference had to be used for Hinkley because it was the first of a kind, so all the risk was on the developer, but that raises further questions. If a CfD was needed for Hinkley because it was the first of a kind in the UK, how on earth can the Government make a final decision to proceed with Sizewell C under a RAB model before Hinkley is even operational?
Hinkley is 25% over budget and at least a year late, with a possible further 15-month delay on top of that. How can the Government have any confidence in signing off on something like Sizewell C, for which the impact assessment talks about a 2023 construction start date? How can that project be anywhere close to “sufficiently advanced”? How can the Secretary of State do a proper value-for-money assessment given all the outstanding issues with Hinkley?
As I said, we need a lot more clarity on that £1.7 billion. Is that going to be the way forward in future? Is it the intention that, for a project to get to a stage where it is sufficiently advanced and the Secretary of State can make a value-for-money assessment, something like £1.7 billion will be allocated to each developer that is in the mix for a new nuclear project? That is crucial for value for money overall.
Paragraph 50 of the explanatory notes gives four criteria that might be used to consider value for money, but three of them are just the traditional Government tropes to justify nuclear in the first place: security of supply, low-carbon electricity and net zero targets. The Minister alluded to that in his opening speech. Those same arguments have been put forward to justify new nuclear for the past 15 years. We still do not have a new nuclear plant operational, so when the Secretary of State looks at the reasons for value for money, it will be very easy because those are the arguments that they will use.
In particular, the security of supply argument was used to justify Hinkley, but Hinkley was supposed to be required by December 2017 to stop the lights going out. It will not be operational for at least 10 years after that original date, and the lights have not gone out, so security of supply is almost a nonsense argument for value for money. That confirms to me that the criteria are too loose and will be too easy. There will be a lack of transparency, but the Secretary of State will sign it off and say, “Yes, I think the project is value for money.” Again, we have this Bill because they are desperate to get Sizewell signed off at any cost.
In conclusion, for me the clause is too loose and too vague. It is set up to encourage backroom negotiations without transparency. At the very least, it would be nice if the Government conceded to an independent assessment of the risks and value for money for consumers. That was suggested in the witness session on Tuesday by Citizens Advice. I look forward to the Minister’s response, but he will have to go a long way to satisfy me that there is a robust procedure in place to assess value for money and how suitably advanced the project is for designation.
Greg Hands
I thank the hon. Gentleman for that varying and detailed speech on clause 2. I will try to deal with each of his points. First, he raised a series of additional factors that could be considered by the Secretary of State. He might have tabled an amendment, for example, on what those additional factors might be. I do not think I have seen any amendments tabled by the Scottish National party, but he might have perhaps tabled one in the same way that the official Opposition did as a test. My initial response is that the additional factors he raised would be covered by the two criteria on whether it is value for money and sufficiently advanced, so his additional criteria would be encompassed by the two processes that are already there. Perhaps he can table an amendment to deal with where he would specifically like something added.
The hon. Gentleman asked about the £1.7 billion. We have been clear, while remaining consistent with the fact that this is a commercial negotiation, that the funding is to bring a project to a final investment decision in this Parliament, subject to value for money and all relevant approvals. That could include development stage funding to support the maturation of the project to de-risk it. It could also include some Government investment at the point of a transaction, helping to mobilise other private sector capital. It is already laid out in detail in the Budget document. It was debated at Budget, and I reiterate it today. That there is a limit to how much additional information I can put out on something when ultimately the background is that it is a commercial negotiation.
Alan Brown
Earlier, the Minister talked about UK pension funds as well in terms of levering in capital. Is some of the £1.7 billion going to be matched funding with pension funds, for example, or is it to provide some guarantees so that the pension fund can invest at a guaranteed rate of return, where the guaranteed rate of return comes from the taxpayer?
Greg Hands
I am not going to add anything on the £1.7 billion, which is a separate process and a separate factor to the Bill. I have nothing further to add. I have given sufficient detail of where the £1.7 billion might be spent. Where it will be spent is properly a matter for which the background is the commercial negotiation.
The hon. Gentleman mentioned delays at Hinkley Point C. He is in danger of arguing with himself at times. At one point he argued that we had not brought a nuclear project to a final investment decision, or we had brought only one in the last decade. Then he said that we should wait to make a decision on Sizewell C until we had Hinkley Point up and running. It sounds to me as if he wants to have it both ways—
Greg Hands
He is saying we are either moving too quickly or too slowly. Ms Fovargue, it reflects back to the starting position. If the hon. Gentleman does not mind me saying it, I think he is opposed to nuclear power per se. I suspect he is less interested in whether it is going too quickly or too slowly, to be frank, and it would be helpful if he gave us a straight view as to whether we are being too quick or too slow.
Dr Whitehead
I beg to move amendment 4, in clause 3, page 2, line 37, at end insert—
“(5) Prior to consulting persons under subsection (3)(g), the Secretary of State must publish a statement setting out why it is relevant to consult those persons.”
This amendment requires the Secretary of State to indicate the relevance of the people he is consulting on the designation of a nuclear company.
The amendment, and another couple that relate to clauses further down the order paper, need not detain us for long. They essentially seek to improve the effect of the text of the Bill and are not controversial.
Amendment 4 applies to clause 3, on page 2 and requires the Secretary of State to
“publish a statement setting out why it is relevant to consult those persons.”
That refers to the list of those people who are to be consulted upon the designation of a nuclear company. At the bottom of that list is the phrase
“such other persons as the Secretary of State considers appropriate.”
I appreciate that is often seen in Bills and I am sure hon. Members have seen it in their time in other Committees, but I suggest that it is rather loose arrangement if we want to have a Bill that will stand the test of time. While it is a catch-all arrangement, one could almost ask why the other categories are listed. One might as well just put, “Those persons who the Secretary of State considers appropriate.”
Surely, where the Secretary of State is considering consulting other people, in addition to those listed, those people ought to be relevant to the designation of the nuclear company. As the Bill stands, it is just people
“the Secretary of State considers appropriate.”
Kirsty Blackman (Aberdeen North) (SNP)
I am slightly confused about why the hon. Member seems to be suggesting that it is a bad thing for the Secretary of State to undertake more consultation. Surely more consultation is a good thing. Generally, the Opposition call for more transparency. If the Secretary of State feels that it is necessary to consult more people, I am not hugely convinced that there is a point to making him justify that.
Dr Whitehead
I hope that the hon. Member will forgive me if I have not made myself clear. I am certainly not saying that consultation is a bad thing or that there should be less of it; I am saying that the Bill appears to provide for consultation with all the people named in it and anybody else the Secretary of State feels like including. One may think that that is a good thing, but I would have thought that anyone else the Secretary of State feels like including ought to be relevant to the designation of the nuclear company. All the amendment asks is that, when and if the Secretary of State decides that people other than those who were already on the list be consulted, he publish a statement to say why the people he has selected for additional consultation are relevant to the issue in hand. Otherwise in principle it would be possible for the Secretary of State simply to choose a random number of people off the street and consult them. That would not serve the cause of further consultation and transparency.
Kirsty Blackman
May I check that an alternative amendment could have been to change the last word in subsection (3)(g) to “relevant” rather than “appropriate”, which would mean that the Secretary of State would be able to consult all the other people he considered to be relevant, rather than appropriate? Is that the direction in which the hon. Member is trying to go with his amendment?
Dr Whitehead
Indeed. The hon. Member has drafted her own, perhaps more succinct, amendment on the fly. I would welcome hon. Members tabling amendments if they feel that they can do it better, or more succinctly, than we can. She is right that it is a test of the relevance of the consultation process. Her suggestion does not quite cover the point because I would like the Secretary of State to say why those people are being consulted. Essentially, the amendment requires the Secretary of State to not just think that people are relevant but tell us why. It is not a big point, but I think that would improve the Bill a little were it to be accepted.
Greg Hands
I thank the hon. Members for Southampton, Test and for Greenwich and Woolwich for amendment 4, which amends the clause governing the process by which the Secretary of State can designate a company. As part of the process, the Secretary of State must consult a named list of persons, including the authority, Ofgem, the Office for Nuclear Regulation and the relevant environment agency. The Secretary of State will also be able to consult, of course, such other persons as they deem appropriate at that time. The amendment would require the Secretary of State to publish the reasons for consulting those persons not named in the legislation.
Of course it is important for us to be transparent, and I welcome the intention of the amendment to increase transparency and accountability throughout the process, but it might help if I set out the intention of the consultation requirement in clause 3. The Government have agreed a set of persons that they feel must be consulted: the Office for Nuclear Regulation, Ofgem, the relevant environmental agencies and the devolved Administrations in the event that all or part of one of the plants be located in one of the devolved nations of the United Kingdom. The ones who must be consulted include the key regulatory bodies for nuclear generators in Great Britain.
Alongside that, for each designation, there may be other relevant parties that the Secretary of State thinks it is reasonable to consult to inform the draft reasons for designation. That sort of provision is standard practice. The clause is modelled closely on existing consultation obligations in the Energy Act 2013, which allows the Secretary of State to consult other persons without the requirement to publish a justification.
I do not seek to reject the amendment because of concerns about transparency. The designation process takes several important steps to ensure transparency, including the publication of a statement on how the designation criteria will be assessed and the publication of the designation notice.
The hon. Member for Southampton, Test says that those consulted ought to be relevant, but I think that the Secretary of State will consult only with those who ought to be relevant rather than, in the terms of the hon. Member for Southampton, Test, a random set of people off the street. The way that governmental processes work is that consultations are supposed to be with people who are relevant. I do not think that including a relatively unprecedented amendment to publish a statement about why it is relevant to consult those persons will help the transparency or the understanding of the decision made by the Secretary of State.
I hope that I have shown hon. Members that the legislation already takes the necessary steps to ensure transparency and that the amendment would go against the established precedent for this kind of provision, which has generally worked well for big Government infrastructure decisions. I therefore ask the hon. Member for Southampton, Test to withdraw the amendment.
Dr Whitehead
I am certainly happy to withdraw the amendment, but in passing I mention that the Minister has drawn attention to the word “must” in clause 3(2), which precedes the people who the Secretary of State is listed as consulting. I am glad that he drew attention to that, because it may reflect on an amendment that I will move later concerning the words “may” and “must”. The Minister will know that a regular concern of mine is that legislation needs to be written in the right way concerning the imperatives on the Secretary of State rather than the allowances. We have made progress from that point of view.
Although this clause contains a fairly standard way of putting things, that may just mean that legislation has been slightly lax in the past, which may be considered less than satisfactory in future. I take the Minister’s point, however, that it is not an exceptional way of putting things, and I take his assurance that a question of relevance would be in the Secretary of State’s mind when he consulted anybody under such circumstances. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Greg Hands
Let me lay out the purpose of clause 3, which is to set out the procedure that the Secretary of State must follow to designate a nuclear company for the purposes of the nuclear RAB model. The clause requires the Secretary of State to undertake various transparency and consultation obligations before a company is designated.
The clause sets out the process. By putting the process in the Bill, the Government are showing their commitment to transparency and openness when designating a company. Prior to the designation of any company, subsection (1) requires the Secretary of State to publish a statement setting out the procedure they expect to follow in determining whether to designate a nuclear company and how they expect to determine that the designation criteria are met.
The Government anticipate that a nuclear company with a generation licence, and which thinks that its project should be funded through a RAB, would approach the Secretary of State. The Secretary of State will then assess the project against the factors set out in the statement, before consulting expert bodies on the designation. That provides opportunities for those directly affected by the potential designation, or with special expertise relevant to the decision, to provide their views on the matter. That includes the Gas and Electricity Markets Authority, the governing body of Ofgem—I will refer to it generally as Ofgem in the course of this debate, for the sake of time—whose primary statutory duty is to protect the interests of consumers.
Alan Brown
The Minister spoke about transparency, but as I touched on earlier, it seems to me that clauses 2 and 3 still do not provide transparency. Clause 3(1) gives the Secretary of State the power, in effect, to make things up as they go along. Under paragraph (a), the Secretary of State sets out the procedure that they will follow, so they are setting the rules, and then paragraph (b) allows the Secretary of State to confirm whether the designation criteria that they have already set in clause 2 have been achieved. The criteria in clause 2 are simply these: does the Secretary of State think that the project is advanced enough to be designated and is it value for money?
Effectively, by my logic, the Secretary of State states that the project is advanced enough and is value for money. Then, under clause 3(1), the Secretary of State affirms what rules will be applied to confirm what has already been confirmed—that the project is value for money and suitably advanced. It is a kind of circular argument. If the Secretary of State is determined to sign off on a new nuclear project, which they are, and they are setting the rules that they are going to apply and then they will publish the rationale as to why it has been signed off, that, to me, does not provide proper transparency. It is not things that can be challenged; it is actually just the Secretary of State giving their reasons for why they have signed off.
As I touched on earlier, paragraph 50 of the explanatory notes still does not give enough information, either. It actually gives too much wriggle room for a Secretary of State to be able to sign off, so that is also not robust enough. The Minister challenged me to table amendments, and I can table a new clause at a later date, or we can challenge further, but it is really hard to table amendments to clauses that are so fundamentally flawed. It is hard to actually improve them.
Turning to value for money, the cost to consumers is one of the items that has been suggested, but the Government are also good at saying that a new nuclear power station will add only £x a year to a consumer’s electricity bill and therefore it will have minimal impact on bills. That is a very neat way of trying to argue that a new nuclear station involves minimal cost to consumers, but of course we are talking about a 60-year contract.
In the same vein, the letter from the Minister to all MPs on 26 October stated that a nuclear project starting construction in 2023 will add only a few pounds to bills during the lifetime of the Parliament and only £1 per month during full construction. I will leave to one side the fact that 2023 is a fanciful construction date, but let me break down what the cost of £1 per month per consumer means. According to the Office for National Statistics, there are now 27 million households in Great Britain. According to the Bill’s impact assessment, the construction period for unit 1 is estimated to be between 13 and 17 years, plus another year for unit 2, so let us call it a 15-year construction period. That £1 a month per household is circa £5 billion up front. It can be argued that £1 a month is a low cost for consumers, but something like £5 billion is actually being committed. That is why we need more robust ways to evaluate what is the actual cost to consumers and what is value for money.
Let us work backwards from some of the figures in the impact assessment. It is suggested that, under RAB, the capital cost and associated financing for a new nuclear power station could be £63 billion. If we work backwards over a 60-year period, that is still only a few pounds a month, but it is actually £63 billion that we are talking about. That is a huge sum, which could be invested much better elsewhere in other forms of renewable energy. I hope that demonstrates how much wriggle room the Minister and Secretary of State have given themselves with the Bill. In fact, looking at the cost and impact assessment that the Government have quoted, it almost undermines their argument about the justification for new nuclear.
I turn now to subsection (2). Truthfully, it adds little more in the way of transparency. The Secretary of State must provide
“draft reasons for the designation”
and consult stakeholders, but the subsection does not detail how the statutory consultation will be undertaken, the timescales applied to it or, more importantly, what happens to the consultation feedback from the stakeholders whom the Secretary of State consults. Paragraph 54 of the explanatory notes states that a final reasons determination must be published as part of the designation notice, and subsection (5) covers that too. With the way the Bill is currently framed, however, this has the potential to simply be a tick-box consultation exercise. The Secretary of State can consult and stakeholders respond, then the consultation is dismissed out of hand and the final reasons are printed.
Subsection (3)(f) states that the Secretary of State may consult the Scottish Ministers and the Scottish Environment Protection Agency for Scottish projects, so what protection is there for the Scottish Government if they say no? We are implacably opposed to new nuclear, as is current SNP policy and the policy of the Government who have been elected by voters in Scotland since 2007. At the moment, the Scottish Government rely on the national planning policy framework to block new nuclear, but will the Minister confirm that, despite market failure, if somehow a proposal came for a new nuclear project in Scotland, the Bill, along with the United Kingdom Internal Market Act 2020, will not be a way for the UK Government to ram it through? How valid would the consultation with the Scottish Government be? It is not clear in the Bill.
Again, clauses 2 and 3 do not do enough to provide transparency and hold the Government to account. As I say, I would like to amend the clauses and be helpful to the Government, but given that I am opposed to the Bill and that I do not think the clauses are robust enough, it is very difficult to do so.
Kirsty Blackman
It is a pleasure to be able to take part in this Committee. Thank you very much for your excellent work in chairing today’s sitting, Ms Fovargue.
I have just been on the Subsidy Control Bill Committee, and the Subsidy Control Bill has an incredible lack of information. We spend a huge amount of time asking for more transparency in that Bill, but this Bill is significantly worse than the Subsidy Control Bill in the lack of information that has been provided. To be honest, I cannot believe that the Bill is actually considered appropriate for primary legislation, because there is a totally stunning lack of info and an absolute lack of transparency.
The Secretary of State has to publish the reasons for the designation. What does that mean? What does the Secretary of State actually have to say in their reasons for the designation? Do they just write, “I think it’s a good idea. Let’s go for it.”? There is not enough information. As my hon. Friend the Member for Kilmarnock and Loudoun asked earlier, does the Secretary of State have to take into account whether there is planning permission in place? Does the Secretary of State have to take into account the licences that have been put in place? It is totally unclear how this is likely to work.
I have a specific question for the Minister in addition to my general dismay at the clause. Subsection (3) talks about the people who have to be consulted. It says that if part of a site is in Scotland, the Scottish Ministers and SEPA have to be consulted. It also says something similar in relation to Wales and England. We know that if something is to be built in a border area, it will likely have cross-border environmental effects, so two environmental agencies could be involved should a project be fairly close to a border.
I would like the Minister to give me some comfort by saying that he would consider consulting more than one environmental agency, because if a project were to be on the border between England and Wales but slightly more on the English side, it might still have environmental impacts in Wales. It would be relevant, therefore, for the Minister to ensure that the consultations are slightly broader than simply where the footprint of the site is, because we know that any large thing that is built—whether it is something as potentially likely to cause massive environmental problems as nuclear or something much less of a potential environmental risk—has wider environmental issues than simply its footprint. It would be useful if the Minister could confirm that he would give consideration to that happening in the event that it is really pretty close to a border.
Greg Hands
I thank the hon. Members for Kilmarnock and Loudoun and for Aberdeen North for their contributions on clause 3. I will try to deal with their points.
It is important to understand the different parts of the process and the transparency involved in the process. The rules are published first; then comes the rationale for the designation, which is consulted on. It is standard practice in a consultation, of course, to take into account the results or the responses made to the consultation. Perhaps the hon. Member for Kilmarnock and Loudoun was trying to characterise it as superfluous or part of a process that would not add any additional information, but a Government consultation is there specifically to seek out and find more information. We then publish the final rationale for the designation. I hope that is helpful in setting out a little of the process involved.
The question about stating the length of the consultation is one that would be appropriate to the project itself. Let us not forget that we are trying to design a process here that would take into account a number of different possible future nuclear power stations. It would be difficult for us today to be prescriptive about the length of time that a consultation should take. We have set out those who we think must be consulted, and we have also left it open for the Secretary of State to consult other interested parties, which is quite reasonable considering that this legislation is supposed to encompass various forms of future nuclear power plants. We would be in danger of becoming too prescriptive about things such as the length of the consultation and the earlier amendment about stating reasons for particular people to be consulted.
Dr Whitehead
I do not want to be accused of trying to be too helpful to the Minister but, as I understand it, this part is about the designation of an existing nuclear company for the possibility of receiving RAB payments for a project it has not yet undertaken. That is it. It seems to me that what we are concentrating on in this part of the Bill—although not later on in the Bill—is just the designation process. I hope the Minister will agree that that is not the project or the RAB process itself, on which we would expect considerable transparency as it goes through, but not necessarily at this particular stage.
Greg Hands
The hon. Gentleman makes a fair point, and he is right that that is the purpose of this clause. None the less, the purpose of the clause is also to allow designation for a potential variety of timeframes within those projects, so it is still important not to be over-prescriptive, for example with the suggestion that we lay out today what the length of time for a consultation should be.
In terms of the costs, the whole purpose of the Bill is to reduce costs. The hon. Member for Kilmarnock and Loudoun is probing on the costs and what they actually mean, but the point is that this is a reduction in the costs that would otherwise be the case under a contract for difference model. That is ultimately getting to the heart of the Bill. I appreciate that he is against nuclear power, but he would surely have to recognise that the Bill is about reducing the costs of nuclear power. That is the purpose of the Bill. He says it is going to be very expensive—we acknowledge that it can be very expensive, and the purpose of the Bill is to make it less expensive.
Mark Jenkinson (Workington) (Con)
Is it not the case that the rest of the UK can learn from Scotland’s lead on net zero when we see the low-carbon content of their grid, which is thanks to nuclear technology?
Greg Hands
My hon. Friend makes a very strong point—one made by quite a few people who were in Glasgow just two weeks ago. Ironically, in Scotland, making that argument strongly were not just the UK Government, but countries from all over the world. They were making the argument for nuclear power being part of our low-carbon future.
The powers of the Scottish Government are unchanged. The Bill makes provisions for the Secretary of State to consult named persons and organisations prior to the specification of any project under a nuclear RAB, and to consult those persons or organisations before he or she amends a projects licence to insert RAB conditions. Ministers in devolved Administrations will be captured—in scope, I should say; not physically—by this consultation.
Alan Brown
The Minister has already said that energy generation is a reserved power. Is he confirming that if the devolved Administrations say no in a consultation, that could be overruled by Westminster, with the imposition of a nuclear power plant?
Greg Hands
The hon. Gentleman is inviting me to go down a hypothetical road. The devolved Administrations have powers in other areas, and if the devolved Administration was strongly minded about having a nuclear power plant in that particular part of the UK, it is difficult to envisage circumstances in which the UK Government would proceed to do that. I hope that gives him enough reassurance.
I will deal with the point made by the hon. Member for Aberdeen North. On the question of a project near a border, it is reasonable then that the UK Government would consider the appropriateness of consulting with the devolved Administration. I return to my earlier point about specifying those who must be consulted and those who the Secretary of State would think it reasonable to consult. That would be within the scope of who the Secretary of State would think it reasonable to consult.
Kirsty Blackman
I appreciate that really helpful clarification.
A couple of points about the lack of transparency in the clause have not been covered. Subsection (2)(a) states that the Secretary of State has to “prepare draft reasons”. Subsection (5)(b) states the Secretary of State must provide the reasons “amended as appropriate”. We have not heard what those reasons look like. Do they say something along the lines of, “The Secretary of State gives designated status because he feels like it”? I presume not, but there is no information about what those reasons would include. Could we have something in writing about what could be in those reasons? There is no framework here at all—the Bill seems to be quite lacking.
Greg Hands
I thank the hon. Lady for that intervention. The point strikes at the heart of what a Government Minister is doing. I think she is asking what happens if a Government Minister behaves entirely unreasonably. The way our constitutional settlement works is that if a Minister is behaving entirely unreasonably, he or she is answerable to Parliament. If Parliament believed the Secretary of State to be unreasonable or acting in a way contrary to the intention of the Act, people would find ways of getting the Secretary of State to explain. I think the hon. Lady was trying to suggest that the Secretary of State might arbitrarily decide to go through with something—
Greg Hands
I am not going to give way again, because I have set out clearly that the Secretary of State is ultimately accountable to Parliament, and Parliament would find a way of examining the reasons that he or she laid out under this clause.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
Expiry of designation
Dr Whitehead
I beg to move amendment 5, in clause 4, page 3, line 24, leave out “5” and insert “4”.
This amendment shortens the maximum time allowed by the Secretary of State for the designation period of a nuclear company.
The Chair
With this it will be convenient to discuss amendment 6, in clause 4, page 3, line 33, leave out “5” and insert “4”.
This amendment shortens the maximum time allowed by the Secretary of State for the designation period of a nuclear company.
Dr Whitehead
The amendments are grouped because one follows directly from the other—amendment 6 is consequential on amendment 5. The previous debate about the designation process was helpful for discussion of this clause, because clause 4 looks at how long a designation may last once the process has started. That is important because the process can cease to have effect either on the expiry of the designation—that is, a company has been designated for moving along the path to eligibility for a RAB and various negotiations will take place as the company develops its plant—[Interruption.]
Dr Whitehead
Hon. Members have such Pavlovian responses these days, automatically running out of the door whatever the circumstances.
The expiry date of a designation could well arrive because the company has received a designation, but has done nothing about it, or because the Government have got a designation through, but are a bit lax in pursuing the subsequent process. Alternatively, as the clause suggests, it could be because a project is under way, the revenue collection contract starts biting, investment is secured and the project goes ahead.
However, I am a little concerned that the expiry date is set at a period of five years, beginning on the date of the designation notice in question. As such, both the nuclear company and the Government have five years to get their act together on the RAB process, although that could lead to a going slow or delays. We already know that nuclear projects have a habit of running over time, sometimes due to construction issues and so on, but we do not want projects to be further delayed because people have not got themselves organised for a proper RAB process or because the Government cannot be bothered to get things going at a certain time and believe that they have five years to sort that out.
We have made the modest suggestion that that period should be four years; that might concentrate minds a little on moving from the process of hopefully being designated to the process of having a revenue collection contract and getting under way properly. There would not be that time to mess about between the two ends of the process, as might be the case under the five-year designation period.
I agree that we could pick any one of a number of different dates; the four-year period is just to suggest that we should concentrate minds a little. The amendment does not lay down the law: if the Government think it could be reconstructed in a different but more concentrated way, we would be happy with that. The amendment just suggests an indicative new date so that the point is borne in mind. I hope the Government will be able to accept it on that basis.
Greg Hands
Amendments 5 and 6 would seek to reduce the length of time a designation remains valid from five to four years and they would reduce the period for which the Secretary of State may extend the designation notice for a designated nuclear company to four years.
First, I thank the Opposition for their consideration of this matter. The hon. Member for Southampton, Test spoke to his amendment in a probing way—trying to get to the bottom of why the period should be five years rather than some other period. I am glad that the Opposition recognise the importance of the designation notice period and the fact that it should strike the right balance between providing enough time for the Government and the company to undertake all the processes necessary to inform a decision on licence modifications without leaving a designation in place for an unreasonable length of time. That is, as it were, the exam question here.
I believe that we have achieved that balance in the Bill. Currently, if negotiations on a project are successful and a relevant licensee nuclear company becomes party to a revenue collection contract, the power of the Secretary of State to modify its licence ceases, of course, outside some limited circumstances. That is vital to give investors confidence that the Secretary of State does not have an open-ended power to further amend the generation licence.
On the other hand, if negotiations are not successful after a project has been designated—the point here is to give enough time for those negotiations to be successful—it is necessary for the Secretary of State’s modification powers to lapse rather than continue indefinitely, so a sunset clause to the designation is also needed. That sits alongside the provisions in the Bill that revoke designation if the designation’s criteria or conditions are no longer met.
However, a decision to take a financial close on a nuclear power station may not happen overnight; robust processes must be followed, extensive due diligence must be carried out and there must be rigorous negotiations to ensure value for money for both the consumer and taxpayer. That is the case with many large infrastructure projects.
Take the negotiations at Hinkley Point C as an example: discussions and eventual negotiations on the project took a number of years to complete. I believe therefore that a five-year window is a reasonable period to expect negotiations to have run their course, recognising that a project for RAB must be suitably advanced to be designated in the first place—that goes back to the earlier debates. That window provides time for negotiations to achieve a successful outcome without providing the Secretary of State with licence modification powers for an inappropriate period. The ability to extend the designation presents a backstop provision that allows the designation to be continued when the designation criteria continue to be met and negotiations are ongoing—in other words, it builds a certain amount of flexibility with a positive decision to extend negotiations. It is therefore appropriate that the extension period should mirror the initial designation period.
I do not consider that the amendments would provide any enhancement to that rationale. I did not hear any specific argument for four years rather than five years, so I am minded to continue with five years. I consider the provisions within this clause, which will permit the Secretary of State to revoke a designation notice at any point if he considers that the criteria are no longer met, mitigates the risk that negotiations—or, indeed, the modification power—will continue for longer than they should. I therefore invite the hon. Gentleman to withdraw his amendment.
Dr Whitehead
As the Minister has said, the amendment was essentially a probing amendment to seek a little more clarification on why five years is considered to be the appropriate time. I am not sure that the Secretary of State has fully answered the question about the extent to which that might allow people not to get on with things as quickly as they might otherwise do, but I appreciate that in a complicated project such as those we are considering, there are processes that take quite a lot of time; it may well be that getting on for five years is the time necessary for such projects to be completed.
The overall point is that we want to make sure that, once designation has been undertaken, we move to the next stage as quickly as possible. I am sure that the Secretary of State would concur with that particular aim. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Greg Hands
Clause 4 sets out the circumstances in which the designation of a nuclear company would expire. As set out in subsections (1) and (2) of the clause, the designation of a nuclear company will be limited to a period of five years from the date of the project designation. If a designation expires, the Secretary of State must publish the details of that fact under the provisions in subsection (5). However, the Secretary of State will have the power under subsection (3) to extend the designation period before the five-year period lapses.
Subsection (4) of the clause requires that prior to granting an extension for a maximum of five years, the Secretary of State would need to consult the company, the authority, the ONR, the relevant environment agency, and the devolved Governments if relevant. Before exercising that power, the Secretary of State would also need to continue to be satisfied that the criteria for designation are met. This would allow for any circumstances in which the negotiations with the designated company and engagement with the financial markets last beyond the five-year designation period, but the Secretary of State believes that the project both represents value for money and is sufficiently advanced to warrant a RAB.
The designation will also expire if the company enters into a contract with a revenue collection counterparty. That is to provide confidence to investors that once the RAB licence conditions have been inserted into the company’s electricity generation licence, the Secretary of State will no longer be able to modify that licence except in the limited circumstances set out in clauses 7 and 35 of the Bill. This is a proportionate approach that balances the need for investor certainty with the ability to flexibly apply the RAB model to individual projects. On that basis, I commend the clause to the Committee.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Revocation or lapse of designation
Dr Whitehead
I rise to speak to amendment 7, in clause 5, page 4, line 16, leave out “either” and insert “any”.
This amendment is consequential on amendments 2 and 3.
This amendment was tabled to deal with the possible eventuality that we would have three designation criteria in clause 2(3), rather than two, as is the case at the moment. We moved an amendment to try to place three criteria into that clause, which the Committee did not accept. The statement, therefore, that either of those two criteria are relevant stands as far as the Bill is concerned, and the word “either” should therefore not be replaced by “any”. On that basis, amendment 7 logically falls, so I have no wish to move the amendment.
Question proposed, That the clause stand part of the Bill.
Greg Hands
Clause 5 provides the Secretary of State with the power to revoke the designation of a nuclear company and sets out the applicable circumstances and procedure for doing so, as well as the circumstances and procedure whereby a project designation could lapse. The revocation power is tightly constrained by subsection (1). It applies only where a nuclear company ceases to hold a generation licence in respect of the nuclear project for which it was designated or it no longer meets the designation criteria. It is important that only the right projects are able to benefit from a RAB where they are sufficiently advanced and likely to provide value for money.
As set out in subsection (2), revocation of a designation would follow a similar process to project designation. The Secretary of State must prepare draft reasons, consult the named persons and publish a revocation notice, where relevant; they can attach additional conditions to a designation notice, as set out in subsection (3). If a company fails to comply with the conditions set out in the designation notice, the Secretary of State will notify the company that it has failed to comply, which will result in the designation lapsing. Such a notice must be published by the Secretary of State under subsection (5).
Such a model is a common feature of similar RAB models. The procedures envisaged allow time for consideration and consultation before any decision to revoke is taken. Given that the ability to continue to meet any of the conditions attached to designation is within the control of the company, there is no consultation requirement for the Secretary of State before a designation lapses.
Taken together, these routes to ending a designation provide an important layer of protection for consumers before a designated company enters into a RAB. In essence, they allow for a designation to end in any circumstance where it is no longer appropriate for a company to benefit from a RAB before project funding begins.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Licence modifications: designated nuclear companies
Dr Whitehead
I beg to move amendment 8, in clause 6, page 5, line 3, at end insert—
“(2A) Prior to exercising the power under subsection (1), the Secretary of State must publish a statement setting out how the exercising of the power will facilitate investment in the design, construction and commissioning of nuclear energy generation projects.”
This amendment requires the Secretary of State to justify the exercise of a power to modify the electricity generation licence of a nuclear company.
The clause concerns modifications to the licences of companies that have entered into a designation with regard to the RAB process. It sets out a number of powers enabling the Secretary of State to make modifications to licences in order to square the designation process with the licence process. It occupies a lot of other areas, but would be particularly relevant to the licence as it applies to, say, the Sizewell C project.
Subsection (2) states that the Secretary of State is able to exercise the power under subsection (1)—to modify licences—
“only for the purpose of facilitating investment in the design, construction, commissioning and operation of nuclear energy generation projects”,
which restricts the powers of the Secretary of State to modify the licences, concentrating it in the field of the design, construction and operation of the nuclear project.
Hon. Members will notice that that restriction stops there—that is, the Secretary of State may exercise that power for that purpose, but no one else needs to know about it. The Secretary of State may consider doing that, or restricting himself or herself to that particular designation, and may consider that he or she has done that, but it is a completely opaque process.
This amendment seeks to ensure that the Secretary of State publishes a statement setting out how his decision does indeed facilitate investment in the design, construction, commissioning and operation of nuclear energy generation projects, so that when he is considering exercising that power, it is a publicly exercised power, and information on what he has done is in the public domain.
The publication of the statement does not restrict what the Secretary of State can do; it sheds a light on what they can do, and ensures that they are carrying out that particular power correctly, as laid out in the legislation. We think that would be a good, safe addition to the Bill. It does not fundamentally alter its direction, but sheds a little more light on the process as the directions of the Bill are undertaken.
Greg Hands
As the hon. Gentleman says, this amendment addresses the process for modifying a designated nuclear company’s licence, particularly which documents should be published before the power is exercised. We recognise that designating a nuclear company and subsequently modifying its licence is a significant decision. That is why the legislation lays out a clear process, which provides transparency and builds confidence in the decisions that the Secretary of State will make when exercising these powers. The process in the Bill is strongly based on existing licence modification powers; it is well precedented.
The amendment obliges the Secretary of State to publish a document setting out how the licence modification would facilitate investment in nuclear projects before modifications are made. I do not believe that is necessary. The Government have already set out a clear process and strong transparency provisions in the legislation. Currently, the Secretary of State is required to consult named persons prior to making any licence modifications, and must then publish the details of any modifications as soon as reasonably practicable after they are made, with material excluded only when necessary—for example, for purposes of commercial confidentiality or national security.
Alan Brown
Could the Minister give an example of an existing licence that the Government have granted that could likely need to be modified to facilitate the investment that the Government are looking for? Could he explain what that process looks like?
Greg Hands
The process is as described. It is based on a very good precedent on these sorts of licence modifications. This would not be the first Bill to come along to look at how to modify a licence, and we have based that entirely on existing precedents. There is nothing unusual in this process or this structure.
The approach of consultation followed by publication is well precedented, as I said, in other licence modification powers. We think that the amendment proposes an unnecessary additional process. Moreover, the consultation provisions will allow expert voices to input on whether the licence modifications are effective in facilitating investment, which, of course, is exactly the purpose of the clause. I therefore hope that the hon. Gentleman will withdraw the amendment.
Dr Whitehead
We do not intend to press the amendment to a vote, but I will say that we think it is a good idea, which adds to the Bill’s transparency. The Minister has given examples where certain elements of that transparency would be facilitated by other components of the Bill, but I would note that most of those are post hoc rather than before the process. Nevertheless, I take some assurances from what the Minister has said about the proper transparency of the process, so we will not pursue that this afternoon. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Whitehead
I beg to move amendment 9, in clause 6, page 5, line 13, at end insert—
“(ba) the interests of existing and future consumers of electricity in relation to their prospects of recouping their contribution at the conclusion of the construction phase of the project;”.
This amendment requires the Secretary of State to have regard to the interests of electricity consumers in recovering the value of their contribution to the construction of a nuclear power plant.
We have now reached the point where we have the first consideration of the consumer in the Bill, in clause 6(4)(b), dealing with the licence modification arrangements. Hon. Members will note in subsection (4) the things that the Secretary of State must have regard to when exercising the power under subsection (1), subject to what we have just discussed about subsection (2) in terms of the design, construction, commissioning and operation of nuclear energy generation projects.
Subsection (4)(b) says that the Secretary of State must have regard to
“the interests of existing and future consumers of electricity, including their interests in relation to the cost and security of supply of electricity”.
I understand that to mean that the Secretary of State, in modifying licences, particularly in respect of a RAB agreement, must look at the interests of consumers with respect to the cost of electricity and the extent to which it may be produced at a better price as production develops in the years following the adoption of a RAB, and the extent to which security of supply to customers can be maintained.
What is lacking in that list of things that the Secretary of State must have regard to—along with many other things—as far as the consumer is concerned is a recognition that the consumer has an active interest as well as a passive interest in this process. If we are setting out to produce a RAB arrangement that effectively requires a levy on customers at all stages of the process—during development, construction and production—then the consumer surely has rather more of an interest in that process than just the passive interest in price and security that is suggested in subsection (4)(b).
For example, the consumer has a considerable interest in making sure that the cost to them is reasonable at all stages of the process, and that it does not simply set out to milk the consumer for the purpose of sorting out the project regardless of its vicissitudes. The consumer has a particular interest not only in the way that the RAB contract talks about the price of electricity, but in how it addresses the extent to which the consumer’s investment may be recouped as the RAB process comes to its conclusion and goes down its path.
Of course, in that context, the RAB arrangements that we are discussing have, during their latter stages, a two-way process. If the production of electricity goes above the ceiling of the allowable costs limit, then it is expected that the company producing the electricity, because the model is regulated, will restore money to the consumer in one way or another. If its production is under that allowable costs ceiling, however, it will take money from the consumer to allow that process to continue smoothly. Indeed, in the RAB consultation, we had a rather optimistic, smooth little curve down as the process comes to its end. I do not think that will quite be the reality as the RAB process goes on, but it is important.
Alan Brown
I share the hon. Gentleman’s concerns about protecting consumers from costs and so on. That is actually why we are against large-scale new nuclear. Can he explain a wee bit more about recouping costs? Recouping costs sounds like getting money back in terms of the asset, which does not make sense. The amendment also mentions recouping contributions
“at the conclusion of the construction phase of the project”.
That is effectively rent on a 60-year contract for the RAB, so I am not sure why it would be at the conclusion of the construction stage.
Dr Whitehead
It is at the conclusion of the construction stage because the construction stage gives way to a production stage. That is the point at which electricity is produced, when the customer—I am assuming we can describe the consumer and customer as an entity—or those acting on behalf of the customer can start to think about the extent to which some of that money may come back as a result of the way that production is carried out within the ceiling set for overall RAB programme costs.
There could be circumstances under which, as the RAB process comes to an end, the customer recoups—in lower bills, dividends and so on—a lot of the money that was put in. There will always be excessive production over the allowed costs level, so money will come back to the customer. We will see later in the Bill the methods by which that money might be restored to the customer. Yes, there is a real interest, post the construction phase, in recouping those costs.
A second issue for the consumer is the eventual outcome of the ownership of the plant at the end of the RAB period, as it goes into production. As it is a regulated asset base, by the end of the RAB period, the company that has undertaken the construction and run the production of the plant will have received all the money it should have received through the regulated asset base arrangement, and will have worked successfully as a result of the support that the RAB process provides.
Depending on how many years are set out for the RAB process to take place, if it reaches its end within the working life of the nuclear plant, the question then arises of who owns the nuclear plant at the end of that period. Does the consumer own it at the end of that period? If they do, that is a little bit like a mobile phone contract, whereby the consumer would expect the charges to reduce substantially after paying off the cost of the phone in their contract. Clearly, it is in the interests of customers to have an active involvement not just in spending their money wisely, but in recouping or changing it into a different form as the RAB process sets its course. Indeed, under those circumstances, the Secretary of State might need to consider the length of the RAB contract, and how far it goes into the operating life of the nuclear power station, to carry out the terms of the contract and to consider what arrangements might be made for life at the end of that contract.
I suggest that those are all things that the Secretary of State ought to have regard to over and above the passive involvement of consumers that is set out in subsection (4). That is why we tabled the amendment, which states that the Bill should take account of
“the interests of existing and future consumers of electricity in relation to their prospects of recouping their contribution at the conclusion of the construction phase of the project”.
That is an active consideration in the management of customers’ contracts, not just a passive one where the customer stands by and waits for the money to be deducted from their account to pay for these projects forever. The Secretary of State should have an active view on that in terms of how to get the best value for the customer from the project overall, over and above the best value for the project itself.
Greg Hands
Amendment 9 addresses how the interests of consumers, which are vital in this process, will be taken into account and what the consequences of that would be. In the Bill as currently drafted, the Secretary of State must have regard to a number of matters when modifying a designated company’s licence. That includes the UK’s net zero ambitions and the interests of existing and future consumers in relation to the future cost and security of electricity supply.
The amendment requires the Secretary of State also to have regard to the prospect of consumers recouping what I think the shadow Minister described as their “investment” at the end of the construction phase. I appreciate hon. Members’ enthusiasm for ensuring that consumers will benefit from any RAB project, and, in that sense, I welcomed their support on Second Reading. However, the amendment is not compatible with how the RAB model works.
The hon. Member for Kilmarnock and Loudoun got to the heart of this: the amendment would make RAB effectively inoperable. It treats consumers as investors, but they are not investors. Consumers will benefit from a new nuclear power station. He and I might disagree on whether that should have happened in the first place, but none the less, the benefit to consumers is in electricity rather than in a return on any investment.
Fundamentally, the amendment misunderstands how the RAB model will work. The RAB model will mean that consumers contribute to meeting project costs from the start of construction and reducing the cost of capital, which is the main driver of project costs. That is why we are seeking consumers’ contribution. What they get in return is a nuclear power station that produces low-cost, low-carbon electricity.
Dr Whitehead
Let me say two things. First, if someone contributes in a penny fund to a co-operative society account of some description, that does not mean that they are not an investor; it just means that they are investing in a certain way and at a certain rate. The fact that the RAB arrangements will be passed on to customers’ bills and that there will be a known and determined amount of levy on those bills, which can be quantified, means that the customer is, in effect, adding an investment into the process on top of their bills. That is what I am trying to say, and I am sure that the Minister would agree that that is a form of investment in the process, even though the consumer is not a conscious investor in the way that a corporation might be. This is one of the problems of how we best protect the consumer interest in this process. Nevertheless, I suggest that that is a consumer investment in the overall process.
Secondly, I am sure that the Minister would agree that the RAB process continues after construction for a considerable time in the production period, as the RAB consultation set out. Therefore, that part of the process needs to be considered equally as an investment in the overall outcome of the project, as it is in the construction period. If he thinks that it is something different, he ought to explain why.
The Chair
Order. Interventions are getting very long. There will be an opportunity to respond at the end of this debate, Dr Whitehead.
Greg Hands
I thank the hon. Gentleman for that lengthy intervention. I think that a bill payer’s contribution is not an investment. The objective is to lower the cost overall to the consumer. That is why we have the figure of £30 billion or more, or £10 a year per bill payer. The consumer’s objective is not to become an investor and get a return on that investment, but to have a future source and availability of low-cost, low-carbon electricity—that is, through a nuclear power station.
Kirsty Blackman
It is not low-cost energy. It may be slightly lower than more expensive nuclear, but it is still way more expensive than offshore wind, onshore wind, solar and such. Characterising it as low cost is simply wrong.
Greg Hands
That is a wider debate around nuclear, which I would contest. Obviously, it is an active debate: first, how expensive is nuclear, and secondly, how expensive is it relative to other forms of power generation? Those are active parts of political debate.
Greg Hands
Can I just deal with the hon. Lady’s first intervention? We are seeking to give effect to Government policy, which is to support the roll-out of more nuclear power. How do we do that in a financially reasonable and more cost-effective way for both consumers and the taxpayer? That is the purpose of the Bill within the confines of having already agreed as a Government that nuclear power is going to be the way forward in providing a large part of Britain’s electricity.
Kirsty Blackman
I was not aware that there was a political debate about the cost. The Department for Business, Energy and Industrial Strategy’s figures say that offshore wind costs £47 per megawatt-hour; nuclear is £93, onshore is £45 and large-scale solar is £39. Those are BEIS figures, so I did not think there was any debate. I am concerned that the Minister is inadvertently misleading us by using the term “low-cost”. He can use “low-carbon”, but to say “low-cost” is simply not true, even by BEIS figures.
Greg Hands
Again, I thank the hon. Member for that intervention. The cost of different forms of power generation is a very interesting part of the energy debate. Obviously those costs move around and will be based on any number of factors, including global market prices and the cost of extracting and producing particular forms of energy. Nuclear’s advantage is its ability to provide a steady, constant baseload, which is not always the case with some of the other technologies the hon. Lady is comparing it with.
I hope I am not digressing too far, but when it comes to offshore wind, the UK has had enormous success. We have the world’s largest capacity. None the less, when the wind is not blowing and the sun is not shining, we have to have something else to provide that baseload. That is the purpose of nuclear power. The Bill is about making it more cost-effective and reasonable for consumers. That is the Government’s position.
I hope I have convinced hon. Members that this amendment would not achieve their goals of helping consumers. The concept of consumers investing in a plant and then recouping their money somehow is incompatible with the RAB model. There are mechanisms in place to give confidence that any RAB project will successfully lead to the means of delivering large amounts of stable, low-carbon energy to consumers. I hope the hon. Member will withdraw the amendment.
Dr Whitehead
This really worries me. What does the Minister think consumers are doing in contributing to a RAB process? If the Minister does not think that that is in any way a form of investment in the plant and that consumers are just completely passive recipients—that they are good for whatever money is required to get the system through and should have no interest in the proceedings, other than being a milch cow for the process—I am afraid that we differ.
Kirsty Blackman
On that, consumers are investing in the significant profits for private companies that are in many cases not based in the UK. That seems to be the essence of the hon. Gentleman’s concerns and the reason he moved the amendment. Is that correct?
Dr Whitehead
Yes, indeed. This is perhaps a separate debate, but we have a position not just on this particular instance of nuclear power, but on similar arrangements that relate to the RIIO process for energy distribution and network companies, whereby they are enabled to charge an additional amount on bills in order to secure assets that they own and that consumers or the public do not. The consumers, however, are expected to pay for the privilege of having that piece of technology at their disposal subsequently, but the question of ownership never comes into it, because they pay collectively for someone else to have an asset to call its own. That is exactly the situation with the nuclear plant.
We therefore need to take the consumer rather more seriously than just being a passive contributor in the way often set out in such processes—“Oh well, the customer will pay an additional levy in the bill. As long as it doesn’t look too serious at any particular time, that’s okay.” Not only is that not okay, in particular for levies with no consequences if applied to customers, but it is not okay to have a cumulative set of levies that put a lot of money on electricity and gas bills over a period for particular purposes that the consumer has no hand in at all.
I agree that the concept of the consumer being a part investor in the process might sound a little odd to those who have a traditional view of an investor and how an investor works, it is nevertheless a real thing: the consumer is in effect investing in the success of the plant. The Secretary of State—the Minister; I have promoted him already—has set out how he sees the customer being involved in the process, but that completely ignores the proper interest and protection of the consumer and bill payer as far as the overall process is concerned.
The amendment would not make the RAB process impossible; it merely states that as part of that process—we will come to the debate about where allowable costs have been exceeded—yes, the customer invests in it, but the customer also has reasonable expectations of some quid pro quo for that investment. That ought to be looked after. The quid pro quo in this instance, as I set out—I am sure the Minister agrees that this takes place in the RAB process—is that in the production process, if there is an excess over the allowable costs of production, the fact that it is a regulated asset means that that money goes back to someone. In this instance, it should be the customer.
That is what I mean by the customers’ interests being protected in recouping their investment. The Minister surely cannot deny that that is part of, not instead of, the RAB process in the production period. That is actually set out in the notes that accompany the Bill. I am therefore a bit mystified as to how the Minister takes the position that he does, given what is in his own Bill and in the arrangements for RAB that he himself is putting forward. I see no reason why he should not accept the amendment if he has the customers’ interests at heart, because it does not detract from RAB; it adds to it by recognising who is paying the money, what their interests are and how they should be protected.
I will not press the amendment to a vote, but I want to record my disappointment in the Minister’s apparent lack of either understanding or empathy for the customer’s position. We are discussing a Bill in which the customer is central, because they are bankrolling a substantial part of the project as it goes forward. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Greg Hands
I will try to speed up a little. As we know, the clause allows the Secretary of State to make the necessary licence modifications to apply a RAB model to a designated nuclear company. Subsection (2) clarifies that the effect of a licence modification is that the company would benefit from being able to receive an allowed revenue to construct, build, commission and operate a new nuclear power plant. Subsection (3) requires that the power be exercised only in relation to a nuclear company that is designated in accordance with the provisions of the Bill.
Licence modifications will not take effect unless the nuclear company whose licence has been modified subsequently enters into a revenue collection contract with a revenue collection counterparty, as set out in subsection (9). The modifications will be subject to negotiation between the Government and the nuclear company. It is therefore not possible to describe the exact modifications that would be required; however, subsection (5) highlights possible examples, such as the revenue that a company is allowed to receive, how that revenue is to be calculated, and the kinds of activities that may be undertaken by the company.
When making any modifications to a licence, subsection (4) requires the Secretary of State to take into account both our commitment to decarbonising the power sector and the interests of existing and future consumers with respect to the cost and supply of electricity. Alongside that, and to ensure that any RAB project is financeable, the Secretary of State, when making modifications under the clause, must have regard to the costs incurred in delivering the project and the need for the company to finance that activity. Together, those obligations will ensure that the modification powers are used so that the project contributes to a transition to a low-carbon, low-cost energy system.
As set out in subsection (3), the power to make modifications to a licence will last while the designation for a nuclear company is in effect. That is important to allow the Secretary of State to make modifications to the licence to take into account developments in negotiations and engagements with the financial market. When making any modifications in that period, the Secretary of State will need to continue to take account of the consultation that he undertook with all bodies named in clause 8. In addition to the modification of the designated nuclear company’s licence, subsections (7) and (8) allow him in very limited circumstances to modify the standard conditions of generation licences if necessary. The Secretary of State can make those modifications only if he considers it appropriate for consequential, supplementary or incidental purposes.
Alan Brown
I will be brief, because I know that time is getting on, and far be it from me to speak to a clause that both Front Benchers have agreed adds transparency to the Bill—albeit that, being facetious, I would say that doing so is a low benchmark. Subsection (2) clearly states that the licence can be modified only to facilitate
“investment in the design, construction, commissioning and operation of nuclear energy generation projects.”
Given that clause 1 states that a company can be designated only if it already has a generation licence, I would like the Minister to provide more clarity on what could be in a generation licence that prohibits the investment that he says that we are seeking to unlock by modifying it. That is the part that I am not quite clear on.
Clause 6(5) says that it is all about being able to change the revenue mechanism to allow a company to create more money. The Minister rightly said that subsection (4) lists some of the things that need to be considered as part of a licence modification. I ask him to consider that in the light of what I said earlier about clauses 2 and 3, and about there not being enough information in the Bill about what the Minister or Secretary of State should consider. We could also look at that in the round on Report, but we would like a wee bit more information about why the licence would need to be modified to release this so-called investment.
Greg Hands
I thank the hon. Member for his contribution. The Government are satisfied that the amount of information included in the Bill is sufficient. Far be it from me to suggest that Members table amendments, but perhaps he might seek to do so if he wants to see more transparency and more information. I realise I was not quite right earlier in saying that the SNP had not tabled any amendments; I know that it has tabled some new clauses. If he wants additional publications, he might table some amendments on Report to be a little more precise about what additional information he thinks the Secretary of State should publish.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7
Licence modifications: relevant licensee nuclear companies
Dr Whitehead
I beg to move amendment 11, in clause 7, page 7, line 8, at end insert—
“(3A) When exercising the power in subsection (1), the Secretary of State must not cause the excess of expenditure being incurred over the allowable revenue cap to lead to further charges upon revenue collection contracts.”
This amendment prevents the Secretary of State from allowing the levy of further consumer charges should an increase in allowable revenue be agreed following increases in costs or timescale of a nuclear project.
The Chair
With this it will be convenient to discuss amendment 12, in clause 7, page 7, line 8, at end insert—
“(3A) When exercising the power in subsection (1), the Secretary of State must publish a statement setting out how an adjustment in the company’s allowed revenue is to be made without relying on revenue collection contracts.”
This amendment requires the Secretary of State to set out how an adjustment to allowed revenue, following an increase in costs or time, is to be provided for by means other than additional customer levies.
Dr Whitehead
With these amendments, we get to the heart of the consumer interest in the Bill. They are closely related, so it is appropriate that they are grouped and spoken to together.
As I think hon. Members know, when the RAB process gets under way, one of the first things that will happen is that Ofgem will be required to draw up a programme of allowable revenue. That is the sum total of the amount that is considered to be within the RAB process. Much of the rest of the Bill is about how that allowable revenue is collected from customers, placed with the counterparty and allocated out to the nuclear company that undertakes the construction and subsequent production of a nuclear plant, and about the safeguards and concerns surrounding that process. The question of allowable revenue is crucial to the rest of the Bill.
Allowable revenue is made up of a number of building blocks. The return on capital must be assessed, as must depreciation, operating costs, the project’s taxation, grid costs, the funded decommissioning programme, incentives and other adjustments. Those all go into the pot of the allowable costs regime, which sets a ceiling for the amount of money that can be taken from the consumer, albeit that that is a contribution towards the process made by lots of people in small amounts on their bills over a period of time. It sets out the quantum of those contributions, and many adjustments can be made to how that works, in relation to the timescale of the process, the part of the allowable costs element that is placed into construction and the part that is placed into production. That is set out later in the Bill as part of the process of allocation from the counterparty body to the body that carries out nuclear construction and production.
As was mentioned earlier, it is not always the case that nuclear power plants are constructed exactly to cost and exactly to time. Indeed, if we look at the construction of nuclear power plants across the world, we find that all but one has run over time or over cost or both—in some instances by very large amounts. The allowable costs ceiling is therefore important for us to get a clear scope of what the customer will have to bear in this process. However, there is also a process in the Bill that allows that allowable costs ceiling to be raised, on the Secretary of State’s consideration, if the circumstances change. If the costs rise or the timescale slips, the Secretary of State can allow the allowable costs ceiling to be raised.
What that means in principle for the consumer is potential catastrophe, because the consumer thought they were in for a particular allowable costs ceiling that had been determined. We have heard already about the rather heroically optimistic cost assessments provided for in the Bill, and on that sort of allowable costs arrangement consumers would have about £1 put on their bills in the design phase, with a lot more—perhaps £10—on their bills in the construction phase. The amount would then taper down as production gets under way, with the possible payback of some money in the process. The overruns on construction costs or time costs could double or treble that amount, particularly during the construction period, in a way that the consumer would not have anticipated.
In the amendments, we suggest that the consumer should be in for the initial allowable costs ceiling estimate—and that is it. In circumstances where the Secretary of State is contemplating what should happen with the allowable costs ceiling, he should not cause any excessive expenditure simply to be plonked on to customers’ bills. At that point, if the costs or the timescale have changed, there are a number of options open to him as to how to deal with the new cost ceiling; that need not necessarily be done by simply raising the allowable costs ceiling. For example, it could be by adding a particular taxpayer’s investment to the project, or it could be by issuing nuclear bonds, which puts additional money into the company but does not impact on customer bills.
We are seeking to cap the RAB in terms of what the customer expectation of it is. That does not necessarily mean that the function of the RAB is determined by that cap; it just means that the exponential milking of the customer to fund the RAB does not take place and that the Secretary of State has recourse to other means and should publish, as amendment 12 says, what the plans would be in the event of an excess over the ceiling to make the project a success.
That is a very important part of the new deal as far as RAB is concerned. The customer is now being asked to invest, in the first instance, in the hope for a plant, well before the plant has been established; that is new—the CfD process is post the construction of the plant. They are being asked to underpin the expensive costs that are incurred during the construction period. They are also being asked to engage in a two-way process whereby, yes, they get cheaper bills but they are still potentially contributing to a RAB process as the production phase continues. So the very least we should expect on behalf of the customer is that they know what they are letting themselves in for at the time of the outcome of the project.
We are not talking about capping costs necessarily; we are talking about how those additional costs are paid for under the circumstances where they do rise. We obviously hope that, as the project progresses, those costs and timescales do not increase, but if they do we do not see that the customer needs to foot the additional bill; there needs to be other recourse. That is what we have put in these amendments, and should the Secretary of State consider in any way that the customer is an investor in this process, we hope he would consider that a reasonable way of dealing with the investment that the customer is undertaking in the process as a whole.
Greg Hands
I will speak for a little longer than I might ordinarily do, because this is an important question of consumer protection. I will try to deal with all the points raised by the hon. Member for Southampton, Test.
Amendment 11 would limit the ways in which the Secretary of State could exercise the powers under clause 7. As we know, clause 7 allows for a nuclear company’s allowed revenue to be increased should its financing cap be exceeded in construction, but only in certain circumstances and where a clear procedure is followed. The amendment seeks to prevent the Secretary of State from creating any additional recourse to consumer funding in the exercising of his or her powers under the clause. Amendment 12 proposes that the Secretary of State should be transparent about the funding of a nuclear RAB project were they prohibited from funding an extension to the allowed revenue through a revenue collection contract.
First, I draw the House’s attention to the remoteness of the scenario under which the Secretary of State may choose to exercise the power under clause 7. Under a RAB model, the licence would determine a risk-sharing mechanism, whereby construction cost overruns up to the agreed financing cap are shared between investors and consumers. We expect that any RAB structure will ensure that financial incentives are in place to ensure the company’s investors manage project costs and schedules. The financing cap will be based on robust risk analysis, including best-practice, reference-class modelling, and set at a level that is sufficiently remote that there is a very low chance that it would be reached.
However, in the event that the financing cap is reached, investors would not be obliged to provide the capital to complete the project and this risks considerable sunk costs to consumers if the project is discontinued. Given the size and importance of the project, the Government consider it crucial that there is a mechanism in place to allow the additional capital to be raised to ensure completion of the project, and that decisions to extend the project’s revenue rest with the Secretary of State.
I would emphasise at this point that any decision taken by the Secretary of State to adjust the allowed revenue is one that is subject to a robust process of scrutiny and transparency. The Secretary of State could exercise the power to extend the allowed revenue only following consultation with the licensee, the ONR and Ofgem, which, I remind the Committee, has as its primary statutory duty the need to protect the interests of existing and future consumers with respect to the cost and security of the supply of electricity.
In exercising the power, the Secretary of State must continue to have regard to those matters detailed in clause 6(4), which includes the interests of existing and future consumers with respect to the cost of supply of electricity. As is consistent with our approach across the Bill, we have sought to ensure a transparency process whereby the Secretary of State is required to publish a statement setting out the procedure to be followed when exercising this power. That is set out in subsection (6).
Dr Whitehead
That is very disappointing. The Minister has effectively said that the customer has no say in this arrangement. He used the phrase “reduce the options to Ministers”; yes, this would reduce the options available to Ministers—it would make them think about how they should put forward other ways of covering a breach of the allowed expenditure without simply fleecing customers. The Minister may think that one of his options ought to be to fleece customers—that might be the universe he inhabits—but we do not think that should be the case. We think that the customer must have much clearer lines of protection, other than the very woolly things that the Minister has said that might cause the customer to be given some consideration in this process. For those reasons, we would like to divide on amendment 11.
Question put, That the amendment be made.
Dr Whitehead
I beg to move amendment 10, in clause 7, page 7, line 17, after “operations” insert
“and have generated power for placement onto the National Grid”.
This amendment amends the definition of the completion of construction of the nuclear project to include initial generation of power.
The amendment relates to statements made, for the purpose of licence modifications, about the completion of the construction of a nuclear project. Clause 7(5) states that completion of the project should be based on
“successful completion of such procedures and tests relating to the project as constitute, at the time they are undertaken, the usual industry standards and practices for nuclear energy generation projects in order to demonstrate that they are capable of commercial operations.”
I wonder whether hon. Members can spot what is missing from that subsection. This is not a quiz, and I think hon. Members have long gone to sleep—but in case not, the answer is that there is no suggestion in it that the nuclear power station actually has to produce anything. Construction could be regarded as complete provided that all the hoops have been jumped through, even if no button has actually been pressed. Presumably what one would regard as the original purpose of the whole operation is that it should produce some power that goes into people’s homes, buildings and so on.
The amendment simply says that not only must all those things be completed, but the project must do what it was originally supposed to do: generate power. As the amendment describes it, the project must
“have generated power for placement onto the National Grid”.
That seems a very modest amendment, but it would put right what I think is rather a serious omission in clause 7(5) with respect to the whole idea of what a nuclear power station is for. Surely we must agree that generating power is the purpose of a nuclear power station, and that completion must therefore be based on that purpose.
I cannot see any great reason why the amendment should not be accepted, but I am sure that the Minister has a very good argument why not.
Greg Hands
I thank the hon. Gentleman for moving his amendment. It is important that we consider that the scenario is remote; before allowing any project to have a RAB, we will obviously have conducted robust due diligence, using best practice benchmarking analysis to set the financing cap at a remote level. The project’s investors will be incentivised to control costs below that level and will be penalised for project overruns. We are clear that this power of modification should be exercisable only during the construction of the plant, and have sought to do this in clause 7(4). This determines that this power cannot be exercised at any point once construction has been completed. For the purposes of this clause, we have defined the construction phase in clause 7(5).
The amendment would provide further qualification to the definition of the end of a project’s construction phase. It seems to make it explicit that the purpose of the construction phase of the nuclear project is to build a plant that will contribute electricity to the national grid, and that might appear fair enough. However, the clause is intended to cover both the period of construction and the testing of the plant, to ensure that it can operate commercially to provide power. An early part of this testing is the connection of the plant to begin to provide power to the national grid. However, there is further testing that follows, to ensure that the plant can operate effectively throughout its life. We consider it appropriate that the option to increase funding to complete the project should run until all testing completes.
In a nutshell, I think the cut-off point proposed by the hon. Member for Southampton, Test is too early in the process. The point at which the power station connects to the national grid is not the point at which one can have 100% confidence in the project from there. Therefore, I thank the hon. Gentleman for his interest and concern, and of course we would not wish to see consumers being penalised, but unfortunately I think he strikes the wrong point in the process at which this clause would kick in. I urge him to withdraw the amendment.
Dr Whitehead
I concede that I may not have fully understood all the various tests that are undertaken to usual industry standards, but nowhere in this clause does it say that those tests include the production of power. That is my central point. It is a bit like going into a car showroom and being shown a really nice vehicle. It has all the bells and whistles on it, and all the guarantees; it looks greats and the paint is really good. But when one asks to go for a test drive, the person in showrooms says, “I’m sorry, you can’t do that, Sir; it hasn’t got an engine in it.” Surely it must be about producing power. That ought to be explicitly in the Bill. That is my only point. If the Minister thinks that, concealed in all these various tests is the production of power, which does not seem to be the case to me, then maybe that is not needed on the face of the Bill. I think it would be rather good if it were on the face of the Bill.
Dr Jamie Wallis (Bridgend) (Con)
Does the hon. Gentleman agree that we are in a very sorry place indeed if all the usual industry standards and practices for nuclear energy production do not actually include the production of energy?
Dr Whitehead
We would be in a sorry place, but that is effectively what the clause appears to state. It is all about the fact that it could produce energy, not that it does produce energy. Those are two potentially different things. The hon. Gentleman is right about the industry standards that set it all up to make sure that energy can be produced. I merely think it might be a good idea if we found out if it did produce that energy.
Alan Brown
I do not want to go on for too long but, further to the previous intervention, is it not the case that it can easily be argued that the EPR reactors currently being built are capable of generating electricity, but not one of the two EPRs under construction in Europe have started generating electricity for the grid? They are actually 10 years late, which underlines the point made by the hon. Member for Southampton, Test.
Dr Whitehead
The hon. Member makes a good point. We have a number of nuclear reactors in Europe that look like they can produce energy, and they are still standing there not producing energy, many years after they were supposed to do so.
We will not press the amendment to a vote. I am a little disappointed that the Minister did not take the opportunity to add to the Bill what I think an average person reading the Bill would think obvious, but I know we cannot get what we want all the time. He has put forward reasons why he thinks that point is covered elsewhere in the clause. It would have been good if it was more transparent and up front. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Alan Brown
Again, I will be brief. I have a few comments on clause 7 stand part. Subsection (2) and paragraph 83 of the explanatory notes confirm that a licence can be modified to allow the cost cap to be exceeded, but also, critically, so that additional revenue can be collected. The Minister spoke about transparency. How can that power be applied transparently? Clause 7 references clause 6(4), but that subsection does not provide enough scrutiny of governance.
I will give an example. What is to stop a nuclear company begging another £1 billion? With the costs of a nuclear project, £1 billion here or there does not make much difference in the overall scheme of things. If the Secretary of State thinks, “I am so worried about security of electricity supply”—that is an argument we keep hearing on nuclear—under clause 6(4)(b), they can then decide, “Yes, this power station is so critical for future energy security, I will just throw more good money after bad.” It is an easy step, and one that could be repeated several times—£1 billion here or there makes no difference.
This Government have already proven to be so pro-nuclear that they signed up to the most expensive power station in the world, Hinkley Point C, and so pro-nuclear that, after market failure, we are here debating this Bill, and, as was said earlier on, they have committed £1.7 billion just to develop Sizewell C to the final investment stage. We know they are so desperate to get Sizewell C over the line for the final investment stage, they are making that the newest, most expensive power station in the world, which we will be paying for for 60 years. So I do not understand how the clause gives protection and transparency for consumers, if costs go up. Invariably, costs will go up. It is unlikely that the risk is going to be carried by the developer. The risk under the RAB model is going to be carried by the consumers.
Greg Hands
Clause 7 provides the Secretary of State with the power to modify the allowed revenue of a relevant nuclear company where that is required to complete the construction of the nuclear RAB project.
I stress that this is a narrow power. Subsection (2) makes it clear that it can be exercised only where the expenditure to complete construction is likely to exceed a cap under the licence and to make modifications to the allowed revenue of the company. Subsection (4) means the power can only be used before the completion of construction, the point at which the plant is ready to enter commercial operations. That refers back to our previous debate. That is the right point at which this power ceases to be exercisable. The use of the power is at the discretion of the Secretary of State.
Alan Brown
Will the Minister explain how he sees the cap being set? Obviously, on a construction project, there is usually agreed risk sharing and that effectively sets a cap, but presumably, given the way the Minister is talking, there will be even more headroom here. How is that headroom going to be set and how transparent will that be, in terms of understanding what costs have increased to reach the cap?
Greg Hands
The financing cap will be set out at the beginning of the project by the Secretary of State. It will be available to be scrutinised. The purpose of the power in the clause relates to what happens in the event that we approach the financing cap.
The clause would have relevance in the very unlikely situation that, during construction, the project is likely to breach its financing cap under a RAB. The financing cap is the point at which investors are no longer required to put money into the project. What happens then? The cap is set at a remote overrun threshold. This means that before committing to a company having a RAB, the Secretary of State should be confident that the prospect of costs hitting that threshold is really very unlikely. Under the RAB licence, mechanics will be in place to incentivise investors to minimise costs and schedule overruns, such as overrun penalties. That will ensure that the breach of the financing cap is a remote risk.
When deciding whether to exercise the powers, subsection (3) means that the Secretary of State will need to have regard to the achievement of carbon targets and the interests of consumers, and whether the company is able to finance its activities. Those are the same considerations as when deciding whether to amend the company’s licence to insert the RAB conditions in clause 6. Given the strategic importance of a new nuclear plant, and the wider considerations, such as our need to secure resilient low-carbon energy, it is more appropriate that such a decision is made by the Secretary of State in this instance.
The Secretary of State is also the most appropriate person to balance the interests of consumers, taxpayers and investors. It is not about putting additional burdens on consumers. The RAB is designed to protect consumers by giving them a more cost-effective nuclear power plant, as shown by the steps that we have taken in the Bill. That includes robust due diligence before the final investment decision to be confident that the project will be effectively managed, incentives on the project in construction, penalties for investors in any overrun scenario, and the option for the Government to step in if the project hits extreme overruns.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8
Procedure etc relating to modifications under section 6 or 7
Dr Whitehead
I beg to move amendment 13, in clause 8, page 8, line 11, leave out from “power” to end of line.
This amendment strengthens the requirement on the Secretary of State to publish details of license modifications.
Ms Fovargue, as there are no amendments or objections to the clauses from this one to the end of part 1, I suggest that it might be possible to dispose of them collectively to get to the end of part 1 this afternoon. The Opposition would have no objection to that.
I will be brief. Amendment 13 simply says that if the Secretary of State is going to publish something, they should get on and publish it. As it stands, the clause states:
“The Secretary of State must publish details of any modifications made under a relevant power as soon as reasonably practicable after they are made.”
That is a weaselly dilution of the “must” at the start of the line—if the Secretary of State must publish details, they should just get on with it. Hon. Members will see that the following subsection states:
“If…the Secretary of State makes a modification…the Authority must…publish the modification.”
That does not have the little weasel phrase at the end, so why is that weasel phrase in subsection (5) and not subsection (6)?
Alan Brown
I do not want to be a pain, but does not deleting
“as soon as reasonably practicable after they are made”
make the timescale for the Secretary of State to publish open-ended? In a way, the amendment is not tightening the timescale but leaving it more open-ended.
Dr Whitehead
My concern in this clause is that the phrase
“as soon as reasonably practicable”
gives the opportunity for almost limitless delay to publication. If the Secretary of State must publish details of any modifications, he must, and if he does not, he can be called up under the terms of the Bill. If that weasel phrase is in it, however, the delay could last for a long time. I suggest that the amendment tightens it up by saying that it should be published and that is it.
Alan Brown
I realise that we are arguing over semantics, but perhaps it should be amended to be “must publish details of any modifications made under a relevant power once that modification has been made” to try to bring absolute clarity that it needs to be published right away.
Dr Whitehead
Yes, that might have been a good idea, but unfortunately it is not on the amendment paper this afternoon. My amendment is, so I hope the Minister will consider ensuring that subsections (5) and (6) are consistent, so that both modifications made under both are required to be published, full stop.
Greg Hands
Amendment 13 addresses how soon the Secretary of State should be obliged to publish the details of any modification made under the relevant powers, as already referred to. We think the clause already provides a clear and transparent process, which includes consulting the named parties before exercising these powers and modifications, and then publishing medications made
“as soon as reasonably practicable”
after the fact. Of course, publication can exempt matters that are commercially sensitive or that relate to national security.
The purpose of the amendment is to remove the obligation on the Secretary of State to publish the details of any modifications as soon as practicable after they are made. The Secretary of State would therefore not be subject to an express time obligation on when the details of the modifications must be published. I welcome the Opposition’s focus on ensuring transparency throughout the process of setting up a RAB for a project. We recognise that decisions to modify licences are important, and we believe it is necessary to provide a transparent decision-making process in legislation, as the Bill seeks to do.
I believe the amendment would reduce transparency, not increase it. I do not consider that it will help us to achieve the objective of a clear and transparent decision-making process. Removing the express obligation on the Secretary of State to publish details of any modifications as soon as reasonably practicable could result in uncertainty about when they should be published, which might cause the Secretary of State to unnecessarily delay the publication informing the public, stakeholders or industries of the modifications made. I hope that the hon. Members for Southampton, Test and for Greenwich and Woolwich will agree with that position; the amendment would reduce transparency, not increase it. I therefore ask that amendment 13 be withdrawn.
Dr Whitehead
I think we perhaps have a slight divergence of opinion here. We were seeking to simplify and create an imperative for publication by reducing the qualifications on that publication. The Minister has sought to suggest otherwise. We will have to disagree on that; however, we do not wish to push this to a vote this afternoon, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 ordered to stand part of the Bill.
Clause 9
Expiry of modifications made under section 6
Question proposed, That the clause stand part of the Bill.
Greg Hands
Briefly, clauses 9 to 14 lay out pretty clearly the direction of travel. No amendments have been tabled, so I assume there is contentment across the Committee with the clauses as they stand. They are perfectly drafted, though I say so myself, and I therefore urge the Committee to agree that they stand part of the Bill.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clauses 10 to 14 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mark Fletcher.)
Nuclear Energy (Financing) Bill (Fifth sitting)
Tuesday 23rd November 2021
(2 years, 4 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 23 November 2021 - (23 Nov 2021)
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Chair
Before we begin, I have a few preliminary reminders for the Committee. Please switch electronic devices to silent. No food and drink is permitted during sittings of the Committee except for the water that is provided. I encourage Members to wear masks when they are not speaking in line with current Government guidance and that of the House of Commons Commission. Please also give one another and members of staff space when seated and when entering and leaving the room. Hansard colleagues would be grateful if Members emailed their speaking notes to hansardnotes@parliament.uk.
May I have declarations of interest first, please?
Mark Jenkinson (Workington) (Con)
I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. It is a matter of public record that I was employed in the nuclear sector prior to my election to this place.
The Chair
Thank you.
Clause 15
Regulations about revenue collection contracts
Question proposed, That the clause stand part of the Bill.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
Welcome back to the Chair, Ms Fovargue. For the benefit of colleagues, I will speak briefly on the clause, which introduces part 2 of the Bill, and what that is all about. The clause gives a power to the Secretary of State to make regulations about revenue collection contracts, which operate between a revenue collection counterparty and a designated nuclear company, referring back to part 1. Contracts will require the revenue collection counterparty to collect payments from Great Britain electricity suppliers and pass them to the licensee nuclear company so that it can receive its allowed revenue. Subject to consent being given, we expect the Low Carbon Contracts Company to take on the role of the counterparty.
Clauses 16 to 24 set out in further detail what the regulations may cover in relation to the contracts. They could include, for example, the duties of the counterparty, the amounts that electricity suppliers must pay and how the authority will enforce the contract. The legislation will enable payments to flow in the opposite direction if necessary, such as in circumstances where the nuclear company receives more than its allowed revenue. The regulations will ensure that the nuclear company can receive its allowed revenue in a consistent and stable flow. Importantly, the regulations throughout this part are based on existing regulations governing the revenue model under the contracts for difference regime, taking precedent from the Energy Act 2013. Regulations relating to clauses to 16 to 22 and the first regulations made under clauses 23 or 24 will be made using the affirmative procedure. They will therefore be subject to a greater level of scrutiny, as we know, as such statutory instruments must be approved by a resolution of both Houses of Parliament.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to serve under your chairmanship, Ms Fovargue. Like the Minister, I would like to spend a moment announcing, as it were, this part of the Bill, which I hope we can get through in an orderly and suitably speedy fashion. It is however important to share an understanding of what we think this part is about. As the Minister said, it concerns the setting-up of revenue collection contracts; the setting-up of a counterparty to hold the revenue collected from suppliers to underpin action by the nuclear company in terms of construction; and, importantly, as he said—he seemed a little concerned when I mentioned this in our previous sitting—revenue collection and distribution during both the construction and production phases of a nuclear project.
My understanding is that during the production phase, the nature of the revenue collection changes. During the construction phase, within the overall allowable costs architecture, the nuclear company is likely to absorb whatever comes its way from the counterparty for the purposes of underpinning the construction costs of the nuclear plant. Obviously, there are debates to be held on that and further regulations to be put in place concerning how the revenue stream for a nuclear company is carried out and the requirements of the construction at various phases.
We have debated to some extent the instance whereby the allowable costs ceiling is breached because of rising costs, particularly during production; whether the regulator would have the opportunity to revisit the allowable costs ceiling; and what effect that would have on the run through the regulated asset base process to customer bills as a result of those recalculations. However, there are issues with what revenue stream goes into the nuclear company, and at what stage during construction, but that is within the overall costs ceiling, or should be, in the first instance.
During the production phase of a nuclear plant, the relationship between collection, distribution and re-disbursement becomes a little more complicated. I would be obliged if the Minister could shed a little light on some of the things that happen during the production process, which are still slightly unclear. That is important because, in the production process, the receipt of funding under the RAB process becomes a comparative issue. The company is making money and producing electricity, and one would expect that, as a result of the RAB model, the money that is being made by the company would sit within the parameters of what has been agreed for the regulated rate of return under the RAB model. If the company is making more money from its production of electricity than is allowed within the overall model’s parameters, that money starts coming back to the counterparty or, at least indirectly, through to customers.
Conversely, if the company is making less money from its production than is allowed within the RAB model for production purposes, money continues to come in under the allowable costs ceiling. The best explanation is given on page 21 of the consultation document on a RAB model for nuclear, which suggests:
“Suppliers could pass the cost of the payment obligation onto their consumers, as they do with other regulated costs and could likewise reimburse their consumers (as happens under a CfD) in periods where suppliers receive payments from the project company (e.g. when the Allowed Revenue is lower than the project company’s revenue from power sales). The design process would need to consider how these charges could be made in more detail, in consultation with suppliers and consumer representatives.”
That is essentially the model during the production phase: it is potentially a two-way process.
That issue reflects, at least to some extent, the amendments that we wish to discuss this afternoon —an understanding of how the money goes into the counterparty, what the counterparty does with the money, what the counterparty does when the money is held, and what the counterparty does if that money may not be needed, or money has been paid back into it by the nuclear company during the production phase. Consideration of how that happens, where that money goes and what sort of requirements one should place on that process are at the heart of some of our amendments.
I thought it important to check whether we have a shared understanding with the Minister of how the process works. Assuming that we do, we can discuss the amendments on the basis of that shared understanding of what this part of the Bill sets out to do. That is essentially a contribution to the clause stand part debate, but I hope that it clarifies how we will proceed with part 2 as a whole, and that it will be helpful to the Committee.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship again, Ms Fovargue. It was interesting that the hon. Member for Southampton, Test spoke about a shared understanding. I wish I had one; I do not think that the Bill is good enough to have any shared understanding of what it is about. Part 1 is clearly all about the definition of designating a nuclear company, and then a blank cheque in terms of defining costs. It seems to me that part 2 is all about how the blank cheque moneys are recouped in revenue collection.
I have one point to put to the Minister. Explanatory note 119 states:
“The terms of a revenue collection contract will be bilaterally negotiated between the Secretary of State and an eligible nuclear company to be designated under Part 1.”
Would he enlighten me on what expertise the Secretary of State has in negotiating a revenue collection contract for a new nuclear power station, how that will be undertaken in a transparent manner, and what options are available for scrutiny of that?
Greg Hands
I thank both hon. Gentlemen for their contributions. I will try to be as helpful as I can. Rather than setting any hares running, it is essentially a very similar process to how contracts for difference work under the Energy Act 2013. There is nothing essentially different here, other than the fact that it is about nuclear power generation and has the RAB model. What we are talking about in this part of the Bill is essentially the same process that is being used for contracts for difference under the 2013 Act. I am always slightly reluctant when an Opposition Member asks whether we have a shared understanding. It strikes me as often being slightly dangerous to give a blank cheque on that. My understanding of the process, and I think the Opposition would agree, is that it is essentially the same process that we have been using for contracts for difference through the collection company.
Dr Whitehead
I substantially agree that that is essentially how the process works, except that of course with CfDs the customer contribution does not change at all once the CfD has been implemented because there is a constant price. The difference is in the company getting the difference between the reference and the strike price, not what the customer pays for electricity bills or pays into the process itself.
Greg Hands
Here there will be a frequent resetting, which is likely to be twice yearly, in terms of the amount of money that has been collected, followed by a reconciliation at the end of the period, but a lot of the detail will be set out in the draft regulations. The hon. Member for Kilmarnock and Loudoun asked what expertise the Secretary of State has to negotiate such a deal. As I said, this has been a tried-and-tested methodology over the past eight years. When we say “the Secretary of State”, we mean that the individual who is the Secretary of State is the decision maker, but acts with the advice of a group of excellent officials at the Department for Business, Energy and Industrial Strategy. That is the normal way in which any reference to a Secretary of State is made in primary legislation. As I say, the legislation is very much based on the Energy Act 2013 and how it looks at the contracts for difference regime.
Alan Brown
The other point that I was making was about transparency. What options are available for the likes of me, an opposition MP, to scrutinise and challenge what is being signed off as a good deal?
Greg Hands
The regulations will be subject to the affirmative procedure, which, as the hon. Gentleman knows, will mean a debate in a Committee Room like this, and the potential to take the legislation to the Floor of the House and have a Division of the House of Commons. In that sense, the scrutiny available to Members of Parliament—if that is what he is referring to—is considerable. That is why the regulations will be subject to the affirmative procedure. I think it is reasonable for Parliament to see the regulations when they are made, although we do not envisage that further technical changes to those regulations will be subject to the affirmative procedure. As laid out in later clauses, those changes will be subject to negative procedure. I hope that the Committee will agree to clause stand part.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16
Designation of a revenue collection counterparty
Question proposed, That the clause stand part of the Bill.
Greg Hands
The power in clause 16 will enable the Secretary of State to designate an eligible and consenting company or public authority to be the revenue collection counterparty for revenue collection contracts. As stated earlier, the Government intend that the Low Carbon Contracts Company should fill that role. The counterparty will be responsible for collecting payments from electricity suppliers and making payments to the relevant licensee nuclear company, as well as collecting any payments from the licensee and making payments back to electricity suppliers.
Unlike contracts for difference, the authority will be solely responsible for determining amounts to be paid to or by the revenue collection counterparty, and would be responsible for communicating that to the counterparty. That responsibility is facilitated by regulations making provision to require information to be shared by the authority, a revenue collection counterparty, and the national system operator under clause 23, on information and advice. The power to designate a counterparty will commence at the point of Royal Assent to support the Government’s aim of bringing at least one large-scale nuclear project to the point of final investment decision within this Parliament.
Question put and agreed to.
Clause 16 accordingly ordered to stand part of the Bill.
Clause 17
Duties of a revenue collection counterparty
Dr Whitehead
I beg to move amendment 14, in clause 17, page 14, line 31, leave out “may” and insert “must”.
Although I have set out some of the shared under- standings that I think necessary for the three amendments that we will move this afternoon, this is not one of them. Amendment 14 addresses the text of the Bill, and puts in place small question marks about what that text means for the Secretary of State’s responsibilities, particularly in relation to the duties of a revenue collection counterparty.
At the moment, clause 17(1) states:
“A revenue collection counterparty must act in accordance with…any direction given by the Secretary of State”
and
“any provision included in revenue regulations.”
That theme of “must” continues in subsection (4), which states:
“A revenue counterparty must exercise the functions conferred by or by virtue of this Part so as to ensure that it can meet its liabilities under any revenue collection contract”.
It is an imperative. And subsection (5) states:
“Revenue regulations must include such provision as the Secretary of State considers necessary so as to ensure that a revenue collection counterparty can meet its liabilities under any revenue collection contract to which it is a party.”
Clearly, those “musts” are imperatives for the revenue collection counterparty to undertake. It “must” act in accordance with directions given by the Secretary of State; it “must” ensure that it can meet its liabilities; and it “must” meet its liabilities under any revenue collection contract.
Then we go to subsection (2) and look at the provision for the regulations themselves, which logically should follow on from the imperatives that I have set out, but we see this statement:
“Revenue regulations may make provision”.
The regulations that carry out the imperatives of the other provisions of the clause do not appear to have the same imperative applied to them.
I appreciate that the word “may” in legislation is a perfectly reasonable and acceptable term where something can be done as part of a series of powers that perhaps a Secretary of State has. A Secretary of State may decide to do various things under those powers. Indeed, we get some enlightenment on that in subsection (3), which refers to the
“provision that may be made by virtue of subsection (2)”.
That is a proper use of the word “may”.
However, in this case, what the word “may” appears to suggest is that the regulations that follow from the imperatives do not have to make provision for these particular things; they “may” make provision. There is no direction from the senior Bill to secondary legislation to actually follow the imperatives in the Bill. If the regulations do not happen to make provision, they simply do not, because they “may” make provision; they do not have to do so. That appears to me to be not a very good way of ensuring that the things that should happen under this clause actually do happen.
I know that we are all good Members of the House—I am sure that if legislation suggested that we should do particular things, we would do them—but that is not quite the point. Legislation from this place is supposed to stand the test of time, cope with the vicissitudes of Administrations as they come and go, and ensure that what the legislation intended will actually be done, so either this legislation intends that these regulations do not have to be made or the word “may” is a little less than robust, hence the very modest and small amendment that we have suggested. It would replace the word “may” in subsection (2) with the word “must”, so that there was consistency throughout the clause. It would not be a major change to the Bill, but might strengthen it a little and give a little more certainty about its operation.
Greg Hands
As the hon. Gentleman outlined, the amendment addresses what the regulations relating to revenue collection contracts may or must contain. The amendment relates to the duties of the revenue collection counterparty in clause 17. The counterparty will be the body responsible for channelling funds between the designated nuclear company and suppliers. Currently, the Bill gives a discretionary power to make regulations that can ensure that the revenue collection counterparty, first, enters arrangements or offers to contract for the purpose of a revenue collection contract; secondly, must, may or may not do certain actions; and thirdly, undertakes or does not undertake actions specified in the regulations or the direction by the Secretary of State. The legislation further clarifies, for example, that the directions may cover, among other things, the enforcement, variation or exercise of right under a revenue collection contract. Amendment 14, moved by the hon. Member for Southampton, Test, seeks to make it obligatory that the revenue collection contracts will cover these areas whenever they are made. I welcome the hon. Member’s engagement with the detail of the revenue collection regulations, which will play a key role in the functioning of the RAB. However, I do not believe that the approach suggested by the amendment improves our arrangements for the regulations.
First, it is the Government’s intention that the regulation made to establish the RAB revenue stream would likely contain all of the topics set out. Obliging them to be included would be unnecessarily restrictive at a point where we are still developing the structure of the regulations, which will be brought forward by the affirmative procedure in due course. It is therefore important that the power remains discretionary, to allow for sufficient flexibility as we progress the policy. Secondly, the amendment seeks to override the original intention of the clause, which was to provide an indicative, non-exhaustive list of what the regulations may cover. That approach is precedented by the Energy Act 2013, particularly in section 21, as well as in other clauses in this Bill. It is entirely regular to use the word “may” for things that we think will be likely to be included.
Finally, as currently drafted, the amendment appears to be in conflict with subsection (3), because the change from “may” to “must” is not reflected there—subsection (3) builds on the subsection that amendment 15 addresses. That leads to an inconsistency in drafting, where subsection (2) would state that the topics “must” be covered, whereas subsection (3) limits it to “may”. I welcome the hon. Member’s scrutiny of, and engagement with, the detail of the revenue provisions in part 2 of the Bill; I recognise the Opposition’s concerns around ensuring that regulation is sufficiently robust. However, I do not believe that the amendment is the way to achieve that, and I hope that hon. Members will withdraw it.
Dr Whitehead
I appreciate that this is a habitual piece of drafting in legislation, found not just in this Bill but in a number of others. One of my hopes with legislation has always been that a group of Members might be courageous enough on one occasion to say, “This is lax writing of legislation and we should not put up with it. We should have what it means included in the Bill.” I appreciate that the lax writing of the legislation may not be lax at all—it may be deliberately giving the Secretary of State a lot more leeway where things are not entirely sorted out. When we look at this clause, we can see that there already is, in subsection (2)(c), substantial leeway for the Secretary of State to take
“further powers to direct a revenue collection counterparty to do, or not to do, things specified in the regulations or the direction.”
That is pretty wide leeway for the Secretary of State to have in the Bill already.
What the “may” does in this subsection is to cast further uncertainty on what sort of things the Secretary of State may do. I am sure that the Secretary of State will actually want, on this occasion, a “must” for what is conferred on the Secretary of State with further powers. That is very helpful to the Secretary of State for precisely the reasons that the Minister outlined a moment ago. The “may” that is in subsection (3) is a different sense of the word “may”. How it would read fully is, “the provision that may well be made by virtue of subsection (2).” It is used in the conditional, whereas the “may” in subsection (2) is a dilution of the imperative. I am sure that the Minister will be pleased to know that that is the case, but I am afraid that it does not accord with what he had to say about the use of “may” and “must” in this provision.
I am not going to press the amendment to a Division, but I think we need to be more careful about how we draft our legislation overall, to make sure that it does what it says on the outside. I am sure this will not be the last opportunity to raise this issue in the Bill. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 17 ordered to stand part of the Bill.
Clause 18
Direction to offer to contract
Greg Hands
Clause 18 builds on clause 17. Subsection (1) explicitly gives the Secretary of State the power to direct a revenue collection counterparty to offer to contract with a designated nuclear company on terms specified in the direction. Those terms will be the outcome of negotiations between the Government and the project company. This power is again replicated from the contract for difference, namely section 10 of the Energy Act 2013, but has been adapted to account for the nature of the revenue collection contracts as a bespoke arrangement.
Regulations can set out the circumstances in which a direction to contract can or must be made, as well as the terms that may or must be attached to the direction. If the Secretary of State does not have the ability to specify when a contract should be offered under the legislation, there could be delays in the offering of a contract to a project company. That could damage investor confidence and slow progress on the project at a crucial time.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19
Supplier obligation
Dr Whitehead
I beg to move amendment 15, in clause 19, page 16, line 11, at end insert—
“(4A) Revenue regulations may make provision to prevent electricity suppliers from recovering the costs of paying a revenue collection counterparty from customers who qualify for the Warm Home Discount Scheme.”
This amendment would mean that electricity bill payers who qualify for the Warm Homes Discount scheme would not be liable for levies on their bills that pay into the RAB revenue collection fund.
Amendment 15 relates to the latter end of clause 19. Hon. Members will see that the clause suggests that revenue regulations may make provision for electricity suppliers to pay a revenue collection counterparty for a number of purposes, including
“to hold sums in reserve; to cover losses in the case of insolvency or default of an electricity supplier.”
According to our shared understanding of how the RAB would work, the regulations would require electricity suppliers to pay into a revenue collection counterparty for those purposes. Thereby, as the RAB consultation makes clear, if that company has been required to pay into the revenue collection counterparty, the company could make restitution for the money it had paid into the revenue collection counterparty by adjusting its bills to reflect that fact.
We are in exactly the same territory as contracts for difference, where there is a levy on customers and the supply company recovers the money that it has paid into the levy fund by passing that levy on to customers in their bills. We have a problem with placing additional levies on already sky-high bills, but that is how this arrangement will work. We question how that process will work. As hon. Members will also know, we currently have within our electricity supply arrangements a warm home discount scheme, which provides for a number of bill payers to get £140 off their bills each year if they qualify. There are some issues about the size of the company relating to that obligation but, in principle, pretty much all customers on a low income or a guaranteed credit element of pension credit will, or should, receive that warm home discount.
The energy company has to supply that discount to its customers. It may socialise the costs through its overall bills as a sort of secondary levy, but it gives a proportion of electricity customers a permanent reduction in their bills due to their particular circumstances, such as—as the discount suggests—particular fuel poverty-type issues in heating their homes and meeting their fuel bills.
The effect of a levy—in this instance, quite a substantial levy—to customers under these circumstances, particularly during the construction phase of a regulated asset base operation, would be to put, say, an extra £10 on the bill of someone who is already receiving a warm home discount, so that their fuel bills go up. A number of people would be placed in fuel poverty as a result of that difference, and therefore, ironically, it is quite possible that more people would be eligible for the warm home discount as a result.
When and if this levy comes on stream, we do not think that the process should include the supply company passing on that increase to those people who are already paying their bills but have a warm home discount. Those companies should not be able to recover the cost of payment into the revenue collection counterparty by passing it to those people receiving warm home discount. This would mean a socialisation of that cost to other bill payers, but the warm home discount would nevertheless remain at the right proportion of the bill, not diminish in value because that person was required to pay that levy to the energy company so that it could recoup its costs related to the revenue collection counterparty.
This is quite a simple amendment to try to return that warm home discount to the position that it would have been in before that levy was introduced. I would suggest that it is in line with what the Government intended for that warm home discount in the first place. Although other customers may pay a little more on their bills, it would maintain the relative billing position for the poorest and most vulnerable customers, including those in receipt of a guaranteed credit element of pension credit, helping those who have considerable difficulties in paying bills and are perhaps in fuel poverty as a result. We would like this power to ensure that energy companies do not incorporate those customers into the arrangements for collection and distribution of money coming into the revenue collection counterparty.
Alan Brown
I will just say a couple of things. I was listening to the arguments and if the amendment goes to a vote, I will be happy to support it and do anything I can to try to support the most vulnerable and not create any more fuel poverty. Listening to the arguments, they seem to confirm that the concept as a whole is a costly burden on consumers. As the shadow Minister said, it creates a levy that will put more people into fuel poverty. The levy will not just last for a few years; it starts with a construction period of 10 to 15 years in all likelihood and then a 60-year contract. Rather than tinkering at the edges, protecting some people and pushing other people into fuel poverty, the heart of the matter is that this is a costly white elephant exercise. That said, I would still support the amendment for what it aims to do.
Greg Hands
As has been stated, amendment 15 looks to make provision to exclude from the RAB charge those consumers who are eligible for the warm home discount scheme. I understand the good motive and the effect of what the hon. Member for Southampton, Test is proposing. For background, the warm home discount is a Government initiative to take £140 from the energy bills of consumers who receive the guarantee credit element of pension credit, or who are on a low income and receive certain means-tested benefits. We have already proposed increasing the value of the rebate to £150 per annum in any case.
As we have discussed, if a new project is funded through the RAB model, suppliers will be obliged to pay towards it. It is expected that the suppliers will pass these costs on to consumers. While I do not intend to go back over the arguments in favour of the RAB model, we believe the arrangement will facilitate private investment while also reducing the costs of delivering new nuclear projects. I understand the Opposition’s desire to protect consumers on the lowest incomes, which is what the Government are already doing. The Opposition are proposing to increase that element of protection. Of course, these consumers can spend a disproportionate amount of their income on energy costs. As we all know, energy bills are regressive.
However, a large-scale project funded under the scheme will add, at most, a few pounds a year to typical household energy bills during the early stages of construction and less than £1 per month on average during the full construction phase of the project. The Government have taken a number of actions to protect low-income households from energy costs, as laid out in our updated fuel poverty strategy. That includes not only the warm home discount but cold weather payments and the household support fund.
Alan Brown
Isn’t the problem with some of the schemes aimed at protecting the most vulnerable that they are paid for by other consumers? By default, the schemes are always creating another cohort to move into fuel poverty, because actual schemes to help people are paid for by other consumers.
Greg Hands
The hon. Gentleman makes an interesting point, but I do not think the amendment in any way answers his question. In fact, if I have understood the amendment correctly, it would probably make those who are not on the warm home discount pay even more, so I am afraid he is making a speech against the amendment, however inadvertently.
As set out in the heat and buildings strategy late last month, we will also publish a fairness and affordability call for evidence to set out the options for energy levies and the obligations to help rebalance electricity and gas prices and to support green choices, with a view to taking decisions in 2022. We are looking at the totality of how these schemes work, then looking at the consultation and then taking decisions on the wider nature of these schemes next year. It is right that broader conversations about how to deal fairly with customers’ bills are dealt with as part of this process, rather than by taking a narrower approach for each technology and funding scheme, which the amendment seeks to do.
As we know, the legislation obliges the Secretary of State to have regard to consumer interests and costs when setting up the RAB. As part of that, the Secretary of State will monitor any cumulative impact from multiple RABs being in operation.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
The Minister has just mentioned the obligation on the Secretary of State that is in the Bill. My hon. Friend the Member for Southampton, Test made the point that this levy may be £10 a year on average, or it may be more. Have the Government made any assessment of the number of customers that that increase will potentially tip into a qualifying benefit, therefore making them eligible for the warm home discount? Have they assessed what a nuclear RAB might do to the number of people who are eligible for that discount? The argument we are trying to make is that there is potentially a saving for Government here by socialising the risk among non-warm home discount consumers when it comes to funding these types of projects.
Greg Hands
The hon. Gentleman asks a fair question, which I would answer in a couple of ways. First, this issue is best considered in the round as part of the process we have outlined, with the consultation and decisions to be made next year. Secondly, the actual amount would depend very much on the nuclear project in question. What we have shown is that we believe the RAB model will make bills overall less expensive to the consumer by roughly £10 a year for an average dual-fuel bill payer, as the hon. Gentleman has rightly pointed out. However, that amount will ultimately depend on the size and scope of the nuclear plant that is proposed. I think a better way to deal with this issue is to deal with it in the round, in the way the Government are proposing. I stress that the RAB is designed to save consumers money over the life of the plant; that is one of the key reasons why we are proposing it.
I am grateful to the hon. Member for Southampton, Test for tabling this carefully considered amendment and for raising the important issue of energy costs for low-income households. Nevertheless, I hope that I have shown both that the Government are already taking action to help this group and that this clause forms part of a wider conversation about how we transition our energy system away from fossil fuels in a way that is fair and affordable for all. I therefore hope that the hon. Gentleman will withdraw his amendment.
Dr Whitehead
I am not sure that the Minister quite gets this. The warm home discount was introduced in 2011 and has been at the level of £140 since then, so the Government suggesting that it should be increased to £150 is not an action of unparalleled generosity: it actually just catches up with inflation over the period that the warm home discount has been in place. That discount has been decreasing in value in real terms over the years, so increasing it is simply a matter of reasonable housekeeping, rather than innate generosity.
Kirsty Blackman (Aberdeen North) (SNP)
I thank the hon. Gentleman for giving way; apologies to my hon. Friend the Member for Kilmarnock and Loudoun for getting in first. Does the hon. Gentleman agree that, given the massive increases in energy prices that we have seen—way outstripping inflation—this increase does not touch the sides of what is needed?
Dr Whitehead
The hon. Member is absolutely right. I am sure that we could do some back-of-a-fag-packet calculations about what we are going to need from the warm home discount, given the rises that are likely to occur under the fuel price cap in the coming spring and over the next six months, but it will certainly be rather more than £10.
Alan Brown
Does the hon. Gentleman agree that another odd aspect of the Minister’s argument is that raising the warm home discount to £150—an extra £10—is really significant and helps people, but an extra £10 on their bill is okay and something we do not need to worry about? The two cannot both be right.
Dr Whitehead
The hon. Member makes a very interesting point, which I was rather slower than him to get to. He is quite right: if this is going to be £1 a month during the construction phase, therefore adding only £10 to £12 to the bill per year, it is contradictory to say that one is insignificant while the other is very significant.
There is also the fact that £12 a year, or £10 a year or whatever, will affect different people’s bills in different ways, because the bill for a large family, or someone with a large house, will be higher in total, and the £12 nuclear levy will be a smaller proportion of it than for someone who is eligible for the warm home discount—perhaps a single pensioner living in a small house, with a lower bill but nevertheless without the wherewithal to pay it. That £12 would be a higher imposition on their bill than it would on other people’s bills.
I think we all agree that the warm home discount is an important actor in combating fuel poverty and ensuring that the most vulnerable people in our society as far as energy costs are concerned do not have it even worse than they do at the moment and are given some assistance with their bills. We all ought to be very mindful of that when we put levies on people’s bills. What the Minister says about who we do and do not put into fuel poverty when we change levies on fuel bills is true, but that is an argument for better indexation, not for continuing with the warm home discount in the way that we are.
I am sorry to say that we will have to divide the Committee, because we think that this is an important principle that ought to be upheld. We do not want to the effects of the levies, which of course may be much more than £12, depending on how the allowable costs ceiling goes, to directly affect the warm home discount, which we think is a very important part of the energy landscape and the battle to combat fuel poverty. We would like it to be on the record that we did not simply allow this to be brushed under the carpet, and therefore wish to vote on the amendment.
Question put, That the amendment be made.
Alan Brown
I beg to move amendment 20, in clause 19, page 16, line 25, at end insert—
“(6B) Prior to making provisions by virtual of subsection (4), the Secretary of State must consider—
(a) the number of customers the supplier has;
(b) the level of bad debt from customers;
(c) the liabilities of the electricity supplier including any renewables obligations due and what levels of collateral will risk the supplier’s operations as a going concern;
(d) the impact on consumer bills of upfront payments to the revenue collection company; and
(e) the value and extent of forward hedging the supplier has in the market.”
This amendment would require the Secretary of State to consider the matters listed before requiring electricity suppliers to provide financial collateral to a revenue collection counterparty.
The other day, the Minister challenged us in the SNP to table amendments, so in that spirit of co-operation—given that I am fundamentally against the Bill but have still tabled amendments to improve it—I look forward to him accepting them.
Clause 19 further confirms the Government’s desperation to provide unlimited guarantees and support mechanisms to get nuclear projects—as we know, that means Sizewell C —off the ground. For me, the clause is further proof of how ill-thought through the Bill is, and how loosely many clauses have been drafted. This clause will be blindly accepted by Government MPs without further thought or debate apart from some challenge from this side of the Committee.
Yesterday, energy supplier Bulb Energy, which has 1.7 million customers, effectively went into administration. Given that 23 energy suppliers have gone bust since August of this year, it beggars belief that the UK Government have introduced clause 19, which may require energy suppliers to pay money up front. Cash flow insolvency is a major issue in the energy supply market at the moment, but the Bill could place further demands on suppliers.
The clause will allow the revenue collection counterparty to set the form and terms of the financial collateral that it demands from electricity suppliers. There is no guidance or controls; there is simply the concept of a nuclear project being so important that revenues must be guaranteed for the nuclear company. Subsection (2) is the start of what I have no doubt will be an accountant’s field day. Subsection (2)(a) is a typical catch-all, as it states that revenue may be collected under
“such…descriptions of its costs as the Secretary of State considers appropriate”.
As an aside, will the Minister tell us whether it is really the Secretary of State who will make those assessments, as the clause states, or will it actually be the regulator?
Subsection (2)(b) and subsection (4) refer to holding sums in reserve and to suppliers providing financial collateral. The kicker with the financial collateral is that subsections (6)(a) and (b) state that the revenue collection counterparty may
“determine the form and terms of any financial collateral”
and may “calculate” the payments that are due. There seems to be no independent scrutiny and no way to challenge those demands. Then, for good measure, subsections (8) and (9) provide for the revenue collection counterparty to make demands on interest, debt collection and further add-ons. That certainly seems very balanced towards the assessments that the revenue collection counterparty makes.
Paragraphs (c) and (d) of subsection (8) mention “references to arbitration” and “appeals”, but what will those processes and procedures look like? Yet again, there is too little detail. Without suitable protections and considerations, the clause and its consequences could damage well-run energy suppliers and those that are struggling to get by, and that is if they get through the ongoing crisis.
Why should energy suppliers pay up front to cover RAB payments? It might suit the Government to have clauses to protect funding for new nuclear, but that could lead to massive cash flow issues for the electricity supply companies that I mentioned earlier. As they would be paying in advance of receiving income from customers, they would need to manage that credit issue by servicing debt costs. Those costs would then be passed on to consumers, further raising the cost of our bills.
I have already stated my opposition to the Bill and to a new nuclear power station, but from my perspective as a consumer, the Government want me to tie into the construction costs payments for 10 to 15 years in a 60-year RAB contract, which will go beyond my lifetime. Then, just to be on the safe side, my electricity company, to which I pay money, will possibly have to provide money up front, which will cost me, as a consumer, more money. That is a ridiculous concept; it just does not make sense.
Although I am against the principle and poor drafting of the Bill, it is important that we debate clause 19, which is why I have tabled the amendment. I hope that paragraph (a) of the amendment is self-explanatory: any collateral or money that is asked for would need to be pro rata based on the energy supplier’s ability to pay, which would be based on its customer base. In paragraph (b), I highlight that bad debt needs to be considered, because some companies have much higher numbers of vulnerable customers, which means that they are likely to carry more bad debt. That dynamic could change further with the collapse of so many energy supply companies.
Dr Whitehead
I am very sympathetic to the amendment, although I do not think that it will do exactly what the hon. Member for Kilmarnock and Loudoun would like. It would be helpful to have some clarification from the Minister as to exactly how the payments will be organised by the revenue counterparty body.
Although those payments are up front, in that the electricity supply companies would be required to make a payment on behalf of the customer into the counterparty before the power station had been built, that does not mean that the payment would all be up front. It means that the payment would be staggered over a period, which might be the whole of the production period of the nuclear power plant, according to what was required at particular times of the construction, so that the counterparty had sufficient funds to meet those calls from its revenues at any one time, but did not have a large surplus against calls. The counterparty would therefore have to modulate and regulate its calls on the energy supply companies as the process of construction continued.
Presumably, then, a company’s health would not be set against an overall up-front payment in that instance. All companies would be required to pay into that levy arrangement regularly, so there would not be a greater demand on one company than another or a large amount of money demanded in one go. That is my understanding of how the system would work, but I appreciate what the hon. Member for Kilmarnock and Loudoun said about the 23 companies that have gone bust recently. As the energy market stabilises, I think there will not be many companies to take a levy from in the first place. Those companies that are able to pay a levy will by and large be those that were in sufficiently robust health in the first instance to weather the storm of high gas prices and high energy costs—there are a number of other reasons why companies may or may not be reasonably robust but that is a debate for another day.
Overall, I do not think that the amendment does exactly what it is intended to do.
Alan Brown
I think I understand the point that the hon. Gentleman is making, but subsection (4) says:
“Revenue regulations may make provision to require electricity suppliers to provide financial collateral to a revenue collection counterparty (whether in cash, securities or any other form).”
I still read that as meaning that cash could be asked for to be paid up front.
Dr Whitehead
Indeed, and that is why we need better clarification from the Minister. Is there a distinction between cash up front in general—that is, one pays before getting any result from a nuclear plant that is being built—or cash up front in the sense of taking all the stuff in the agreed revenue allowance? Would that be taken either mostly up front, all in one go, or at level that an energy company would find unaffordable during particular elements of the process? There is still some uncertainty about exactly how that process would work.
I have a lot of sympathy with the argument of the hon. Member for Kilmarnock and Loudon. If the revenue counterparty decided that it was going to take a very large amount of levy early in the process to have lots of money in the bank and to be able to cover any eventualities connected with the construction process, that would be a pretty unreasonable imposition on energy companies, particularly in the present circumstances. However, I think there are least implied elements of regulation in the Bill that would prevent that from easily happening, and I would be interested to hear whether the Minister thinks that is the case. If he does, where in the Bill is that, and which arrangements would be preferrable in terms of the revenue collection counterparty operating on a more equitable basis as the construction period progressed?
Greg Hands
I thank the hon. Members for Kilmarnock and Loudoun and for Aberdeen North for tabling their amendment. Of course the Government welcome all Opposition parties tabling amendments; that does not necessarily mean that we will agree with the aforementioned amendments, but it is a useful process to test and probe the Bill, and I think our publics would like to see a process whereby all Opposition parties tabled amendments to test the Government’s proposition. I fully buy into that process, but I do not happen to agree with this amendment.
The amendment addresses how the interests of suppliers and their customers should be considered when making provision in regulations for the supplier to pay the revenue collection counterparty. It would also require the Secretary of State to have regard to the other liabilities of electricity suppliers—the hon. Member for Kilmarnock and Loudoun talked with topicality about that—as well as to the impact that collateral requirements will have on a supplier’s operation. I thank the hon. Gentleman and the hon. Lady for ensuring that the Government consider the impact on suppliers and consumers when establishing the RAB revenue stream.
I reassure Members that the Government intend to act in a way that effectively manages the payment obligations on suppliers and, through them, consumers. We do not believe, however, that the amendment is the best way of ensuring that. First, the provision of collateral by electricity suppliers is a form of security that has been administered very successfully in the contract for difference regime. As I said on clause 15, the regime seeks to replicate that tried-and-tested regime, which has functioned effectively to bring investment into new energy projects for the last eight years.
We have been clear that in designing the RAB revenue stream we are seeking to replicate many of the provisions of contracts for difference to help to provide a familiar and workable framework for suppliers, but it is not just about supporting investment. We will protect suppliers from paying unreasonable amounts of collateral and ensure that overpayment of collateral is returned to suppliers.
Alan Brown
What is there in the Bill that protects suppliers from having to pay too much collateral?
Greg Hands
The protection in the Bill is through the regulation of the process and the oversight, for example by the authority, in this case Ofgem, which will ensure that any amounts paid to the generation company are reasonable. The hon. Gentleman is right to ask who will set the parameters, the Secretary of State or the regulator. The Secretary of State sets the initial licence conditions; however, it is the authority, in this case Ofgem or its equivalent, that will ensure that any amounts are reasonable and in the interests of existing and future consumers. That is very much in the Bill.
Kirsty Blackman
Could the Minister provide more information on that, in the form of a letter perhaps? We have raised concerns on how companies, and therefore consumers, will be protected. I appreciate what he says, but that was not obvious to us, so a response in writing would be hugely helpful.
Greg Hands
That is a reasonable request. I am saying that this is a tried-and-tested process that has been there throughout the contract for difference regime. Paying in collateral, and the way that collateral operates, is something that has been around for decades, but if it is helpful I am happy to write to the hon. Lady and copy in members of the Committee to explain in more detail how it works in the CfD regime and the Energy Act 2013. I should also make it clear that the Bill provides a framework for the RAB revenue stream and requires that the detail of suppliers’ payment obligations is set out in the secondary regulations that will need approval from both Houses. Ahead of that, and as required by the Bill, we will publish and consult on the draft regulations. We will include British energy suppliers within the consultation, so they will have the opportunity to feed in any views from an energy supplier perspective.
In the context of protecting our most vulnerable energy consumers, which was the subject of the previous amendment, I refer Members to my comments in that debate setting out the numerous actions that the Government are taking to help low-income households, including the warm home discount, cold weather payments and the household support fund. I hope that I have assured the hon. Member for Kilmarnock and Loudoun that the design of the RAB revenue stream will ensure that the interests of consumers are protected and that mechanisms are in place to protect suppliers from disproportionate requirements that would affect their ability to operate. As such, I believe that the amendment is unnecessary, and I hope that he will withdraw it.
Alan Brown
It was no surprise that the Minister did not accept the amendment. It will be no surprise to him that he has not completely satisfied me either with his explanation. We keep hearing the argument that we are trying to replicate the CfD model, which is interesting considering that we are introducing the RAB model. It was said that CfD would not work for nuclear, but now we are trying to replicate certain things. He said that there will be consultation and secondary legislation, but there are no guarantees on what the Government will do or how they will respond to any consultation. Secondary legislation can easily get steamrollered through this place anyway. Given that, I would prefer to press my amendment to a vote.
Question put, That the amendment be made.
Dr Whitehead
I beg to move amendment 16, in clause 19, page 17, line 2, at end insert—
“(10) Persistent non-payment of sums owed to the counterparty by an electricity supplier may be referred to OFGEM, which may in such circumstances place the electricity supplier’s licence under review.”
This amendment would allow cases of persistent non-payment of sums owed to the counterparty by an electricity supplier to be referred to OFGEM.
The amendment follows on quite well from our previous debate. Although the issue is not entirely certain, the collateral expected to be paid by energy supplier companies would be required in a measured way. The Secretary of State would make sure that the revenue collection counterparty did not try to scoop up huge funds in one go—not that I think that very likely—and would regulate the collateral so that it was more or less allied with the calls on it by the nuclear company at that stage.
If the revenue collection counterparty had a large pot of money sitting in its bank account at any stage, one would expect that money to be redistributed to the supplier companies from which it had been collected, and one would hope that in the end it would be redistributed back to customers. I think that there is still some way to go in deciding how exactly the regulation is to be set up, but I welcome the Minister’s statement that that is roughly how the Government assume the process will be undertaken. That being the case, there is then the question of what happens if supplier companies do not pay what the revenue collection counterparty has required of them, assuming that it is a reasonable payment. That leads on to some existing issues with how levies are collected by counterparties.
There has already been some mention of what happens with Ofgem’s collection of the renewables obligation, and of the collective obligations of energy companies to supply the right amount in buy-outs, renewables obligation payments or whatever. For those who think that the renewables obligation is done and dusted and that it came to an end in 2017, I should mention that it is still alive in a ghostly fashion and is collecting money until 2027, I think, so the obligations continue.
If one were being very unkind, one might say that a barometer of the health of some of the smaller energy companies that have recently been involved in the struggle to stay afloat has often been whether their renewables obligation payments were outstanding at the time of closure, which I think is the end of each October. There were reports from Ofgem, I think in September, that x number of companies had not paid their renewables obligation levies, and that if they did not do so by the closure date, it is conceivable that action would be taken—which could include, in the end, the removal of the company’s licence to operate.
One could say that that is what happened over the recent period, in that companies that knew they were in some difficulty with their renewables obligation payments at the end of October folded pretty soon afterwards because they were not going to pay them. That has had the unfortunate side effect that that non-payment has had to be socialised among other energy companies in order to ensure that the fund is the right amount to meet the renewables obligation certificates going around. Nevertheless, the regime appears to have a sanction relating to an energy company’s licence, so that we can ensure that payments are brought in, or that there is fairly swift closure relating to the outstanding amount, so we at least know roughly where we are regarding the payment pool at a future date.
As the Bill stands, that does not appear to be the procedure that will be adopted regarding levies into the revenue collection counterparty. Indeed, the Bill states that if payment is not received, collection will be a civil matter. In the amendment, we suggest that we adopt a similar procedure to that which is in place with Ofgem concerning non-payment of renewables obligation payments. In the case of persistent non-payment, a sanction should be available regarding the continuation of the company’s licence. The Minister may say that going through the civil courts is just as good. What concerned me about the arrangements in respect of renewables obligations was that some energy companies were borrowing their payments in order to stay in business. That is not what a healthy energy company should do, long term; it will not result in a secure landscape as regards collateral inputs to a counterparty.
A better way of proceeding would be to have in place the sort of regime that we have for the RO. The amendment would allow the Secretary of State to introduce that kind of arrangement, if he thought it a good idea for the stability of collateral payments. It gives him an extra option, and goes beyond the regime set out in the Bill, so that we can ensure that payments are properly levied, paid on time, and not resisted.
Greg Hands
As the hon. Gentleman outlined, amendment 16 addresses how the obligations of suppliers under revenue collection contracts should be enforced. Clause 19 deals with suppliers’ obligations in relation to the RAB. It lays out what the revenue collection regulations may provide for. This includes how the obligations placed on suppliers by RAB revenue collection contracts can be enforced by the revenue collection counterparty. The powers in clause 19 are supported by clause 22, entitled “Enforcement”, which states:
“regulations may make provision for”
obligations under revenue collection contracts to be enforced
“by the Authority as if they were relevant requirements…for the purposes of section 25 of the Electricity Act 1989.”
This means that a breach of such a contract can be treated as if it were a breach of a licence condition, and this allows the authority to obtain an order to secure compliance and impose financial penalties.
The amendment would set up a different enforcement route, outside the regulations, by allowing the revenue collection counterparty to refer suppliers who persistently fail to meet their obligations to the authority—that is, to Ofgem. Ofgem could then consider whether to remove a supplier’s licence. Of course, I welcome the Opposition’s focus on ensuring adequate protection from non-compliance. Creating strong enforcement procedures will be vital to give investors confidence that the RAB will function and that the project will receive the funds to which it is entitled. However, the amendment leaves out much of the detail necessary for a clear understanding and the smooth functioning of the enforcement procedure. For example, it does not clarify what should be classed as “Persistent non-payment”, or the process for referral. It also does not make clear what Ofgem would take into account when reviewing a supplier’s licence, or the process for appeal.
The hon. Gentleman feels that a supplier’s failure to make payments to the counterparty should have consequences for their licence, but those concerns are adequately addressed by clause 22, which states that the regulations may make provision to treat non-compliance as if it were a breach of a licence condition, and to allow the imposition of suitable penalties against suppliers through tried-and-tested, long-standing legislation. This will ensure compliance, and will mean that obligations under revenue collection contracts are met.
I welcome the hon. Gentleman’s constructive contributions, his proposing the amendment, and his recognition of the need for strong enforcement provisions, but I hope I have convinced all hon. Members of the appropriateness of the Government’s approach, which already treats non-compliance in the way that is suggested in the amendment, but in a far more watertight way, and that the hon. Gentleman therefore feels able to withdraw his amendment.
Dr Whitehead
The Minister talks about taking action in a more watertight way, and suggests that we look at clause 22, which relates to clause 25, which relates to a series of clauses relating to the Electricity Act 1989. It is a sort of Marx brothers’ “A Day at the Races” form guide arrangement, whereby in order to understand a guide, a person needs another one, and so on endlessly—and they end up missing the race.
The Minister will be aware that there are a number of instances in which we are asked to go way back, via regulations, into Acts such as the Utilities Act 2000 and the Electricity Act, and we are reluctant to do that. Indeed, there are a couple of quite incomprehensible repeals at the end of the Bill, to which I might draw the Committee’s attention; one has to go through four or five stages before one can understand what on earth those are about.
In this instance, it is possibly true that we could, by regulation, apply the provisions of section 25 of the Electricity Act 1989 relating to licence modification or removal; but that provision is not in the Bill, but possibly applied by regulation. In the Bill there is one remedy, and one remedy only. The Minister may say, “Trust us; we may produce regulations that have the effect that I have suggested.” However, it probably would have been wiser for some of those things to be in the Bill. Of course, the amendment does not do all those things that the Minister mentioned. I fully accept that it is deficient from that point of view, because it does not mention the four or five other pieces of legislation that have to be taken into account, amended or consequentially changed. It merely allows us to make the point that these things ought to be in the Bill, so it is a probing amendment.
I hope that the Minister will think about whether there are better ways of getting those different forms of regulatory certainty than this extended process of referring to other pieces of legislation, which may become more or less opaque as one reads them. It would be much more straightforward for this provision to be in the Bill and clear for everyone to see. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 19 ordered to stand part of the Bill.
Clause 20
Payments to electricity suppliers
Question proposed, That the clause stand part of the Bill.
Greg Hands
Clause 20 seeks to ensure that electricity suppliers can be reimbursed in cases where the counterparty has overcharged suppliers or overpaid a licensee nuclear company. The clause is similar to the approach in section 17 of the Energy Act 2013. It is proposed that suppliers will be charged their share of a RAB payment based on their expected market share. Where their actual market share is less than expected, reconciliation processes will be carried out and the revenue collection counterparty will repay them the difference.
Likewise, when the relevant nuclear licensee company’s forecasted market revenue exceeds its allowed revenue over a given period, the counterparty could be required to repay any overpayments to suppliers. Again, that would replicate the approach used in contracts for difference. Subsections (1) and (2) allow regulations to be made requiring the counterparty to make payments to suppliers in such instances. Regulations made will be subject to the affirmative procedure, given the effect they will have on electricity suppliers and other relevant bodies.
Dr Whitehead
I do not oppose the clause, but I want to ask the Minister about what it actually says. At first sight, it appears to say—this was the shared understanding that we established—that there were circumstances where a revenue collection counterparty could pay collateral back to electricity suppliers. We are not clear over how long a period the collateral might be repaid, or at what point it might be considered that there was sufficient additional collateral in the funds of the counterparty to warrant a repayment.
The funds might be held for quite a long time while consideration is given to whether the nuclear company is likely to overperform on its revenue generating activities in the production phase so consistently that the money can be safely restored to the supply company. The counterparty might hold the money over a considerable period, thinking there would be variations or fluctuations in the revenue stream obtained by the nuclear power company, and that the money might therefore need to be called on, if it dipped below the range implied by the overall allowed costs arrangements. There is that question of the likely length of the period over which repayments take place.
However, the second question, which is also quite important, is what would happen to that money once the counterparty had restored it to the electricity supplier. There is nothing in this clause that says anything other than, “That money is restored to the electricity supplier, and the electricity supplier is very pleased about that and puts the money in its bank account.”
However, the electricity supplier has collected that money from the customers—albeit at the direction of the counterparty—in the form of an additional levy placed on their bills. If the electricity supply company is getting that money back again, then as night follows day, the company should give that money back to the customers and not just hold it in its bank account. There is nothing in this clause to ensure that that happens. I would be interested to hear whether the Minister thinks that such a requirement ought to be added to the regulatory procedure that will be undertaken. He may want to go away and think about whether he can at least indicate to the Committee that it will be assumed, and probably will happen, that as long as the surplus funds can be distributed back to suppliers by the counterparty, they should be given back to the customers.
Essentially, we have a couple of questions, but we do not oppose this clause standing part. I am sure that the Minister will be able to reassure us about his intentions with regard to making this clause operate as well as it can.
Greg Hands
I will try to deal with the two questions that the hon. Gentleman raised. First, he asked whether the funds can be held for a long time, and about the period over which they can be held. Obviously, the regulations will be laid before Parliament in due course, and will be subject to the affirmative procedure. However, I point him to how the contract for difference regime works under the 2013 Act. My belief is that in this case, the reconciliation takes place after a period of months—that is probably the best way to describe it. It depends on what the hon. Gentleman means by somebody holding on to funds, or indeed having a shortfall of funds, for “quite a long time”, but we always have to strike the balance between what is operationally straightforward and what prevents somebody from holding on to funds, or from having a shortfall of funds over a period of time. However, the workings of the contract for difference regime might give the hon. Gentleman the most likely pointers as to what the regulations may look like; they will obviously be subject to consultation in due course anyway.
The hon. Gentleman also asked what happens to the money, and whether the supplier is obliged to return the money to the customer. He raises a fair point. The difficulty is that there is no obligation on the supplier to take the money for the RAB from the customer in the first place. The assumption is that the supplier will bill the customer for the cost of the RAB, but there is not an obligation to do so, so I am not sure that creating an obligation in this legislation to send back money the other way would be appropriate. Again, I refer the hon. Gentleman to the workings of the contract for difference under the 2013 Act.
Matthew Pennycook
That raises an interesting, and quite concerning, point: what in the legislation prevents a supplier from overcharging its customers on the basis that it is levying the RAB? Is there a limit to which a supplier can levy the customer? On the basis of what the right hon. Gentleman has just said, the supplier could overcharge the customer, make the payment owed to the counterparty and find itself with additional funds raised from those customers.
Greg Hands
First, the whole process will be regulated by the authority—in this case Ofgem—which would have oversight. Secondly, that would also be a matter for the regulations that are to be published in due course. Thirdly, the frequent reconciliations would obviate risk of that happening in the way the hon. Gentleman describes.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
Application of sums held by a revenue collection counterparty
Dr Whitehead
I beg to move amendment 17, in clause 21, page 17, line 34, leave out from ‘are’ to end of line and insert ‘not to be paid into the Consolidated Fund unless there is no other alternative.’
This amendment would require the Government to consider alternatives to the absorption into the consolidated fund of sums held by a revenue collection counterparty on behalf of energy bill payers.
Amendment 17 takes aim at a different part of the undergrowth we are dealing with in the often fairly complex arrangements related to the revenue collection counterparty and all that goes with it. In this instance, we have two subsections in italics because they include a Treasury implication. Clause 21(5) says:
“The provision that may be made by virtue of subsection (4) includes provisions that sums are to be paid, or not to be paid, into the Consolidated Fund.”
In that regard, subsection (4) states:
“Revenue regulations may make provision about the application of sums held by a revenue collection counterparty.”
Effectively, that subsection allows regulations to be made about the sums held by a revenue collection counterparty. We have already discussed how long they may be held for and the circumstances under which they may be paid back—[Interruption.] The Minister and his Whip are discussing when we will finish, I suspect. They must not worry; we will finish on time.
The clause adds a new dimension to the question of where the sums held by the revenue collection counterparty may go and, indeed, suggests where they might go, presumably, after the process outlined by the Minister. At a certain stage, the existence of surplus amounts held by the revenue collection counterparty is established and then there is an issue as to where that money goes. Clause 21(5) says that the money may be paid into the Consolidated Fund, which is the Treasury. It therefore gives rise to the idea that money could have been raised from customers and paid into the revenue collection counterparty by suppliers. Levies are raised on customers and possibly overpaid, as my hon. Friend the Member for Greenwich and Woolwich has just said. The money sits in the account of the revenue collection counterparty for a time and then, when the decision is made about what to do with the money, the Treasury nicks it. That is not right and it is not what should be done. As we have established, if there are surpluses in those funds, they should certainly be returned to the supplier and the supplier should make sure that they are returned to the customer.
As we have said on a number of occasions, the customer is at the heart of the process as they are funding it through their bills. They are not paying free money into the Treasury but paying into the process on a reasonable basis of allowed costs. If those allowed costs prove to be more than is required, the least they should reasonably expect is to get their money back.
There should be no talk of the Consolidated Fund in the Bill; I do not think it is right that it should be in the Bill. We have sought to suggest in the amendment that only if there are no other recourses for the payment of those funds should it even be considered that money go into the Consolidated Fund. I can conceivably imagine circumstances in which nothing else could be done with the money but put it into the Consolidated Fund, but it is a real squeeze for me to think that.
The Secretary of State must be able to think of better purposes for the money than for it to go in that direction. The amendment strengthens the Secretary of State’s ability to do that. I hope that the Secretary of State—the Minister; I am promoting him again—will be happy to accept it as a clear understanding of what we want to do with the money unless absolutely pressed to do otherwise.
Matthew Pennycook
I rise to speak briefly to amendment 17, because it relates to an important matter that builds on our earlier discussions. I listened to the Minister and heard what he said about the revenue collection contracts arrangement seeking to replicate the tried and tested CfD arrangement, as he put it. The thing that makes what we are talking about different is that there has never been a CfD arrangement of the size of the RAB nuclear model. The scale of the capital commitment involved in a nuclear project dwarfs anything that we have seen before. The changes in total nominal amounts that are likely to happen from year to year in the scale of that capital value could mean that we have large fluctuations in the amounts being collected by the counterparty.
The Minister has said that regulations will address that and are forthcoming via the affirmative procedure. He expects that the reconciliation process of attempting to ensure that the revenue stream matches the allowed expenditure will happen twice a year, but there is the possibility that very large sums will sit within the counterparty, even if just for months. The amendment tries to address the possibility of those funds, or a proportion of them, finding their way into the Consolidated Fund.
It surely has to be the case, and I assume that it is the Minister’s intention via regulations, that the reconciliation process should be as frequent as possible so that the revenue stream matches the allowed expenditure at any point in the construction. I foresee circumstances in the production phase, however—perhaps not in the construction phase, because it is unlikely that a future nuclear project will come in under budget given their history—in which a company’s revenue from power sales might exceed the allowed revenue. There is a chance that we could see large mismatches and, therefore, lots of funds being stored up in the counterparty.
The central thrust of what the Opposition are trying to do with the Bill is to protect consumers and ensure that they pay the lowest possible amount to get a project such as the one that we are talking about onstream. It is therefore really important that we ensure that the Treasury cannot in any circumstances, unless it has exhausted all other options, take part of the funds that may sit with the counterparty for relatively brief periods. The Treasury could decide to take sizeable amounts, and it is important that they flow back to suppliers and, ultimately, to customers. That is the thrust of the amendment.
Greg Hands
As the hon. Members for Southampton, Test and for Greenwich and Woolwich laid out, amendment 17 addresses the situation in which funds held by the counterparty may be paid into the Consolidated Fund, which of course is the Government’s general bank account at the Bank of England. Currently, the legislation allows the revenue regulations to provide for sums to be paid into the Consolidated Fund. The intention of the amendment is to narrow the scope of that so that the regulations can provide for sums to be paid into the Consolidated Fund only where there is no alternative.
I thank the hon. Members for the amendment, which they explained well. It certainly echoes my sentiment that consumer funds should not generally go into Government accounts. I reassure Members that we envisage the power to have limited but important uses. For example, it could be used to ensure that the counter- party repays a loan given by the Government—by the taxpayer—to respond to an emergency. That is not a hypothetical situation. We saw the importance of it quite recently in the course of covid, when the Government did indeed have to provide a loan to the counterparty for the contract for difference regime: to the Low Carbon Contracts Company.
The taxpayer should be able to be repaid that loan, but the amendment provides that sums cannot be paid into the Consolidated Fund where there is an alternative. I could see a number of people making an argument that different things that could be done with that money would provide alternatives to what is being envisaged: in this case, repaying the taxpayer. If passed, the amendment would unnecessarily narrow the scope of the power in a way that would limit its use. I hope that my explanation has shown Members the importance of the power, which is in my view unlikely to be used. However, I have given a real example from the last couple of years of where exactly such a situation arose.
Alan Brown
The Minister has given the example of an emergency loan, but surely the regulation is all about
“apportioning sums…received by a revenue collection counterparty from electricity suppliers under provision made by virtue of section 19”.
Clause 19 is about collecting money from electricity suppliers; ergo, the example of a loan does not equate to what this is about.
Greg Hands
I disagree with the hon. Gentleman. My understanding is that the loan would not be repayable if an alternative were there. The ambiguity of an alternative would unnecessarily narrow the scope of the power, though I appreciate where he is coming from.
Alan Brown
I ask the Minister to read clause 21(1)(a), which contains the reference I quoted to clause 19, which I do not think covers the emergency loan situation.
Greg Hands
We will just have to agree to disagree. I think the amendment unnecessarily narrows the scope of the power in a way that we would not wish to see in terms of protection of the taxpayer. I therefore ask the hon. Member for Southampton, Test to withdraw it.
Dr Whitehead
I thought that this was the most reasonable amendment by far that we have tabled. I am sorry that the Minister has responded in the way that he has. He made the point that some money that had come from the taxpayer might be sitting in the funds of the revenue collection counterparty, and should therefore be paid out of it. That would actually be covered by the amendment, which would insert:
“not to be paid into the Consolidated Fund unless there is no other alternative.”
If someone were trying to pay back a loan that they effectively got from the Consolidated Fund in the first place, there is no alternative other than to pay it back to the Consolidated Fund, so the amendment would cover that. We want circumstances in which the Treasury—I am sure that the Minister does not particularly want to be a high-ranking Treasury Minister in the future—
Dr Whitehead
Again—indeed. I think the Minister will know from his previous experience that the Treasury is not above, shall we say, treating all Government money as essentially its own. In circumstances in which the Treasury thinks that it can get hold of certain amounts of money, it may well do so. Obviously, the purpose of Bills is not to be written to keep the Treasury’s hands off money that it really should not have, but it might not be such a bad idea at least to put that in regulation so that it would be fairly hard for that to happen. As the amendment is drafted, however, it is not a prohibition; it just says that there needs to be a pretty good argument—the argument made by the Minister about the loan, for example—for that money to be paid into the Consolidated Fund. That, really, is all the amendment says, and I think that is a wholly better construction than what is in the Bill.
Dr Whitehead
Given the circumstances, I think I will.
Question put, That the amendment be made.
Dr Whitehead
The Labour party accepts that the clauses cover important technical matters relating to how the rest of this part of the Bill holds together, and we therefore have no objection to their being taken together.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Clauses 23 to 30 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Nuclear Energy (Financing) Bill (Sixth sitting)
Thursday 25th November 2021
(2 years, 4 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 November 2021 - (25 Nov 2021)
The Chair
I welcome Members back to the line-by-line consideration of the Nuclear Energy (Financing) Bill. I will not trouble you with the parish notices that you have heard before, with the exception of reminding you that Mr Speaker has encouraged us to wear masks when we are not speaking, which I will do, but of course it is a matter for individual choice.
Clause 31
Relevant licensee nuclear company administration orders
Question proposed, That the clause stand part of the Bill.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
May I welcome you to the Chair, Mr Gray? It is a pleasure to serve under your chairmanship. I will be brief.
Clause 31 is the first clause of part 3 of the Bill, which establishes a special administration regime for relevant licensee nuclear companies, or RLNCs. In the unlikely event that such a company becomes insolvent during the construction or operation of the power plant, the Secretary of State, or the authority—that is, Ofgem—with the Secretary of State’s permission, may apply to the courts for the appointment of a special administrator. The objective of the administrator would be to ensure that electricity generation commences, or continues, until it is unnecessary for the administration order to remain in force for that purpose.
The introduction of a special administration regime will reduce the risks of customers being deprived of the benefits of the building of a nuclear power plant using a regulated asset base model compared with normal insolvency proceedings. It also reduces the risk of requiring a replacement source of electricity generation, which may further increase the cost of electricity to consumers. The clause defines the relevant terms for this part, which are necessary for the effective functioning of the legislation. I therefore urge that the clause stand part of the Bill.
Dr Alan Whitehead (Southampton, Test) (Lab)
I thank the Minister for setting out what the clause is about. Hon. Members will recognise that the clause is deeply embedded with the rest of the clauses in this part of the Bill. Further clauses spell out in greater detail what clause 31 talks about. Hon. Members will also be aware that we have an amendment to the following clause to be discussed, which, were it to be agreed, would have implications for clause 31. Although we do not wish to oppose clause stand part, we would like it to be noted that when we discuss the amendment to the next clause we will refer back to clause 31 as one of the reasons why the amendment was tabled and the difference that might make to the whole part, should it be passed.
The Chair
Order. I am ready to be advised on this matter, but I suspect that if the Opposition believe that amendment 18 would have a consequence for this clause, it would have been necessary to table an amendment to this clause, or we would have to revisit this clause later. The Clerk advises that we cannot revisit. In other words, if we pass this clause stand part now, it will not be possible to amend it later. Let us cross this bridge when we come to it. That might be the sensible way forward.
Dr Whitehead
Mr Gray, if the amendment were to be passed, I do not think it would have an effect on clause 31. I merely raise the issue because we will be talking about all these issues in clause 32.
The Chair
That is fine.
Question put and agreed to.
Clause 31 accordingly ordered to stand part of the Bill.
Clause 32
Objective of a relevant licensee nuclear company administration
Dr Whitehead
I beg to move amendment 18, in clause 32, page 24, line 24, at end insert—
“(5A) In the event that a relevant licensee nuclear company cannot be rescued as a going concern, or if a transfer of the undertaking to a wholly owned subsidiary does not result in the establishment of a going concern, the Secretary of State must establish a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued at the nuclear installation in respect of which the relevant nuclear licensee holds a nuclear licence.”
Where a failed company cannot be rescued as a going concern or successfully have its assets transferred to a subsidiary, this amendment would require the Government to establish a Government-owned company to allow operations to continue.
The amendment goes to the heart of this part of the Bill, which deals with a special administration regime for when a nuclear power plant cannot get to production levels—in other words, when the nuclear power plant is not completed at the point at which the company that is constructing it effectively goes bust—or is in production but the company that is responsible for the management and operation of it goes bust at that point. The special administration regime is put in place, as the Minister says, to protect the interests of the customer, in terms of the sums they have put into the whole arrangement through the counterparty. We discussed how that works in a previous sitting of the Committee.
We certainly welcome the setting out of the provision in part 3, because it is important in providing a backstop in case of failure, during either construction or production, of the company that is involved in doing it. That company will have gone through the process of designation, licence modification and so on, and is therefore deeply involved in the nuclear power station at that point. Although we welcome the provision, analysis of how the clause works suggests that there are potential deficiencies in the end outcome of the process that is set out. I say that partly because, as I am sure hon. Members will be interested to know, the clause is closely modelled on the special administration regime set out in the Energy Act 2011. Of course, the 2011 special administration regime is oddly pertinent this morning because of the collapse of Bulb Energy and the decision by the Secretary of State to invoke sections of the Energy Act to establish a special administration regime over and above the supply of last resort, which was previously the method used for assuring customers about their supply when energy companies went bust. On this occasion, the Energy Act has come to the rescue.
There are lots of questions about how the regime under the 2011 Act will work, but it is sufficient for us to note the closeness of the text and direction of part 3 of the Bill to sections 94 and 95 of the Energy Act. Hon. Members will have to take it on trust that the wording is so similar, but they are very welcome to go and look up the relevant piece of legislation. I have a copy in front of me, and if this were an undergraduate essay that I had to mark in a previous life, I would be immediately on the phone to the department to say that my student had been guilty of substantial plagiarism.
Of course, there is a substantial difference in the application of those two pieces of legislation. One is applied to a failed energy company, about which a number of things can be done fairly quickly, such as seeking to revive the failed energy company through a period of administration and then relaunching it at a later date, when circumstances have changed—in this instance, perhaps when the high fuel costs have abated and the company, with different set-ups, might be a going concern again. The options are to launch it as a going concern, to pass it on to other buyers—which is very possibly the case with Bulb Energy—or, as an extreme, to eventually close the company down and parcel out its customers to other companies. According to the 2011 legislation, there are a number of fairly obvious routes that end that period of administration.
That is not the case for a nuclear power station. It cannot be divided up; it is a huge, multibillion piece of investment on the books of the company, and in this case largely supported by its customers paying into the regulated asset base arrangement. The idea that a company might easily come along and say, “I know, we’ll take over the assets of this nuclear power station and run it ourselves” is a fairly unlikely proposition, as we have seen from events around the world. Nevertheless, the wording of the clause follows the 2011 wording closely enough to suggest that that would be relatively easy in the case of a nuclear power company failure.
As the Minister has already outlined on the previous clause, the court would make an order to the nuclear company to go into administration, and
“the affairs, business and property of the company are to be managed by a person appointed by the court”—
that is, an administrator. The objective, stated in this clause, is
“that electricity generation commences, or continues, at the nuclear installation in respect of which the relevant licensee nuclear company to which the administration relates holds a relevant licence”—
that is, generation continues under administration—or “that it becomes unnecessary” through two means that are set out in the next subsection:
“the rescue as a going concern of the company”
or transfers of that company that fall into the next subsection, whereby the company can be transferred to another company or two or more different companies.
As such, the path that would be followed in this instance is that an administration order would be made; the company would be kept running in the meantime; and the alternative outcomes would be that the company either becomes a going concern again as a result of administration, or is effectively sold to another company or two or more other companies. Failing that, this clause appears to suggest that that special administration continues forever. That is the conclusion one has to reach when reading these subsections.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Gray. Some of the other Labour amendments that we supported when they went to a vote have been about cost controls and have tried to provide protections for the consumer. Despite what the hon. Member for Southampton, Test said, I do not think the amendment protects consumers or customers, although we are not sure that clause 33 in itself would not provide this option. The explanatory statement says:
“this amendment would require”—
that is, compel—
“the Government to establish a Government-owned company to allow operations to continue”.
I am not sure of the benefits of compelling the Government to keep running a power station if a company goes bust and cannot be taken over as a going concern, because it is still loss-making and a transfer cannot be concluded. Why do we want to make it mandatory for the Government to take over a loss-making operation to continue to generate electricity?
It seems to me that in the event of such financial failure, the best value might be to shut the thing down and decommission it. Although the hon. Member for Southampton, Test said that this provides a final option—a final endgame—there is nothing on time scales here. The amendment does not say how long the Government would be expected to continue to run this loss-making power station to generate electricity. There is nothing that gives that certainty or end date. I think it actually places a burden on the Government and the consumers—the taxpayers. For that reason, it does not make sense to me. I do not think it achieves the ends it is supposed to.
I will quickly refer to new clause 5, which is in my name; I know we will debate it later.
Alan Brown
New clause 5 does relate to clause 32. I will refer to it just briefly. All I would say is that the new clause sets out considerations that would need to be addressed before anyone contemplated taking over a nuclear power station. I will return to that when we debate the new clause.
I have concerns about clauses 32 and 33, when considered together with clause 41. We will return to this, but clause 41 possibly gives the Secretary of State an open-ended blank cheque to do what he wants to keep a power station operational; I dare say that ensuring security of supply will be the excuse given.
The hon. Member for Southampton, Test, referred to the provisions relating to the special administration regime under the Energy Act 2011, which have now been applied to Bulb Energy. It would be good if the Minister could enlighten us on how those provisions will operate with regard to Bulb Energy, and how the similar provisions in clause 32 would operate if they had to be used. Also, will he commit to reviewing how the special administration regime operates in the Bulb Energy scenario, and to making improvements to the Bill, if they are required, following that process?
Greg Hands
I thank hon. Members for their speeches for and against amendment 18. I remind the Committee that a relevant licensee nuclear company, or RLNC, is one that has had its licence modified under part 1, clause 6(1) of the Bill and has entered into a revenue collection contract. An RLNC administration order is made by the court in relation to an RLNC and directs that, while it is in force, the company is to be managed by a person appointed by the court. That is defined in part 3, clause 31(1), which we have just debated.
Amendment 18 addresses the course of action that the Government must take if an RLNC administration order is in force, but an RLNC cannot be rescued or a transfer envisaged by clause 32(4) effected, namely a transfer of the undertaking of the RLNC to a subsidiary that results in a going concern. The amendment seeks to ensure that, in this scenario, the plant will commence or continue electricity generation under public ownership. The amendment would require the Secretary of State to move the assets, liabilities and undertakings of the RLNC to a Government-owned company, even if a transfer envisaged by clause 32(3) to one or more companies would achieve the objective of the administration order. The amendment would put in place a new process. Although the amendment does not address who must make the assessment that the objective cannot be achieved by the means specified, it appears to limit the available options before the power plant is moved into public ownership.
First, obviously, I thank the hon. Members for Southampton, Test, and for Greenwich and Woolwich for their clear desire to ensure that a nuclear power station will commence or continue the generation of electricity—on the face of it, that seems a very reasonable objective—and for recognising that the special administration provisions add a valuable layer of protection in this area. Ultimately, that is why they are in the Bill. However, I do not consider it necessary to place a statutory requirement on the Government to take ownership of a plant in the unlikely event that a special administration fails in its objectives, because the provisions for the energy transfer scheme, applied by clause 33, already serve this purpose. The amendment may even inadvertently lengthen the period of an RLNC administration order, as one assumes that the Government-owned company would, for example, need to apply for a new nuclear site licence.
In the unlikely circumstance where rescue cannot be achieved and it is unnecessary for the administration order to remain in place, the Secretary of State—or the authority, Ofgem, with the consent of the Secretary of State—may apply to bring the administration order to an end. Once the administration has ended, the Secretary of State may prepare a nuclear transfer scheme, which would bring the plant under the control of a public body, or, for example, the Nuclear Decommissioning Authority. In such a scenario, it is envisaged that the plant would then be decommissioned and cleaned up. However, the Government would still retain the option to move the power plant into public ownership and, if deemed in the best interests of consumers and taxpayers, commence or continue the operation of the plant.
Let me say in response to comments made by the hon. Member for Kilmarnock and Loudoun that there may be circumstances in which discontinuing the project and having it safely decommissioned is in the best interests of both consumers and taxpayers. That will ultimately be down to a value-for-money process that asks: what is the best deal here for consumers and taxpayers? The Office for Nuclear Regulation may have shut down the plant for safety reasons; there may have been an environmental or security incident, or maybe something else happened that meant that trying to make that plant commence or continue to generate electricity was not in the interests of consumers or taxpayers. It is important, then, that the Secretary of State retains discretion to act in whatever way will achieve the best outcome for consumers and taxpayers during the insolvency of a relevant licensee nuclear company.
I stress to the Committee that the likelihood of those scenarios is, of course, very remote, as indeed is the likelihood of a nuclear administrator ever being appointed. I thank the Opposition for their forward thinking and consideration of what would happen in such a scenario, but I hope that I have assured the Committee that it would not be sensible to tie the hands of the Government in such a way that they had to commit further taxpayer money to a project without being able to balance that against the merits of doing so. The amendment would create an automatic process, but the Bill provides sufficient flexibility to allow the Government to pursue the option that the amendment provides for if they consider such a decision to be in the best interests of consumers and taxpayers. I therefore ask the hon. Member for Southampton, Test, to withdraw the amendment.
Dr Whitehead
I thank the Minister for his consideration of the processes by which a power plant might need to be rescued and/or decommissioned and/or discontinued. I think he will recognise, however, that the circumstances in which he says ministerial discretion would need to be exercised are an unlikely part of an unlikely scenario of an unlikely future.
The Minister gave the example of an accident, or something else, closing the plant down, so that it would have to be decommissioned and could no longer produce power. That would need to be done anyway, even if the company was placed in Government hands, so I do not think that those circumstances affect the path I have set out relating to Government interest in a plant that could not be bought out of administration because it was a going concern, or because it had been sold to another company—unless the Minister has it in mind that the sale of a nuclear company to another company would be done on a peppercorn basis, in which case the nuclear plant would lose all the value that the bill payer had invested in it.
In any event—this is what concerns me about the intervention by the hon. Member for Kilmarnock and Loudoun—the whole purpose of the RAB model is to produce a working nuclear plant that was invested in up front by members of the public and bill payers. That plant would then produce power as a reward for that up-front investment. If we easily closed a plant down because it was insolvent, we would be overthrowing the whole purpose of the RAB scheme, which is for the public to get something back, and we would be back to the instance that we talked about early on in Committee.
Alan Brown
The hon. Gentleman is right about the purpose of the RAB model, but would the unlikely event of insolvency not just confirm the failure of the RAB scheme? We should not keep throwing good money after bad in the event of such a failure.
Dr Whitehead
The hon. Member is right that in the event of an utter catastrophe, where the nuclear core does not work, the concrete casings are seriously deficient and the whole thing has to be closed down, we are in a scenario—this was sort of suggested by the Minister—where it would not be viable to continue the project. However, where it is in principle possible, electric power production in the plant should continue, because billions of pounds of customer payments will have been invested in the plant.
The Chair
We have had a substantial debate on clause 32 already, so I will put the question on it.
Clause 32 ordered to stand part of the Bill.
Clause 33
Application of certain provisions of the Energy Act 2004
Question proposed, That the clause stand part of the Bill.
Dr Whitehead
I have a brief question for the Minister on clause 33(7)(b), concerning the application of section 171(1) of the Energy Act 2004. It says:
“omit the definition of ‘non-GB company’.
I am slightly mystified as to why that is in the clause, because so far as I can see, the definition in section 171(1) of the 2004 Act of a non-GB company is perfectly reasonable and should continue to exist. Perhaps the Minister can shed some light on that.
Greg Hands
I have to confess that I am not able, at this moment, to shed light on subsection (7)(b) and why section 171 of the 2004 Act should be so amended. I pledge to write to the hon. Gentleman—I will copy in Committee members—to clarify why omission of that part of the 2004 Act is proposed.
Dr Whitehead
Yes. I thank the Minister.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Clauses 34 to 42 ordered to stand part of the Bill.
Schedule
Minor and consequential provision
Question proposed, That the schedule be the schedule to the Bill.
Dr Whitehead
I suspect that the Minister may also want to write to me on this. Paragraph 4 deals with consequential repeals. I am familiar, as I am sure everybody is, with the works at the back of any Bill amending various Acts to bring them in line with the amendments made in the Bill, or in some instances repealing measures that are replaced by provisions in the Bill. I have no dispute with the way that various Acts are to be amended in the schedule.
However, the consequential repeals—I have tried to follow them through in the way I described to the Minister in our recent discussion on form guides—include repeals of section 6(10)(b) of the Smart Meters Act 2018 and section 11(2) of the Domestic Gas and Electricity (Tariff Cap) Act 2018. These actually do the same sort of thing: delete sections of various Acts regarding licence modifications. Having looked through how these two provisions apply and why they are being repealed, I cannot see what on earth they have to do with nuclear energy financing. While I am sure that this would not have anything to do with somebody trying to put a couple of repeals in the back of a Bill even though they are not strictly in scope, I would like some assurance that these repeals are actually relevant to the forthcoming Act. If they are relevant, how? Why is it necessary to repeal two provisions that, on the face of it, do not appear to have anything to do with the Bill? I am sure the Minister will be happy to write to me to set out why that is the case.
Greg Hands
Yes, I think I will write to the hon. Gentleman, if I may. I am told that it is to remove a double label in the legislation, so it is purely a tidying up exercise. I will write to him, copied to members of the Committee, and for convenience I may combine it with the letter mentioned in the previous debate. It would be convenient for the Committee to have that letter well in time for Report, in case Committee members wish to consider following up with an amendment on Report.
Question put and agreed to.
Schedule accordingly agreed to.
Clauses 43 to 45 ordered to stand part of the Bill.
New Clause 1
Report on expected costs
“(1) Prior to exercising the power under section 6 (1), the Secretary of State must lay a report before Parliament.
(2) The report must set out—
(a) the expected overall capital cost of the prospective projects;
(b) the expected up-front cost of the prospective projects.” —(Alan Brown.)
This new clause would require the Secretary of State to set out (a) the overall capital cost; and (b) the expected up-front cost of the prospective projects prior to exercising the power under Clause 6 (1).
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
Again, I am trying to rise to the challenge from the Minister to put forward amendments and new clauses to improve the Bill. New clause 1 is about trying to ensure much greater transparency on costs by asking the Secretary of State to lay a report before Parliament. That in itself should not be onerous and it is something that I expect the Minister would easily be able to commit to. All the other new clauses are similar and about trying to establish that transparency, so that parliamentarians and consumers understand the cost of a nuclear project once it is signed off or at different phases following that.
New clause 1 is very modest. Subsection (2)(a) is about the provision of confirmation of the capital cost. Parliamentarians and, more importantly, consumers need to know just how many billions of pounds are committed to each new nuclear project. We hear that Hinkley Point C is now costing around £22 billion, an increase of 25% on the original estimated cost of £18 billion, but we never get these figures confirmed by Government, because it is said that cost increase is a contractor risk. So, we do not ever formally get to understand the true costs of Hinkley Point C.
At the moment, while we assume that Sizewell C will be in at least the same order of magnitude of cost, we are always told that Sizewell C will be cheaper than Hinkley Point C because of lessons learned in the design and construction of the project. Even then, that still means that Sizewell C will be in the order of £20 billion. That is a lot of money being committed for consumers, and consumers have the right to know just how much money is being committed.
We do not even know how that £20 billion estimate is going to pan out because construction costs are soaring post covid and post Brexit. Even if savings are made on Hinkley Point C, they could easily be counterbalanced by natural cost increases in the construction industry.
Subsection (2)(b) calls for all up-front costs to be clarified. If we look at the development of Sizewell C, that would mean confirmation of how much of the £1.7 billion allocated in the budget has been used and what it was used for. We also need to know what other costs are committed to during the anticipated construction period. Under the RAB proposals, consumers will start to pay money as soon as construction begins, but they are actually not committed to the full construction cost because that gets spread out over the rest of the RAB contract period; but I think it is only right to know what costs have been committed to as soon as construction commences.
Looking at the bigger picture—possibly I should have made the new clause more wide-ranging—we need to know what decommissioning costs are committed to within the overall cost envelope. We should also have the full details of RAB payments in terms of anticipated changes going forward, over the six-year period post construction.
I say to the Minister that I do not want to hear commercial confidentiality used as a smokescreen for not providing information. Giving details of the kind that I have highlighted would in no way endanger an operating company’s patent in design, or people being able to work out the costs of individual elements, because we are looking for the big picture costs.
Greg Hands
As the hon. Gentleman just explained, new clause 1, tabled by himself and the hon. Member for Aberdeen North, seeks to place additional reporting requirements on the Secretary of State. In particular, it will oblige the Secretary of State to lay a report before Parliament outlining expected overall capital and up-front costs of the project, before the licence modification powers are exercised. I want to thank the hon. Member for engaging with the substance of the Bill. He is right that I challenged him on the first day because he had not tabled any amendments; now he duly has, and it is our job to debate and scrutinise those amendments.
While we agree that it is important for the Secretary of State’s decision making with respect to a RAB to be transparent, a requirement to publish details of a negotiated deal prior to the licence modifications could jeopardise our ability to complete a successful capital raise—that is the point here. That could in turn impact our capacity to secure value for money for consumers; at the end of the day, that is what this Bill is all about. I want to reassure the hon. Member—
Alan Brown
Can the Minister explain more fully why giving detail on what the anticipated capital costs of the project are will somehow endanger the sign-off of that deal?
Greg Hands
At the point of the licence modification, we then go into the raising of the capital. Raising the capital may be more difficult, or be jeopardised, if that information has been published. It must be in the best interests overall for the Secretary of State to make the judgment as to how they can best effect best value for money for consumers, and ultimately for the sake of the taxpayers.
Alan Brown
I am still not clear how putting in the public domain what the capital cost is would make it difficult for somebody to secure private investment. First, they will have already looked at securing investment; and secondly, once the costs are known it would surely be easier for them to secure additional private investment.
Greg Hands
The hon. Gentleman may be mixing up what is in the public domain and what is part of the negotiation. You will know, Mr Gray, that it is important for the Secretary of State to be able to, in the negotiation, get the best deal—that is what we are looking for here. That is the whole purpose of the legislation; the purpose of the RAB model is to save consumers money overall. It responds to the National Audit Office report that mentioned Hinkley Point C, and said that there ought to be the ability to save money overall by sharing costs between consumers and taxpayers. That is what the RAB model is seeking to do. What we are debating overall with this legislation is how to best effect a saving for the consumer, which we estimate to be in the region of £30 billion overall. That is a very effective saving for consumers.
I would like to reassure the hon. Member that the allowed revenue for the project will be calculated by the authority throughout the construction period, thus helping to ensure that the company is spending money efficiently and economically. In response to that part of the new clause looking for detail on capital costs, these will be a key input to a project’s value for money assessment as it goes through relevant approvals. As set out in our consultation on RAB, when assessing the value for money of new nuclear projects, the Government would be focused in particular on whether the project was expected to contribute to the target of net zero emissions by 2050 and deliver security of supply at a lower total electricity system cost for consumers than alternatives without the project, so additional considerations do come into play.
In response to the part of the new clause that asks about the up-front costs of a project, we have suggested elsewhere that any initial costs to the project financed under a RAB model would be very small. For example, a project beginning construction in 2023 would cost only a few pounds per dual-fuel household in this Parliament.
The new clause is not necessary, given the steps that we have taken elsewhere in the Bill to ensure that the modification procedure and the designation process that precedes it are as transparent as possible. We believe that sufficient transparency is already embedded in the Bill. The Secretary of State will be obliged to publish the designation statement setting out how they will assess nuclear companies against the designation criteria, including value for money, for a RAB project. The Secretary of State will also need to consult with a list of key independent bodies, including Ofgem as the RAB regulator, the UK’s nuclear and environmental regulators and the devolved Administrations, on their draft reasons for project designation, which will include the Secretary of State’s assessment of the project’s value for money. They will then be obliged to publish these reasons at the point that a project is designated.
The Secretary of State is also required to consult named persons prior to making any licence modifications, which will allow expert voices to input on whether the licence modifications are effective in facilitating investment. Following the consultation, the Secretary of State must then publish the details of any modifications made as soon as reasonably practicable after they are made. This approach—of consultation followed by publication—is well precedented in other licence modification powers.
I turn to a couple of points raised by the hon. Member for Kilmarnock and Loudoun. He asked some questions about potential the savings of Sizewell relative to Hinkley. First, of course we are expecting there to be savings—learnings from the Hinkley process to be transferred to the Sizewell process. Secondly, going back to what I said earlier, we would expect that the RAB model would also lead to savings overall for the consumer over the life of the plant.
The hon. Member then asked about the strike price reduction. Under the RAB model, it is not appropriate to talk about a strike price, because it is a fundamentally different financing construct, without a strike price, which is applicable under a contract for difference regime. It would not be appropriate to use a strike price in this case. It is fundamentally different.
Alan Brown
My point was that part of the original strike rate deal agreement for Hinkley Point C was that if Sizewell C followed on, there would be a consequential reduction in the strike price for Hinkley. I know this is about a RAB model; but I am asking, will that consequential price decrease in the strike rate nevertheless be made—or, because of the RAB model, does Hinkley remain at £92.50?
Greg Hands
The hon. Member raises a very good question. The negotiation is ongoing at the moment with Sizewell. I reiterate the point made by the Secretary of State that the learning process from Hinkley is ultimately transferable to Sizewell. There are also aspects of the supply chain that were established for Hinkley that are transferable to Sizewell. If I understand correctly, there have been savings during the construction of Hinkley, with learnings from the earlier part of the construction going into the later part. We expect those savings to go forward to Sizewell. However, I stress again that comparing a RAB model strike price with the strike price of a contract for difference is not appropriate. There is no strike price with a RAB model.
By following this model and allowing the Secretary of State to lead on negotiations, as is standard for a project of this type, we will be able to achieve the best deal for consumers and taxpayers. I hope that demonstrates to hon. Members the Government’s commitment to transparency in the licence modification and the processes that support it. I hope they will withdraw the amendment.
Alan Brown
I have listened to the Minister and I am still not convinced in any way that what he outlined will provide the transparency that I am looking for. Again, the argument is, in terms of construction costs, “Well, it is only a few pounds per dual-fuel household per month for the duration of this Parliament.” That is one of the points I keep returning to. “We are talking about just a few pounds per month per consumer” is a way of trying to minimise the actual costs that are being committed, and I do not think it is sufficient. That is why I want to see much more transparency on the actual costs that are committed.
It is also interesting that the Minister made an assessment about security of supply and the whole-system cost, and looking at the value for money of a nuclear power project on that basis. I would like to understand a bit better how the Government actually undertake that. I refer him to the Imperial College report that demonstrated that using pumped storage hydro would save £690 million a year compared with nuclear energy. So, clearly, it is all about how we look at the metrics and which other technologies we consider when looking at the whole system and looking ahead to 2050.
I will not press the new clause to a vote at the moment. We will look at bringing back something on Report to try to encapsulate what we are looking for in terms of that transparency. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Report on agreed strike rate
“(1) When granting an electricity generation licence to a nuclear company in relation to a nuclear
energy generation project, the Secretary of State must lay a report before Parliament.
(2) The report under subsection (1) must set out—
(a) whether the Government has offered the nuclear company a guaranteed strike price for the sale of electricity onto the National Grid;
(b) the strike price included in any such arrangement;
(c) the duration in years of any such arrangement.”—(Alan Brown.)
In respect of new nuclear projects, this new clause would require the Secretary of State to publish details of any agreement reached offering a guaranteed strike price for the sale of electricity onto the National Grid.
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
I will be very brief because most of my new clauses are quite self-explanatory. This new clause seeks full clarity on any commitments that we undertake in a new nuclear project. It has previously been suggested that once a new power plant is operational, the actual cost of the electricity will be deducted from the RAB payments and, arguably, somehow the RAB payments could then be nullified by that arrangement. I do not see how that is credible.
If we are entering a 60-year contract to pay back a lot of the capital cost of the project, it does not make sense that the electricity would work to counterbalance that. I am concerned that a strike rate or some sort of minimum floor price will be agreed with a company, else it might not want to commit to the £20 billion or £20 billion-plus capital expenditure. That is what the new clause is all about. If there are any agreements on the price for the sale of electricity that is baked into contracts or negotiations—although it might not be called a strike rate—we need to understand that. Again, we need to have that full transparency on the costs that will be committed to consumers’ bills.
Greg Hands
I thank the hon. Member for Kilmarnock and Loudoun for probing, but I will briefly point out two reasons why we cannot include his new clause in the Bill. First, the new clause makes reference to “granting an electricity licence”; to be clear, the Bill does not give powers to the Secretary of State to grant any licences but, instead, to amend existing generation licences. Purely on language terms—important terms—we cannot accept the new clause. Secondly, the new clause proposes that the Secretary of State must report on any strike price agreed in relation to a project and provide further detail on that price. As I have already said, “strike price” is not an appropriate term because there is no strike price in a RAB model. For those reasons, I ask that the hon. Gentleman withdraw his new clause.
Alan Brown
I will not press the new clause to a vote at the moment. I will have a think about what the Minister recommends on language, which presumably means the language he would accept; I will also revisit what we are calling a strike rate. Maybe we can agree something on Report. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 3
Report on decommissioning costs
“(1) When granting an electricity generation licence to a nuclear company in relation to a nuclear generation project, the Secretary of State must lay a report before Parliament.
(2) The report under subsection (1) must set out—
(a) how decommissioning costs will be met, including any role played by—
(i) revenue collection contracts;
(ii) strike rates; and
(iii) consumer risk.
(b) how this would change if the nuclear company were to become insolvent.”—(Alan Brown.)
In respect of new nuclear projects, this new clause would require the Secretary of State to publish details of how decommissioning costs will be met, including in the event of the nuclear company becoming insolvent.
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
Again, I will be very brief, because I think it is clear what I am looking for. I am sure that the Minister will give the same answer about granting and modifying a licence, and that it is not the time to provide that information. However, I do think it is very important that, at some point, we understand it. We keep being told that decommissioning costs are baked in, up front, in the price of a contract. For me, it is vital that we get more information on what is actually baked in, and how that can provide any certainty on future decommissioning, because I still have grave concerns that a company could choose to walk away, and the taxpayer or consumer is left to pick up the decommissioning costs at a later date.
Greg Hands
I thank the hon. Gentleman for tabling the new clause. He is right that, in my view, it cannot be accepted into the Bill because it refers to granting rather than amending a licence; however, I welcome his attention to the costs of decommissioning, which is an important issue across all these projects. It is important to note that the Energy Act 2008 legislated to ensure that the operators of new nuclear power stations have secure financing arrangements in place to meet the full costs of decommissioning. Nothing in the Bill would alter in a negative way the provisions of the 2008 Act.
Under the 2008 Act, operators are required to submit a funded decommissioning programme to the Secretary of State for approval. I stress to the Committee that it is a legal requirement to have an approved FDP in place before any nuclear-related construction can begin on site. When making a decision on an FDP to approve, reject or approve with conditions, the Secretary of State must have regard to the FDP guidance, which sets out the guiding factors that the Secretary of State must be satisfied are met. The guidance stipulates key documentation and so on, and consultation with the ONR, the Environment Agency and Ofgem.
All of that is laid out in the 2008 Act, so I hope to have demonstrated that the robust FDP legislation, combined with the RAB model and our insolvency measures, will ensure that the costs of decommissioning are met. For all those good reasons, in addition to the reason that the new clause talks about granting rather than modifying the licence, I ask that the hon. Gentleman withdraw the new clause.
Alan Brown
I will not press the new clause to a vote. Equally, I am not convinced that there is enough transparency on the decommissioning costs. It is certainly something that I would like to revisit. I understand what the Minister says about the process, but of course we have not had a chance to test how robust it is. It has been applied to Hinkley, but decommissioning is some way off. We know how much liability the taxpayer has at the moment in terms of the existing decommissioning, which it is estimated will cost £132 billion over the next 100 years. We have an astonishing nuclear waste legacy that the taxpayer is having to pick up. That is why I am really keen to explore the robustness of the process, and more importantly what costs there are, but I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 4
Report on proposed payments to a nuclear administrator or relevant licensee nuclear company
“(1) Prior to making payments for the purpose described in section 41(2)(c), the Secretary of State must prepare and publish a report on the proposed payment and must lay a copy of the report before Parliament.
(2) Before the payment is made, the report under subsection (1) must be approved by the House of Commons.”—(Alan Brown.)
This new clause would require any payments under clause 42(2)(c) to be approved by the House of Commons before being made.
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
I will be brief. The new clause could have been an amendment to clause 41. I am concerned that the financial provisions under clause 41 are open-ended. The Secretary of State can make decisions, and subsection (1) begins:
“There is to be paid out of money provided by Parliament”.
It is effectively saying that Parliament will pay for whatever decisions the Secretary of State makes. As I say, that is open-ended; it is a blank cheque, if something is enacted under clause 3. That is why I simply ask that, before making any payments, information be provided to Parliament, and the anticipated level of expenditure be approved by Parliament itself.
Greg Hands
New clause 4 would add another new report for the Secretary of State to lay before Parliament, as the hon. Gentleman said, to detail the funding that the Secretary of State would propose to make to a nuclear administrator or relevant nuclear licensee company, and further requires that the report be approved by the House of Commons. As I have already made clear, I think the clear and transparent process that we have already laid out in the Bill achieves the objective overall, but in this particular case such an amendment could have negative implications for the operability of the SAR, or the special administration regime. This may place additional risk on consumers being unable to realise the benefits of the plant that they have contributed to building and significant sink costs. Of course, these are powers that we hope the Secretary of State will never have to use, and money that will never need to be spent.
As well as the need for pace, there is also a need for all relevant parties to be comfortable that the SAR is deliverable. In order to take on the administration appointment, the administrator would need to be assured that funding in the form of loans, guarantees or indemnities would be available from day one of the SAR. That is a crucial part of how a SAR regime operates. The administrator must know that funding is available from day one. The proposed amendment could introduce a degree of uncertainty over the funding pending a report from the Secretary of State to be deposited in Parliament, such that the administrators might be reluctant to take on the appointment.
I remind the House that the objective of the RLNC administrator is to commence or continue the generation of electricity, and we expect that in doing so the administrator must be able to act swiftly. It is imperative that an administrator has quick access to the funding required to ensure that such outages do not occur—we are talking, after all, about a nuclear power plant—and security of supply is maintained. More importantly, such swift action must also be conducted safely, and any lapse in funding could result in safety-critical operational expenditure not being spent. I therefore consider that such a reporting obligation on the Secretary of State would hinder the effectiveness of the special administration regime, so I ask the hon. Gentleman to withdraw the motion.
Alan Brown
I really do not buy the argument that getting approval for expenditure somehow jeopardises getting that expenditure and getting the plan operating. It makes no sense whatever. I think the Minister just wants to retain the open chequebook policy that allows the Secretary of State to do whatever he wants, but he argued it was necessary for security of supply.
It feels as though the end is in sight. I am not going to press this to a vote, given that we will simply lose it, so I am happy to withdraw, but, again, I would like to reconsider it because, to repeat myself, I want greater clarity and transparency on the costs that could be committed in future. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 5
Report on transfers falling within section 32(3)
“(1) Prior to a transfer falling within section 32(3), the Secretary of State must lay a report before Parliament.
(2) The report under subsection (1) must set out—
(a) the liabilities associated with the nuclear company;
(b) any estimated costs of getting the plant operational again if it has been temporarily shut down;
(c) the estimated lifespan of the nuclear power station; and
(d) decommissioning costs and confirmation of any funding provided by the nuclear company for this purpose.”—(Alan Brown.)
This new clause would require the Secretary of State to publish a report on the matters listed prior to any transfers falling within clause 32(3).
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
Lastly and briefly, new clause 5 ties in with the debate that we had earlier on amendment 18 to clause 32. These are the key considerations that the Government would need to consider before committing to maintaining the operation of a nuclear power plant. In the case of a company becoming insolvent, it cannot be taken over as a going concern and cannot be transferred. In terms of the going concern aspect, what liabilities are associated with the nuclear costs? Obviously, there are the actual costs of getting the plant operational again if it has had to shut down. The estimated lifespan of a nuclear power station and the decommissioning costs and confirmation of any funding that is provided by the nuclear company for that purpose again gets into the value for money argument and making a sensible decision. Do the Government take over the operation of the plant, for example, or do they start the decommissioning process and shut it down to get best value for the taxpayer?
Greg Hands
I thank the hon. Member for Kilmarnock and Loudoun for describing his proposed new clause 5. It is important to understand that the new clause, like the previous ones, would oblige the Secretary of State to lay before Parliament a report, in this case detailing the liabilities associated with a nuclear company, the estimated costs of restoring operation in the event of a shutdown, the estimated lifespan of the nuclear power station and the decommissioning costs of the project.
Obviously, I welcome the hon. Gentleman’s desire to increase transparency and the robustness of the Bill. However, I would like to bring to the Committee’s attention that it is of course the court that has the final say, as it is the court that appoints the time at which the energy transfer scheme is to take effect, following approval by the Secretary of State. It is a matter for the court. Therefore, the proposed reporting obligation on the Secretary of State must be considered unnecessary, as sufficient transparency is already offered through the court process. The courts will make an informed decision and will have ultimate responsibility for the decision on when an energy transfer shall take effect.
The proposed reporting requirement might oblige the Secretary of State to publish sensitive material, including of a commercially sensitive nature, which could have implications for the effectiveness of the RLNC administration order, the ability to achieve the objective and also to bring the administration to an end. It might well act against the public interest. The new clause risks the failure of the RLNC administration order’s objective and considerable sunk costs to consumers. I therefore ask the hon. Gentleman to withdraw the motion.
Alan Brown
In each response, the Minister says that he welcomes my desire for greater transparency, but he then rejects all my requests for greater transparency, so it does not quite feel like that. Presumably it means that we will be able to agree something on Report to get the transparency that we desire. Again, I am not convinced that doing this report would jeopardise the process, but I am happy to withdraw the new clause at the moment and to try to find ways to get the answers and transparency that I am looking for. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Question proposed, That the Chair do report the Bill to the House.
Greg Hands
On a point of order, Mr Gray. I would like to thank you and Ms Fovargue for your excellent chairing of the Committee, getting us through this important process efficiently and effectively. This has been a very interesting debate on a very interesting Bill on a very interesting topic, which attracted broad interest across the House. I have to confess that this has none the less been a relatively uneventful Committee, but for connoisseurs of the topic, it will provide many future years of reading as to how nuclear financing was scrutinised by the House of Commons so effectively and in significant detail.
I thank the excellent witnesses whom we heard from last week and all members of the Committee for their constructive debate. That has allowed the Bill to go through significant scrutiny, and facilitated important discussions. I also thank the Whips—the Whips must always be thanked—on both sides for their efforts and their effective management of the time. I offer my thanks to the Clerks, the Hansard reporters, the Doorkeepers and, indeed, all the parliamentary staff, and to my excellent team of Department for Business, Energy and Industrial Strategy officials, for the smooth proceedings and ensuring that we have all been well looked after and have finished with the Bill well scrutinised, but in good time. I look forward to the next stages of proceedings on the Bill and the continued insight from colleagues across the House.
Dr Whitehead
Further to that point of order, Mr Gray. I would like to associate myself with the Minister’s remarks about the passage of the Bill and with the thanks that are due to the many people who took part in its processes, from witnesses to hon. Members here today. A number of them were, I know, somewhat tested on occasion by the detail into which some amendments went. But overall, we have had good scrutiny of the Bill, facilitated by the courteous way in which the proceedings were conducted. I thank the Minister for those courtesies in how our debates proceeded, and I thank you, Mr Gray, for your excellent chairing of our proceedings.
Alan Brown
Further to that point of order, Mr Gray. In a similar vein, I thank yourself and Ms Fovargue for chairing the Committee. I especially thank the Clerks for all they have done, and for the assistance they have provided with drafting amendments and new clauses. I must admit, although the Minister has said that some were not relevant, I trust the Clerks’ judgment more than I trust the Minister. I do not mean that to be facetious.
The Chair
All three points of order are, of course, entirely bogus, but are none the less very welcome indeed. I put on the record my view that the bulk of the work of the chairing of the Committee has been done by my hon. Friend the Member for Makerfield. Nevertheless, I am grateful to all three Members for their entirely bogus points of order.
Question put and agreed to.
Bill accordingly to be reported, without amendment.
Nuclear Energy (Financing) Bill
Monday 10th January 2022
(2 years, 3 months ago)
Commons ChamberRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 10 January 2022 - (10 Jan 2022)
18:54 - The House divided: - Ayes: 204 / Noes: 316 - Question accordingly negatived.
19:07 - The House divided: - Ayes: 207 / Noes: 315 - Question accordingly negatived.
19:19 - The House divided: - Ayes: 207 / Noes: 315 - Question accordingly negatived.
20:00 - The House divided: - Ayes: 458 / Noes: 53 - Question accordingly agreed to.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss the following:
Amendment 1, in clause 1, page 1, line 15, at end insert—
“(6) “Owned by a foreign power” means owned by a company controlled by a foreign state and operating for investment purposes.”
This amendment is a definition of “foreign power” set out in Amendment 2.
Amendment 2, in clause 2, page 2, line 14, at end insert—
“(c) the nuclear company is not wholly or in part owned by a foreign power, and
(d) the fuel rods for the company’s reactor are supplied by a UK based company.”
This amendment prevents the Secretary of State from designating a nuclear company owned or part-owned by the agents of a foreign power and ensures that the fuelling of the designated company’s reactor is provided by a UK based company.
Amendment 6, in clause 3, page 3, line 8, at end insert—
“(e) detail of any public funding agreed as part of the project development and the services being provided for this funding.”
Amendment 9, page 5, line 21, at end insert—
“(4A) The Secretary of State must lay a report before Parliament in respect of each project in relation to which a nuclear company has been designated under section 2(1) before exercising the power under section 6 (1), setting out—
(a) the expected overall capital cost of the prospective project,
(b) the expected up-front cost of the prospective projects,
(c) the general terms of the project for the sale of electricity onto the grid, including—
(i) a statement of whether the Government has offered the nuclear company a minimum floor price mechanism for the sale of electricity onto the National Grid,
(ii) the minimum floor price mechanism included in any arrangement including any inflationary or baseline indices, and
(iii) the duration in years of any such arrangement under sub-paragraph (ii); and
(d) how decommissioning costs of the project will be met, including in the event of insolvency of the nuclear energy company, setting out any role for—
(i) revenue collection contracts, including any percentage specifically dedicated to decommissioning costs;
(ii) protection of decommissioning payments for time of need;
(iii) insurances; and
(iv) consumer risk.”
In respect of new nuclear projects, this amendment would require the Secretary of State to lay before Parliament a report on the up-front and overall expected cost of the project, details of any agreement reached terms for the sale of electricity onto the National Grid and how decommissioning costs will be met, including in the event of the nuclear company becoming insolvent.
Amendment 8, page 6, line 15, at end insert—
“(n) provision about penalties the Secretary of State may apply if the level of power outages of a nuclear reactor results in up to 60 non-operational days in a 12 month period.”
Amendment 3, in clause 7, page 7, line 8, at end insert—
“(3A) When exercising the power in subsection (1), the Secretary of State must not cause the excess of expenditure being incurred over the allowable revenue cap to lead to further charges upon revenue collection contracts.”
This amendment prevents the Secretary of State from allowing the levy of further consumer charges should an increase in allowable revenue be agreed following increases in costs or timescale of a nuclear project.
Amendment 4, page 7, line 8, at end insert—
“(3A) When exercising the power in subsection (1), the Secretary of State must publish a statement setting out how an adjustment in the company’s allowed revenue is to be made without relying on revenue collection contracts.”
This amendment requires the Secretary of State to set out how an adjustment to allowed revenue, following an increase in costs or time, is to be provided for by means other than additional customer levies.
Amendment 7, in clause 11, page 10, line 2, at end insert—
“(1A) The Secretary of State must exercise the power under subsection (1) to require each designated nuclear company to make an annual report of—
(a) the number of outages of each reactor, the reasons for outages and the total number of non-operational days per outage, and
(b) an assessment of the operational lifespan of the reactor and its key components and details of all safety inspections carried out.”
Amendment 5, in clause 32, page 24, line 24, at end insert—
“(5A) In the event that a relevant licensee nuclear company cannot be rescued as a going concern, or if a transfer of the undertaking to a wholly owned subsidiary does not result in the establishment of a going concern, the Secretary of State must establish a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued at the nuclear installation in respect of which the relevant nuclear licensee holds a nuclear licence.”
This amendment ensures the continuation of a nuclear project where a failed company cannot be rescued as a going concern or successfully have its assets transferred to a subsidiary.
Amendment 10, page 24, line 26, at end insert—
“(7) Prior to a transfer falling within section 32(3), the Secretary of State must lay a report before Parliament.
(8) The report under subsection (7) must set out—
(a) the liabilities associated with the nuclear company;
(b) any estimated costs of getting the plant operational again if it has been temporarily shut down;
(c) the estimated lifespan of the nuclear power station; and
(d) decommissioning costs and confirmation of any funding provided by the nuclear company for this purpose.”
This amendment would require the Secretary of State to publish a report on the matters listed prior to any transfers falling within clause 32(3).
Alan Brown
I express my condolences on the untimely passing of Jack Dromey. I pass on my sympathies to his family, particularly the Mother of the House.
I rise to speak to new clause 1 and amendments 6 to 9 in my name. I make it clear at the outset that I still oppose the Bill. The strategy is completely wrong, but I tabled these amendments to seek transparency and to see whether there is any seriousness to ministerial words about their willingness to consider amendments and their openness to further parliamentary scrutiny.
Let me start with amendment 9, which is all about ensuring that Parliament has a fuller understanding of what sums are involved and what commitments the Government will be making as regards any new nuclear project. The Minister has been very good at telling us about the mythical savings that will accrue via the regulated asset base funding model introduced by this Bill—they are estimated at between £30 billion and £70 billion.
What the Government are not so good at is telling us what money they want to commit for the likes of Sizewell C. In effect, they are telling us, “Let’s save money for bill payers by signing up to a less bad deal for a new nuclear project.” According to the impact assessment, the capital and financing cost is going to be in the region of £40 billion to £60 billion for a new nuclear power station. It is a strange logic to tell us that £50 billion being added to our energy bills at the time of a cost of living energy crisis is somehow a good thing. By default, the Government are also confirming just how much of a stinking, rotten deal Hinkley Point C was for bill payers if we are saying that we can save that much money compared with the contracts for difference model for Hinkley C.
We know that eye-watering sums are intended to be committed, but the Bill, as it stands, gives the Secretary of State carte blanche to sign off on a new nuclear deal. Amendment 9 tries to address that by setting out key criteria that should be laid in a report before Parliament. In Committee, and at other times when there has been quizzing on cost transparency, we have been given the con trick, “We cannot share that information for commercial confidentiality reasons.” If Parliament is told that the capital cost of a new power station is some £23 billion, which is the current estimated cost for Hinkley Point C, we do not know what the breakdown of that £23 billion is, so there is no way that that would breach commercial confidentiality. We have a right to know what up-front costs are being committed to or forced on bill payers, and it is important we know that for any deals on the sale of electricity. As I said, at the moment the Government tell us how much money the RAB model will save, but they want to continue to be vague on how much a new project will actually cost. We have the smoke and mirrors argument that it is a basic RAB payment that somehow, in the future, gets partially negated with the sale of electricity to the grid.
In Committee, the Minister also argued that if the capital cost of the project was somehow known, it would be harder to raise capital in the private markets. That is a nonsense argument, given that other infrastructure projects have their costs put in the public domain while capital is still to be raised. I would have thought it advantageous for it to be in the public domain how much capital is required to be raised, in order to generate competition for that capital investment. Initial capital-raising discussions would need already to have been held to get some assessment of the viability of the project as it was being developed. Lines about market sensitivity and best value just do not stack up as a counter argument.
We also need to know what other costs are committed to during the anticipated construction period. Under the RAB proposals, consumers will start to pay money as soon as construction begins, but they are not committed to the full construction cost because that gets spread out over the 60-year operational contract period. It is only right that bill payers know what costs are being committed to at the outset before that final sign-off of a 60-year contract.
Amendment 9 also tries to get transparency about the sale of energy. We are told there will not be a strike rate, but to me it is not credible to believe that some £50 billion-worth of capital and financing costs will be committed for a 60-year operational plan without sufficient confidence on the returns from the sale of electricity. Ministerial clarity is required, and that is why it would be good to have the Government commit to having to report on that.
For example, in a briefing in favour of the Bill, the Prospect union has come up with the ridiculous supposition that if energy prices in the market are at the right level in the future, RAB payments could reduce to zero. Are we seriously supposed to believe that is a credible proposition? Equally, are we supposed to believe that if wholesale electricity prices drop to a certain level way below the operational costs of the nuclear plant in generating electricity, the nuclear company will just carry on regardless, because it carries all the risks? It might not be a strike rate as we understand it in terms of the contract of difference scheme, but given the scenarios I have painted, some sort of guarantee will be looked for and it might be a minimum floor price on the sale of electricity. If so, we should know about it as parliamentarians and bill payers. If there is not a minimum floor price in future and the risk lies with the developer or is somehow baked into the RAB payments, we should know and understand that as well. Otherwise it is about continued closed-door negotiations hidden from the public who are actually paying for it.
Amendment 9 tries to shine a light on what would otherwise be that closed-shop negotiation by a Government who still have not learned the lessons from their desperation to sign off on Hinkley Point C at any cost whatsoever and seem destined to do so again with Sizewell C, just this time with a different model and the bill payers carrying a greater level of risk through the RAB model. I would expect any parliamentarian here who believes in some form of parliamentary scrutiny to be happy to have the Secretary of State obliged to report on the capital cost, any up-front committed costs and any future sale of energy contracts as a basic form of transparency, as amendment 9 seeks.
John Redwood (Wokingham) (Con)
The hon. Gentleman is raising some important questions about cost and reliability. What is his recommendation as to what the Government should do to make the position better?
Alan Brown
My ideal recommendation would be not to invest in a new nuclear plant. That would be the first thing, but if we take the situation as it is and look at the position going forward, the Government first need to satisfy themselves on the design. Bear in mind that the EPR system is still not working anywhere in the world. The whole point of the amendment is to at least have yearly assessments and reports to Parliament that advise on reliability. As I say, that would allow parliamentarians to understand that, challenge the Government if need be, and help to put pressure on nuclear consortiums if they were not performing to plan. That, for me, is critical to actually getting what has been signed up for.
Wera Hobhouse (Bath) (LD)
Does the hon. Gentleman agree that increasingly, the view that we need a permanent base-load for energy supply is outdated thinking, and that most modern thinking around the idea of energy supply all day, every day is that we do not need the idea of base-loads anymore?
Alan Brown
I agree wholeheartedly with that. Actually, as far back as 2015, Steve Halliday, the then chief executive of National Grid, said that baseload was an “outdated” concept and a false argument, so I agree with that. This goes back to my point that nuclear is too inflexible because it is either on or off, and it is actually nuclear that leads to wind turbines being turned off so often. The bizarre thing is that nuclear has hidden costs because of the energy constraint payments that are made.
To return to the amendments, our amendment 10 relates to clause 32, as does Labour’s amendment 5. I would point out, as I stated in Committee, that I do not support the Labour amendment because I believe that compelling the Government to take over a plant confirmed to have been economically unviable would be throwing good money after bad, which is the polar opposite of the rationale behind our amendment 10. However, to be fair, I certainly support all the other Labour amendments, particularly those about foreign ownership, and I will be happy to support them if they are pushed to a vote.
Finally—people will be glad to know—I turn to new clause 1. This is another attempt at transparency in what could otherwise be the Secretary of State committing huge sums of money via the special administration route. Again, I do not think it too onerous for the Secretary of State to have to report to Parliament on the likely costs of a bail-out of an insolvent company.
In Committee, the Minister argued that it would hamper the process, but given that the SAR process is only being implemented for the first time through Bulb going bust, it is unclear to me why a report to Parliament would unduly delay the anyway complicated process of going through the courts. The Minister stated that the court process would provide enough transparency, but also that the reporting requirement might have commercial implications and affect the Secretary of State’s ability to bring the administration to an end. Both aspects of that cannot be true: there is enough transparency or there is not. It seems to me that reporting to Parliament should not hinder the transparency process, and it should not have commercial implications, so this new clause has been put forward to ensure clear reporting of information to Parliament.
In conclusion, I have made it clear from the outset that this Bill lacks transparency. Clauses 2 and 3 give way too much power to the Secretary of State to assess what he or she believes to be a value-for-money nuclear project and then commit bill payers to paying for it. While I am opposed to the Bill, I have not even proposed wrecking amendments because the amendments today are all designed to ensure that, first, parliamentarians and, secondly, bill payers know exactly what money is being committed and for what reasons.
If the Government have faith in their arguments that nuclear energy is required and that it represents true value for money, it seems to me that they should willingly accept these amendments and new clause 1. If the amendments get defeated in votes, we will know that it is all about continued backroom deals that they fear will not stand up to scrutiny if they were to report on the actual sums.
John Redwood
I welcome proposals that will create more generating capacity in the United Kingdom. As the Minister knows, I am extremely worried that we are already typically 10% dependent on imported electricity and that the current plans envisage our becoming more import dependent, with the preferred route for electricity provision being the construction of more interconnectors. I am worried about this on security grounds, because we link ourselves at our peril into an energy-short system on the continent of Europe that is far too dependent on Mr Putin and Russian gas. I also worry about it because we are short of electricity and gas at the moment, and we see the price pressures that that creates. I think we should be doing more to expand the supply of both electricity and domestic gas.
I think the Scottish National party has made some important points, although it comes at nuclear power from a different perspective from that of the Government. While we could usefully enjoy more nuclear power, it is very important that those projects are timely and cost-controlled, with technologies that will deliver reliable power on a sustainable basis. Does the Minister agree that nothing in this legislation, and nothing that he can now do, can prevent the proportion of our electricity that is generated by nuclear from declining for the whole of this decade? As I understand it, these projects take a long time to get type approval and financing, and a long time in construction. As I also understand it, all but one of our current nuclear power stations is scheduled to close by 2030, and although one large new nuclear power station should come on stream during that period, it will not offset all the capacity that is taken out.
Bob Seely (Isle of Wight) (Con)
The purpose of small modular nuclear reactors—we are going to be building 10 or 15 of them—is to enable us to bring the price down. Is my right hon. Friend also concerned that 18 major projects in oil and gas exploration have seemingly been put on hold, given that we need those projects and those fields to come online now?
John Redwood
Yes. I fear I may be wandering a little from the actual Bill, Mr Deputy Speaker, but given the general context of energy shortage and the crucial role that gas has been playing in recent months in generating electricity, because we are short of nuclear power and short of wind power when the wind does not blow, I would strongly recommend that we get on with exploiting our own gas reserves. That is greener and cheaper than relying on gas being brought halfway round the world in a liquefied natural gas tanker or on Mr Putin’s gas routed via the continent. That is probably an argument for another day, but I am grateful to the Deputy Speaker for allowing me to answer my hon. Friend’s very good point.
In conclusion, I would like the Minister to set out a little bit more of the context of when nuclear might start contributing to our electricity demand and need, and how he sees the balance of that developing between small nuclear being rolled out at greater scale and the one or two large nuclear projects that might still be around. Also, given the hugely radical electrical revolution that the Government wish to encourage, with switching home heating from predominantly gas to electricity and switching much transport from predominantly diesel and petrol to electricity, we are going to need a massive expansion of total capacity. Would he agree, however, that we are starting from a position where we do not have enough capacity for our current levels of demand and where the nuclear element of that capacity will contract quite a lot over this decade?
Wera Hobhouse
As a lifelong anti-nuclear power campaigner, I could not fail to speak in this debate or to represent the views of the many Bath constituents who have written to me over the last weeks and months about voting and speaking against this Bill. We need to get to net zero by 2050 at the latest, but do we need nuclear power to get there, and is nuclear energy a fair deal for our consumers? While nuclear power is not a carbon fuel, it is enormously expensive, costing twice as much as generation from renewables. In answer to the right hon. Member for Wokingham (John Redwood), I believe that we just need to roll out renewable energy. We have the capacity. Britain is a country surrounded by sea, and there is a lot of wind further out. Projects such as floating wind are out there—I speak to that industry a lot. If only the Government had the political will to make that renewable energy revolution happen.
John Redwood
What difference would it have made if we had had double our wind capacity in recent weeks when it was supplying only 2% of our total electricity because there was no wind?
Wera Hobhouse
As I said, there is the potential for offshore wind, particularly further out where the wind blows all the time—the right hon. Member needs only to talk to the industry about that—if only the Government were prepared to invest much more in that and not just rely on the small projects that we currently have.
Yes, we doubled our offshore wind capacity thanks to the Liberal Democrats in government—some time ago now—but there is still no level playing field for the renewable energy sector. We speak of this again and again. If only the Government were prepared to set a regulatory level playing field, we could see a lot more renewable energy to cover our energy costs.
Let me repeat that while nuclear power is not a carbon fuel, it is enormously expensive, costing twice as much as generation from renewables, and in the end that cost will fall on the consumer. We have seen the disasters of that in recent weeks. Quite apart from the long-term costs of decommissioning, disposal and storage of waste, nuclear is an unusual technology that sees costs rise instead of fall over time. In other words, it has a high need for Government subsidy.
The Government say that the Bill is about saving consumers money by removing barriers to private investment in the nuclear sector, but that is misleading. Their proposed regulated asset base funding model provides no protection for consumers; instead, evidence shows that costs under this model for abandoned nuclear power stations have still been passed on to consumers.
Let us look at what happened in the United States, where a version of the regulated asset base model—early cost recovery—was introduced more than 10 years ago. As in Britain, ECR was sold to policy makers as a way of lowering the cost of capital, thereby making nuclear power more competitive with other sources of generation. However, the lower capital cost was not a true saving. The nuclear renaissance’s 2009 peak consisted of applications to build 31 units pending at the Nuclear Regulatory Commission. Of those, 29 have been cancelled, and despite expenditure exceeding $20 billion, no new US nuclear plants have gone into service. In South Carolina, ratepayers are having to pay $2.3 billion for a cancelled nuclear plant. While US electricity customers are exposed to paying more than $10 billion for cancelled nuclear plants and another $13.5 billion in cost overruns, no reactors have come online as a result of the US shift to early cost recovery. Florida and South Carolina have repealed the laws allowing early cost recovery, and no states have enacted such laws in the last decade, so why on earth are the Tory Government introducing a failed financial model from the US?
In contrast, the cost of renewables is falling globally. Renewables are significantly undercutting fossil fuels as the cheapest form of energy as the cost of renewable technologies falls. According to the International Energy Agency, the world’s best solar power schemes offer the “cheapest…electricity in history.”
Wera Hobhouse
I will not give way again.
Renewable energy is the future, and we in the UK are ideally placed to take advantage of the wind and wave power all around us. When UK tidal wave projects were cancelled in the past, that was always on a cost basis. Why do we not look at those projects again? They are truly renewable and truly the future. We could be an exporter of renewables. Onshore wind is now the cheapest form of electricity generation in the UK—
Mr Deputy Speaker (Mr Nigel Evans)
Order. I have been incredibly generous, as I was to Sir John Redwood. Could the hon. Lady tell me which clause she is speaking to?
Wera Hobhouse
Thank you, Mr Deputy Speaker; I am coming to the end. I could not miss the opportunity to speak in this debate because I believe that the whole Bill is a complete failure. However, I will be supporting all the amendments that are proposed today because they will improve it, but I will vote against the Bill.
Virginia Crosbie (Ynys Môn) (Con)
It is a pleasure to speak in this debate. As the co-founder of the nuclear delivery group, along with my fellow atomic kitten, my hon. Friend the Member for Copeland (Trudy Harrison), I have been at the forefront of campaigning for nuclear energy to form a key part of our 2050 net zero strategy since becoming MP for Ynys Môn.
I can talk about the various amendments tabled by the Opposition, but the reality is that this Bill is critical if the UK is to tackle climate change, and it is critical for the UK’s energy security and stability. The demand for electricity will only rise as we phase out carbon-based energy. Although renewables such as solar, wind and tidal energy must form part of our zero-carbon mix, they simply do not currently offer the capacity or reliability that we will need to go forward. Nuclear power is the only viable alternative to fossil fuels that the UK can implement in the timeframes required.
Alan Brown
When the hon. Member speaks to the amendments, will she explain why she opposes any of them? I would have thought that tabling amendments about transparency and to highlight the costs of nuclear would be a good thing.
Virginia Crosbie
Several of the amendments that the hon. Member mentioned relate to information flow and financing. I will talk more about financing and how that is so important to my constituents on Ynys Môn.
In recent years, we have seen our nuclear generation capacity drop and UK progress on the decarbonisation of power stall. Over the past year, I have been working hard to raise the issue of financing for nuclear power with Ministers and officials, because it is a key blocker to bringing more nuclear power online. The majority of my constituents support Wylfa Newydd. It is recognised as the best site in the UK, possibly the world, to host a nuclear power plant.
I will end by saying that the Bill will make a huge difference to Ynys Môn. My constituency has one of the lowest levels of gross value added in the UK and we desperately need these jobs to come through. On behalf of the nuclear delivery group, I would like to thank all my constituents and, in particular, the community of Llanbadrig for remaining positive and united in the hope that Ynys Môn sees the fruits of this important piece of legislation.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
Order. It would be really useful when people are contributing on Report if they could mention some of the amendments or the new clause now and again.
Charlotte Nichols (Warrington North) (Lab)
I welcome the return of this important Bill from Committee and I am pleased to support it, as is the Labour party. Indeed, although our NHS is the Attlee Government’s greatest achievement, it was his Labour Government who approved this country’s first nuclear reactors, which have been supplying clean energy ever since.
It is regrettable that it has taken the Conservatives more than a decade in office to bring forward these new plans to finance and ensure that we have the next generation of nuclear that we need. I am concerned that much of our domestic expertise and supply chain capacity has eroded in that time, but it is still true that if the best time to build a nuclear plant was 10 years ago, the second-best time is today. This is especially important with the retirement of Hunterston B last week, which alone provided 1 GW of the UK’s 7.9 GW nuclear capacity—enough to power 1.7 million homes.
As our energy bills rocket in the months to come, as a result of huge volatility in the international gas markets, we will be reminded yet again of the importance of the diversification, sovereignty, security and constancy of our power supplies, which Labour’s amendments address. Ensuring that there is a further generation of nuclear plants is the best way to address that as well as to be environmentally sustainable as we seek net zero.
There are too many myths about nuclear power that undermine it in the public mind and in pockets of this place. Let us hear the facts: nuclear power has the lowest lifecycle carbon of all technologies, the lowest land use of all low-carbon technologies, the lowest mining and metal use of all low-carbon technologies and the highest employment multiplier of all low-carbon technologies. Those peddling such myths rely on misleading comparisons, over-optimism about alternatives and wholly outdated concerns about safety that do not reflect the reality of modern nuclear plants. We should not be scared of making the positive case for nuclear, and making it strongly and proudly. Nuclear is safe and reliable, and it directly creates quality, high-paying and unionised jobs, as well as supporting many more in its supply chain.
Mark Jenkinson (Workington) (Con)
Does the hon. Member have any figures on how many of those jobs in Warrington might be put at risk by the exclusion of companies that are partly foreign-owned? If passed, Labour’s amendment might keep them out of new nuclear build.
Charlotte Nichols
I do not have the data on my person at this point, but ultimately more jobs are at risk in Warrington North’s nuclear sector if we do not approve the building of new nuclear. Regardless of whether that involves direct state investment, a regulated asset base model, as we are discussing today, or foreign investment, the fact is that we need to get it built, because all those jobs will be at risk if we do not.
Going back to the point that the hon. Gentleman raised, we have heard complaints about the cost of the regulated asset base model. Indeed, my preference would be direct state investment in this vital national infrastructure, which would keep the stations and the power they produce in public ownership. None the less, the model that we are discussing must be recognised as an investment that guarantees construction and production over the longer term.
As I wind up my remarks, I want to point out that the uncertainty and lack of guarantees have left the industry in the dark for so long. With the uncertainties now addressed by the Bill and the amendments that Labour has tabled, the industry can now have the confidence to plan and move forward. My hope is that by passing the Bill on a cross-party basis, it will send the signal that there is a clear consensus on the vital role that nuclear will continue to have in our energy mix. This message is fundamental as we hopefully move on from Sizewell C to other projects and plan these as a fleet to drive down costs and to maintain and expand the world-class expertise and skills of the British nuclear sector.
Bob Seely
I rise to speak to amendments 1 and 2. If I have time, I will get to amendment 9, but I will speak for no more than five minutes.
I hear what people say about the importance of renewables, but it is not a choice between renewables or nuclear. Frankly, if the world is to have any chance of meeting its carbon targets, it is not “either/or” but “and”. I am afraid to say that we see the environmental, energy and security disaster that is Germany’s imbecilic energy policy, caused by the shutting of nuclear and the dependence on Russian gas and lignite coal, the dirtiest form of energy production known to humanity.
Wera Hobhouse
I am not speaking on behalf of Germany, because Germany is in a very different position from that of Britain. It is more or less landlocked, it does not have sea, and it does not have wind in the same way. Britain has a massive opportunity to invest in new renewable energy that no other country has apart from Greece, which is doing so.
Bob Seely
I am half German and I think my German relatives would confirm that they have wind in Germany. [Interruption.] And the Baltic sea—thank you very much indeed. There is no reputable case, including in reports from the UN and others, that disagrees that, if we are to meet zero carbon at some point in the next 20, 30 or 40 years, nuclear will play an increasingly significant element, whether we like it or not. It is a very low-carbon form of energy, with no greenhouse gas, and it is important for us to take that on board.
On foreign ownership and foreign funding, would I start from here? No. I am uncomfortable with the idea that we would ever want to build an untried, untested Chinese nuclear reactor in this country, especially one that has not been built anywhere else, to say nothing of the geopolitical ramifications of that. I am not hugely happy that we have Chinese funding in place, but I understand the critical point that we need a sense of momentum to make progress on this issue. In a perfect world, though, we would not be starting from here.
Alan Brown
The hon. Gentleman spoke about the importance of nuclear to get to net zero, but the UK Government are committed to decarbonisation of the electricity grid by 2035. If we are going to rely on nuclear, there is no way on earth that we can fully decarbonise the grid. Other things are needed, such as carbon capture and storage and green hydrogen.
Bob Seely
The hon. Gentleman makes a perfectly sensible point, but his argument that we can do it all with renewables is a bit of a cop-out. We are not doing so. I want tidal energy for the Solent and for the Isle of Wight as much as he does for the west of Scotland, but the argument that renewables will solve our problems—especially when, as the right hon. Member for Wokingham (John Redwood) says, there is no wind— is a difficult one to sustain.
Moving back to amendments 1 and 2, it is perfectly sensible for the Government to make the point—the Minister did so when we were in conversation last week, and I thank him for his time—that we need foreign institutional funding, especially from friendly states, such as the United States, Australia, Canada, and the European Union, and a RAB system to make that investment in nuclear, which is expensive and which we need for the long term, but we need to be getting on with it. Having argued against those two amendments, I have to say that we have had two decades of incredibly poor leadership on energy supply. The hon. Member for Warrington North (Charlotte Nichols) spoke eloquently about the attractions of the nuclear industry, but, unfortunately, the point she missed out was that nuclear was killed as an investment discussion early on in the new Labour years. Unfortunately, the coalition carried on with that, because, effectively, we were appeasing a rather extreme green lobby in our country. We are coming to this very late. As my right hon. Friend the Member for Wokingham said, in a decade’s time, we will lose 12 out of the 13 nuclear reactors that we have. That means that we will go backwards when it comes to producing low-carbon, low-greenhouse-emission energy, even if more renewables come on stream, which I hope they will, so we need to get on with this.
Are we in a perfect position with Chinese funding? No. Do I want to see a Chinese nuclear reactor in this country? Absolutely not. Do I want to see Rolls-Royce nuclear reactors, which I hope will be the Rolls-Royce solution in all senses of the word? Absolutely, and we need to get cracking, because that will lower the price. It is also British technology and we will be keeping those high-quality jobs. We need to get moving. On that principle, I oppose amendments 1 and 2. I am happy with where we are with the Government at the moment, but let us just crack on, get this done, get another Bill for another nuclear plant this side of an election and then get in place the laws and the Bills that we need for modular nuclear to come onstream.
Jim Shannon (Strangford) (DUP)
It is a pleasure to speak in this debate, and I am grateful for the opportunity to do so.
In the past, I have spoken in the Chamber and in smaller debates about nuclear energy and its importance in today’s society. I will put on record once again my support for nuclear energy and for what it can deliver for all of this great United Kingdom of Great Britain and Northern Ireland. We need nuclear generating capacity for the United Kingdom, and I believe that this Bill gives the opportunity for that to happen.
The hon. Member for Kilmarnock and Loudoun (Alan Brown) put forward a very good case for his proposals in new clause 1 and amendments 6, 9, 8, 7 and 10. I believe that, ultimately, it comes down to whether we support nuclear energy and the benefits that it brings or whether we have some concerns, which, obviously, the hon. Gentleman has.
Nuclear energy in the UK is minimal, with only 13 nuclear reactors and six plants, which are able to supply only about 20% of the UK’s electricity demand. It is worth pointing out that Northern Ireland is the only devolved institution in the UK without a nuclear plant or power station. I note from the papers supplied to us by the Minister that
“For the RAB model and revenue stream measures in Parts 1 and 2, these will extend and apply to England and Wales and Scotland only. This is because the unique energy position of Northern Ireland means they would not benefit from energy produced by nuclear energy generation projects under a RAB model in Great Britain, and so should not be obliged to pay.”
It is clear that the Government have provided protection for us in Northern Ireland. It is also important to remember that in the context of the Government’s levelling up agenda as well as the Bill, the funding is not relative.
Nuclear energy in the UK has not peaked since 1995 and the opening of Sizewell B, the last commissioned plant to be built.
Alan Brown
I appreciate that the hon. Gentleman is saying that he would welcome new nuclear power. I mentioned earlier that the impact assessment stated that the capital and financing costs of a new nuclear power station would be some £50 billion. If I were to offer the hon. Gentleman £50 billion for an investment in Northern Ireland, would a new nuclear power station really be it?
Jim Shannon
If only we had the opportunity of a nuclear power station in Northern Ireland! We do not have that possibility at this moment, but I would certainly be keen. I have supported this throughout my years as an elected representative—as a councillor from 1985, in the Northern Ireland Assembly, and now today.
This group of amendments also deals with reports to Parliament on costs of nuclear projects, provision of information on outages, and limits on additional charges to revenue collection contracts.
We are expecting the next nuclear plant to be built in Hinckley Point C in Somerset in 2025, some four years from now. |There is no doubt that there is a huge cost implication when it comes to safe nuclear energy, but I look to Members today to see the good that comes along with it. It ensures that we keep our carbon footprint to a minimum, which is one of the main goals that we addressed at COP26. It is also essential in addressing the energy gap and relaying our response to climate change and lowering gas emissions.
The new RAB model is expected to allow new nuclear projects to be financed privately, which is the thrust of what the Bill is about. However, it is the responsibility of our Government, and our Minister, to ensure that private investors are protected. I should like to hear from the Minister how he plans to include Northern Ireland in this strategy, so that we can gain some benefits. What will happen to private investors should things change in future? I encourage the Minister to engage with the relevant Ministers back home to ensure that similar opportunities are within reach for Northern Ireland. I have historically encouraged him and his Department to ensure that there are the correct provisions for nuclear energy improvement across the UK. While this is a long and costly road, I urge other Members to look at the benefits and sustainability factors that come along with it. Additional funding must be secured for successful and green living throughout the UK.
What is important in this debate is that we understand the essential role that nuclear power has to play, and allow that role to be played in a regulated and possible manner. I support the aim of the Bill to allow the Secretary of State—or the Minister, in this case—to regulate for revenue collection contracts, which will be used to fund a nuclear company. Payments will be managed by a “revenue collection counterparty”. Projects will be paid an “allowed revenue”, which is broadly the agreed capital cost of a project along with other relevant costs. Payments will be made by electricity supply companies which are expected to pass the cost on to consumers. Costs will start to be charged to consumers during construction, based on the allowed revenue due for that period. During operation, the cost will be the allowed revenue due, minus the value of selling the energy generated.
All this seems to me to be common-sense and logical. It is important that we regulate effectively and ensure maximum security. This is not a matter that we can ever take lightly, and I believe that the Bill’s progress has been right and proper. I therefore support the Bill, but ask the Minister to reconsider the role of Northern Ireland in our nuclear power plan. Now that the potential for a plant has been removed from the old equation, there must be a place for us in the new equation.
Richard Graham (Gloucester) (Con)
What a pleasure it is to join the debate. One of the most enjoyable moments for me was to hear the hon. Member for Warrington North (Charlotte Nichols) making the case strongly and proudly for nuclear power. It was wonderful to hear that, and many of us on this side of the House have shared that feeling for a long time, while perhaps not everybody on her side has done so. It was fabulous to hear it being said.
This debate comes in a week when one of our most important nuclear power stations has just closed. It is a moment to pay tribute to all those involved in Hunterston B, which was designed to last for 25 years and actually did its job for 46 years—a tribute to the huge engineering skills and safety operation involved. It generated enough carbon-free electricity for the whole of Scotland for 31 years. In that context, I find it puzzling that the SNP continues to take such a strong anti-nuclear power position, after all the good work that Hunterston B has done for people across Scotland.
Wera Hobhouse
We always say that in the past it delivered so much energy, but what about the radioactive waste that is still there? We just close our eyes to that.
Mr Deputy Speaker (Mr Nigel Evans)
Order. I just remind Richard Graham before he continues that the new clause and amendments should be spoken to, as opposed to a general debate.
Richard Graham
I am grateful, Mr Deputy Speaker. I would have made precisely the same observation—that we must focus on new clause 1 and the amendments. In that context, it is worth mentioning that there was undoubtedly a strategic error of no new investment in nuclear during the period from 1997 to 2010, when the Opposition were in power. That is precisely why we are here today to discuss the Nuclear Energy (Financing) Bill.
Neil Parish (Tiverton and Honiton) (Con)
The need for a baseload of nuclear power of up to 25% is apparent. Big nuclear power stations such as Hinkley Point C that will produce about 8% will be absolutely important, especially as Hinkley Point B will soon be mothballed. We really do need to get this going, and it is a shame that when the Labour party was in power it did not develop nuclear power.
Richard Graham
I am grateful for my hon. Friend’s comments because they lead in to the Bill and what we are debating today, which is largely about finance and the optimum way to ensure that a new, large nuclear power station is constructed, following the success of Hinkley Point C. Indeed, obviously, the ideal thing would be to move the team seamlessly from one project to another. In all of this, it is worth paying tribute to the hugely successful operational nuclear headquarters for the whole country at EDF Energy’s offices in Gloucestershire in my constituency. One thing I hope the Minister will touch on today is how important a part they will play in the future development of our nuclear capacity, whether in further large stations such as the one at Wylfa, talked up—rightly and so effectively—by my hon. Friend the Member for Ynys Môn (Virginia Crosbie), or in any other part of the United Kingdom, as well as in the small modular reactors that have been mentioned by several Members as a key way of generating more nuclear power, and probably faster, to answer the question raised by my right hon. Friend the Member for Wokingham (John Redwood).
Alan Brown
I issue the challenge again to the hon. Gentleman to speak to the amendments. For example, can he explain why, if he is pro-nuclear, he will vote against amendment 9, which is about providing transparency on cost? Why does he oppose amendment 7, which would compel the Secretary of State to report on the operation of the new nuclear stations in the future, including outages and their condition and operability?
Richard Graham
The hon. Gentleman has tabled several amendments, including amendments 6, 8, 9 and 7. Largely speaking, my perception is that they are designed to tie down the Government in as much detail as possible, avoiding the uncomfortable truth for the Scottish National party that the whole process of regulated asset base funding, which the SNP opposes, has already been used very successfully for infrastructure projects around the country, not least the separation of ScottishPower and Scottish Hydro Electric in 2005. It has also been used for the Thames tideway tunnel and Heathrow terminal 5. I do not recall those projects ever being criticised for the concept and detail of the regulated asset base funding, which is precisely what we are discussing for Sizewell C.
Alan Brown
The RAB model has been used successfully for some infrastructure projects, but as outlined earlier it has not been very successful in the United States when applied to nuclear power stations. Can the hon. Gentleman tell me of a successful application of the RAB model to a nuclear power station?
Richard Graham
May I answer the intervention from the hon. Member for Kilmarnock and Loudoun (Alan Brown) first? We are more interested in what has been tried and tested here in the United Kingdom than in what may not have succeeded in a different model in a different sovereign country. Obviously, this is the first time it has been used for nuclear power here, but let us not forget, as I have pointed out, that there was a whole generation in which no nuclear power stations were built at all. When it came to the funding for Hinkley C in around 2010-11, I remember well the debates that we had at that time and, of course, the uncomfortable truth that we had lost the expertise to build these things ourselves, so we needed to bring in both foreign finance and foreign expertise. The situation today is different, because we are building on what we have already learned and achieved so far in the process at Hinkley Point.
I agree with the Government that this is a time to choose to move to regulated asset financing, because the crucial difference is that the businesses involved will be able to finance at lower rates and, as I understand it, two thirds of the cost of electricity from Hinkley Point C will come from the cost of capital. Making access to income available during the construction period will both reduce the costs of the project and make it more attractive to institutional investors, who are quite happy with a lower but steady return on their investment. I believe that that is the key reason—and I am comfortable with it—for adopting that approach to this nuclear power station and, I hope, others to come in the future.
Richard Graham
I will give way to my hon. Friend the Member for Workington (Mark Jenkinson) first and then to my right hon. Friend the Member for Wokingham.
Mark Jenkinson
If I could take my hon. Friend back to Sizewell C and to EDF in his constituency, and specifically to amendment 2 in the name of Her Majesty’s official Opposition, does he share my concerns that removing nuclear companies that are part owned by foreign powers would remove EDF’s involvement in the likes of Sizewell C? That would kill Sizewell C and it would kill Moorside.
Richard Graham
I am very grateful to my hon. Friend for that intervention, because I was coming on to what seems to be a curious irony in the position of Her Majesty’s loyal Opposition, particularly the hon. Member for Southampton, Test (Dr Whitehead), for whom I have a lot of respect on energy issues. It seems ironic that, as my hon. Friend has pointed out, amendment 2 would make it virtually impossible for a company partly or wholly owned by a foreign power to build and run a nuclear entity. Of course, since British Energy was sold by the last Labour Government in 2009, it is not possible for a company that is entirely British owned to do the work. In that context, the amendment seems rather ironic. Perhaps the fact that it would be a UK subsidiary of EDF answers the question; otherwise, I am inclined to agree with my hon. Friend that amendment 2 should be ruled out immediately by Members on both sides of the House on the basis of it being wholly impractical.
I am conscious that my right hon. Friend the Member for Wokingham wants to intervene, but I think the hon. Member for Norwich South (Clive Lewis) was first.
Clive Lewis
The hon. Gentleman is being very generous. Some of us on the Opposition Benches consider energy to be a public good, and therefore if we are talking about the optimal way of funding this public good, it would be via the state. The RAB system that he is talking about is very complex and is actually being backed by the state, not the market. Ultimately, if he wants to bring the costs down and make the system more cost-effective and to be optimal—that is the term he used—we would have the state funding this area fully, as well as the rest of the energy roll-out that he is talking about.
The final point I will make is that the hon. Gentleman gave some examples about Heathrow and other large-scale projects, but the difference here is that the system that he is advocating will mean that bill payers will foot much of the risk and much of the bill if there is an overspend. The problem is that that proposal is regressive—it is like a poll tax on energy. The far more progressive way to fund things would be through progressive taxation.
Richard Graham
We may be straying a bit from the subject and scope, Mr Deputy Speaker, so I will try to come back to the road of virtue as quickly as I can, but the hon. Member raises interesting points about what structure of ownership is required to develop nuclear power stations effectively. To be honest, it was his party that decided to sell—to privatise—British Energy. I think it is too late to try to row back on that and recreate that situation, unless he is proposing an interesting new Anglo-French argument over nationalising EDF Energy in the UK. We have to accept that things have moved on, and we must focus on the amendments proposed today.
John Redwood
The burden of the argument with the SNP, my hon. Friend and the rest of us is, as I understand it, transparency over the costs and terms of putative contracts. If those are to be private sector contracts, there are issues about commercial confidentiality, but if there is to be a lot of state exposure, there needs to be a very clear definition of its limits and what it will be, and I am sure that is what the Minister has in mind. Does my hon. Friend agree that we expect to see a very clear and honest statement of any state liabilities, but that commercial private contracts are not as appropriate for that kind of transparency?
Richard Graham
Yes, that is a very good way of defining the difference between the confidentiality of commercial agreements and the state’s obligation to be transparent in what is clearly a model that has elements of both. There is an element of hybrid in it, as Members have alluded to.
To bring my contribution to a close fairly swiftly, fundamentally we need to get on, as other colleagues have said, with the business of building more nuclear capacity as quickly as possible. The Bill is an opportunity to move that forward fast, with the safeguards offered by the Government within it, and to get on with a new way of funding through the regulated asset base mechanism. It will provide cheaper costs of financing and ultimately bring down the costs to consumers. Clearly, the Labour party is supporting us today in principle, and perhaps the hon. Member for Southampton, Test will give his support to the Bill from the Opposition Front Bench. The SNP is not supporting it.
From the Government Benches, I want to reiterate my support as the MP for Gloucester for what the nuclear operational headquarters in Barnwood has successfully achieved for a very long period, and I hope that the Minister, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands), will accept an invite to visit Gloucester to look at the operational headquarters and what it is doing and to discuss ways to ensure that that expertise can be used most effectively in the development of nuclear capacity in the future, as well as now.
I am afraid none of the amendments will have my support. I have mentioned that amendment 2 is ironic and inappropriate, and I think all the SNP amendments are designed to try to ensure as far as possible that today’s Bill does not go any further. Bearing in mind that we are celebrating the 46-year role of nuclear in providing electricity to every home in Scotland, that seems rather ironic and, frankly, a bit disappointing. Thank you for calling me, Mr Deputy Speaker. I very much hope the Bill goes through.
Mr John Whittingdale (Maldon) (Con)
I do not want to detain the House for too long. However, I want to say a few words as the Member of Parliament for Maldon, which contains Bradwell-on-Sea.
Bradwell had been the home of a nuclear power station since the early 1960s, and it safely generated power for nearly 40 years before being successfully decommissioned. I remain a strong supporter of nuclear power, and I agree with my hon. Friend the Member for Isle of Wight (Bob Seely) that it is not a question of choosing between renewables and nuclear. We will need both if we are to achieve our ambitions, particularly our ambition to reduce carbon emissions.
The fact Bradwell has been the site of a nuclear power station for so long is probably the reason why it was chosen as one of the designated sites for new nuclear development. Of course, an agreement was reached between EDF and China General Nuclear Power Corporation whereby Hinkley Point and Sizewell would be majority owned and financed by EDF with some Chinese contribution, but Bradwell would be the site of a Chinese-designed and majority Chinese-financed reactor.
I visited China General Nuclear in Shenzhen when I was Secretary of State for Culture, Media and Sport, when the attitude of the British Government was perhaps a little more friendly towards China than it is today. At that time the Government were keen to encourage investment in Bradwell, partly because it appeared to be the only way that we would be able to finance new nuclear, as the Chinese were the people who had the resources and the willingness to do so.
My hon. Friend the Member for Isle of Wight referred to the concerns about Chinese technology, and my concern is not about the safety of Chinese technology. The Chinese reactor is now well advanced in the generic design assessment process, and it appears to be proceeding smoothly. I suspect it will be found to be safe, but there may be other reasons why the British Government are perhaps less keen on the idea of a Chinese-owned and designed nuclear power station in this country than they were five years ago. I fully appreciate and understand the reasons for that.
Bradwell is one of the few locations to be designated as appropriate for new nuclear, and the site is owned by CGN. If the Government decide it is not appropriate to build a Chinese reactor, I would still like to think Bradwell is a possible site for an alternative nuclear power station development. Whether or not the Government reach that decision on China, it is too early to say, and I am sure the Minister will not be in a position to say definitively this afternoon, but I would like to put it on record that Bradwell successfully hosted a nuclear power station for 40 years—Bradwell A—and I saw the benefits it brought to the local community. I would therefore still be positive about the possibility of Bradwell B, whoever designs and owns it.
Dr Alan Whitehead (Southampton, Test) (Lab)
I rise to speak to the amendments tabled on Report. You will be interested to know, Mr Deputy Speaker, that I would also like to talk about the Bill and its contents.
Mr Deputy Speaker (Mr Nigel Evans)
Order. Dr Whitehead, do you intend to keep your mask on?
Dr Whitehead
Sorry, no—I have a general habit of wearing a mask whenever possible.
The Bill essentially falls into three parts. Part 1 concerns the designation of a company for the receipt of regulated asset base payments. Part 2 concerns the collection and disbursement of funds through the regulated asset base arrangements. Part 3 sets out a special administration regime, should a nuclear power plant be unable to carry out its obligations arising from the institution of the regulated asset base arrangement.
The Bill, essentially, is trying to produce a method for funding and getting over the line one particular nuclear power plant: Sizewell C. That is the only plant that is developed enough to be able to generate by 2030. A substantial part of the Bill is not about the general future of nuclear, or the relationship with nuclear renewables; it is about how one plant is to be financed over the next period so that it can actually start producing energy, hopefully by the end of this decade or shortly thereafter.
The Labour party supports nuclear power for the future and is particularly concerned that, for example, the Climate Change Committee has indicated that some 8 GW of nuclear power might be put in the mix for low-carbon renewable power for the future. Sizewell C is an important part of that process—indeed, getting it going is long overdue. Perhaps I can put the record straight, because the previous Labour Government, as the 2007 nuclear White Paper and the strategic planning documents of 2009-10 show, laid the basis for the present number of sites to be considered and, therefore, for nuclear power going forward.
Bob Seely
The hon. Gentleman is absolutely right, but unfortunately we lost a decade, from 1997 to 2007, when nuclear was taken off the table. Because of the timescales, which he is well aware of, will he just accept—this is not necessarily party political—that losing that decade put us back and is costing us now?
Dr Whitehead
The hon. Member is quite right that prior to 2007 the Labour Government did not consider the development of nuclear power by state means to be an appropriate way forward, although they never suggested that the development of nuclear power by private means could not be countenanced. However, we have since had more than 10 years of Conservative-led Government, which has produced precisely no nuclear power plants. Indeed, there is one nuclear power plant in the pipeline, and we hope a nuclear power plant that can be financed by reasonable means. One of the problems with the previous plant, Hinkley Point C, which the present Government got off the ground, was the funding arrangements, with EDF supplying most of the capital for the plant and then a CfD for the plant at the end, which looks like it will be quite disastrous, with future electricity prices being completely uneconomic.
It is therefore important that we get a method for funding those nuclear plants, and particularly Sizewell C, that does not fall into those traps and is also secure for the future. That is the concern of our amendments 1 and 2. To put the record straight, anyone who looks at those amendments reasonably closely will see that amendment 1 defines what is stated in amendment 2, and that it is defined as
“means owned by a company controlled by a foreign state and operating for investment purposes.”
That does not include EDF. Let us be clear from the outset that EDF is not
“a company controlled by a foreign state.”
Although it is substantially owned by a foreign state, it is not operating for investment purposes, but for production purposes. Let us be clear about what the particular concern is for the future.
Richard Graham
Please correct me if I am wrong, but my understanding is that EDF is majority owned by the state. If the state required it to do certain things, I do not see how the company could say no. Could the hon. Gentleman confirm if that is his understanding?
Dr Whitehead
It is correct that EDF is owned by the French state, but it is not controlled by the French state and, as I say, it does not operate for investment purposes. The amendment specifically excludes that kind of company from its provisions, but, importantly, it includes companies such as the China General Nuclear Power Corporation, which is clearly owned and controlled by a foreign state and operates for investment purposes.
Richard Graham
This is incredibly important. The amendment states
“the nuclear company is not wholly or in part owned by a foreign power”.
Factually, that is the situation with EDF. I do not have a problem with it, but I am trying to explain to the hon. Gentleman that his amendment does not say what he has just said it does, and it is therefore inaccurate, even by what he is trying to achieve.
Dr Whitehead
I am afraid we will have to differ on that. Amendment 1 has been written on good advice, in terms of what EDF does and does not do in its operation, and, on the contrary, what a company such as the China General Nuclear Power Corporation does. There is a clear distinction between those two particular companies and organisations.
The amendments wish to draw attention to the fact that this is not an academic issue. As the right hon. Member for Maldon (Mr Whittingdale) mentioned earlier, we have an agreement in place at the moment whereby the Chinese state nuclear corporation has a 35% stake in Hinkley Point C, a 20% stake in Sizewell C, should it go ahead, and complete control of Bradwell, should that go ahead, with ownership of the site and operations, and with the installation of a Chinese reactor. That agreement has already been reached, so the issue in this Bill is that if the regulated asset base is going to be put in place to finance and bring about the control of a nuclear power plant by the Chinese Government over the next period, we think that that would be a retrograde step for the future of nuclear power in this country, for obvious reasons.
In Committee, we asked the Government whether they wished to make any statement about the future of the agreement that is currently in place, which was agreed between 2013 and 2016 and includes the Secretary of State’s investment agreement, and about future arrangements for nuclear power. We asked if they could they confirm that RAB would not be used as an instrument to extend those arrangements, as far as the Chinese Government are concerned. They have not said anything about that at all; I regret that. Hence we have brought these amendments to try to clarify what RAB will be used for, what the position is concerning the 20% of Sizewell C that looks to be owned by the Chinese Government in the future, and how that relates to RAB overall. Although it is not central to the RAB debate, it is an important element in that debate and needs clarification for the future.
We did not particularly want to table these amendments. If we had had a statement from the Government that they were not proceeding with Bradwell and were going to bring an end to the arrangements that are in place for Sizewell C at the moment, perhaps things might have been different, but we urgently need some clarification about their intentions in relation to RAB and Chinese involvement in UK civil nuclear power in future. That is what amendments 1 and 2 would achieve.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I welcome these amendments because one of the concerns about RAB is that there are no safeguards, so the developer could run up costs and there would be nothing to stop them doing so. Therefore, if the Government do not accept the amendments, would it not be irresponsible to support the Bill on Third Reading?
Dr Whitehead
It would not be irresponsible to support the Bill on Third Reading, but it would be responsible of the Government to take a little more notice of these particular problems with the RAB process and possibly, as we move forward with its development, bring in mechanisms that can protect the bill-paying public in a rather better way than is suggested at the moment. That is essentially what the amendments do.
The arrangement for the RAB to be put into place is that a series of considerations are entered into to give an agreed expenditure cap for what is considered to be the proper use of the collection fund that will provide assistance to the company producing the new nuclear power plant. It can properly draw on that, up to a certain ceiling, from the general public. That is if everything goes well with the nuclear power plant, but of course that may not necessarily be the case. Of 176 nuclear power plants across the world, 175 went substantially over time and over budget, so we need to be very clear that we should not commit the general public to fund these proposals completely open-endedly. We are saying in these amendments that should there be a cost overrun or a time overrun, the Secretary of State should seek an increase in the agreed revenue ceiling without further recourse to customer funds. That may be by producing bonds or it may be by further state funding if that is the choice the Government wish to make, but they should not increase the ceiling for customers to pay exponentially at the same time.
These are very simple and straightforward amendments saying that, should there be such cost overruns or time overruns and there is a suggested further call on customer bills through RAB, the Secretary of State will have to think of something else to fund the system. Let us be clear that, with the RAB arrangements at the moment, it is suggested, I think very optimistically, there will be an increase of about £10 to £20 in customer bills. That is a really current topic at the moment, but a cost overrun would substantially increase such a levy on customer bills, and we just think that should not be part of the RAB arrangements for the future.
The third set of changes we wish to put in place are to part 3 of the Bill, which sets out what should happen and what arrangements should be in place if a company, despite all the investment from the public in the construction of a nuclear power plant, essentially goes bust. In this part, the Government have in effect lifted the provision in the Energy Act 2011 for a special administration regime. Again, that is rather current because it is precisely such a special administration regime that was used to rescue Bulb Energy when it went bust a little way ago. It was placed in such a regime under the 2011 Act—the wording is identical to that in this Bill—to allow it to continue trading for the time being, subject to the company being disposed of.
However, I would suggest that a nuclear power plant the size of Sizewell C, for example, is not remotely the same as an energy company the size of Bulb. It would be quite possible to dispose of Bulb or disperse its customers according to the special administration regime, but that would not be the case for a large nuclear power station. We are saying in amendment 5 that there should be an additional backstop so that, in the circumstances of a special administration regime, it would not be possible to pass the company on—to sell it on or to reintroduce it as a going concern through allocation to a subsidiary—and that the Government should have a plan to introduce a public company to take it over, provided it is working as a nuclear power station. That would not be the case—some Members may think the amendment means this—if the power station could not continue because the reactor head had exploded or the power plant was otherwise non-operational. If it is an operational power plant, we think that such a backstop should be available.
Hon. Members have mentioned what I think is the salutary case of the North Carolina energy plant that was conceived under RAB arrangements, or something very similar. Some $9 billion of customer money went into that plant, but the plant went bust, not because it was not operational, but because it was unfinanceable. Customers lost $9 billion of money, and there is no power station at the moment.
John Redwood
Is it not the case that, if the Government in power are faced with a big financial disaster from a very large project going horribly wrong and the company going bust, they will need flexibility to make the best decisions they can in the interests of the taxpayers and customers at the time, and it is quite difficult for us to pre-think that and embed it clearly in law?
Dr Whitehead
That is precisely why we wish to put in the Bill that there should be a direction in which the Government should go. Of course they should have flexibility in how they work, but we think this is an important backstop that will ensure customers do not lose their shirts in a company that goes bust after they have invested large amounts of money in its operation.
We will seek to divide the House on amendments 2 and 3 in the absence of any clear further Government commitments today in relation to. We may well be minded to support amendment 9, tabled by the SNP, should that also be put to a Division. However, I emphasise that we are happy to support the Bill overall. We want it to go through Third Reading, but we would like it to be strengthened as much as it can be by the addition of the amendments we have put forward today.
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
First, may I minute my condolences on the death of Jack Dromey? I shared his 12 years here and he made an enviable contribution to the House. Particular condolences to the right hon. and learned Member for Camberwell and Peckham (Ms Harman).
I am thankful for the excellent contributions we have heard today, and over the past few weeks during the passage of the Bill through the House, from Members throughout the House. I will attempt to address all Members’ comments and explain why the Government do not believe that today’s amendments should be accepted.
I turn first to new clause 1, tabled by the hon. Member for Kilmarnock and Loudoun (Alan Brown) for the SNP, regarding the special administration regime, but before I deal with his amendments, let me reflect a little bit on the contribution by my hon. Friend the Member for Gloucester (Richard Graham). The SNP, as we know, is talking today about transparency, but its real agenda is a hardcore anti-civil nuclear power agenda. This comes, ironically, just a few days after the closure of the Hunterston power station, which had its life extended by two decades beyond what was predicted and provided 31 years—31 years—of zero-carbon electricity to every home in Scotland. The Bill would make things cheaper, but I do not think that the SNP has got Scotland’s best interests at heart here for Scottish electricity or Scottish consumers.
Nuclear power has been a massive success story in Scotland, which is what I hope the Bill will also enable. New clause 1, tabled by the hon. Member for Kilmarnock and Loudoun, would severely risk the effectiveness of the special administration regime by delaying the speed at which an administrator could access funding to continue a nuclear RAB project construction or a plant’s generation of electricity. That could result in significant sunk costs for consumers and is not in the public interest.
I will turn now to Labour amendments 1 and 2, tabled by the hon. Member for Southampton, Test (Dr Whitehead), while responding to some of the points made in the debate. The hon. Member and I are aligned in our concern that foreign investment in our critical infrastructure should not come at the cost of national security. However, I want to be clear that the Bill is not about decisions on individual future projects; it is about widening the pool of potential investors and financing while reducing our reliance on state-owned developers to build new nuclear power stations. As the House is aware, we have committed to taking at least one project to final investment decision in this Parliament, subject to value for money and all relevant approvals. We are in active negotiations on the proposed project at Sizewell C. The hon. Member argued that the approval of Hinkley Point C would inexorably lead to the approval of other projects. That is simply not the case. Decisions on nuclear projects in this country are made on a case-by-case basis, and subject to a number of robust approvals from both Government and independent regulators.
Sarah Owen (Luton North) (Lab)
Will the Minister give way?
Greg Hands
I am not going to take an intervention. I will respond to the debate first.
Whatever the intent of the hon. Member for Southampton, Test with amendments 1 and 2—this is the crux of the argument, ably pointed out in interventions by my hon. Friend the Member for Gloucester—they could rule out many companies from investing in new projects under a RAB model. The RAB model is designed to bring in new investment, but in my view and in the view of the Government, his amendment would severely restrict who could invest. It could extend to some of our closest international partners. My advice is that EDF itself would be very much in scope, or at least it would be arguable in court as being in scope, of his amendment. It could also mean the rejection of huge amounts of potential investment from bodies such as major sovereign wealth funds of friendly or allied countries.
I am sure that the hon. Member’s intent does not lie in that direction, as that could make it much harder to bring new projects to fruition, and the purpose of the RAB model is to find new investors. We also need to maintain resilience in our fuel supply chain, referred to in amendment 2. I put on record my visit to Springfields recently to give the UK Government’s support, including funding announced in the spending review recently, to make sure that we have that flexibility.
Alan Brown
Will the Minister explain why he does not want to put forward a report that explains the public funding that is allocated to a project? I do not understand why that would be so difficult for him.
Greg Hands
We think those processes are already in place, and it is right that this should be a commercial decision and negotiation, but with transparency. We think the balance in the legislation as proposed currently meets that.
On amendment 9, also tabled by the SNP, the additional reporting obligations are unhelpful and unworkable. The requirement to publish up-front capital costs of a project could jeopardise our ability to complete a complex and lengthy capital raise. The amendment’s requirement to publish the floor price is simply not workable. In the context of a RAB model, there is no minimum floor price, and nuclear companies’ allowed revenues are determined by the economic regulator throughout the life of a plant.
Greg Hands
No, I will not. I will try to respond to the debate.
Amendments 3 and 4, tabled by Labour, address how additional costs beyond the financing cap could be paid for. I agree that any RAB scheme must have adequate protections in place for consumers. However, given the size and importance of a new nuclear project, there must be a mechanism in place, with appropriate protections, to allow additional capital to be raised to ensure completion of a project where the financing cap is likely to be exceeded. The amendments proposed by the official Opposition would nullify the ability to be flexible. We are making sure that we do not have to go down that course to carry out robust due diligence on the project in the first place, having learned from existing and current projects to set a robust estimate of project cost.
SNP amendments 7 and 8 refer to reporting requirements. Planned outages at nuclear power stations may happen for a variety of reasons, and it is right that they are governed by the amount of time required to complete the maintenance—the actual cause of the outage in many cases—rather than the arbitrary time limit set out in the SNP’s amendment. Both the Office for Nuclear Regulation and National Grid already work closely with nuclear operators with regard to outages and availability, and they should do so independently of the Government. Nevertheless, I would like to reassure the hon. Member for Southampton, Test that we are aiming to design the RAB regime so that the nuclear company is incentivised to maintain availability.
I turn now to amendment 5, tabled by Labour. It deals with situations whereby a RAB project
“cannot be rescued as a going concern”,
having entered special administration. Of course, I share the wish of the hon. Member for Southampton, Test that the special administration regime should protect consumer interests, but the amendment could have the impact of damaging those interests. We expect the insolvency of a nuclear RAB company to be a highly unlikely event. However, there may be even rarer circumstances within this where it is actually in the best interests of both consumers and taxpayers to discontinue the project, and for it to be safely decommissioned—for example, if a safety fault, which is very unlikely, discovered at a plant made it, in practical terms, inoperable. It is important that the Secretary of State retains the discretion to act in whichever way can achieve the best outcomes for consumers or taxpayers during the insolvency of a relevant licensee nuclear company, and the Opposition’s amendment would remove this discretion.
Finally, I would like to discuss amendment 10, tabled by the SNP. It is important to make it clear that special administration is a court-administered procedure and that the nuclear administrator is an appointee of the court. There is already an appropriate level of transparency through the court process for the transfer.
I will now deal with other points raised in the debate. My right hon. Friend the Member for Wokingham (John Redwood) asked about new supply, particularly in relation to gas, which is not on the face of the Bill. I can tell him that six new gas fields came on stream in the last quarter of the last year: Arran, Columbus, Finlaggan, Tolmount, Blythe and Elgood. It is not the case that there are no new gas fields coming on stream. Gas is, of course, heavily incentivised at present, simply by the price, for there to be more extraction. According to the developers’ estimates, Hinkley Point C could be online or start to come online as early as 2026. However, my right hon. Friend is right that we need to think ahead. I should Make it clear that I welcome the official Opposition’s support for the Bill overall, but let us not forget that awful 1997 Labour manifesto, which said:
“We see no economic case for the building of any new nuclear power stations”—
not just state-owned nuclear power stations, as my right hon. Friend said. Hinkley Point is being built, and an amazing job has been done to keep that construction work going through the pandemic. Our nuclear industry deserves congratulations.
The hon. Member for Bath (Wera Hobhouse) said that we should be rolling out renewable energy. That is exactly what we are doing. We have massively expanded our offshore wind power, and we are quadrupling it over the next decade. I think she said that Germany did not have any wind, but it has a target of 30 GW of offshore wind. There is a lot of wind in Germany. I know that she is from Hanover, which is a long way from the sea, but there is even a famous film—it is one of the best German films—called “Mit dem Wind nach Westen”, which is all about wind carrying people in balloons from east Germany to west Germany. There is most definitely wind in Germany.
Greg Hands
No, I will not give way.
My hon. Friend the Member for Ynys Môn (Virginia Crosbie), who described herself as one of the original atomic kittens—my hon. Friend the Member for Copeland (Trudy Harrison) is the other one—gave a passionate speech in favour of civil nuclear power. She is right that the Bill is all about financing, making cheaper and alternative sources of finance.
Again, I welcome the Opposition’s support for the Bill, but the hon. Member for Warrington North (Charlotte Nichols) was wrong to point the finger of delay at the Government. I should point out the 1997 Labour party manifesto and how nothing happened for 13 years. Hinkley Point C is now being built.
My hon. Friend the Member for Isle of Wight (Bob Seely) made a fantastic speech. He was quite right that the Bill’s purpose is to reduce dependence on foreign developers. He is right that we are not in a perfect position when it comes to energy or to nuclear power, but the Bill will significantly improve that position by creating options and establishing expertise for us to go forward.
The hon. Member for Strangford (Jim Shannon) made important points about Northern Ireland. I speak to Gordon Lyons quite often, and obviously Northern Ireland has a special status for energy and electricity.
My hon. Friend the Member for Gloucester made a fantastic speech and fantastic interventions. I am sure that his hub of expertise in Gloucester will come in incredibly useful, and I of course agree to visiting it.
I turn finally to my right hon. Friend the Member for Maldon (Mr Whittingdale). Bradwell, which has been a successful site in Britain’s civil nuclear experience, is at a very early stage of development and not a decision for now. Of course, in terms of the future of the site, the Bill is not site-specific; it is all about financing.
This has been an excellent, wide-ranging debate and I thank all right hon. and hon. Members for their contributions.
Ronnie Cowan (Inverclyde) (SNP)
Will the Minister give way?
Greg Hands
No, I am winding up now. For the reasons that I have set out, I cannot accept the amendments tabled and therefore ask right hon. and hon. Members not to press them. I hope that I have nevertheless shown that our aims are closely aligned for Britain’s brilliant nuclear renaissance, and the Bill will be a key part of that. I urge the House to reject new clause 1 and amendments 1 to 10.
Alan Brown
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Clause 1
Key definitions for Part 1
Amendment proposed: 1, page 1, line 15, at end insert—
“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”—(Dr Whitehead.)
This amendment is a definition of “foreign power” set out in Amendment 2.
Question put, That the amendment be made.
The Secretary of State for Business, Energy and Industrial Strategy (Kwasi Kwarteng)
I beg to move, That the Bill be now read the Third time.
I want to start by following right hon. and hon. Members in paying my respects to the late Member for Birmingham, Erdington (Jack Dromey). His constituency has lost a dedicated public servant and a real champion of local industry. I am sure that all our thoughts are with his wife and his family.
Civil nuclear power has worked for this country and it works for consumers, but we all know that the existing financing scheme has led to too many foreign nuclear developers walking away from projects, setting our nuclear industry back a number of years. While the contract for difference model was right for Hinkley Point C, the lack of alternative funding models has contributed significantly to the cancellation of recent potential large-scale projects, including Hitachi’s project at Wylfa and Toshiba’s project at Moorside. We urgently need a new approach to attract capital into the sector, and therefore we are introducing the new nuclear RAB model, which will deliver nuclear projects at a lower cost for consumers.
This new funding model is a win-win for nuclear and for our country. Not only will we be able to encourage greater diversity of private investment; we will also be able through this mechanism to lower the cost of financing new nuclear power and reduce costs commensurately to consumers and to businesses. New nuclear is absolutely essential if we are to have security of energy supply and diversity to ensure resilience.
We have heard from MPs across the House about how the nuclear industry in their constituencies has created and will create jobs—from Wylfa to Hartlepool to Hinkley. All those hon. Members are powerful advocates in this place for the future of the nuclear industry. Thanks to the Bill and other steps we are taking, I firmly believe that we are at the beginning of a new age, a new renaissance, of nuclear energy in the UK.
We have already made a commitment to bring at least one further large-scale nuclear project to final investment decision by the end of this Parliament, subject of course to value for money and relevant approvals. We are also creating not only an ability to invest in large-scale nuclear but a £120 million future nuclear enabling fund to tackle barriers to deploying new nuclear technologies. I am particularly pleased to refer to the fact that we have committed £210 million to back Rolls-Royce’s plan to deploy small modular reactors.
Jonathan Edwards
The one thing that perplexes me about this Bill is that it is for nuclear only. If the RAB model is the way forward, why is it not also available for other technologies, such as tidal?
Kwasi Kwarteng
I am pleased that the hon. Gentleman mentions tidal, because for the first time, I think, in the history of the technology—in the history of the world—this Government committed to supporting tidal stream only last year. I am pleased that he should support that initiative.
I would like to make a few brief comments on some of the key themes that the debate has covered. One of the Labour party’s amendments would have put investment in new nuclear in the deep freeze. It would have prohibited investment from abroad. The very purpose of the Bill is not only to reduce the UK’s reliance on overseas developers for finance, but to widen—and this is often overlooked—the pool of potential investors, including British institutional investors and investors from some of our closest allied countries. That is why we rejected the Opposition amendment and why we feel that the Bill broadens our ability to finance new projects. The amendment would have ruled out many companies and prevented like-minded allies such as Canada, Norway and Singapore, with their large pools of capital, from being able to invest in our industry.
Dame Andrea Leadsom (South Northamptonshire) (Con)
I sincerely congratulate my right hon. Friend on bringing forward this Bill. There is absolutely no doubt that nuclear provides the zero-carbon baseload that we need in our transition to net zero, and this is really going to help, so many congratulations to him.
Kwasi Kwarteng
I thank my right hon. Friend for her intervention. The House will know that she and I worked very closely in the Department for Business, Energy and Industrial Strategy, and she was one of the first in the new Parliament to realise the key importance of nuclear. I pay tribute to the work that she, among others, did to drive this agenda. Clearly, this Bill is timely because, as she said, we cannot reach net zero without a substantial commitment to nuclear.
John Redwood
Will the Secretary of State give some indication of how long it might take to prove and put into a working model the small nuclear technology, if all went well?
Kwasi Kwarteng
My right hon. Friend will be aware that the small modular reactors cannot be brought onstream in the next few months, but with the right investment and the right incentives, all this technology can be brought onstream very quickly. I cannot say that it will be five years or 10 years, but it will be brought onstream and will help us to reach the decarbonising targets that we have set ourselves.
Kwasi Kwarteng
I must make progress—forgive me.
Since the publication of the Prime Minister’s 10-point plan in November 2020, £6 billion of new investment has already poured into the energy sector—just in a period of barely 15 months. It was notable at the global investment summit in October last year that a further £9.7 billion-worth of deals was announced. Foreign investment is particularly eager to help to finance our way to net zero. But I have to state that foreign investment must not come at the expense of our national security. That is precisely why the National Security and Investment Act 2021 was introduced to safeguard our key strategic industries.
The final issue that we have debated is the necessity of ensuring that there is adequate protection for consumers. With this approach, private investors will be given greater certainty through a lower and more reliable rate of return, but that will, in turn, lower the cost of financing projects and ultimately, in the medium term, help sharply to reduce consumer electricity bills. To protect consumers, the Government will of course put any potential projects through a rigorous due diligence process, allowing detailed scrutiny of a project’s cost along with its delivery plans. The RAB regime will be designed to incentivise the company to deliver the project to time and to budget.
Britain once led the world with our civil nuclear industry, and we fully intend to clear a path to leadership and innovation in this critically important piece of infrastructure.
Alan Brown
If there is such a desire for investment, why was £1.7 billion allocated in the last Budget just to develop this project to final investment stage? What are we getting for that £1.7 billion of taxpayers’ money?
Kwasi Kwarteng
We all know that the hon. Gentleman’s party is against nuclear, but we also appreciate that the comprehensive spending review that he alluded to was all about ensuring our commitment in the 10-point plan to at least one further final investment decision before the end of the Parliament, and that is the sum of money that we have allocated to ensuring that that happens.
I look forward to following the progress of this Bill and pursuing our plan for greater nuclear investment, greater resilience and greater affordability in our energy mix. On that basis, I commend the Bill to the House.
Dr Whitehead
The Bill, as its title suggests, is about how to finance nuclear power. We know that the Climate Change Committee has indicated that some nuclear power is needed in the future as part of an overwhelmingly renewable energy mix. The Bill is therefore important in ensuring that we get at least the next, and only, nuclear power plant that can generate power by the early 2030s in place and developing, as the prospects of a new plant elsewhere seem bleak.
We welcome the arrangements that the Bill will make for financing nuclear power. We need to remember that there has been a 10-year hiatus, during a time of Conservative Government, in bringing forward any nuclear power, so the Bill is welcome, but overdue. We hope that with the RAB model in place, Sizewell C will be able to reach financial closure and go ahead.
We ought to understand both the advantages and possible problems of a RAB model, in the context of the people who will fund it from their bills. Although RAB has been used for other projects, a RAB model of the size and scale needed for Sizewell C has never been attempted. We urge the Government to be very careful about how they deploy the RAB model in terms of the customer interest, to not just regard customers as a milch cow for overruns or time delays in nuclear power for the future, and to ensure that the customer contribution is properly regarded as far as nuclear power development is concerned. We think the Government should pay closer attention to customer involvement in RAB, particularly because, on this occasion, the customer is funding the nuclear plant before, and not after, it develops. Careful stewardship and close custody of how that RAB model is used is vital.
The question of ownership of plant is important for UK national security. Although the Government have rejected our amendments about foreign influenced or owned investment in nuclear power in the future, we all know what that is actually about—the role of China and the Chinese state nuclear corporation, the China General Nuclear Power Corporation, in Sizewell C, and the possibility of them owning the nuclear power plant at Bradwell in the future. Despite the Government’s bluster, we know the arrangement is now in place for that development to succeed. Is that a wise way to go with nuclear power in the future, we ask?
We consider it imperative that the Government are clear about what they think about Chinese involvement in the very near future, and that they plot a clear course whereby this RAB investment is not the vehicle for the realisation of China’s developing and owning a nuclear plant in the UK, with all the security implications that has. I urge the Government to come forward at an early stage with clarity on what they consider to be the future for that arrangement. As the Secretary of State knows, that was not arranged on his watch, but in 2013 to 2016, before he was a Minister. I hope he will be able to cast an eye over the arrangement, with a view to the future that he has set out today.
With my party being in favour of nuclear power, I repeat the question asked by the hon. Member for Kilmarnock and Loudoun (Alan Brown) about the £1.7 billion in the Red Book at the last Budget for the completion of the project. Is it about buying off China? Is it about developing this project? Is it about funding further nuclear power for the future? We have no clarity at all, as we have only one line on that investment, which is not good enough. We need much more clarity for the future.
The health and welfare of Springfields is vital to this development, as it could be and should be supplying nuclear fuel rods to the new plant, and we hope the Government will look carefully and sympathetically at the future of that company, because the delivery of British fuel rods to a British nuclear reactor is very important for the future. It is vital that the Government do not allow the company to slip away under their watch when its contribution could be so important to the future of nuclear power in the UK.
Overall, we see much to support in this Bill and believe that, properly executed, its provisions will be able to establish a viable way forward for UK nuclear power. We therefore wish to support its Third Reading.
David Morris (Morecambe and Lunesdale) (Con)
We have two nuclear power stations in my constituency. I cannot say how glad I am to hear the news that the Bill will proceed, and I am elated that the shadow Minister has endorsed it. I have been talking about it for many years, and this is a great day.
I remember the coalition era, when private enterprise had to fund nuclear power, and now we are taking steps to safeguard our own energy supply and, more to the point, to safeguard jobs in my constituency, because we have two nuclear power stations that are due to cease production within the next decade. This is £40 million to my local economy and jobs—nuclear is the largest employer in my constituency. I wholeheartedly back this Bill.
Alan Brown
Unlike the hon. Member for Morecambe and Lunesdale (David Morris), I do not support the Bill, which may come as a surprise to some.
The basis of the Bill, as outlined by the Secretary of State, is that the Government recognise market failure in nuclear power, with Hitachi and Toshiba walking away from the sites they were developing. It is interesting that the Government now admit what we have said all along, which is that Hinkley Point C is a bad deal for bill payers. The Secretary of State dresses it up as being the right deal at the right time but, if we look at the impact assessment, it says the new RAB model could save up to £80 billion. By default, the impact assessment is telling us that the Government believe the model for Hinkley Point C cost bill payers an additional £30 billion to £80 billion.
Looking at the 35-year contract for Hinkley Point C, this means the Government are now telling us that bill payers will pay an additional £1 billion to £2 billion every year of that 35-year contract if Hinkley Point C starts generating electricity. That is a disgraceful waste of money.
Alison Thewliss (Glasgow Central) (SNP)
My hon. Friend is making a good point about the waste of money. It sounds like he agrees with my constituent Maureen from Kelvingrove, who says she believes
“the money being poured into this would be better spent on smaller scale more local solutions such as tide, wind, solar, hydro…and of course the key to it all, energy storage.”
Does my hon. Friend agree?
Alan Brown
I agree wholeheartedly, and I said earlier that the £1.7 billion allocated for the final investment stage of Sizewell C could deliver two pumped-storage hydro schemes in Scotland—two schemes that provide dispatchable energy when it is required.
My other big concern about the Bill and the RAB model itself is that the savings will not accrue and, worse, bill payers will carry too much of the construction risk. We keep hearing how successful the RAB model has been for other infrastructure projects, but nobody can demonstrate that it is proven to work for delivering nuclear power stations. As we discussed earlier, the examples from the United States suggest otherwise. Abandoned projects are costing bill payers billions of dollars, including $9 billion for the abandoned South Carolina project.
At the present time, in the here and now, we have a cost of living crisis, so it is absolutely scandalous to commit an estimated £50 billion to £60 billion in capital and finance costs and pass those on to bill payers. The Government tell us that is only £10 per household over the construction period, but what they do not tell us is how much more it will be when the 60-year RAB model contract kicks in.
We are in a bizarre situation where the trade body Energy UK supports the RAB model while arguing that consideration needs to be given to the removal of levies from our existing electricity bills due to the impact on the cost of living crisis. That is contradictory. Why support a payment mechanism with contractual payments of some 70 to 75 years being added to our bills during the current energy price crisis? E.ON has confirmed that it opposes such a move, and particularly the concept of bill payers starting to foot the bill as soon as construction commences.
Instead, if we retrofitted 11 million homes with energy efficiency measures, it is estimated that peak heat demand could fall by 40%. That is where the Government should start the targeted investment. We do need to consider whether we need new nuclear at all, and therefore whether we need this Bill or alternative funding mechanisms. Of the eight existing power stations, Dungeness went offline last year, seven years early; Hunterston B has now stopped production; Hinkley Point B will stop later this year; and Heysham and Hartlepool will stop in 2024. So five of the existing eight stations will be down by 2024, way before Hinkley will be up and running.
If nuclear is so critical to baseload, how will we live without it for these years? It actually undermines the Government’s own argument, particularly when we realise how often nuclear power stations go down and outages need to be managed. The wind might not be blowing and the power stations might go down as well, so what is the answer then? That is why we need investment in alternative renewables.
Worse still, the proposed EPR model developed at Hinkley looks set to be used at Sizewell. There is no functioning EPR model anywhere in the world. Taishan in China is still shut down, and according to a French whistleblower more fuel rods are damaged than China has acknowledged. Indeed, at Flamanville in France, which is already predicted to be 12 years behind, construction has stopped again because the French nuclear authorities are investigating a possible flaw in the EPR design. Surely this Government would not be so daft as to sign a new nuclear contract with an EPR design that has still not been shown to work.
This Bill represents the wrong priorities for the Government. Instead of mitigating the cost of living crisis and the cost of energy crisis, they are looking to compound the misery by adding further burdens on bill payers. I know that the Labour party has said that it will support the Bill, but I strongly recommend that it reconsiders its position, given the commitment of £50 billion to £60 billion in capital and finance costs being added for bill payers. We do not require another Tory white elephant nuclear project. I will certainly be voting against it.
John Redwood
I wish the Secretary of State, the Minister and the Bill every success. I think we might call this Secretary of State brave, because experience tells us that it is extremely difficult to land one of these really big projects and keep it to time and budget, and it is extremely difficult to get agreement to cheaper power. I am delighted that Ministers are motivated by the wish to have both more reliable generating capacity and more affordable power. Those are two excellent objectives of energy policy.
However, I fear that what I have learned from this debate, and from previous debates like it, are these things. First, we are going to have less nuclear power in 2030 than we have today, whatever Ministers do—they are prisoners of their inheritance. Secondly, it will be difficult signing up big projects in particular, or getting smaller projects that are available and working in good time so that there is more nuclear, rather than less, in the decade that follows, and it will be difficult securing that at prices that customers think are good.
In the meantime, we have the problem that, on a typical day, we are already 10% import dependent for our electricity—I think it should all be generated in the UK—and that we are very dependent on the sun shining and the wind blowing, but the wind not blowing too much. When those things did not happen towards the end of last year, we had to reopen three old coal plants. People would rather not have to burn coal, but coal stations were reliable and actually worked when the wind did not blow and the sun did not shine. If the plan is to close them down and make them unavailable in future before we have anything else as a good stand-by, we will be trying the patience of the international community and trying our own luck rather too far.
I urge the Secretary of State, on the back of this Bill, to consider ways of increasing reliable power for this coming decade—the decade that we are living in and that we will be battling over in immediate elections to come—because that is what will matter to our voters. We should have in mind security of supply, availability of supply and affordability as the crucial things that we need to take care of so that we do not have a self-imposed energy crisis. Linking us into the European system is not a secure thing to do, because those countries are chronically short of reliable green power. Poland and Germany are in the middle of trying to phase out coal and lignite. Germany is in the middle of phasing out nuclear altogether. France needs to think about replacements for its ageing nuclear fleet and it is chronically short of gas, which is a sensible transition fuel, so it needs to rely on Putin and Russia.
Wera Hobhouse
We talk again and again in this House about Britain being a global leader. Does the right hon. Gentleman agree that Britain could be a global leader in renewable energy? We are not making the most of the areas in which we could be a global leader, which are renewable energy from tidal, wave and offshore and onshore wind power.
John Redwood
I would be delighted to see a mixture of renewables, so that the reliability issue is taken care of. The problem with wind is that it is erratic. In the industrial revolution, people tended to prefer water power over wind power because it was a bit more reliable. The hon. Lady must understand that, like me, she is answerable to constituents who will expect the lights to stay on throughout this decade and will expect electricity and gas and other main energy sources to be affordable and available. The danger is that, if we do not do more to expand our capacity of the transition fuels as well as working on improving and increasing renewables, we will not be able to guarantee the crucial features of a good energy policy: availability and affordability. So, yes, fine to the Bill, but it is about the 2030s. We need also to think about the 2020s.
Mark Jenkinson
We have heard a lot today about offshore wind and how it could be the saviour of our energy system. Is my right hon. Friend aware that the levelised cost of energy of our largest offshore wind farm last year was £140 per megawatt-hour, which is twice the price of nuclear energy, if not more?
John Redwood
I have learned enough about energy to know that people produce figures that suit their case. I agree with my hon. Friend that we can say that wind energy is a lot dearer than its advocates suggest. It depends on whether we cost out the back-up power and the back-up arrangements. Obviously, once the windmills are turning they deliver very cheap power, but there is a lot of sunk cost to take care of, and we do need to account somehow for the cost of the alternative when the wind does not blow. We would need to do quite a lot of homework, and probably not in a Third Reading debate, to crack what exactly is the true cost of wind power.
I urge Ministers to think again about availability and affordability now as well as their nuclear ideas.
Mark Menzies (Fylde) (Con)
I rise tonight to put on record my sincere thanks to the Secretary of State and to the Minister for Energy, Clean Growth and Climate Change, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) for the support they have shown to Springfields nuclear fuels, which is located in my constituency. I did a Westminster Hall debate a few months ago to highlight the importance of Springfields. It is the only nuclear fuel manufacturer in the UK, and it contains some of the most highly skilled people in the world when it comes to nuclear fuel design and manufacture. Part of that site is also the National Nuclear Laboratory. This is integral to the future of UK energy security and the next generation in the UK nuclear story.
I really want to thank the Government for everything they are doing and continuing to do. I know how hard they are working to secure the future of that plant and its workforce and to ensure that Springfields has an incredibly important part to play in the future. Let us be in no doubt that those of us on the Government Benches have always been committed to nuclear. We have not always pushed it as far forward as I would have liked, but no one can doubt the efforts the Government are making to ensure that nuclear plays an incredibly important part in Britain’s industrial renaissance and in our low carbon journey. I will support this Bill on Third Reading.
Question put, That the Bill be now read the Third time.
Nuclear Energy (Financing) Bill
Tuesday 11th January 2022
(2 years, 3 months ago)
Lords ChamberRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 10 January 2022 - (10 Jan 2022)
Nuclear Energy (Financing) Bill
Monday 21st February 2022
(2 years, 1 month ago)
Lords ChamberRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 10 January 2022 - (10 Jan 2022)
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the Bill establishes a new funding model for new nuclear projects, known as a regulated asset base—RAB—model. This funding model would allow a company to receive funding from consumers through their energy suppliers in relation to the design, construction, commissioning and operation of a new nuclear project. By using a RAB model, a company’s investors share some of a project’s risks with consumers. This can lower the cost of finance for funding new nuclear plants, which is the main driver of project cost. This could deliver nuclear plants at a lower overall cost to consumers than if we relied on existing funding mechanisms alone.
As the National Audit Office observed in its 2017 report on Hinkley Point C, by using a model such as a RAB, which shares more project risk while providing the developer with a revenue stream, the required return to investors could be lower, resulting in lower project costs overall. As well as introducing a RAB model for nuclear, the Bill takes steps to remove barriers to private investment to further incentivise the development of new nuclear projects in the United Kingdom. These measures will reduce the UK’s reliance on overseas developers for finance and deliver better value for money for consumers. This legislation is vital in getting new nuclear projects off the ground and will help the UK meet its decarbonisation targets. As well as contributing to achieving our net-zero commitments, new nuclear will complement renewable energy to ensure that the UK has a resilient, low-cost, low-carbon electricity system for the long term.
With all but one of the UK’s current nuclear reactors scheduled to close by 2028, representing 85% of our existing nuclear capacity, the need for new nuclear projects is more urgent than ever. The UK was the first country in the world to establish a civil nuclear programme and the sector has a proud history of innovation and of creating high-skilled jobs across the length and breadth of the country. The Bill is an opportunity to boost this vital sector and its supply chain by getting projects off the ground, while supporting the Government’s recent levelling-up White Paper.
With construction of Hinkley Point C under way, the Government are aiming to bring at least one large-scale nuclear project to a final investment decision by the end of this Parliament, subject to value for money and all relevant approvals. The recent spending review provided up to £1.7 billion of direct government funding to support this objective. The Government have also provided further funding to support the development of future nuclear projects, including small modular reactors, led by Rolls-Royce.
This funding has been made available to develop and mature prospective projects. In addition, we need a new funding model that unlocks cost-effective nuclear power. This is the main objective of the legislation before us today. We must harness the potential of private capital to be partners in our nuclear sector and widen the pool of available finance for new projects. This will naturally take us away from reliance on single developers financing new projects at their own risk, something which has contributed to the cancellation of recent projects at Wylfa and Moorside. The effectiveness of the RAB model has been seen in the successful financing of other complex and large infrastructure projects, including the Thames Tideway tunnel and Heathrow terminal 5. With nuclear projects, the RAB model has the potential to bring in new sources of capital at a value for money cost to consumers.
In terms of international comparisons, it is important to stress that there are key differences between the RAB model and projects in the US that used the early cost recovery model. At projects such as those in South Carolina and Georgia, the economic regulatory approach taken was driven by unique company ownership models, which had implications for how costs were passed on to consumers. Other differences include the level of regulatory oversight and how incentives were established for projects to be delivered to cost and on schedule.
There were also several project-specific issues, including the maturity of design work at the start of major construction, the experience of the project supply chain, and the structures in place to manage the project. All potential nuclear projects in the UK will be subject to very rigorous due diligence, including the designation process set out in the Bill, which would mitigate against such issues arising in this country.
The Bill consists of four parts. Two of these establish the RAB model. The others take additional steps to incentivise investment and protect the interests of consumers. The first part of the legislation creates a framework for the implementation of an economic regulatory regime for the RAB model. The regime will be designed to share risk in a way that reduces the cost of financing projects, while incentivising investors to manage project costs and schedules.
This part of the Bill will allow the Secretary of State to designate a nuclear company for the purposes of the RAB model, as long as it meets specific criteria and relevant persons are consulted. The designation criteria require the Secretary of State to be of the opinion that the development of the relevant project is sufficiently advanced to benefit from the RAB model and that designation is likely to result in value for money. Once designation has occurred, the Secretary of State will be able to amend the nuclear company’s electricity generation licence, allowing it to receive a regulated revenue stream to support the design, construction, commissioning and, of course, the eventual operation of the nuclear project.
The second part of the Bill covers how funding will flow to a nuclear company that has been given access to RAB funding. This mechanism draws on the contract for difference model. Ofgem will calculate the nuclear company’s allowed revenue for a given period in accordance with its modified generation licence and how much will need to be collected from electricity suppliers. Suppliers will then pay their appropriate share of this to a counterparty, which will be responsible for passing the total amount on to the nuclear company. This will enable a steady flow of funding between domestic and non-domestic consumers and a nuclear company.
The third part of the Bill introduces a special administration regime, which will come into effect in the unlikely event of a project company’s insolvency. Unlike an ordinary administration, a special administrator must prioritise the commencement or continuation of electricity generation from a nuclear power plant which is benefiting from a RAB model. This seeks to ensure that consumers benefit from the investment they have made through RAB payments in the form of the electricity generation that the project will ultimately provide.
The fourth part of the Bill makes technical clarifications to the regime of funded decommissioning programmes in the Energy Act 2008. The Bill clarifies that entities such as security trustees and secured creditors will not be bodies “associated” with nuclear site operators simply by virtue of holding or exercising certain rights relating to the enforcement of security. This will facilitate these bodies’ involvement in the financing of nuclear projects. This part of the Bill also contains a financial provision that provides an indication to Parliament of the spending that may be incurred under the Bill’s provisions.
Finally, the commencement clause sets out the limited number of provisions in the Bill which are subject to early commencement. This is crucial in ensuring that the Government can bring at least one large-scale nuclear project to final investment decision in this Parliament, subject, as I said earlier, to value for money and all relevant approvals.
I have already touched on a number of the benefits that the Bill provides. As mentioned earlier, this legislation could significantly reduce the cost of financing new nuclear projects and reduce the UK’s reliance on overseas developers for financing new nuclear, while providing low-carbon, reliable energy. Consumers will therefore benefit from lower system costs than if the UK relied solely on intermittent power sources.
More broadly, this legislation also represents a significant opportunity for UK businesses. As Hinkley Point C proves, new nuclear build projects create jobs locally and nationally to support the supply chain and boost economic recovery. The nuclear sector employs approximately 60,000 people, which includes a significant proportion of highly skilled jobs, and the nuclear RAB model will help create thousands more.
In terms of the devolved Administrations, the nuclear RAB regime would extend to England, Wales and Scotland only. We understand that the Scottish Government do not share our position on the need for new nuclear projects. However, this Bill does not alter the current planning approval process for new nuclear projects. In addition, the Secretary of State would need to consult with Scottish Ministers before designating a nuclear company whose proposed project was wholly or partly in Scotland.
I was pleased to see the support expressed for this Bill by numerous MPs from all sides in the House of Commons representing constituencies in Wales. We will continue to work closely with the Welsh Government on options for a future nuclear project at Wylfa, and a RAB model remains an option for financing a nuclear project at this site. I was pleased also to see the support that the Bill got from Her Majesty’s Official Opposition as it passed through the other place. I look forward to further constructive engagement—indeed, we have already commenced it—and co-operation as the Bill proceeds through your Lordships’ House.
At Committee and Report stages in the Commons, there were broadly three key areas of debate. One of the issues raised was the role of foreign investment in the UK’s civil nuclear projects. The Government welcome investment but never at the expense of our national security. We recognise the importance of having appropriate protections and scrutiny in place to ensure that any investment aligns with our core interests. The National Security and Investment Act gives the Government significant oversight of acquisitions of control in a nuclear project. It is also important to note that national security considerations will form part of the wider approvals process.
Another issue raised in the Commons was costs to consumers. We recognise that the rise in global gas prices has increased the cost of energy for households. However, in the medium to long term the Government are clear that new nuclear is crucial to providing consumers with reliable, low-carbon and affordable energy.
The Bill also contains measures that will allow the Government to incentivise project developers to avoid cost overruns, providing protection to consumers prior to the approval of a project, as well as during its construction and operation. Ensuring that a project has matured to a suitable point of development will be a central criterion for approving a project under the RAB model. The Government will submit project proposals to a thorough business case process, and intensive due diligence will take place throughout project negotiations. This due diligence will allow the Government to produce a robust estimate of a project’s cost. Developers will then be incentivised to manage costs and timings effectively, overseen by the economic regulator.
Finally, the other place also had constructive debates around transparency. The Government fully recognise the importance of transparency, which is why the Bill places clear requirements on the Secretary of State to publish information and consult key stakeholders at each stage of the project.
The Government are clear that nuclear energy has a vital role in reducing our reliance on fossil fuels, thereby protecting us from volatile global gas prices. Nuclear power will need to play a significant role in the UK’s future energy mix to ensure reliable, low-cost, low-carbon power as we transition towards net zero. I hope that noble Lords will recognise the exciting opportunity that this Bill represents to further develop the UK’s civil nuclear sector, while stimulating economic growth and job creation in support of the Government’s levelling-up strategies. I beg to move.
Lord Rooker (Lab)
My Lords, I strongly support the Bill. I recall some years ago being on a boat on the Thames with Thames Tideway and being briefed about the massive new tunnel. When the financing was explained, I was not alone in asking whether it had been used for any other big infrastructure projects as, frankly, it seemed too good to be true. That sounds simplistic, but the fact is that I was sold, as were others, on the system of finance. An operational nuclear power station is not the same as a tunnel taking sewage away from London, but the cost, infrastructure and quality-of-life implications are very similar. At the end of the day, of course, the consumer will pay. You cannot hide that fact and nobody seeks to do so. But over the next 30 years, the use of electricity in the United Kingdom will double compared to the 2019 figure. The overall use of energy will go down, and we will use a smaller proportion of oil and gas, and, of course, introduce renewables and hydrogen. This this makes electricity absolutely fundamental. We will always need a baseload, and nuclear is the best form.
I do not think you can be taken seriously as a political party in 2022 if you are not in favour of civil nuclear power: it is as simple as that. I do not want to disparage people, but I am reminded of the brown bread and sandals brigade attacking nuclear not on a scientific basis but on an almost mythical, quasi-anti-religious basis, yet it is clean, green and cheap to operate. We know from our regulatory information powers that it is safe. We started it—we invented it—and we used it to make electricity. We cannot do nothing, given that our older Magnox stations will be phased out in a few years. We have to prove that we have learned the lessons from Hinkley Point C. The National Audit Office has given its approval for the use of alternative financing models, hence this Bill.
I want to be brief, and I have just two key points to make. One relates, as the Minister very fairly pointed out, to customers. The Government have to ensure that customers do not pay more than twice. They will pay twice for this, of course—that is the system; it is split—but they do not need to pay three times. Paying for construction and operation is one thing, but they should not pay for aborted projects or massive cost overruns. There has to be something which gives a degree of confidence. The Government have to prove that they have customers’ interests as a top priority, as energy policy requires that customers change their behaviour. We are asking the citizens of this country to massively change their behaviour, and they have to understand why. We know from the pandemic that behaviour will change if people understand why. We have to be transparent and open about this.
My second point concerns security. There is no reason at all why the UK, along with other democratic states, cannot ensure security and stability of nuclear technology and get control of it itself. My view is that there should be no finance from China or Russia at all. They cannot be trusted with commercial contracts these days. I remember someone once telling me, many years ago, that the Soviet Union had never reneged on a commercial contract. We do not have the Soviet Union now; we have Russia, and it is reneging on commercial contracts. Leave the security bit aside, if you will—I am worried about that as well—but it cannot be trusted on commercial contracts, and we are talking here about very long-term commercial contracts.
We started the process. Okay, it never came about that electricity was so cheap that it was not worth recording, but we are in a different age. We will not have coal and gas to fall back on for a quickie. Nuclear is going to take on an importance beyond keeping the lights on, whether it is the small modular reactors or new build.
I do not want to turn the clock back—it was never the “good old days”—but when I left school, you could get an apprenticeship with the Central Electricity Generating Board. What I cannot see today among the 20 or more different organisations is the replacement for that, so that we can upskill and give careers and a future to the people of this country. We have lost that. I would like to believe that this Bill could be one of the most important that the Government introduce. It could actually be a factor in restoring that from a bygone age.
Lord Teverson (LD)
My Lords, first, I declare my interest as a director of Aldustria Ltd, which is an energy storage company. I thought the noble Lord, Lord Rooker—who I have huge regard for—was back into Corbynism there for just a moment. I knew someone who worked for the Central Electricity Generating Board. It was a great time in history.
The Minister mentioned both value for money and zero carbon, and I want to come back to both. One of the basic things about zero carbon is the circular economy, and one of the first questions on the decision tree of circular economy is whether you need something or not. I will go down that route in a minute. I have always been favourable to nuclear power but, over the last decade, facts have changed. That is why I am sceptical about the need for this type of nuclear development altogether. Let me say why.
First, we still have not solved the nuclear waste issue—and it is a real issue. Conversations with local authorities and communities are going on throughout the UK about finding a way forward but, even if we do, those facilities will not be ready for many decades, as we have seen from previous experience in Finland. Secondly, I come to the area of baseload because this is, if you like, a 1990s argument. One thing about nuclear power—particularly with Hinkley C, which I have visited, and Sizewell C—is that, for it to be effective, it needs to operate consistently: it does not go up and it does not go down. If we have large renewables in this country, nuclear must go up and down from hour to hour, day to day, week to week. It is not a technology suited to that. It becomes inefficient. It is inefficient not only operationally but in terms of what the Bill is trying to do, which is minimise capital costs. I know from my experience in industry that, when you have capital, you work it day and night as long as you can: you sweat the assets. With a large renewable input into our electricity system, that becomes not possible with nuclear power after a certain threshold.
Also, you come to costs, and this is where facts come in: the cost curve for nuclear has gone up while the cost curve on renewables has come down significantly, as we know. I congratulate the Government on part of their work in making sure that is the case. In terms of value for money, which was the Minister’s caveat on this nuclear project, it seems to clearly fail. The trend is going that way, but we have the largest energy cost crisis that we have had in many years at the moment, and we are told that it is not going away any time soon. Yet the Bill actually adds costs to consumers, when we have a cost-of-living crisis—fuelled by energy—that is more of a problem than it has been for some time. If I was an adviser to the Government—which I never have been or will be—and I wanted to use nuclear power, I would probably go down the Korean route: you build a fleet of 20, you get your economies of scale and you finance it through the public purse, which has minimum interest cost. What do you have? You have a much cheaper capital cost, zero carbon and greater efficiency. The Government are not going down that route, but that has been shown as probably the only way that you can make nuclear power successful in the modern world.
There is an alternative—and, strangely enough, it is not renewables. It is that boring thing called energy efficiency. The Minister shakes his head, but every government publication with comparisons says that energy efficiency shows the highest return in terms of capital investment that there is. For the £20 billion that this will cost—probably more at the end of the day—it is my rough calculation that you can retrofit 2 million to 3 million homes; those would be some of the worst ones to bring up. This is important for social fuel poverty but also means that energy costs for consumers go down—whereas the Bill makes them go up. Page 55 of the 2019 Conservative manifesto says:
“We will help lower energy bills”—
somewhat ironic—
“by investing £9.2 billion in the energy efficiency of homes, schools and hospitals.”
Fantastic, but it is not enough. Here, twice that could be put towards it. I ask the Minister: how much of that £9.2 billion has already been spent, half way through the Parliament?
Lord Howell of Guildford (Con)
My Lords, I declare an interest, as I am advising a company involved in the power construction sector—Mitsubishi Electric—and a long-standing interest as a former Secretary of State for Energy. That was many decades ago, I am afraid, when I tried to get a nuclear power replacement programme going but failed, which is why we are back at the same issue now.
The Bill has excellent intentions and purposes, so I of course welcome it, as does the noble Lord, Lord Rooker, but some questions must be asked and, if not answered here in Parliament, will be asked again and again by investors. Let us be clear: the basic aim of the Bill is to make future nuclear power projects more widely attractive to private capital, such as pension fund money, of which there is plenty around to invest today. With the regulated asset base model, it is eventually consumers, via the licensed suppliers, who will find themselves bearing more of the risk from the start.
There are two key questions which investors, licensed suppliers and consumers will want answered. First, for how many years can consumers be asked to pay this extra levy on top of everything else and carry the risk of all the delays and vast cost overruns so familiar in this industry to date? Of course, the answer depends on what sort of nuclear plant is being financed and “on offer”. The one immediately before us and mentioned in the Bill is Sizewell C: a very large-scale project billed as a “replica” of the only other one being constructed in the UK, which is at Hinkley Point in Somerset. Is it a replica? Perhaps it is technologically, but definitely not financially. That is the reason we are here looking at a new financing model.
At Hinkley, the returns to the two main investors, Électricité de France and China General Nuclear, are due to come through by requiring that electricity produced, when it finally flows, is purchased by wholesale distributors at what looked at the time of the deal to be an enormously inflated “strike price”—although, ironically, it is not that inflated compared with the current soaring electricity prices which we are now suffering. Why will this so-called replica at Sizewell, or other future projects for that matter, look any better? These big plants take 10 to 15 years to get up and running, and it so happens that the history of Hinkley Point C, the evolutionary power reactor—evolutionary it certainly is—is not at all encouraging in that respect. None of its EPR design predecessors is successfully operating, has stayed anywhere near planned construction time or is anywhere near planned budget. Now at Hinkley Point C there is talk of parts having to be totally redesigned and further delays and costs. The reactor plant being constructed jointly by CGN and EDF at Taishan in China was meant to be the poster—the model—for being on time and working, but even that has now been closed for security reasons. As for the prototypes at Okliuoto in Finland or at Flamanville on the Cherbourg peninsula—which I visited some years ago with the noble Viscount, Lord Hanworth—one hardly dares look at their time overruns: years and years late.
Are investors ever going to wait that long for payback? However guaranteed the cash flow from consumer bills during construction—which may, incidentally, have to be jacked up to cope with construction risks—private money will not find that very attractive. Smaller scale, quicker built models, such as the small modular reactor type, or the advanced smaller reactors, are bound to be far more attractive when they can be built in series with lower waste, fabricated at factory level and begin operating and earning in two or three years. That means a much shorter period of risk for consumers paying up in advance and, of course, capital can be lent at cheaper rates because of a quicker return and less risk. That is obvious.
That is the first key decision, or choice, right now in our nuclear fleet replacement programme which confronts Her Majesty’s Government: a programme which has already had its share of setbacks. Do we plug on with these mammoths at Wylfa, Moorside, Oldbury and Sizewell or turn all our efforts to small and more advanced nuclear power plants? I appreciate that this is a choice the Government would rather not make.
There is a second and really awkward issue to be resolved; namely, how to deal with the Chinese involvement. There is not time in the allocated five minutes to go into detail, but 10 years ago the mood was to welcome everything Chinese and give them a central role in our nuclear replacement programme, and now the mood has swung 180 degrees. There will be little private investment attraction at all at Sizewell until all that is sorted out, even if the EPR design could be assured of working, which none of its predecessors is yet doing.
For this Bill to work and for the RAB model to function, there will have to be a major change of strategy here. Low-carbon nuclear replacement is vital for security, for climate, for cheap green hydrogen and to avoid the kinds of energy bill explosions we are suffering right now. This Bill should help get us back on the right track—eventually—but there are these key decisions to be taken before we can be anything like sure of that.
Lord Whitty (Lab)
My Lords, I broadly support the principle of this Bill and the mechanism proposed, but with some reservations and with the need to put this decision and decisions on nuclear policy in general in a wider context. I have long been a supporter of nuclear power, ever since, as a very young man, I worked at Harwell and was infected by the evangelical commitment of scientists to that alternative energy source. I did not entirely buy it, even then. I never really thought we were going to get completely free electricity; nor did I believe our colleagues down the road at Culham that fusion technology was only five years around the corner. Nevertheless, I think—much more so now than all that time ago, because we now need rapidly to move to a carbon-free energy system—that we do need nuclear power.
The problem has been that despite the investment in research and in earlier generations of nuclear power, for 30 years successive Governments have shied away from key decisions. The noble Lord, Lord Howell, mentioned examples during his time. There was a piece of evidence produced for us in a briefing for this debate that rather chilled me because it said the best time for nuclear investment is 20 years ago. That shook me, because 20 years ago, the Labour Government decided not to proceed with a new nuclear plant, just as their predecessors had. I was a junior Minister at Defra at the time and was party to that decision. It was taken largely because of the cost, which was then envisaged as being entirely on the taxpayer—whereas this puts the cost on the consumer and on business—but also because the enormous success of North Sea gas meant that we were going to have relatively cheap power for a long time and we did not need to take a decision at that time. The position of that Government was that we did not absolutely oppose nuclear power and that there would be new stations. We did not completely adopt the more extreme green agenda, although we did take it into account. We left it on the table, as it were.
We also made a number of provisos. I remember saying in the course of making that decision that while we may have not needed nuclear power at that time, we might eventually, and that even if the UK did not need nuclear power, the world would. So, we had to ensure that we retained the UK’s capability in industry and research, which was at that point—to use a phrase that is current now—still world leading. It had already been run down fairly substantially but we had a strong nuclear capability. The other provisos were that we needed to continue to identify potential nuclear sites, which we have started to do, continue to find options for dealing with nuclear waste, which the noble Lord, Lord Teverson referred to, and reduce the eventual cost of decommissioning, which has distorted our energy cost programme and the Government’s contribution to it over the last few years. These were important caveats but regrettably successive Governments ignored those caveats.
The research and operational expertise have been run down and dispersed, and we are almost entirely dependent on overseas technology, whether it is French, Japanese, Korean or, indeed, Chinese. Not enough new sites have been identified, and the public in those areas have not been fully consulted. Decommissioning costs of the AGRs, and now the Magnox, have soared, and we are still not clear on waste disposal. Instead of cost considerations reducing the upfront cost of nuclear projects, which is now met entirely by private capital, those costs have continued to escalate with the delays in the various schemes here and elsewhere in the world. Some of this is a worldwide issue, and some of it reflects non-decisions by previous Governments, as I say. But whatever form of finance that we adopt now has to be accompanied by addressing those other dimensions.
The Bill does not sufficiently protect consumers or small businesses. Interestingly, the impact assessment says that there will be no cost to small business. That is not true; there will be costs, and, particularly in the current climate, we will have to explain the fact that we are asking consumers and businesses to meet costs the benefits of which they will not see for many years.
So I am in favour of the Bill, but it needs to be extended and the Government need to surround it with some broader commitments. For example, if we are to have big nuclear sites such as Sizewell, we ought to require them to meet other objectives, such as attaching to such sites major provision for the production of hydrogen. There are other possibilities: CCS and storage. Some equivalent of Section 106, as was, needs to be applied to any nuclear projects, because other aspects of energy provision need to be addressed as we approve the provisions within the Bill.
Baroness Neville-Jones (Con)
My Lords, I support the Bill because it is both urgent and important. It is urgent because, as the history of Wylfa recently demonstrated, the lack of ability to provide funding for new nuclear energy has become a serious obstacle in the way of new building. That applies whether it is a big site or project or SMRs and AGRs.
We need the Bill because, as the Minister has said, it provides an alternative funding method that, as the noble Lord, Lord Rooker, pointed out, has been used for other utilities—it is not quite the same, but nevertheless there has been good experience. We need to get it on the statute book as soon as we can, with early commencement, so that the detailed work on financial flows via the RAB model can go ahead, with some prospect of Sizewell and other possible nuclear sites coming on stream in a reasonable timescale. It is not too much to say that, absent a Bill like this or the funding method that it would give us, it will be very difficult to support and fund Sizewell. So the stakes are high.
I am not an expert on funding mechanisms and will not compete with those who are more competent than I am in discussing them, but I will make a couple of points. As the Minister said, the RAB model enables private sector capital to be brought in, reducing the burden on the taxpayer. As has also been pointed out, we do this by getting a contribution from the consumer—this reduces the loan element and drives down the overall cost. There has been comment on this aspect both in this Chamber and in the other place, and I share the concern that the consumer should not be taken for a ride. The experience in South Carolina was cited, certainly in the other place. It is fair to say that any method of finance can be discredited by poor management and, indeed, fraud.
But the concern for protecting the consumer is legitimate, and I hope that the Minister can assure us that there will be due diligence on the project costing so that we are not faced subsequently with unprovided cost overruns. I hope that he can also tell us that incentives will be placed on the builders to keep costs down and that they will be real and effective.
I said that I thought the Bill was important as well as urgent. The truth is that this country is not going to achieve its statutorily embedded climate change goals of net zero by 2050, nor the decarbonisation of electricity production by 2035, without a contribution from nuclear energy generation, which, as has also been said, is at the moment declining. We need that base power when renewables are not performing. I know there is a big divide on this issue, but it is not just the Government who say we need it; so does the Climate Change Committee. We need the contribution of nuclear-generated power. Frankly, Parliament cannot deny the means to the end that it has ordained.
We need to bear in mind something else that is often forgotten. In a data world, we need a much greater quantum of electricity, above all, to power the world that we are going into, which is going to be so desirable and green. If we want the greenness, we need to provide the means to get there.
I also strongly suspect that, for the foreseeable future, which is quite some time, the era of cheap energy is over and that people will take a different view of what the appropriate strike price is likely to be in an upwards direction.
Lastly, I have a couple of thoughts on safety and security. The UK’s record on nuclear safety is of the highest order and we can have confidence in it. I do not come to the same conclusion as the noble Lord, Lord Teverson, who legitimately mentioned this issue. We already have sound methods for dealing with nuclear waste, but it is absolutely true that we must find a permanent solution. I hope the Minister will confirm that finding that solution remains a high priority. It is important for future generations to be able to cope with the outcome of nuclear power.
On security, if ever the world needed a demonstration that high dependence on international energy markets carries a considerable risk to the economy, Mr Putin is giving us a masterclass. Do we really need more persuasion that we must exploit our undoubted ability to become more self-reliant in energy? Secondly, as discussed in the other place, there is the participation of foreign state money in funding nuclear energy plants. I am not in favour of a blanket ban on this, but I am sure the Government need to be vigilant on the issue and use, if necessary, the power of the special share and the terms of the recently passed foreign investment Act. That is what those bits of legislation are there for. I hope the Minister can assure us that, if we are going to counter it, this would be the case.
Lord Ravensdale (CB)
My Lords, I first declare my interests as an engineer and project director in the nuclear industry, working for Atkins. I welcome the Bill, and given that finance and costs dominated the £92.50 per megawatt hour strike price agreed for Hinkley C—approximately two-thirds of that price—it is clear that the proven RAB mechanism will be transformative in reducing the costs of new nuclear. It will reduce the weighted average cost of capital in new nuclear and, as the Minister said, bring a new range of investors, including pension funds and other institutional investors.
It is worth reiterating why we need new nuclear. I have taken part in many debates in my time in Parliament on the need for nuclear in our energy system. I have always been struck by how often the argument is reduced to nuclear versus renewables, so I would like to say a few words on the economic case for new nuclear, to counter what the noble Lord, Lord Teverson, said.
I started my career a long time ago, as a systems engineer, using systems thinking to design, integrate and manage complex systems. Applying that thinking to the energy system shows that we cannot consider elements of the system in isolation. For example, renewables are achieving competitive costs of power at the generator, in levelised cost of electricity—or LCOE—terms. But as the percentage of renewables on the system increases, so, too, does the cost of system modification and back-up to cover those periods of low renewable outputs. At high penetration, when there are high percentages of renewables on the system, the marginal cost of renewables, measured on a whole-system basis, will be far higher than the reported LCOE. We should therefore be comparing costs on a whole-system basis, rather than on a simplistic comparison of levelised costs of electricity between technologies, and investigating the system architecture that minimises the costs of electricity to the consumer. A multitude of studies confirms that having reliable firm power on the grid, such as that provided by nuclear, working together with renewables—that is the important point—makes the system cheaper. With the further cost reductions provided by the RAB model, not to mention fleet build, which, it must be emphasised, led to the great cost reductions that we have talked about in renewables, nuclear will be a vital part of the 2050 energy system.
The Bill is critical for the future of the energy system, helping to ensure that it is low carbon, secure and cost effective. But I suggest to the Minister an opportunity that could be taken with the Bill, involving another aspect of the net-zero system—hydrogen production, to build on what the noble Lord, Lord Whitty, mentioned. The Minister may recall that in July last year I asked him to consider whether hydrogen produced from nuclear energy should be eligible for the renewable transport fuel obligation, or RTFO, alongside other low-carbon sources. He replied that the Government’s aim was to remain technology neutral but that energy change to RTFO sources would require primary legislation. Now we have an ideal vehicle, in the shape of the Bill, to undertake this change. Now that we have left the EU, we are free to determine our own definitions for clean, non-emitting sources of energy. I am sure that the Minister would agree that the Government’s strategy should be technology-neutral across all sectors, and that opening policies such as the RTFO to a wider range of eligible solutions would create more resilience and cost-effective outcomes.
I know that there are ambitious plans to use the construction of Sizewell C as a world-leading example of UK hydrogen-powered construction, using hydrogen buses, diggers and other construction equipment. The early large-scale use of these vehicles will help drive down manufacturing costs and increase hydrogen demand, helping UK companies to get ahead and invest in long-term job creation. A simple change, adding nuclear-derived hydrogen to the list of zero-emissions sources defined by the Energy Act 2004, could unlock millions of pounds of private investment into hydrogen production in the UK and accelerate the Government’s hydrogen production targets, while also supporting the nuclear industry. I would welcome the Minister’s thoughts on this and look forward to discussing further with him and his officials.
Finally, I support what the noble Lord, Lord Rooker, said—although maybe without wishing for the return of the Central Electricity Generating Board. However, I mentioned the system architect. Who defines the overall system architecture? It is not clear at the moment who that is. I agree with the noble Lord that that is something to which the Government need to give serious thought.
Lord Wigley (PC)
My Lords, I am delighted to follow the noble Lord, Lord Ravensdale. I agree very much with what he said, particularly his reference to hydrogen. I also wanted to comment on the speech by the noble Lord, Lord Rooker, who was spot on, not only in his content but in the passion with which he put forward his points.
I speak in a personal capacity, as Plaid Cymru, like most parties, has a spectrum of views on nuclear matters. Plaid MPs did not oppose Second Reading and the two local authorities, Gwynedd and Ynys Môn, which cover the nuclear power sites of Trawsfynydd and Wylfa, are both Plaid-led. Both councils support re-establishing nuclear energy generation on those sites, subject to safety, environmental, employment and community provisions. Indeed, we were moving towards securing Wylfa Newydd when Horizon proposals faltered on financial issues and Hitachi pulled out, so the Bill is very relevant. There is particular support for SMRs at these sites and, while I appreciate that the Bill is a facilitating measure, not tied to specific technologies, I hope that the Minister can indicate greater urgency by the Government for the SMR programme and for securing from the Nuclear Decommissioning Authority a freeing up of land at Trawsfynydd for Cwmni Egino, the site development company created by the Welsh Government, to facilitate an SMR demonstrator plant and develop medical radioisotope production there.
The main purpose of today’s Bill is to speed up investment in a new generation of nuclear power plants. I support the Government’s aim of fully decarbonising the generation of electricity by 2050, but will the benefits of this Bill be felt in time to meet the 2035 interim target of a 78% reduction in carbon emissions compared to 1990?
I accept that nuclear has a key role in guaranteeing electricity supplies for everyone in these islands when full decarbonisation is reached. This is implicitly part of the energy decarbonisation contract between government and the people.
We do not know what the constitutional relationships within these islands will be by 2050, but I believe that all four nations will be part of an integrated European electricity network through which the sale of low-carbon electricity will offer substantial financial returns.
Writing recently in Social Europe, Sarah Brown of the Ember think tank, warned:
“Europe is still in denial about fossil gas.”
She stated that there is an overwhelming consensus that limiting global warming to 1.5 degrees requires
“the rapid and complete decarbonisation of the power sector”.
A United Nations Economic Commission for Europe report, published in October, showed that for each kilowatt hour of electricity generated the grams of carbon dioxide released into the atmosphere are, for coal, 1,000 grams; for gas, 430 grams; for solar, 37 grams; for wind, 14 grams; and for nuclear, 5 grams. These full-life cycle figures include the carbon implications of mining, construction, operation and decommissioning of relevant plant.
We need a complete end to the use of coal, oil and gas for generating electricity and their replacement by dependable low-carbon sources of energy. There is an important role for renewables—solar power, wind generators and tidal and estuarial energy such as the Severn barrage—but they cannot generate all our electricity on the consistent, reliable, 24/7 basis necessary to meet in a timely fashion the needs of each household and place of work. Developments in hydrogen technology and battery capacity will play a role, but the basic challenge remains. Eventually, we may see a renewable, fully decarbonised electricity generation sector if we have the political will, but the clock is ticking towards a global warming profile in which human life on this planet will be snuffed out. Our present trajectory is unsustainable.
Over time, we shall see new clean sources becoming available. We have long awaited fusion as a better source than nuclear fission; recent developments at the Joint European Torus facility at Oxford are encouraging. I hope this Bill might facilitate nuclear fusion investment in due course, but we cannot base our 2050 target on the assumption that fusion will be in place. We have a period of perhaps half a century when the gap between low-carbon supply and demand must be met from a dependable source. Over that timescale, nuclear electricity is an essential part of the clean energy mix.
There are valid questions about the cost of nuclear power. If we are going to support nuclear with this type of financial intervention, how do we ensure that we maximise the UK’s industrial opportunities with technologies and manufacturing capabilities that can be exported as well as used for our own clean energy needs? With the UK taxpayer funding nuclear in this way, we must ensure that the UK economy benefits fully from the opportunity this affords. One major issue of concern relates to the cost of clearing up nuclear power sites; this must be factored into the equation.
I also want assurance that the Bill can cover a variety of sources of nuclear generation, including SMRs and eventually nuclear fusion. We must ensure that the model which has been developed can benefit other developers, and should not be seen as one customised solution for the benefit of EDF at Sizewell C. What commitment can the Minister give that other technologies and potential projects can benefit from this Bill?
I shall also be seeking greater clarity on the role of devolved Governments in designation, licence modification, consultation, transfer schemes and decommissioning.
Because of the pressing need for a new generation of safe, clean, low-carbon nuclear generation facility to underpin our carbon footprint commitments, I am content for this Bill to have a Second Reading.
Lord Goodlad (Con)
My Lords, it is a great pleasure to follow the noble Lord, Lord Wigley. I remember with great pleasure visiting Trawsfynydd and Wylfa in his former constituency when I was a junior Minister of energy, almost four decades ago. I was pleased to hear from my noble friend the Minister that further investment up there is now envisaged.
I strongly support the Bill. We have no prospect of achieving a goal of net-zero carbon emissions by 2050 without new nuclear power. All but one of our current reactors are due to close and we urgently need to make up for lost time and get on with building their replacements, faced as we are with the doubling of electricity demand over the next 30 years.
We have discussed today the other sources—wind and solar power, which the Government have very successfully promoted and will continue to promote—but as we have seen, they are very much victims of the weather from time to time. Oil and gas currently provide a very large proportion of our electricity and will continue to do so, on a diminishing basis. I entirely agree that they should be sourced locally and domestically, rather than being imported, so far as is possible; I only wish more of my compatriots north of the border saw it that way. The Government are rightly supporting investment in small modular reactors—good luck to Rolls-Royce—but that is down the line, as are hydrogen and fusion, which are well down the line.
Increased energy efficiency—which we have heard about from the noble Lord, Lord Teverson—both domestic and industrial, has to my knowledge been a theme of government for at least four decades. That remains a work in progress; much low-hanging fruit has already been gathered, but there will always be room for new carrots and sticks. The Government have made commitments in that direction, which my noble friend the Minister may wish to comment on.
If we are to avoid electricity rationing as demand doubles, we do not have the luxury of time. We need the certainty of new baseload nuclear electricity very soon. That is what this Bill, through the proposed new financial arrangements, will enable, showing the project costs for consumers, investors and developers. The impact assessment has shown that the RAB model for building a large-scale plant is hugely cheaper than the alternative, and for that reason the Government are quite right to choose it.
In the debate on civil nuclear power in your Lordships’ House on 9 December, it was suggested in a most brilliant speech that alternatives to the present proposals could include the issuing of designated bonds backed by the security of the Government, or creating
“a supply of funds to enable the projects to pre-empt the necessary resources by increasing the supply of money.”—[Official Report, 9/12/21; col. 2078.]
Since the Government can borrow money more cheaply than anybody else, it is clear that there is some attraction in this. The noble Lord, Lord Teverson, referred to it as the North Korean model.
Lord Goodlad (Con)
South Korean! I beg his pardon. My hearing aid has been letting me down. The South Korean model. Well, that may be so, but that is not the way the Chancellor of the Exchequer sees it, faced as he is with an enormous borrowing requirement already, and that is not the proposal before us.
One of the lamentable side effects of the lack of investment in nuclear power in recent decades has been the serious reduction in this country’s relevant skills and expertise. Sizewell C, following Hinkley Point C, will be essential in keeping in existence this expertise. It is salutary to remember the role of British expertise in the construction of the pressurised water reactor at Daya Bay in China, the first nuclear reactor. How the world has changed, but we are where we are, and I hope that we can yet again lead the world in nuclear technology if we show the will to do so, as we can.
I hope that this Bill will enjoy a relatively swift passage through this House, as it did through the other place, with the encouragement of the noble Lord, Lord Rooker, who spoke as eloquently as ever in its support. I hope also that work can be carried out with the urgency that the situation requires.
Viscount Trenchard (Con)
My Lords, I declare my interests as a consultant to the Japan Bank for International Cooperation and as a member of the advisory board of Penultimate Power UK Limited.
I welcome this Bill, which adds to the range of financing structures available for nuclear power station projects. Construction of gigawatt-sized nuclear reactors involves enormous investments in excess of £20 billion, with very long periods before revenues begin to accrue. The nuclear sector deal of June 2018 set out an ambition to reduce capital costs by 30% by 2030. This Bill should facilitate a reduction in the cost of capital for such projects. As Humphrey Cadoux-Hudson, managing director of EDF UK, explains, out of Hinkley Point C’s contract-for-difference price of £92.50, only £12 to £13 was the cost of construction. Operation and waste management represented another £25, and the rest is the cost of finance.
The RAB model is already established in the UK as a way of financing large infrastructure projects. There were around £160 billion worth of RAB assets in the country in 2018, such as Thames tideway, a £4.2 billion project whose weighted average cost of capital will be 2.5% until completion of construction and testing. That compares with around 9% for Hinkley Point C, which is borne by consumers.
The RAB model increases the options for financing nuclear projects and supports the Government’s recognition of the essential role that firm baseload nuclear power must play in meeting both our rapidly increasing demand for electricity and our much bigger need for low-carbon industrial energy. Many people are not aware that the two are different and that currently only 20% of our total energy consumption is electricity, while 80% is domestic and industrial heat, transport, and industrial processes, which at present are principally supplied by gas. Renewable energy cannot replace fossil-fuelled industrial heat.
As I mentioned in the excellent debate on nuclear power introduced by my noble friend Lord Howell of Guildford on 9 December 2021, there are many reasons why the Government should prioritise any opportunities to collaborate with Japan on nuclear energy, to mitigate the damage caused by the cancellation of the Horizon project and Toshiba’s NuGen project at Sellafield Moorside.
The Government have committed to provide £385 million towards advanced nuclear research and development. I welcome their decision to support Rolls-Royce’s SMR programme. The 10-point plan committed the remaining £175 million to research and development of AMR technologies. My right honourable friend the Energy Minister confirmed on 2 December that the Government had decided to focus on high-temperature gas-cooled reactors as their technology choice moving forwards, with the objective of building a demonstrator by the early 2030s. I suggest that this is too modest an objective. As my noble friend Lord Goodlad said, we do not have the luxury of time.
The HTGR technology developed by the Japan Atomic Energy Agency is based on an early British design, the Dragon reactor, developed at Winfrith in Dorset in 1965. The 21st century version has been licensed and operating in Japan for more than 10 years. It is inherently safe and would complement Rolls-Royce’s SMRs well as HTGRs produce heat up to 950 degrees centigrade and would serve a different but essential sector of the UK economy, such as replacing fossil fuels in industrial processes, manufacturing and the production of green hydrogen. The reactors are much smaller than the relatively large Rolls-Royce SMRs, producing around 50 megawatts thermal or 22 megawatts electrical, ideal for embedding in industrial clusters.
Does my noble friend not agree that the Government are proceeding much too slowly in seeking only to establish a demonstrator? The Japanese Government and JAEA are keen to commercialise this already proven technology in the UK and would welcome ministerial engagement at an early date to discuss how this might be best achieved. The RAB model enabled by the Bill we are debating today will provide increased opportunities to finance smaller nuclear projects as well as very large ones such as Sizewell C.
However, I have reservations about saddling consumers with too much by way of additional levies on their electricity bill. Does the Minister agree that the allocation of risk must be fair, transparent and robustly regulated to protect the consumer if the burden is to be applied through regressive electricity bills rather than general taxation? I look forward to other noble Lords’ contributions and the Minister’s winding-up speech.
Viscount Hanworth (Lab)
My Lords, the recent history of the nuclear industry is evidence of the failure of the Government’s energy policy. The coalition Government of Clegg and Cameron recognised the need to renew Britain’s fleet of nuclear reactors. In 2010, it was agreed that the construction of eight new nuclear power stations should be called for. Several contactors expressed willingness to undertake the projects but one after another they withdrew. The list includes Scottish and Southern Electricity, the German companies RWE npower and E.ON, and the Japanese companies Hitachi and Toshiba.
This has left the French company EDF as the sole nuclear contractor, and at one stage it was doubtful whether it would be prepared to proceed with its project, given the difficulty in raising the necessary funds and the paucity of its own resources. The principal difficulty has arisen from the Government’s insistence that infrastructure investment in the nuclear industry should be financed by private capital.
One is reminded that the construction of our existing nuclear plants was invariably financed by central government. Money borrowed from private lenders is subject to burdensome surcharges comprised within exorbitant rates of interest. These charges consist of a risk premium, a scarcity premium and a discount rate. The discount rate reflects the time preferences of the lenders, whereby future receipts are valued at far less than current receipts. It is a consequence of this short-term perspective that half the cost of constructing a new nuclear power station, which can take as long as 10 years, will be attributable to interest charges. These will eventually constitute a massive transfer payment from the consumers of electricity to the financial sector.
As a provider of finance, the Government should be expected to take a long-term perspective. It should be one that envisages the consequences of global warming and the need to provide a stable baseload of carbon-free electricity, which only nuclear power can provide. The free market ideology of the Government has resulted in a system of contracts for difference, under which the guaranteed payments are entailed in a so-called strike price. Any returns to the investment that are below the strike price will be supplemented and any returns above it will be taxed.
This system has been an invention of neoclassical economists. It has accorded perfectly with their theoretical vision of how the economy ought to work, but it is at variance with reality. Among the economic fictions that support this system is a belief in the efficiency of intertemporal financial intermediation, whereby lenders can be prevailed upon to accept future repayments with little in the way of monetary inducements. In reality, it has proved impossible for prospective contractors to acquire the investment funds without incurring a heavy burden of payments to the financial sector.
The Government’s latest attempt to square the circle is represented by the Nuclear Energy (Financing) Bill. The Bill proposes to provide a stream of revenues to the contractor during the period of construction. The revenue will be derived from a charge levied on existing consumers of electricity. The supposition is that, with a guaranteed revenue stream and the alleviation of some of the risk, the contractors will be able to acquire capital funds from the private sector with greater certainty and at a reduced cost.
This begs the question of where the funds will come from and whether they will be adequate to cover the costs. The Government have also reserved the right to judge whether a proposed nuclear project will represent value for money and there is a risk that they will declare or decide that it does not. The common understanding is that the capital will come from the pension funds. I believe that this is the Government’s assumption. We have yet to hear any assessment of the likelihood that the funds will be forthcoming. Perhaps the Minister could address this point. To my knowledge, the Government have revealed no plans to meet the eventuality that the funds to sustain the regulated asset base will not be forthcoming from the private sector. Perhaps, in that case, the Government should derive funds by issuing designated nuclear bonds, as has been suggested.
In January, the Government announced £100 million of funding to support the continued development of the Sizewell C project, in the hope that this would attract further financing from private investors. This is a trivial sum. It might seem odd to describe £100 million as a trivial sum, but it is small in comparison with the £4.3 billion that is reported to have been lost through Covid-related fraud. The cost of the Hinkley Point C power station, which should open in 2026, is estimated to be between £22 billion and £23 billion. The cost of Sizewell C has been estimated at £20 billion. One should be mindful of the fact that, under existing arrangements, at least 50% of these sums will be paid to the financial sector in interest charges. Stripped of interest charges, the true cost of constructing a massive power station at Hinkley Point or Sizewell can be compared with the cost of the 2012 Olympic Games, which is supposed to have been £14.8 billion. These costs seem small when set beside the accumulated profits of banks and the tax paid by the banking sector.
These figures have been bandied about because I wish to pose a rhetorical question: can we afford to secure our future energy supply and fulfil our carbon reduction ambitions? The Government’s economic philosophy might suggest to them, absurdly, that both of these questions should be answered in the negative and that it will be too expensive to achieve these goals.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Viscount, Lord Hanworth, with his arguments about the financial sector, although I would make the point that we of course cannot afford the cost of not having a liveable planet—there are no jobs on a dead planet. I feel I have to begin by restating the Green Party’s long-term opposition to new nuclear power, but I will focus today on particular elements of this Bill in the short time available to me. I am particularly opposed to the point made by the noble Lord, Lord Teverson, about forcibly adding to the debt burden of energy users—the same people who are already going to be made to pay for the Government’s cost of living “rescue” package.
I do not have time today to go into detail about all the excellent reasons why local campaigners are so vehemently opposed to a new nuclear plant in Suffolk or to revisit all the arguments about why new nuclear is a terrible idea. Top of the list is that it is way too slow to deal with our climate emergency, together with the demonstrable fact that it crowds out the investment and attention needed on renewables and energy conservation—a point that I will come back to. I will not list the woes of EDF: its shares down almost half in the last three years; its French reactors expected to produce 10% less energy than forecast this year; and its regulatory and safety problems.
Instead, I will focus on two short cautionary tales. One comes from South Carolina. The story starts in 2008 with a decision to build two new nuclear power plants commissioned from Westinghouse Electric Company, owned by Toshiba. I could go through a long and sorry tale, but I will cut it short and get to the final cost—$9 billion, which consumers in South Carolina will be paying for over 20 years; and, for that, they have got a hole in the ground that has now been filled back in. Commenting on the project, former US Nuclear Regulatory Commissioner Gregory Jaczko said:
“It used to be that you didn’t start charging for a plant unless it was done and operating. Whether it was a nuclear plant, or a coal plant”.
That is particularly relevant to our debate on this Bill because the former commissioner was talking about a time before the costs and risks were socialised and the profits were privatised—those profits going very much to the financial sector, as the noble Viscount said. It was interesting that the Minister acknowledged in his introduction that RAB shares risk and said, with an interesting use of the word, that it “could” deliver at lower overall cost.
I come secondly to a cautionary tale somewhat closer to home, to which a number of noble Lords have already referred: the filthy, incredibly dangerous UK former nuclear sites, which the Nuclear Decommissioning Authority acknowledges it still does not even fully understand. The Public Accounts Committee estimates the cost of the clean-up at £132 billion, a sum it has rightly described as “astronomical”. Other noble Lords have referred to the private contract to clean up the Magnox site. In 2018, four years after it had been let, the Government had to take it back; the cost of that alone was £140 million. It is interesting that we have not worked out what to do with the waste, and that we can have no idea of the final cost that will be charged to the public because we do not know how we will get rid of the waste—and that is part of the whole project.
Back in 2012, I attended a fascinating meeting of the local group in Cumbria opposed to deep nuclear waste disposal, chaired as I recall by the former Conservative head of the county council. I say “fascinating” because it was perhaps the most politically diverse meeting I have ever been at, ranging from representatives from the Allerdale and Copeland Green Party to fervent advocates of new nuclear power, but all were opposed to a nuclear disposal facility in Cumbria—and, of course, Cumbria, through its county council, said no. In the other place, the Minister said that they were looking to accelerate dealing with this problem. Well, you cannot accelerate something that is absolutely stationary; or not without an awful lot of force.
I come back to the point I started with, about nuclear crowding out other opportunities and ways of dealing with our climate emergency and poverty crisis. There is a sure bet for the future for people and planet: renewables and—as the noble Lord, Lord Teverson, said—energy efficiency. I note that the Office for National Statistics has just reported that these green industries have essentially flatlined between 2012 and 2020. While the Government have been focusing on their approach, they have utterly neglected the proven, certain practices that would deliver jobs in every community up and down the land.
What we should have is a “Green New Deal (Financing) Bill”, perhaps funded by those who could afford it, such as the private landlords who the Green Party proposed last autumn should face a one-off land value tax to help deal with our energy issues. That would be a Bill fit for our climate and poverty emergencies. Instead, we have a Bill trying to resurrect a failed, expensive, outdated industry—benefiting the few while we all pay the price.
Lord West of Spithead (Lab)
My Lords, I strongly support the Bill and agree very much with the things that were said by my noble friend Lord Rooker. There is no doubt that an energy crisis is looming, as we move towards net zero. Indeed, it could be argued that the energy crisis is already here. The amount of electricity used in this country will at least double, as my noble friend Lord Rooker says, if not increase by even more. The noble Lord, Lord Teverson, mentioned insulation, and I agree that it is very important. However, it is not that easy and straightforward. I have just visited one of my sisters in the West Country and she has had made her house amazingly well insulated. She had to basically demolish the house, almost rebuild it and put everything back together. It is now fantastically energy efficient. If we were to think that millions of people in this country could easily do that, we would have to be in cloud-cuckoo-land. When we are all driving around in electric vehicles, there will be that additional demand and those vehicles cannot be insulated.
Why are we in this position? It is because of the failure of successive Governments—as has been mentioned. It is a national disgrace, actually. We have gone from being the world leaders in civil nuclear—we made masses of money exporting this stuff to Japan—to a position where we cannot build even one of these large reactors ourselves. That is appalling. Reliance on the Chinese, for example, as has been mentioned by a number of speakers, is extremely dangerous and not good. In terms of Sizewell C, could the Minister let us know exactly what the Chinese involvement in finance will be with the new scheme? Will they still be involved in that? I presume so. Will he let us know whether there is any thought about Bradwell going ahead? I imagine that it cannot, because it is too dangerous in terms of our security.
Some people have said that nuclear should not be used because it is not safe. Let us not kid ourselves—more people die every year in the petrochemical and other energy industries around the world than have died in all the nuclear reactor accidents put together. This is nonsense; we have very strict regulations and do this very well. As regards—
Lord Teverson (LD)
I hesitate to interrupt, but I do not think that anyone in this whole debate has said it is unsafe, actually.
Lord West of Spithead (Lab)
The noble Lord is quite right. What I am raising is: why have we got to this position? It is partly because parties such as the Greens are so anti this, and one of the things they threw around casually was how dangerous this is. I do agree that, in terms of waste and its disposal, we are currently able to do it quite safely on a temporary basis—but there is a need to resolve the long-term issue. The noble Baroness, Lady Neville-Jones, is absolutely right, and I hope the Minister will say that this will be pushed forward. From what I have seen, it seems that we are moving down that route very quickly.
Basically, we need to pull our finger out and get going on this. Sizewell C and Hinkley Point C are absolutely necessary. Looking to the future, we absolutely have to go for SMRs, AMRs and the use of hydrogen. This can all be encapsulated somehow in this. I think we would all agree with that.
I ask the Minister: will the problems at the Taishan plant, mentioned by the noble Lord, Lord Howell, have an impact on Hinkley Point C or have those problems been resolved?
Finally, when I had responsibility for more than 20 nuclear reactors two decades ago, only the Navy was training people and awarding nuclear degrees, which universities in this country had stopped doing. I know that they have restarted, but a number of noble Lords have made the point that this is an opportunity for us to get apprentices and to start training people. I am not sure about a CEGB—but I must say that we need something like it. This sort of training is needed because, at the moment, they are nicking all the people we trained in the Navy to go and do these jobs, and that is not a good way to go ahead.
Lord Oates (LD)
My Lords, I declare my interest as the chair of the advisory committee of Weber Shandwick UK. I am very pleased to follow the noble Lord, Lord West, and to take part in what has been a very interesting and informative debate. It follows on from a debate we had just before Christmas where I found myself the only person on one side of the argument. I see a little bit more support here today.
The Liberal Democrats are opposed to the provisions of this Bill on two principal grounds. The first is that we believe that new nuclear power generation is neither feasible nor a desirable means of reaching our net-zero targets. Secondly, we believe that, even if new nuclear projects were a feasible mechanism for reaching our decarbonisation requirements, this Bill, and the regulated asset base funding model for new nuclear that it establishes, are fundamentally flawed. The Bill imposes a double whammy on consumers, hitting them both with the upfront cost of construction and then with the huge, uncompetitive cost of nuclear generation. It takes no account of the ability of consumers to pay. Costs will fall equally on the richest and the poorest; those already struggling with the massive spike in the energy price cap will feel the charges most acutely.
The Bill is completely opaque in relation to the assumptions and models used to arrive at the estimated RAB charges. In the discussions that we had ahead of the Bill, the Minister’s own department described some of this as “a little bit arbitrary.” It gives the Secretary of State unacceptable powers to prevent publication of relevant material simply on the grounds that it might prejudice a commercial interest, regardless of the public interest in such disclosure. We hope that the Minister will recognise the need for far greater transparency in these matters than is currently proposed.
The Bill takes no account of willingness to pay. Some consumers have contracted explicitly with electricity suppliers that they do not receive nuclear-generated power, but they will be just as compelled to pay as anyone else. It proposes a funding model that has been used for new nuclear only in the United States, where, as we have heard from the noble Baroness, Lady Bennett, it was an unmitigated disaster. It cost consumers billions of dollars, with not a single new plant coming online as a result. The Minister tells us that the circumstances for the RAB are different because of different company structures and a different regulatory approach, but at the heart of both is the fact that risk is being transferred from an unwilling private sector to the consumers, who will not be given a choice. These are just some of the flaws in the Bill that we will attempt to correct in Committee.
Liberal Democrats, for a number of reasons, have a more in-principle objection to new nuclear projects. The noble Lord, Lord Wigley, quite rightly pointed out that we need to rapidly decarbonise our energy sector, but the new projects envisaged in the Bill cannot feasibly come online in time to meet the target to decarbonise our electricity supply by 2035, which the Government themselves say is necessary if we are to hit our 2050 net-zero target. The noble Lord, Lord Howell, underlined the huge difficulties that face these large-scale reactor projects. Even the notoriously optimistic EDF does not believe that Sizewell C could start generating before 2034 at the earliest. Given that it was wrong by a factor of 12 years for Finland’s Olkiluoto EPR, and that in January of this year EDF announced yet another delay to its Flamanville 3 EPR, which is already running a decade late and at quadruple the cost of its first estimate, I hope the Minister can agree with me—on this, if on nothing else—that EDF’s predictions are not ones on which to bank our net-zero plans.
Nuclear is not a feasible global strategy for meeting net-zero targets. We cannot possibly envisage nuclear power being the solution across the world. It is just not going to happen, so we need to find other ways. Nuclear is also, as we heard from my noble friend Lord Teverson, a particularly bad technology for complementing renewables. It is designed for baseload generation and, despite the ability of PWRs to load-follow, it is limited. As my noble friend said, the astronomical costs of construction mean that it does not make economic sense to run these plants at less than full capacity.
However, we also have to take into account the fact that delayed completion and outages can leave huge holes in supply. When Hinkley Point C finally comes online, should it suffer further delay or an outage once operational, we would lose 7% of all UK power, so we have to have an ability to backfill that. We should be aware that at this present moment, 10 of the French reactors are currently offline—nearly 20% of their fleet.
Thirdly, new nuclear is a costly distraction from the urgent need to radically rethink our energy system. As the noble Baroness, Lady Bennett, said, with the Bill we will be crowding out capital that is vitally needed for rethinking and reshaping that energy system through demand reduction, demand repositioning, and energy storage and release. The Bill is stuck in outmoded thinking.
As we heard from my noble friend Lord Teverson, the most cost-effective way to reduce CO2 emissions—I think I saw the Minister nodding his head in agreement—is to reduce energy use. For the amount that Hinkley Point C will cost we could retrofit enough homes to save all the energy it will produce.
Lord West of Spithead (Lab)
I mentioned that with regard to this sort of work that is very easily said, but the complexity of doing it is immense when you are talking about people packed into tower blocks and all the different houses. It is not easy and straightforward. It is very important, but it will not resolve that problem, in exactly the same way that over the last weekend renewables did not provide us with that much energy. Luckily—I suppose—power lines went down so people were not demanding it that way, but my goodness me, renewables were not providing it.
Lord Oates (LD)
A huge amount of work could be done. Huge numbers of homes that are in very poor housing stock and in very poor condition could easily be brought up to speed. That is the urgent thing that needs to be done now instead of becoming obsessed with huge power plants which are immensely expensive, highly complex and cannot possibly come online in time to meet the targets that the Government have set themselves.
Baroness Bennett of Manor Castle (GP)
Does the noble Lord agree with me that the noble Lord who just intervened on him—
Baroness Bennett of Manor Castle (GP)
I am sorry; I was trying to get the terms right. The noble Lord, Lord West, might like to go to Portsmouth to see where there was a wonderful passive house refurbishment of an entire council house block.
Lord Oates (LD)
I am grateful to the noble Baroness. I am sure that the noble Lord, Lord West, is very familiar with Portsmouth and that he will take the opportunity to visit such projects.
As we know, electrical use is highly cyclical, both in terms of daily peaks and troughs and annual swings. Therefore, we have to show much greater urgency about how we use smart pricing to reposition demand rather than simply piling on more production to meet peak load. We also have to invest in energy storage and integrate it into grid planning through batteries, green hydrogen production, pumped hydro, compressed gas storage and other solutions.
Finally, nuclear power generation produces high-level nuclear waste which is deadly for longer than any human civilisation has ever survived. It is notable how few noble Lords who contributed as nuclear proponents to this debate addressed that fundamental issue.
The Minister was keen to tell us, as other noble Lords were, how the UK was the first country in the world to begin a civil nuclear programme, yet decades after that and after promising that a solution to this problem is just around the corner, the Government and industry have still failed to supply one. It is our contention that, quite apart from the other powerful arguments against nuclear, it is morally unjustifiable to build new nuclear stations until we first have a geological disposal facility in operation for the long term to deal with the existing high-level waste we have produced. That is key.
In our view, the case for new nuclear generation projects falls down at every hurdle. They cannot contribute to our 2035 electricity decarbonisation target, they cannot effectively complement renewables, and they cannot even clean up the mess they have already created. So laden are these projects with risk, so staggeringly unable are they to keep to time or budget, and so eye-wateringly expensive is the electricity they generate that the only way to finance them is by passing the risks and costs to consumers and taxpayers who are given no choice over whether to accept them.
It is hard to improve such a fundamentally flawed project, but in Committee we will do our best to bring forward amendments to deal with the specific flaws in the Bill that I identified earlier. We look forward to working with noble Lords across all parties in the House to at least make the best of a bad job.
Viscount Hanworth (Lab)
Before the noble Lord sits down, may I ask him to clarify how he proposes that we should accommodate the variability of wind and solar power, which I believe are the sources of power that he prefers or proposes?
Lord Oates (LD)
If the noble Viscount had listened to my speech, I set out a range of areas in which we need to completely rethink our energy system, including significant investment in energy storage that we can bring online, demand repositioning and demand reduction. Those are the solutions, but I am happy to discuss them further with the noble Viscount outside the Chamber.
Lord McNicol of West Kilbride (Lab)
My Lords, I thank the Minister for his introduction and all noble Lords who have spoken in today’s short debate.
I start by declaring an interest—not a financial one, like many other noble Lords, but a personal one. I grew up in Thirdpart, west Kilbride, on a small holding about one mile from Hunterston nuclear power station. My dad, Iain McNicol, worked at the power station as an operator for 17 years in the 1980s and 1990s, so my experience is far more on a personal level.
I do not think there is a contradiction between encouraging and driving new nuclear build, investing in and expanding renewables, and retrofitting and insulating. All the different parts of creating a future energy system and the better use of energy can be complementary and fit together.
This Bill is about finance as much as it is about nuclear power. As my noble friend Lord Rooker said, Labour believes that new nuclear has an important supporting role to play in the future energy mix, alongside the decisive shift towards renewables that is needed to deliver the climate transition and secure our energy security. As my noble friend Lord West touched on, energy security for the future is critical.
If we are going to build new nuclear power stations—which we agree with—the fundamental question is: how are we going to fund them? We could use the Hinkley Point CfD model, but, as my noble friend Lord Rooker said earlier, if not discredited, the CfD model has at least had its value for money questioned and challenged. We saw that in the NAO 2016 and 2017 Hinkley Point review.
As the noble Lord, Lord Teverson, and my noble friend Lord Hanworth, said, we could fund it by direct government financing, which I am not opposed to. On the impact assessment, when the different funding models were considered, was direct government funding considered as one of them? If not, why not?
In front of us we have the system of the regulated asset base—RAB—model. As I said, Labour supports the building of new nuclear power stations for a number of reasons. Nuclear energy is the only proven technology that can supply low-carbon baseload electricity at scale, notwithstanding the comments and points made by the noble Lord, Lord Teverson. We heard that when Hinkley Point C comes on stream, it will provide 7% of the UK’s energy at any one time—that is from one station.
This is at a time when we face a global climate crisis. The further rolling out of nuclear energy will play a crucial role in the UK meeting its climate targets. Nuclear energy will help ensure that the UK has control over the transition to net zero, due to its small land footprint and it being a low-carbon generating technology, as the noble Lord, Lord Wigley, said.
Rebalancing—it is rebalancing—the use of nuclear energy could also see the further use of hydrogen, as my noble friend Lord Whitty and the noble Lords, Lord Ravensdale and Lord Wigley, mentioned. More specifically, the production of green hydrogen is another key to decarbonising our electricity economy. Hydrogen can be used, without any carbon emissions, as a vehicle fuel and industrial or domestic heat source, if produced using renewable or nuclear energy sources. Although there may be issues around the baseload and the effect of the use of energy across the grid, you can use both renewable sources and nuclear, through electrolysis, to change the hydrogen and create hydrogen that can be stored for use when required.
Although some renewable energy sources, such as solar and wind, are dependent on weather conditions, as we have just heard, nuclear energy has no such constraint: it does not matter if the wind is not blowing or if it is cloudy. Nuclear power plants are essentially unaffected by external climatic factors and can create predictable and steady energy output. Come 2028, Hinkley Point C—if it is constructed on time—and the existing Sizewell B station in Suffolk will be the only nuclear plants generating power in the UK.
We have not even touched on the energy security issues or the socioeconomic and financial reasons for the UK to continue the use of nuclear energy. Nuclear power stations sustain thousands of well-paid and highly skilled jobs, most of which are outside the south-east of England. They also support thousands of supply-chain jobs across the country.
As we have heard, the regulated asset base model is tried and tested. When delivered reliably, it can help to save on capital infrastructure costs, especially those encountered in the CFD model. We will scrutinise the Bill to guarantee fairness for bill payers, including protecting consumers against any potential cost overruns, protecting the poorest households and scrutinising the balance between public spending and the bill payers.
Sizewell C will supply 6 million homes with low-carbon energy for up to 60 years. It will bolster Britain’s network supply chain, providing up to 70,000 jobs and 1,500 apprenticeships. It can reduce Britain’s reliance on energy imports, which is critical for our energy future.
We of course need to proceed with caution in anything as costly and crucial as this. We must learn the lessons from Hinkley; some have been learned in the move from the CFD to the RAB model. But we always need to ensure that consumers are the ones who benefit from these projects in the long run.
This is why Labour had previously proposed amendments around foreign state control, which would mandate nuclear stations to use UK-manufactured fuel and stick to UK consumer charges. As the Bill progresses, the Government can expect Labour’s overall support but also a proper critical eye on aspects of the mechanisms they are adopting and an emphasis on protecting people.
I agree with the noble Lord, Lord Oates, on one point: transparency. We are debating transparency in the Subsidy Control Bill and there will be further such discussions on this Bill. The Government and the country will only benefit from wider and greater transparency. There is no time to waste. Nuclear and low-carbon energy projects are crucial for the future of our environment, economy and energy security. It is therefore critical that we act now.
Lord Callanan (Con)
I start by thanking all noble Lords who contributed to this excellent debate. I was encouraged by the widespread support for the Bill across the House, with the honourable exception of the Liberal Democrats and the Green Party. I particularly welcome the support of Her Majesty’s Official Opposition. These are long-term projects and it is good that the only two serious parties of government support the Bill and the need for new nuclear power.
Before I address the questions raised, I remind noble Lords of the importance of the Bill. The legislation will create a new funding model for future nuclear projects, which can reduce the cost of nuclear power stations when compared to existing funding mechanisms. This will substantially widen the pool of private investors in nuclear projects and, in turn, reduce the UK’s reliance on overseas developers for finance. The lack of a funding model has been the biggest barrier to nuclear projects getting off the ground in recent years and the Bill will help to resolve this issue.
The RAB model will help ensure a cost-effective approach to new nuclear projects, which will play a critical role in the UK’s future energy mix in support of intermittent renewables, such as wind and solar. That is the key point missed by contributions from the Liberal Democrats and the noble Baroness, Lady Bennett. Of course, we want to encourage renewables; they are good thing. We have some of the largest renewable capacity in the world but, by their very nature, renewables are intermittent and we need stable baseload power to keep the lights on. It is no good telling people that they cannot run their car or cook their dinner because the wind is not blowing in the North Sea. This is an unrealistic way to finance the future energy mix. I think this is the key point that the noble Baroness misses.
I also agree with noble Lords on the importance of home insulation schemes. The noble Baroness mentioned the figure herself; we are spending £9 billion on insulation schemes. I will come to that later. These are all important things that we need to do—and in fact are doing—but they are not either/or approaches; we need to do both.
I start by welcoming the support of the noble Lord, Lord Rooker. He does not often support my Bills, so I am pleased that he is doing so on this occasion. I am delighted that he agrees that the funding model will be of benefit to consumers and that he recognises the opportunities for new apprenticeships. As the noble Lord, Lord McNicol, remarked, Hinkley Point C has already trained 800 apprentices and it is on track to meet the EDF target of 1,000 apprenticeships during the construction phase of the project.
The noble Lord also raised some important questions, to which other noble Lords added, about protections for consumers under a regulated asset base model—a point also made by my noble friend Lord Howell and the noble Lord, Lord Whitty. My noble friend Lady Neville-Jones was particularly keen that the Government should adopt a rigorous commitment to value for money in their approach. Of course, that is a point I completely agree with.
The Government totally agree with noble Lords that consumers should be protected. Recognising the unique risks of nuclear construction projects, our proposals for the RAB model include multiple mechanisms for ensuring that consumers are protected from unacceptable costs. This includes undertaking robust due diligence before a final investment decision so as to ensure that the project will be effectively managed. As well as satisfying the requirements of the RAB designation process, for a project to reach a final investment decision it will need to undertake a successful capital raise, complete a government business case and satisfy all other relevant approvals from Her Majesty’s Government. I reassure my noble friend Lady Neville-Jones that any decision to commit taxpayer or consumer funding to a nuclear project will be subject to negotiations with staged approvals and value-for-money tests in line with the Treasury Green Book. Also, during construction a project will be incentivised to deliver to time and to estimated costs through an incentives regime overseen by the economic regulator. I hope that the assurances I have been able to give will provide some comfort to noble Lords that we are very much on the case.
The noble Lord, Lord Whitty, referred to the Bill’s impact on small businesses, which is indeed an important point. We addressed that in the impact assessment accompanying the Bill, which stated that, if a nuclear RAB model is implemented on a new nuclear power plant in future, it would impact small and micro-businesses by creating jobs in a supply chain and would indirectly impact them as a result of any costs or cost savings passed through to electricity suppliers and then to consumers. The illustrative analysis in the impact assessment shows that society as a whole, including small businesses, could save significantly on the cost of a generic large-scale nuclear power plant, using an RAB as opposed to existing fundamental mechanisms.
The noble Lord, Lord Rooker, asked me about the role of foreign financing in future projects, an issue also raised by the noble Lord, Lord West, and my noble friends Lord Howell and Lady Neville-Jones. It is important to point out that we welcome overseas investment in the UK’s nuclear sector. We value the important role that international partners have in our current nuclear programmes and potential new projects. Let me emphasise that this will not and should not come at the cost of our national security. The RAB model will help us to attract the significant amount of investment needed for new nuclear power plants, including from British pension funds and institutional investors, as well as from our closest international partners. In doing so, it will reduce our reliance on overseas developers for finance, and open opportunities for British companies and investors to work with our closest international allies to develop projects across the United Kingdom.
Investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. In particular, as my noble friend Lady Neville-Jones highlighted, the recent National Security and Investment Act 2021 allows the Government to scrutinise and, if necessary, intervene in qualifying acquisitions that pose risks to the UK’s national security. As well as that Act, the independent Office for Nuclear Regulation, the ONR, applies a range of strict regulatory requirements to all organisations seeking to operate nuclear sites in the UK. That includes assessments of the organisation’s capability, organisation and resources to manage nuclear material safely and securely.
My noble friend Lord Howell mentioned the history of EPR reactor constructions. The projects he highlighted, at Olkiluoto and Flamanville, are first-of-a-kind builds in each of those countries. This brings unique risks and challenges with the construction process. Developers have learned lessons from these projects and several EPR reactors are now under construction or in operation around the world, including, of course, at Hinkley Point C.
The noble Lord, Lord Teverson, made a number of points about the underlying economic case for new nuclear capacity. He asked specifically about the Government’s action on investment in energy efficiency. As I said earlier, I agree with the noble Lord. The Government recognise the importance of increasing the energy efficiency of homes. It is a difficult and complicated task, as the noble Lord, Lord West, pointed out, but we are spending considerable sums of money on insulating the country’s homes, particularly those of low-income families, both to reach our decarbonisation targets and to tackle fuel poverty in the longer term. That is why we have introduced, among many schemes, the energy company obligation, the value of which we have just increased, to provide energy-efficiency and heating measures for fuel-poor households. In the next iteration, which will run from April this year to 2026, the funding will go up to £1 billion a year.
We have also released today the results of the sustainable warmth competition. If I remember the figures correctly, another £980 million of investment will be delivered through local authorities to insulate homes up and down the country. A number of other schemes are contributing to the £9.2 billion insulation scheme that the noble Baroness, Lady Bennett of Manor Castle, mentioned. So these are not either/or decisions. We need to do both, and, indeed, we are.
The noble Lord, my noble friend Lady Neville-Jones and the noble Lord, Lord Oates, raised the important issue of the long-term solution for nuclear waste. It is important to remember that around 94% of the waste arising from nuclear power stations and other sectors is low in radioactivity and is disposed of safely every day in existing facilities such as the UK’s Low Level Waste Repository. The remaining higher activity waste is currently stored safely and securely in facilities around the UK. We have a process in place to identify a suitable location for a geological disposal facility to permanently dispose of higher activity waste. We are making good progress on four areas in discussions with the developer, Nuclear Waste Services, which is a division of the NDA. The vast majority of the higher activity radioactive waste to be disposed of in a geological disposal facility is waste that already exists.
Baroness Bennett of Manor Castle (GP)
I thank the Minister for giving way. Very briefly, can he identity those four areas?
Lord Callanan (Con)
When we have announcements to make on those areas, I am sure the noble Baroness will be here to question me, but I am not in a position to release the names at the moment.
The noble Lords, Lord Whitty, Lord Wigley and Lord Ravensdale, all made important points about nuclear projects’ potential for the cogeneration of hydrogen. As the noble Lord, Lord Ravensdale, said, the Sizewell C project is in the initial phase of exploring the potential of using electricity and low-carbon heat for a range of cogeneration applications such as the production of low-carbon hydrogen and direct air capture of CO2 for carbon capture. While these cogeneration opportunities are currently outside the scope of consumer funding through the RAB model, they could provide benefits to consumers by enabling Sizewell C to be utilised as a more flexible asset. I look forward to exploring that further with the noble Lord. This could provide greater flexibility for the energy system, thereby facilitating a greater number of potential pathways to meet the net zero target by 2050. If used in this way, Sizewell C could become the first nuclear low-carbon heat source, setting an example that we can emulate at other future nuclear power plants.
The noble Lord, Lord Wigley, and my noble friends Lord Howell and Lord Trenchard asked about the application of legislation to small and advanced nuclear modular reactors, for which we see a vital role moving forward. The Prime Minister’s 10-point plan for a green industrial revolution highlighted that SMR technologies have the potential to be operational by the early 2030s in the UK. The recently published net-zero strategy committed to take measures to inform investment decisions during the next Parliament on further nuclear projects as we work to reach our net-zero target. This will of course include consideration of large-scale and advanced nuclear technologies, including SMRs and, potentially, AMRs. As part of this, the net-zero strategy announced a new £120 million future nuclear enabling fund to provide targeted support to barriers to entry. Let me reassure noble Lords that the Bill is not product-specific and could apply to all civil nuclear technologies, and we will make decisions on appropriate investment portfolios on a case-by-case basis when presented with specific project proposals.
The noble Lord, Lord Wigley, as he always does, asked me about the role of devolved Administrations in the process of designating a project company to benefit from the RAB model. Although the ultimate decision to designate a nuclear company for the purposes of the RAB model will sit with the Secretary of State, given that nuclear energy and electricity are not devolved matters for Scotland or Wales, the Bill takes steps to ensure there is both strong transparency in decision-making and involvement of the devolved Governments. The Secretary of State will need to consult the relevant devolved Government before designating a nuclear company where any part of the site of the relevant nuclear project is in Scotland or Wales. It is important to make the point that the Bill will not alter the current planning approval process for new nuclear or the responsibilities of the devolved Governments in the planning process. Nothing in the Bill will change the fact that devolved Ministers are responsible for approving applications for large-scale onshore electricity generation stations within their own territories.
To move on to address some of the points made by the noble Lord, Lord Oates—I addressed some earlier—renewables represent an important and ever-growing source of electricity, but it is important that we have a diverse mix of sources to ensure a resilient electricity system in which the lights do not go off. Just as consumers paid for the previous generation of nuclear power plants, which, according to EDF, have generated enough electricity to power all Britain’s homes for 20 years and saved something like 700 million tonnes of greenhouse gas emissions, it is right that all consumers should share the costs of these projects to help realise their overall longevity and ensure that future generators bear the cost of the low-carbon infrastructure that we need to reach our net-zero goals.
The noble Lord, Lord West—and, I think, the noble Lord, Lord McNicol—asked me about Chinese involvement. In a 2016 Statement to Parliament, the then Secretary of State, Greg Clark, set out Her Majesty’s Government’s intention to
“take a special share in all future nuclear new build projects.”—[Official Report, Commons, 15/9/16; col. 1066.]
This policy has not changed; as such, we intend to take a special share in the Sizewell C project at the suitable time and, of course, subject to negotiation.
Lord McNicol of West Kilbride (Lab)
My Lords, the Minister mentioned taking a special share in Sizewell C. Are the Government looking to take one in Hinkley as well?
Lord Callanan (Con)
These matters are subject to future negotiations. I will come back to the noble Lord on that.
I have addressed most of the points made in the debate. I am encouraged by the general support for the Bill across your Lordships’ House and I look forward to continuing the constructive engagement with all sides as it progresses. I therefore commend the Bill to the House.
Nuclear Energy (Financing) Bill
Tuesday 8th March 2022
(2 years, 1 month ago)
Grand CommitteeRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 89-I Marshalled list for Grand Committee - (4 Mar 2022)
The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)
My Lords, Members are encouraged to leave some distance between themselves and others and to wear face coverings when not speaking. If there is a Division in the Chamber, I will adjourn the Committee for 10 minutes. At 4.40 pm the Committee will adjourn, as will the Chamber, until about 5.15 pm for Members to go to the Commons to listen to President Zelensky.
Clause 1: Key definitions for Part 1
Amendment 1
Lord Wigley
“(2A) “Nuclear energy generation” includes the generation of energy by either nuclear fission or nuclear fusion.”Member’s explanatory statement
This subsection is to clarify that the provisions of the Bill may extend to nuclear fusion electricity generation if that process becomes viable.
Lord Wigley (PC)
My Lords, it is an honour to be moving the first amendment in our Committee deliberations on the Nuclear Energy (Financing) Bill. It is fair to say that this is a probing amendment in the true meaning of the term. If I had received an answer on the issues relating to nuclear fusion when I raised them at Second Reading, I would not have needed to have tabled this amendment now.
Amendment 1 proposes to insert the definition that
“‘Nuclear energy generation’” includes the generation of energy by either nuclear fission or nuclear fusion.”
The Bill is clearly intended to serve as a long-term framework for the financing of nuclear projects. It could hardly be otherwise, since the cycle of agreeing a location for a new nuclear facility, securing all the necessary consents, getting a credible financial package into place and then building the facility, testing it and engaging it with public electricity networks takes over a decade, and probably two, to bring to full fruition. It is by definition a long-term project, and all the uncertainties arising from such long-term gestation periods are what make this Bill necessary.
It is in this context that I tabled Amendment 1, relating to nuclear fusion. Many people may mutter, “Nuclear fusion? But surely we’re many decades away from that becoming an economic possibility.” Yes, it is true that for most of my lifetime nuclear fusion has been the big white hope lurking just over a distant horizon. Back in the 1950s we were told about what I think was then called the Zeta project, which could harness abundant fuel made from seawater, as was quoted, in a process that was far safer than nuclear fission and whose waste product had a half-life of less than 100 years. That project stuttered on through the 1960s, seen as having the possibility of producing an inexhaustible source of energy for future generations, but with scientific and engineering challenges that seemed then to be insurmountable.
Then in 1997 there was a breakthrough, and, excitingly, only last month scientists at the Joint European Torus project, JET, at Culham near Oxford, succeeded in generating by fusion 11 megawatts for five seconds—a small amount, yes, but an indication of things to come. This came shortly after American scientists, using the world’s largest laser, achieved burning plasma, a major stride towards self-sustaining nuclear fusion energy, and in America the National Spherical Torus Experiment will be fired up in the autumn of this year. So at long last we are at a credible position where nuclear fusion may be a practical proposition for the second half of this century. As such, that possibility should be on our agenda as we map out the means of funding the production of electricity with a very low carbon footprint.
However, there is a problem as far as we in Britain are concerned. Last year EUROfusion decided to end JET’s operations at Oxford next year after 40 years, and according to reports the UKAEA intends to decommission the experiment. The focus of research is sadly moving from the UK to France, where the International Thermonuclear Experimental Reactor—abbreviated as ITER—is being built, funded by the European Union, the United States, China and Russia. When it is fired up in 2025, it will be the world’s largest fusion reactor. If it works, it will make fusion power a viable source of energy, with realistic hopes of it being in commercial operation between 2030 and 2035. It will generate usable electricity without carbon emissions and with low levels of radioactivity.
So we are falling off the bus just as it moves towards its destination. Does this not just encapsulate the botched manner in which successive UK Governments have dealt with the nuclear industry? I want to see a pledge from the Government that they have some commitment to nuclear fusion technology and that they would be prepared to put their money on the table to help make this happen.
In the context of this Bill, Amendment 1 would ensure that projects related to nuclear fusion would be fully entitled to seek funding through the avenues opened by the proposed legislation before us today. The best way of ensuring that this possibility does not fall by the wayside is to accept Amendment 1 and provide that nuclear fusion is included on the face of the Bill. I beg to move.
Lord Teverson (LD)
My Lords, I will make just a brief intervention. I do not disagree at all with the noble Lord’s amendment, except that clearly we should not use this form of funding for research until we know that we are building something that is going to work. It would be absolutely wrong to use this sort of funding for the research side. In defence of this Government and previous ones, in the area of fusion we have probably been more consistent in terms of our policy and research than we have with nuclear power— so that was probably slightly unfair criticism of the Government in that regard.
At this stage, without getting into heavy weather, the point I want to make is that we have an energy crisis at the moment, which makes this Bill slightly less relevant than anything else. I would be interested to have a statement—just a short sentence—from the Minister on what BEIS is doing at this moment to accelerate the alternative forms of energy that we have in the UK, particularly renewables, given the situation that we are now seeing: not just even higher energy prices but energy prices that will probably remain high for a long time, and the wish and absolute need of the West—Europe and the UK—to disinvest from supplies of Russian energy. I realise that is not great in terms of the UK, but we are as much subject to these global markets as anyone else.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, before we begin, I understand that the noble Lord, Lord McNicol, is unfortunately unwell and therefore unable to join us here today. I wish him a speedy recovery and look forward to welcoming him back to the House soon. It is a pleasure to open for the Government in response to the amendment tabled by the noble Lord, Lord Wigley. Mae’n ddrwg gen i am beidio a roi ateb i chi yn barod—I am very sorry that we have not given you an answer already. I think that somehow passed me by after Second Reading.
The Government share the noble Lord’s enthusiasm for the potential of fusion energy to play a role in our future energy system. However, I do not believe that the noble Lord’s amendment is necessary or appropriate here. First, the term “nuclear energy” is sufficiently broad that fusion projects can be regarded as already falling in scope. This makes a specific amendment on this point unnecessary.
I also want to make clear to the noble Lord that, despite recent technological advances and increases in private investment, fusion remains a comparatively early-stage technology; prototypes are not expected to be deployed until the 2030s or the 2040s. The Government are supporting the development and deployment of fusion demonstrator facilities by investing in R&D programmes and facilities and developing a proportionate regulatory framework. Indeed, there is already significant private investment in a number of fusion projects both here in the UK and in the US.
None the less, the Government intend to develop an appropriate funding model for commercial fusion energy facilities in due course, as fusion energy moves closer to commercial deployment. This funding model will reflect the nature of this means of energy generation. I hope that I have provided adequate reassurance for the noble Lord, Lord Wigley, that the Government share his goals and that this amendment is not necessary for achieving them. I therefore hope that the noble Lord will feel able to withdraw his amendment.
On our support for renewables, we have enunciated the breadth of work that we are doing in this area a number of times. We have made numerous statements in the House on this issue recently. I would be happy to write to the noble Lord with more information about the Government’s plans, but I do not think it is appropriate just to give a brief statement of our current intent.
Lord Teverson (LD)
What I was trying to ask is whether BEIS is getting itself into gear—and I realise that the Government will probably look wider than renewables—and getting its act together now to really look at how we move forward in this area. Can the Minister assure noble Lords on this?
Baroness Bloomfield of Hinton Waldrist (Con)
I am sure that this is upmost in the minds of the Secretary of State and the Energy Minister. The Prime Minister has also made statements to this effect, and it is very much on every morning’s agenda. We have a ministerial meeting and it is the first topic at every one of them.
Baroness Wilcox of Newport (Lab)
Before the Minister sits down, I had hoped that she would have said that the Bill had been drafted in a technology-neutral manner and that the amendment was therefore not necessary, so receiving a clarification would be useful. We cannot afford to fall off the bus again.
Baroness Bloomfield of Hinton Waldrist (Con)
I take the noble Baroness’s point. Indeed, the Bill has been drafted in a technology-agnostic way to cover all forms of energy infrastructure.
Lord Wigley (PC)
My Lords, I am very grateful to the noble Baroness for her response and for the interventions on the points that I raised. A moment ago, the noble Lord, Lord Teverson, appeared in the uncharacteristic role of being a protector and defender of the Government on these matters, and I am sure that that will be bankable by the Government at some stage. This is not a party-political point because it is not party politics; I am speaking on my behalf, as my own party has divisions on these issues. Over the past 30 years, we have had “stop-start-stutter” with regard to nuclear; if you do not want nuclear, perhaps “stutter” and “stop” are good options. But if nuclear is going to play a role, it has to be treated in a serious and coherent manner. It needs to be transparent, and we will be coming on to questions of transparency in a number of later amendments.
Returning to the core of my amendment—
Lord Teverson (LD)
I hesitate to interrupt, but I was relating only to fusion, rather than fission, in my comments.
Lord Wigley (PC)
I accept that clarification, of course. With regard to fusion, I accept that successive Governments have been generous in helping to sponsor research but, over the last couple of years, we seem to have had some difficulty with our European partners as to the ongoing role of Oxford, which apparently is coming to an end, and the fact that the Russians, Americans and Chinese are providing finance for the location in France where the major project is going forward. I very much hoped that we would have been involved in this, because so much of the work on fusion has been done in the United Kingdom. It is something that we should be proud of.
I hope that, when this eventually comes through, it is something that is of benefit. That is why I want to see, if this Bill goes forward—and it has shortcomings, but any such Bill is bound to, because of the uncertainties that we have in this area—that we have full provision for fusion as one of the nuclear alternatives. The Minister stated quite categorically that fusion is included in this Bill, so that anyone who is considering fusion projects for the future may be able to rely—other things being equal—on this Bill as a source of finance and a framework within which to operate. That is a helpful clarification and, on that basis, I beg leave to withdraw the amendment.
“(6) “Owned by a foreign power” means owned by a company controlled by a foreign state and operating for investment purposes.”Member’s explanatory statement
This amendment provides a definition of foreign ownership and is linked to a further amendment to Clause 2 in the name of Lord McNicol of West Kilbride.
Baroness Wilcox of Newport (Lab)
My Lords, I begin my comments by thanking my noble friend Lord McNicol for the substantial work he has already done on this important Bill, and by conveying his apologies to the Committee for being unable to attend because of his continuing isolation with Covid. I had just a passing knowledge of the Bill until yesterday, and my interest, as always, was fired by the attention given to the outcomes for Wales, which is my main shadow portfolio brief. Nevertheless, I shall do my best to substitute for my noble friend Lord McNicol’s wide and detailed knowledge of the subject, ably supported by our team of advisers, who have supplied me with excellent briefing notes on this significant Bill.
Lord Vaux of Harrowden (CB)
My Lords, first I should apologise for not being able to take part in the Second Reading of the Bill. I therefore start by stating that I generally support the Bill, for two reasons: first, because I believe that nuclear power will be essential if we are to meet our net-zero goals; and, secondly, because I believe that it is essential that we become more self-sufficient in our energy needs and, in particular, reduce our reliance on other countries that may not share our values—this has been starkly demonstrated in the past couple of weeks.
The three linked amendments in my name in this group, Amendments 11, 22 and 24, are intended to address that last point. In order to ensure that we are not reliant on potentially hostile parties for our energy needs, we must be able to identify the ultimate beneficial owners or controllers of any companies that own a material part of our key energy providers. I hope that that is not a controversial statement. Indeed, the Government are in the process of putting rules in place for the identification of owners of UK property and I would argue that it is much more important for owners of nuclear-generating assets to be identified.
However, I can find nowhere in the legislation where identification of the ultimate beneficial ownership or control is a requirement. The nearest that I could find are the persons of significant control rules, but they do not always apply; they apply only to UK companies, for example, and in any event are easily avoided. These three amendments therefore try to address that shortcoming. I tried to introduce a clause that required all holders of nuclear generation licences to identify their ultimate beneficial owners, but it was not allowed. It was apparently out of scope of the Bill. I think that the Minister might want to consider that. Therefore, I have had to restrict these amendments simply to the designation process.
Amendment 11 ensures that, before a nuclear company can be designated under the Bill, the Secretary of State should be satisfied that the identity of any party that owns or controls, directly or indirectly, more than 10% of a nuclear company has been verified. Amendment 22 then allows the Secretary of State to revoke that designation if at some future point they are no longer satisfied that those identities have been verified. Amendment 24 adds a further duty on the nuclear company to notify the Secretary of State of the identity of any party that later gains ownership or control of more than 10% of it, again directly or indirectly, and allows the Secretary of State to revoke the designation if the nuclear company fails to make such notification or if the Secretary of State considers the new party not to be a fit or proper person to own or control a nuclear company.
I have deliberately not put in any prohibition of ownership in these amendments. I would not, for example, go as far as the noble Lord, Lord McNicol of West Kilbride, or the noble Lord, Lord Oates, in Amendment 9, which would prohibit the designation of a nuclear company that has any foreign power as a shareholder. As we heard, there are plenty of countries—France, for example—where it would be perfectly acceptable for them to own a stake and there are many others where it would clearly not be acceptable.
We should not be looking at state shareholdings only. There are many non-state parties that I would think would not be fit and proper to own nuclear assets. I think that it is appropriate that we look at each case on its merits and allow the Secretary of State to decide if the ownership is acceptable in the particular circumstances. The critical thing is that we should be able to identify the ultimate ownership and control and take appropriate decisions based on that, including the right to revoke the designation.
I am sure that the Minister will point out his statement at Second Reading that the Government intend to take a special share in all future nuclear new-build projects, but that is only an intention and, as the Minister pointed out, is subject to negotiation; no details of the rights attached to such special share have been provided. I therefore think that some safeguard is required in the legislation. While I would be happy to discuss the details of these amendments—for example, whether 10% is the right level—I hope that the Minister can see the attraction of the principles set out in Amendments 11, 22 and 24. I also hope that, as I said, he will consider the wider point that these rights and duties should apply with respect to all nuclear power generation licences, not just those that wish to be designated.
Lord Howell of Guildford (Con)
My Lords, we are getting to the important issue—quite rightly raised by the noble Lord, Lord Vaux—of control, the involvement of foreign companies and, behind them, possibly foreign Governments in this vital part of our energy security. There is one thing that I would like to know before the Minister replies. He will remember, as will most of your Lordships, that my right honourable friend Theresa May, back in 2016 after she became Prime Minister, ordered a review of Hinkley Point C, in particular the involvement of Chinese interests in that vast project, which is now going ahead. Everyone got quite agitated at the time. I remember the Chinese ambassador walking around saying, “Has there been a coup? What’s happened? What’s gone wrong? Was the Chancellor of Exchequer not in Beijing the other day agreeing that this was a new golden area of co-operation between China and the United Kingdom and, in the words of Xi Jinping, that there was going to be ‘unlimited’ partnership in all sorts of investments?” The Chinese, along with EDF and the French, were welcomed with open arms to get the Hinkley Point C project off the ground.
After a while, there was a review, which concluded that Hinkley Point C should go ahead, to the great delight of the Chinese. The whole thing was a very good bargain for them: not only did they get involved in Hinkley Point C, but they had a promise of involvement in Sizewell C and, even better for them, a promise of bringing in Hualong technology and managing their own project at Bradwell-on-Sea. This was a great delight and was going to be the poster boy project for the Chinese, as they moved into massive sales of Chinese technology and development, which would go well beyond a GDA for Bradwell into the possibility of building and managing a nuclear power station right at the middle of our system.
The review that Theresa May authorised was thorough and went into considerable detail into the conditions that there should be on the Chinese going forward. I would like to know from the Minister whether those conditions still prevail or whether they have been modified 10 years later, under further pressures, when the public attitude towards Chinese involvement has changed 180 degrees. We have moved from an age of loving everything Chinese to getting rid of everything Chinese. Has there been a change? It would be helpful if he could describe to what extent we have moved on that and to what extent those review conditions of 2016 still prevail.
Viscount Trenchard (Con)
My Lords, I agree with the amendments put forward by the noble Lord, Lord Vaux of Harrowden. The noble Baroness, Lady Wilcox, introduced the amendments in the name of the noble Lord, Lord McNicol, extremely impressively, but I agree with the noble Lord, Lord Vaux, that they go too far by effectively excluding all companies owned by foreign powers.
It is a matter of great regret to me that, in collaborating with Japan on nuclear energy, the projects at Wylfa, Ynys Môn, of Hitachi’s Horizon, and at Moorside, Sellafield, of Toshiba, were both cancelled. Perhaps if the Bill before the Committee had already been on the statute book, there would have been a good chance that either or both might have been rescued. If either project had gone ahead, it was expected that one or both of the state-owned banks in Japan—the Japan Bank for International Cooperation, on which I declare my interest as a consultant to that bank, and the Development Bank of Japan—would have provided both or part of the equity and debt for those projects. On the face of it, if the amendments tabled by the noble Lord, Lord McNicol, were enacted, it would be impossible for those banks to participate, which would have killed the projects by another means.
Baroness Bennett of Manor Castle (GP)
My Lords, I offer support to Amendments 11, 22 and 24 in the name of noble Lord, Lord Vaux of Harrowden, although I start from a very different position from him on nuclear power and perhaps where my areas of concern lie. It is important that we are talking here about ultimate ownership and control identified and verified. We are looking at ensuring that any change of ownership is clear. When I looked at the amendments, I inevitably thought about what has happened with our water companies and indeed with some privatised elements of our NHS, where we have seen GP surgeries sold off through a chain and sometimes the ownership and the sale have become clear only several times down the track. When we are talking about something as crucial, strategic and potentially dangerous as nuclear power generation, we need to ensure that there is clarity about where control lies—obviously, I am looking at that not just from a national perspective but much more broadly.
I shall comment particularly on Amendment 19 in the name of the noble Lord, Lord McNicol, and the important elements in that about transparency of costs and ensuring that those costs and the spending are fully declared. I talked last night in relation to the Health and Care Bill about instances where public money that is paid in supposedly for care—in this case, it might be paid in for power—is pumped out into dividends through complex financial instruments.
Since this is the first time that I have risen to speak in this Committee, I want briefly to pick up one point raised by the noble Baroness, Lady Wilcox: we are now in unprecedented times in European history. Since Second Reading, the events in Ukraine have taken place. At Zaporizhzhia, the largest nuclear power plant in Europe, a building—not the reactor—was set on fire during a bombardment from all sides, on the Ukrainian account, by Russian forces. The International Atomic Energy Agency has expressed grave concerns about its safety. It is worth noting that, even after those reactors are switched off, they will need weeks of cooling down. There are pools of spent fuel rods which require safe storage for several years. As the noble Baroness said, this has put us in a different situation from that of even weeks ago.
I will point to something else, for reasons which will take a second to become clear. There is an Australian town called Lismore that I know very well. It is a town that floods; it has always flooded. A hundred years ago, they built a church high on the hill to make sure that it would not flood—a couple of decades ago, they built a shopping centre that was flood-proof. Lismore has just flooded, with significant loss of life; both the shopping centre and the church have flooded. We are in unprecedented times.
I ask the Committee to think about how, when we put public money into a nuclear power plant, we have to guarantee political, military and climate stability—the last of which we know we will not have—for six or seven decades at a minimum. Does anyone in the Committee truly believe we can guarantee that we can continue to safely operate a nuclear power plant in six or seven decades in the world we live in? That has to underlie all of our debates today.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, as well as of course supporting the amendments spoken to by my noble friend Lady Wilcox, I support the amendments spoken to by the noble Lord, Lord Vaux. In fact, he is in danger of changing my views about hereditary Peers—these debates are difficult things.
I support him on two counts. The first is in relation to beneficial ownership. Could the Minister say if this would cover ensuring that we could check whether countries we do not want to own these power stations are setting up companies in tax havens—particularly the Crown dependencies and overseas territories we have responsibility for? That has been happening far too often and we need to clamp down on that.
Secondly, I support him because I too was concerned about the scope of the Bill. I support what he said, and I am sorry that he was not allowed to table the amendment he suggested; I hope it will be picked up. I had a little problem in tabling my amendment; I had to change it and the one I have got down is not exactly what I wanted. I will come back to that later. The scope of the Bill has unfortunately been drawn far too narrowly. It deals with the purposes the Government want and are concerned about, but it does not allow us to deal with some of the wider aspects. So there we are—I support a hereditary Peer on two counts. It is a red letter day.
Lord Oates (LD)
My Lords, I will speak briefly on this group, particularly to Amendments 2 and 9 in the name of the noble Lord, Lord McNicol of West Kilbride, which I have also signed. I also support the amendments in the name of the noble Lord, Lord Vaux. Like the noble Baroness, Lady Bennett, I come at this from a different perspective from him, but it surely must be right that we are able to identify and verify the ultimate ownership.
As the noble Baroness, Lady Wilcox, set out, Amendments 2 and 9 seek to ensure that a nuclear power station cannot be owned or part-owned by a company controlled by a foreign state and being operated for investment purposes. However, I was a little surprised to hear her say that the amendment would cover EDF, because that was not my understanding. My understanding was that the amendments would not cover EDF, which is not operating for investment purposes, and that is why
“and operating for investment purposes”
is critical in the definition—but it would cover China General Nuclear Power Group, which does operate for investment purposes. I understood that was why the amendment was tabled and drawn in that specific way, but we can perhaps discuss that further later.
The main point here is the general concern that has been expressed on all sides of the Committee about the involvement of the Chinese state in critical national infrastructure, particularly nuclear. As we know, it currently has a 35% stake in Hinkley C and will have a proposed 20% stake in Sizewell C if that goes ahead. So I imagine that, regardless of our wider views on nuclear, we are all concerned about this issue and need some clarity from the Government on their position on this. I hope that the Minister will be able to tell us how the Government intend to proceed with regard to these matters and also answer the important questions asked by the noble Lord, Lord Howell.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
First, I thank everyone who contributed to this important and well-structured debate. I also pay tribute to the noble Baroness, Lady Wilcox, for her valuable contributions and for stepping in at the last moment to substitute for the noble Lord, Lord McNicol; having picked up a difficult and complicated subject at such late notice, she did extremely well in moving the amendment.
This group includes Amendments 2, 9, 11, 19, 22 and 24, originally tabled by the noble Lords, Lord McNicol, Lord Oates and Lord Vaux. They have been grouped together because they all address in different ways the ownership of nuclear companies that ultimately may benefit from the RAB model. Let me be clear at the outset, as I was at Second Reading, that the Government emphatically do not support investment in our critical infrastructure at the expense of national security. There is no compromising on that point and I hope to reassure all noble Lords who have spoken during this discussion shortly.
The general purpose of this Bill is to broaden our options when financing new nuclear projects and to widen the pool of potential investors; that is widely understood. It is our expectation that doing this will reduce our reliance on state-owned developers to finance the construction of new nuclear power stations. So I do not consider that Amendment 11 and, as a consequence, Amendment 22 are necessary, for the reason that designation is a robust and transparent process. I make a similar case with regard to Amendment 24. The Committee can be assured that appropriate and robust due diligence will be carried out through to the financial close of every single project, in particular following a capital raise where the financing structure of the project may change as new investment is introduced.
I assure noble Lords—particularly my old sparring partner, the noble Lord, Lord Foulkes—that the Government have strong oversight of foreign ownership in nuclear projects as a result of the National Security and Investment Act, which includes a wide-ranging ability to call in for assessment qualifying acquisitions if, in our opinion, there are any national security concerns. These are wide-ranging powers. The noble Lord will be aware that we deliberately did not define “national security” during the passage of what became that Act to give ourselves a wide range of flexibility on this subject.
I should add that the Secretary of State may also apply any conditions that he deems appropriate to the designation of a nuclear company—conditions that, if not met, may lead to the company having its designation revoked. Let me also stress—I made this point in a letter to the noble Lord, Lord McNicol—that it is the Government’s intention to take a special share in the Sizewell C project, assuming that the negotiations are successful and the project proceeds to a final investment decision.
I note the intention of the noble Lord, Lord Vaux, that we should legislate for this sort of safeguard, but I caution him that it is right that the terms of the special share should be negotiated as a commercial agreement, according to the circumstances of every particular RAB project. The projects might be different when they are negotiated, so I think that imposing constraints in primary legislation would be too severe.
Baroness Wilcox of Newport (Lab)
I thank the Minister for his reply and the noble Lord, Lord Vaux, for agreeing with me that we must address the shortcomings. I beg leave to withdraw the amendment.
Lord Foster of Bath
(b) a geological disposal facility for the disposal of high-level nuclear waste has been constructed in the United Kingdom and is operational, such that the full life costs of construction and decommissioning of a nuclear energy generation project can be accurately quantified prior to designation.”Member’s explanatory statement
This amendment would prevent the Secretary of State from designating a company under the Act until such time as a geological disposal facility for the disposal of high-level nuclear waste has been constructed in the United Kingdom and is operational.
Lord Foster of Bath (LD)
My Lords, on behalf of my noble friend Lord Oates and—I am sure—with his agreement, I beg to move Amendment 3 in his name.
Lord Wigley (PC)
My Lords, I wish to speak to Amendments 17 and 20 in my name, which have been linked with this group headed by Amendment 3 which—I have written here—has been spoken to with considerable force by the noble Lord, Lord Oates. That may need to be adjusted a little, but I agree with the principles put forward in Amendment 3. However, my Amendment 17, which paves the way for Amendment 20, writes into the Bill—
The Deputy Chairman of Committees (Lord Lexden) (Con)
My Lords, there is a Division in the Chamber. The Committee stands adjourned for 10 minutes.
The Deputy Chairman of Committees (Lord Lexden) (Con)
My Lords, in the circumstances, all voting having taken place, let us resume. The noble Lord, Lord Wigley, can continue his speech and perhaps the noble Lord, Lord Oates, might follow.
Lord Wigley (PC)
I am grateful to you, Lord Chairman. As I was saying, my Amendment 17 paves the way for my Amendment 20, which writes into the Bill, on page 3, line 13, a duty on the Secretary of State to impose conditions that provide: first, for pinpointing responsibility for the eventual decommissioning of a project; secondly, for specifying the extent of the nuclear company’s liability for decommissioning and rendering the site safe; and, thirdly, for providing that all residual costs for decommissioning, over and beyond those shouldered by the nuclear company, are paid by Parliament.
This amendment deals head on with one of the arguments used, sometimes very effectively, by the opponents of nuclear power concerning the cost of decommissioning nuclear power stations and the danger, of which local communities are understandably fearful, of the site of a nuclear power station being left as a radioactive hulk. They are also concerned that under- takings given at the time when planning consent was approved might just be abandoned, with the local community being left to deal with a problem way beyond its ability to handle.
We see at Trawsfynydd today, over three decades after the ending of the generation of electricity, the hulk of the station still there. It is still radioactive and still awaiting full decommissioning. In 2020, it was announced that there would be a new programme for the demolition of the reactor buildings and that the site would be fully cleared by 2083—yes, another 60 years. If the Government are serious about bringing forward another programme of nuclear power stations—as colleagues will know, I support that, because I believe that it is the way to tackle the global warming issue—they must show that they are prepared to take on the ultimate responsibility of rendering the site safe, clean and in a condition acceptable to the local community.
Part of the responsibility for securing this must, of course, be placed on the plate of the nuclear company; after all, if it is to make money from the site, it has a moral duty to clear up the station when it has ended the generation of electricity. But such companies can easily walk away from their responsibilities and the buck must surely stop with Parliament for the residual work of clearing up and rendering safe the site that the Government and Parliament have approved.
This amendment tests the Government’s resolve on this issue. If they are serious about having a new programme of nuclear power stations, they must grasp the nettle and write these, or equivalent provisions, into the Bill. I look forward to their response and, in the event of them failing to give adequate, bankable assurances, I give notice of my intention of returning to this issue on Report and pressing an amendment along these lines to be written on the face of the Bill for MPs to further consider.
Lord Oates (LD)
My Lords, I apologise for my delay in arriving; I misunderstood and thought that the Committee was adjourned until the end of the special session, which was slightly delayed.
I am pleased to follow the noble Lord, Lord Wigley. Amendment 3 in my name and that of my noble friend Lord Teverson would require a geological disposal facility, or GDF, to have been constructed in the United Kingdom and be operational before the Secretary of State could designate a nuclear company under this Bill. The amendment’s objective is to bring some focus to the issues of nuclear waste and decommissioning, which were largely and curiously absent from the debate at Second Reading.
Viscount Hanworth (Lab)
The proponents of this amendment are trenchantly opposed to nuclear power. They are proposing as a condition for allowing a company to construct a new nuclear plant that a facility for the disposal of high-level nuclear waste should be available. Presumably they imagine they are proposing a condition that cannot be met. The proposers should be aware, albeit that they may have missed the point, that work is already under way to establish a geological facility for such waste. Three locations have been proposed, and there have been favourable responses from the people in the areas concerned. This was announced in a symposium that was held in November in Methodist Central Hall, a stone’s throw away from Parliament by Nuclear Waste Services, which is a branch of the Nuclear Decommissioning Agency. In fact, the Liberal Democrats have strongly opposed the establishment of a geological disposal facility. They have recently organised a petition of local residents to oppose a tentative proposal that such a facility might be created on the south coast under Romney Marshes.
Just a month ago, the Liberal Democrats ago voiced the old trope that nuclear waste is highly radioactive and highly hazardous and that the hazards will endure for millennia. They cannot have it both ways. Nuclear radiation is subject to a geometric or exponential process of decay. The more intense the radiation, the shorter lived it will be. On the other hand, a substance that has a half-life of thousands of years is only weakly radioactive. The methods that have been devised for the storage of nuclear waste can accommodate all these circumstances in a manner that can render the waste harmless. We have had various figures quoted for the cost of this enterprise, but the proponents of the amendment are proposing these figures as if they are a cost to be borne immediately. In fact, that cost will be distributed over a long period. If you take that into account, a very different conclusion arises.
This is an ill-conceived amendment and should be dismissed without further ado. We should not allow the legislative process to be entrammelled by such groundless objections and impediments.
Lord Foulkes of Cumnock (Lab Co-op)
I am not sure why my noble friend is so surprised that the Liberal Democrats have moved this amendment. They are always looking in two directions, and this is absolutely typical of them. My noble friend has been in the House of Lords long enough, and he ought to have got used to it by now.
Viscount Hanworth (Lab)
Yes, indeed. In 2010, the Liberal Democrats in the coalition Government proposed that 10 new nuclear plants should be built. Of course, they have totally changed their opinion.
Lord Teverson (LD)
Perhaps the noble Viscount will explain how the Labour Party in government has made some of the biggest U-turns on nuclear power ever seen in this country.
Viscount Hanworth (Lab)
No, I am not in the business of explaining that. There has never been consensus in the party but, right now, I think there is consensus as never before. The party is facing up to realities. I hope I shall have the opportunity to describe what those realities may be if we were to follow the prescriptions of the Liberal Democrats. I think that we would be looking at a scenario of misery and—
Lord Teverson (LD)
We all agree with the principle that the polluter pays. I believe that we also have a principle in life that we should not pollute if we have no way of solving that pollution during the time for which we are planning. The issues here are complex, but I do not think they are necessarily quite so straight- forward as the noble Viscount describes.
Lord Howell of Guildford (Con)
My Lords, I had rather a nice time working with the Liberal Democrats in the Cameron Government, when, in an enlightened way, they were strongly in favour of nuclear power. It appears that they chop and change from time to time, but those were the days.
Before I speak further, my noble friend Lord Trenchard has reminded me that I should have made it absolutely clear that I have an indirect interest to declare, in that I advise Mitsubishi Electric, which is concerned with the power sector and indirectly therefore with nuclear construction. I suppose that I also have a sort of interest in the sense that I was Secretary of State 40 years ago and tried to build nine new reactors, of which only one, Sizewell B, was ever built. I think that I am allowed to reflect to this Committee that things would be much nicer for us if we had got the other eight built as well. They were all low-carbon and would have helped greatly in the present crisis, but that is all history.
On these amendments, it is absolutely true, as the noble Lord, Lord Oates, observed, that the radioactive waste issue requires careful handling and examination, and it must be addressed fully and with all the knowledge that we can bring to bear to establish and meet the many understandable concerns about it.
As for value for money, we will come to that in the next amendment. Of course, there are enormous difficulties in defining what value for what money, but we can debate that in more detail in a moment.
What is not true is to imply that there has been no technical solution to the absolutely safe—nothing is 100% but it is highly safe—burying of high-radioactivity nuclear waste for thousands of years. It is certainly more than 40 years since the late Walter Marshall explained to me that vitrification and burial two or three miles down in a stable geological formation was very nearly foolproof. There was a faint possibility of corrosion of the glass vitrification case around the radioactive material, but otherwise it would be safe for hundreds of thousands of years. He added, rather cynically, that if before then people wanted to dig it up and eat the glass, they may have more problems than radioactive waste. The vitrification option is there; it can be done.
In the great debate going on in America about the Yucca Mountain development as a waste disposal centre, I noticed that the statistics produced—I have the precise figure here—say that all but one in every 10,000 waste packages going into the repository, if it is built, would be secure for more than 150,000 years. So we are talking about the most minute dangers. The danger is there, but it is minute, and has to be weighed against all the other problems—we will come to value in a moment—of abandoning an area of low-carbon electricity which will be reliable, will stop a great deal of the suffering that we have today, and will be not only a stepping-stone to but a crucial adjunct and back-up of the renewable and clean energies that we all want to see dominate when conditions allow.
Lord Vaux of Harrowden (CB)
My Lords, my Amendment 42 to Clause 40 is loosely related to decommissioning, which is why it is in this group, but perhaps slightly niche or tangential.
It is important that there is clarity as to who is responsible for decommissioning. As I understand it, Clause 40 is intended to make it easier for nuclear companies to obtain debt finance by removing the risk that a lender might be caught by the definition of being associated and so potentially become liable for the decommissioning costs, which would not be appropriate for a debt provider. That makes perfect sense, and I fully support the clause in principle.
However, it seems to me that as currently drafted there is a risk that the exemption the clause sets out could create a loophole under which a party that should be treated as associated for decommissioning purposes is able to avoid that by doing some creative structuring of their holding using debt. This is often done, for example, by private equity companies, although more commonly for tax purposes, but it would not be hard to reduce a shareholding to just below the threshold of 20% while in fact retaining the ability to take control above 20% because of the rights attached to debt or quasi-debt. If a party has structured their investment to be 19.9%, and is thus not deemed associated and not liable for decommissioning costs, but it then goes over 20% through the exercise of rights arising due to debt holdings, that party should clearly be treated as associated and should not be able to utilise the exemption set out in Clause 40. However, as the clause is written, it would be able to.
It would be highly unusual for a genuinely arm’s-length debt provider such as a bank to own shares in a company as well as providing debt, apart from the share security rights that come with the debt. Amendment 42 would simply restrict the exemption to parties that did not own shares. That should close off the potential loophole while not changing the intended aim of Clause 40 to encourage debt financers to step up. I hope the Minister can accept it.
Baroness Bennett of Manor Castle (GP)
My Lords, I shall speak to Amendments 44 and 45 in my name. They have essentially the same aim as Amendment 3, moved by the noble Lord, Lord Oates, but would intervene in the Bill in a different place and at a different point in the process. The noble Lord was intervening at the designation stage; my amendments would intervene in Clause 44, at the stage of handing over the money.
We have had a very illuminating debate. I make the point that no one can accuse the Green Party of not having been being consistent through the decades about nuclear power.
Baroness Bennett of Manor Castle (GP)
Well, on many issues, such as the climate emergency, the nature crisis, concern about air pollution and whether we should have a living wage, we have won all those arguments over time, and I fully expect that we will make the same progress here.
The noble Viscount said, “Don’t worry, the costs won’t be borne immediately.” I point to your Lordships’ House having recently passed the Wellbeing of Future Generations Bill—an acknowledgment that we have already laid huge costs on future generations in terms of the destruction of the earth. What we are talking about here is like buying a property and then saying that the ground rent in future will be decided by a random number generator. We do not know what the costs will be, but those costs of trying to dispose of this material exist.
The noble Lord, Lord Howell, said, “Oh, we have the technological solutions”, and the noble Lord, Lord Deben, hinted at the issue when he asked, “Why would future generations dig this up?” We should think about what we have done to the pyramids and a great many ancient sites: here is this mysterious thing from the past and there might be treasures in there. One of the great challenges of trying to decide about deep geological disposal is the question of whether you should mark it or hide it. If you mark it then how do you convey, many centuries into the future, that this is a dangerous place? That is not a question that anyone has ever found an answer to because there is no answer to it.
I would be interested in the Minister’s answer to this. At Second Reading the noble Lord, Lord Oates, said there had not been much discussion of this issue, but when I raised the question of a geological disposal facility the Minister told me there were four places where this was being consulted on. I asked him to identify those places and he said he could not, so I would be interested to hear any updates on that. It rather contradicts the comments from the noble Lord in front of me, who said that three places had already decided. I spoke at Second Reading about my experience of being in Cumbria and seeing what resistance there was, even in a place that is broadly pro-nuclear power, to deep geological disposal.
You do not make a purchase, particularly with public money, without knowing what the costs will be. I have some sympathy with the amendments in the names of the noble Lords, Lord Wigley and Lord Vaux, about trying to make sure that the cost does not land on the public purse—except that the practical reality is that we have seen a great deal of socialisation of costs and privatisation of profits. The state will always be the organisation that has to pick up the costs because the clean-up and the storage have to happen and the state has to ensure the security of its people.
Baroness Worthington (CB)
My Lords, I apologise for not being present at Second Reading, and this is the first time I have spoken in Committee. I am speaking to Amendments 3, 44 and 45. Normally, when I speak on matters of climate change, there is not much distance between my position and those of the noble Lords, Lord Oates and Lord Teverson. However, on this issue, I totally oppose Amendment 3, which can be interpreted really only as a wrecking amendment designed to derail the Bill and the financing of this essential infrastructure, which we need to see built for the clean, affordable and secure sources of electricity that we will need in the future. Amendments 44 and 45 similarly seek to derail this effort and therefore should be opposed by the Government.
To pick up on some of the details, at heart, the difference between us is a sense of radiophobia. Noble Lords on the other side believe radiation to be a deadly, uncontrollable source of pollution that cannot be managed, which is just not true. We know how to manage this waste today and will know how to manage it tomorrow. If you know the source of radiation, and whether it is alpha, beta or gamma, and how it can be stopped by simple everyday materials—paper, metal and concrete—you can contain this waste. You can stand today in a disposal facility of high-level waste, in existing reactors above ground, and touch the sides of the casks containing that waste. It is that safe. In fact, the background radiation would be less than you would get if you were exposed to background radiation from visiting parts of Cornwall.
So please can noble Lords engage in this debate on the basis of science? Can you visit these facilities and engage in an understanding of how this currently operates and will operate in the future? If you drop this radiophobia, you will understand that this is essential in the fight against climate change—not only the existing reactors, but the new reactors and existing-design reactors. We need them all. We need to throw everything we can at this. We need to do it safely and securely, and that is what we have been and will be doing.
Please can we not accept this amendment, but have a dialogue and get to the root of noble Lords’ concerns? I am sure, as was pointed out by the noble Viscount, Lord Hanworth, that once you understand the nature of radiation and that the higher the radiation, the quicker it decays, you will understand that this is a manageable problem, unlike the completely unmanaged problem of CO2 emissions. CO2 is emitted every second of every day in every country, and is accumulating in the atmosphere with no one taking responsibility. No one is paying for its collection and storage. You have to put this in context, understand the science and visit the current management practices in this country and others. Then you will understand that these amendments are not in good faith; they are designed simply to slow this down, and I therefore cannot support them.
Baroness Bennett of Manor Castle (GP)
Before the noble Baroness sits down, perhaps she would acknowledge that the circumstances in which waste is currently being managed are stable—I do not think she was here when I was speaking to the earlier group of amendments, about Ukraine—and we have orderly government and an orderly economic system. We have controls. The world cannot be guaranteed to stay in that place. In another case, waste could look very different.
Baroness Worthington (CB)
Perhaps the noble Baroness would like to comment on the completely and utterly irresponsible spreading of misinformation around the Ukraine reactor. People are claiming that it would be 10 times worse than Chernobyl, which is utterly untrue. This is the largest reactor in Europe, yet it is so secure that it cannot be compared to Chernobyl in any way, shape or form, but all this misinformation is circling around it. We have seen that reactor being rendered to a safe point even under the conditions of war. What more proof do you need that this can be safely managed?
Baroness Bennett of Manor Castle (GP)
The noble Baroness directed that to me, so I will point out that, yes, the artillery shells did not hit the reactors, but they are designed to deal with aircraft strikes and earthquakes. They are not designed to deal with artillery shells.
Baroness Worthington (CB)
Which do you think is more impactful—an artillery shell, or an airliner or F14 fighter flying into the side of the reactor? They are designed for this. They have regular safety protocols and procedure which they go through in considering what should happen in a conflict situation like this. You are really not speaking from a position of information to understand this, I am afraid. I should not use pronouns; I should have said that the noble Baroness should really study this more before making proclamations such as this. It derails this essential effort.
Lord Teverson (LD)
My Lords, of course, the problem is actually flooding, as was shown at Fukushima—and bad maintenance, even in an organised society like Japan. The Tokyo Electric Power Company is probably seen as one of the most reliable companies in the world, but it did not do its job and caused a lot of the problem when there was the tsunami. I am not suggesting that a tsunami will hit Ukraine very soon, but there are issues.
I want to move away from the polemics. I thank Labour Members of the Committee for giving us a headline on opposing such facilities, but I admit that it is not the Liberal Democrats who have determined that they have not happened so far; it is the local communities that have rejected them. Maybe that will change. I have huge regard for the noble Baroness, Lady Worthington. I said this at Second Reading and will not go through it again: if you want nuclear, you do not do it this way. You do not build one big facility at 22 billion quid, and decide five years later to build another. You organise it in a different way, perhaps as South Korea did, with a fleet of the bloody things; sorry, I should not say that. This is the most inefficient and crass way of building nuclear power in this country.
Baroness Worthington (CB)
We are doing series building. The existing Hinkley Point is two reactors built in series, and these will be another two built in series. That is four, so that is not bad—and they are large reactors, double the size of the existing PWRs. You get what you pay for. You will get an enormous amount of reliable, secure and clean electricity that will be the backbone of our grid. It will flex to allow us to accommodate huge proportions of renewables, and it will be a system where we can produce hydrogen from nuclear. There is absolutely nothing for one to be concerned about in this proposal. I am a fan of alternative reactors; there are other ways of doing nuclear that are inherently safe and would not have led to the Fukushima accident, because they could have been designed differently. However, I ask the noble Lord: how many other reactors sustained themselves through that tsunami? It was unprecedented—10,000 people lost their lives—yet there was only one reactor problem, because it did not allow a release of pressurised air with water and vapour. That was what went wrong, not maintenance. There was a political call, and the reason for that was the world’s media focusing on it because of the radiophobia that has been spread, I am afraid, largely by the green movement over the last 30 years.
Lord Teverson (LD)
I can see the Government Benches starting to go for a refreshment break; never mind. I am trying to make a serious point. I have been to Hinkley C; I understand it all, believe me, but this is the wrong way to do it—the technology is obsolete. The question I want to ask the Minister outside the polemics is about the Nuclear Liabilities Fund, which he will be well aware of. Its current value in assets is £15 billion, largely through the Government’s sale of British Energy. We heard from my noble friend Lord Oates that the potential future liability is some £53 billion. EDF pays into the Nuclear Liabilities Fund at the moment.
My question is around the problem of there being a future liability that cannot be met. How does the Minister see that developing? Will the fund be able to meet the costs in the future? I am particularly interested in understanding whether the fund is in a bank account somewhere or is just an item on the Treasury’s balance sheet, so it is not really there and is just absorbed into public expenditure. It is a serious question. I would like to understand the previous methods that have been used to make sure that there is not a liability in the future. The figures just seem totally inadequate. Even if we do go through these types of facilities, how will we make sure that the liabilities can actually be met?
Baroness Wilcox of Newport (Lab)
My Lords, this group of amendments centres on the important aspects of nuclear waste and the decommissioning process. As we have heard, they give rise to polarised opinions. I will be brief, given the number of amendments that we are aiming to get through this afternoon.
A number of speakers raised issues around nuclear waste at Second Reading. The Minister acknowledged that work on a geological disposal facility to dispose of high-level waste permanently is still ongoing. It is doubtful that the Minister will be able to provide any meaningful updates on that project this afternoon, but I may be proved wrong.
There are genuine questions to be answered. However, whether they need to be answered in full through this Bill is less clear. The answer to that question may lie in the likely process once the Government are finally ready to proceed with their chosen long-term solution. Will separate legislation be required to get that project under way?
Lord Stunell (LD)
Yes, I know—it’s boring hearing the facts, isn’t it? I apologise for not catching the noble Baroness’s eye earlier but I want to contribute briefly to this debate with just a couple of historical facts that might help.
I thank the noble Lord, Lord Howell, for his words about the Liberal Democrats in the coalition. As one of the four people from the Liberal Democrat side who contributed to the agreement with the Conservatives, my recollection on that is that, as I am sure he will remember, nuclear power was to be at no cost to the public purse. That was very much the coalition’s starting and finishing point; I hope that it will continue to be so.
I have done most of the things that the noble Baroness, Lady Worthington, invited us to do to apprise ourselves of the facts. Indeed, back in 2001, with the active co-operation of BNFL—British Nuclear Fuels Ltd—I produced a short report, Cleaning Up the Mess, which looked specifically at what would be the best way to deal with nuclear waste; at that time, it was much more prominent in the headlines than it is now and just as intractable. We looked at some of the conditions needed. One is stable geology but the other, which the noble Baroness, Lady Bennett, mentioned, is stable politics. If you look at Europe, only two countries —England and Sweden—have had even 350 years of political stability. Of course, the events in eastern Europe at the moment are a reminder of that.
Lord Foulkes of Cumnock (Lab Co-op)
It seems to have been relatively stable in Scotland.
Lord Stunell (LD)
I am sure that the noble Lord’s colleagues from the Scottish National Party will remind him of the Act of Union, which was subsequent to that date. Yes, England was a deliberate choice, but I will accept other places; it is hard, however, to find another place other than Sweden that has had even 300 years, let alone however many thousands of years we are talking about, of stability.
Lord Stunell (LD)
Let us try Portugal. The Duke of Wellington was required to liberate Portugal from Spanish and Napoleonic domination. It is easy to forget Napoleon and Hitler and all sorts of things but—not that it is particularly relevant to this debate—political stability is important and rare. This country is one of the places that has been able to exhibit that despite our sometimes fractious debates on nuclear storage.
The conclusion of my report was that you need deep geological storage. It would be sensible for it to be in England. This is not, and never has been, Liberal Democrat policy, but my report pointed out that there was a big business opportunity because nobody else in the world—neither then nor, for that matter, now—had a good place to put their nuclear waste. I am certainly not opposed to having a deep geological disposal point.
The purpose of this is to establish the risk and the cost to the public purse. I go back to where I was in 2010—that there should be no cost to the public purse. We have gone backwards since 1999. Then we at least had a site and a plan—or BNFL did, which was strongly advocating it—but at the moment we have neither. We had a timescale; it would have been operational in 2024, which would have been very convenient for the passage of this Bill. Now it will probably not be for another 25 years, even if it gets a fair wind.
Lord Wigley (PC)
When the noble Lord says that there should be no cost to the public purse, is that in regard only to future projects or also to existing nuclear power stations? I mentioned in my intervention the situation in Trawsfynydd, the cost of decommissioning which could never have been anticipated when it was built. Is there not a case in those circumstances that the public purse is the only way to bail out that sort of situation?
Lord Stunell (LD)
The noble Lord is almost certainly right. That ship has sailed, to say the very least. In phases one, two and three of the nuclear programme, no adequate provision was made for decommissioning or any way of storing the waste. Unfortunately, that will clearly fall back on to the public sector in some form or another.
We are talking about a new generation. It is surely right and proper to learn from the mistakes of the last 60 years and make sure that that is properly costed in the formulation given for the construction and operation of these plants. I do not think that it is particularly controversial that we should learn from previous experience, although it is often very hard to do so.
Is the Minister satisfied that the public purse will be properly protected over a period of time from finally picking up the costs of geological disposal of nuclear waste from the plants that this Bill is intended to finance? The Government ought to answer that honestly and frankly so that there is no illusion on anyone’s part either about what is happening in terms of public subsidy or that the true costs of delivering a nuclear programme incorporate the costs of decommissioning, rather than shuffling them off at the start and delivering them as a bill of unknown but undoubtedly large size to the public purse.
Baroness Worthington (CB)
Before the Minister responds, I would be interested in whether we should have a review of the societal demands of how we treat the decommissioning and waste of nuclear, because it seems to me that we are operating against a set of principles that have become detached from the reality of how you can manage this more cost-effectively. A large body of evidence says that geological disposal is not needed, because you can just do subterranean management. If it were not for the widespread lack of understanding about the nature of the problem and the way it can be dealt with, we would not have to incur these costs. If there is a review, we should go back to basics.
The same is true of decommissioning. The simplest and cheapest way to decommission is to leave it alone and then decommission it. The desire to bring it back to greenfield status is utterly unnecessary. These are highly concentrated industrial sites that serve clean energy to millions of people. We should not be seeking to return them to greenfield on an accelerated timescale, unnecessarily incurring huge costs to the taxpayer. We should have a review, go back to basics and consider all of the above in terms of what we should do with our waste and decommissioning.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I shall speak to Amendments 3, 17, 20, 42, 44 and 45, laid by the noble Lords, Lord Oates, Lord Teverson, Lord Wigley and Lord Vaux, and the noble Baroness, Lady Bennett. They relate to decommissioning and it is appropriate that they are all discussed together.
Prior to doing that, I will address the comments of the noble Lord, Lord Teverson, on the Nuclear Liabilities Fund. The NLF is a segregated fund which has been set up to meet the costs of decommissioning nuclear power stations currently owned and operated by EDF. The fund is managed by an independent Scottish trust, the Nuclear Trust. The trustees are responsible for ensuring the sufficiency of the NLF to meet decommissioning liabilities. I hope that that answers his questions.
I return to new nuclear and make it clear to the Committee that there is already a robust and effective statutory regime in place that addresses the decommissioning costs of new nuclear power stations. Under the Energy Act 2008, it is a legal requirement that all proposed new nuclear power stations have a Secretary of State-approved funded decommissioning programme in place before nuclear-related construction can commence on site. This includes setting out how the operator will safely manage spent fuel and waste during operations and meet the costs of decommissioning and the clean-up of the site. I note with interest the comments made by the noble Lord, Lord Wigley, and welcome the opportunity to meet him if he would like to discuss this process further.
As part of the FDP approval process, the Secretary of State must consult the Office for Nuclear Regulation—the ONR—and relevant environmental regulators where their functions are concerned. The Government have also published FDP guidance, which clearly sets out the principles that the Secretary of State will expect to be satisfied in an FDP. I note that we expect any approved FDP for a new project to be available publicly, as was the case for Hinkley Point C, save for material of a sensitive nature.
Approximately 94% of legacy waste created by nuclear power stations in the UK is low-level waste, which is either recycled or disposed of safely and securely. Higher-activity waste is treated and stored safely and securely in nuclear-licensed sites around the country. This will then be disposed of in a geological disposal facility, which the Government are committed to developing. The noble Baroness, Lady Worthington, made these points eloquently and I thank her for her contribution. A GDF will ultimately allow the Nuclear Decommissioning Authority to complete the decommissioning and clean-up of the existing nuclear estate and to continue to manage radioactive waste effectively. This is the safest and most environmentally responsible option for managing higher-activity radioactive waste in the long term and there is a process under way to identify a suitable location for a GDF.
The noble Lord, Lord Callanan, recently wrote to the noble Baroness, Lady Bennett, on this very matter. A GDF working group, which is the first formal step in the process to identify a suitable location, has been formed in Theddlethorpe in Lincolnshire and is beginning discussions with the local community. In addition, the first three GDF community partnerships—the second formal step in the process—have been formed in Mid Copeland, South Copeland and Allerdale in Cumbria. These groups provide a platform for long-term community engagement, local investment funding and investigations to assess potential site suitability.
It is for these reasons that I cannot accept Amendments 3, 17, 20, 44 and 45. The FDP regime in the Energy Act 2008 already exists to ensure that new nuclear projects have effective arrangements in place before they begin construction to manage, pay for and dispose of the waste that they create. Amendment 3 in particular would prevent the Government from bringing forward new nuclear power using the nuclear RAB model that we need to decarbonise our power system and help meet our ambitious climate change goals. A GDF is the best option for the long-term management of radioactive waste and I thank the noble Viscount, Lord Hanworth, for his support for such a facility. I also thank my noble friend Lord Howell for his thoughtful reflections on this matter. As I said, a process is already under way to identify a suitable location with a community willing to host a GDF. It is imperative that we bring forward nuclear now, given that arrangements are in place for safe, secure interim storage of waste and its ultimate disposal.
The noble Lord, Lord Oates, made several comments on the potential costs of a GDF and how our understanding of these has developed. The earlier cost figure to which the noble Lord referred represented a lower-end single point estimate around some basic assumptions on the depth and type of rock in which the GDF would be constructed. It included only the cost of disposing of legacy waste. The revised cost range of £20 billion to £53 billion is a more mature and complete estimate based on credible scenarios. It includes figures for waste from new nuclear projects and materials such as uranium and spent fuel from earlier nuclear power stations, which may be declared as waste if no further use is found for them. It also accounts for factors including uncertainty and optimism bias. Uncertainty will be reduced as we progress through the siting process. We will understand the specific geology and associated engineering and technical requirements, allowing us to refine our cost estimates.
I turn to Amendment 42, which was laid by the noble Lord, Lord Vaux. It is our understanding that the intent of the definition of “associated” in Section 67 of the Energy Act 2008 was to provide the Secretary of State with the flexibility to impose decommissioning obligations on entities that would be expected to have a substantial degree of influence over the operator’s normal activities, such as the operator’s group companies and shareholders with an interest in the company significant enough to influence its decisions.
Lord Wigley (PC)
Will the Minister clarify her response on Amendment 20? If the cost of decommissioning, including of the site, goes beyond that which has been built in to the financial agreement at the origin of the scheme, is she saying that the Government would pick up the bill in those circumstances and that there is already a provision to provide for that, or is she saying that in no circumstances would the Government use public money for that purpose? If she is saying the latter, getting a nuclear power station such as Wylfa off the ground does not have a snowball’s chance in hell. There has to be a guarantee that ultimately the public purse will pick up the cost.
Baroness Bloomfield of Hinton Waldrist (Con)
All I can say is that all these issues will be negotiated up front in the agreement that we make with the potential operator of a new nuclear site.
Lord Wigley (PC)
I am sorry to press this further, but of course there will be negotiations and some sort of a deal will be made with those developers, but if the circumstances change, as happened at Trawsfynydd, and there are immense additional costs beyond what was anticipated, surely there has to be a public guarantee to those communities. Those communities have supported nuclear power on the basis that such an understanding exists. If it is not there, there will be a volte-face, and there will be a reaction against nuclear power. This assurance has to be given one way or the other. If the Government want to go away, think about what mechanism is appropriate and come back on Report, I accept that, but to say that in no circumstances would the Government pick up the tab is to kill off the prospect of those locations.
Baroness Worthington (CB)
I do not think that that assertion is correct, because my understanding is that once the nuclear industry stopped building new reactors it moved into decommissioning. What we had was a period in which the entire sector was making all its money from decommissioning costs. The reason that those costs kept rising was that we had a very poor regulator which allowed a reciprocal relationship with private contractors, who brought forward all sorts of faster decommissioning timetables. That was nothing to do with what society needed or required; it was to do with the profitability of the industry. I hesitate to say that there are these red lines where society will not accept a new reactor because of decommissioning. It is much more complicated than that. We must be careful that we are not gold-plating regulations that deliver millions of pounds to contractors unnecessarily.
Lord Wigley (PC)
I entirely accept what the noble Baroness is saying, but circumstances will change and there will be costs that have not been anticipated. Those will be picked up either by the local community or by someone else. If it is someone else, who else can it be but central government?
Baroness Bloomfield of Hinton Waldrist (Con)
What I can say is that the Government will meet all our obligations to communities in decommissioning the site.
Lord Vaux of Harrowden (CB)
When the Minister was answering on Amendment 42, I think that she confirmed the existence of the loophole that I had pointed out, so I will just ask her a direct question. If someone whose stake was, say, 30% managed to structure it so that it was 19% and debt, then that debt was subsequently rejigged to bring us back above the 20% threshold, should that person be treated as associated or not?
Baroness Bloomfield of Hinton Waldrist (Con)
I am told that Section 67 of the 2008 Act already provides for this, because the totality of the investment would be taken together. If it is over the threshold, it will be caught.
Lord Vaux of Harrowden (CB)
But the whole point of Clause 40 is to create an exemption, so that share security rights that arise from debt are not taken into consideration when deciding whether someone is over the 20% or not. That is the whole point of Clause 40 and is precisely the problem that I was alluding to. I am happy to meet the Minister to discuss it, if that is easier.
Baroness Bloomfield of Hinton Waldrist (Con)
I am happy to explore this further out of Committee.
Lord Oates (LD)
I thank noble Lords—some more than others—for their contributions to this debate. I particularly thank the noble Lord, Lord Howell, who, while we disagree strongly on these issues, addressed nuclear waste seriously. One of my purposes in tabling Amendment 3 was not only to expose issues about and have a proper discussion around the costs of a geological disposal facility but because it concerned me, at Second Reading, that there was little focus on waste.
I perhaps should have declared an interest at the beginning as, many years ago, I acted as an adviser to the NDA. While I do not pretend to be a scientist, I have some understanding of this and say gently that there are many people, on all sides of this debate, who have an understanding and take different views. Noble Lords should not make assumptions about their greater knowledge to underpin their enthusiasm for nuclear.
On the specific point of my party’s position on this—again, rather than addressing some of the issues, we seemed to get into a rather unnecessary partisan issue—different parties have different views. As my noble friend Lord Stunell pointed out, the agreement in the coalition was no public subsidy for new nuclear and that is the position we took.
The noble Viscount, Lord Hanworth, for whom I have great respect, was uncharacteristically partisan. He told me that I could not have it both ways, but I gently suggest that he cannot have it both ways either. If the issue of nuclear waste is of such marginal concern and I should not be bothering the Committee about it or the costs of it, why are we intending to spend potentially £51 billion—I imagine much more by the time we get to it—on a geological disposal facility? The noble Viscount said, “Well, there are things happening”, but there have been things happening for a long time on the GDF. As my noble friend Lord Stunell pointed out, we have gone backwards in many ways. I have also heard some argue, “Oh, actually, we do not need a geological disposal facility. That solves it, because then we do not have to worry about the costs of that or the difficulties of securing it.” That is not the view of the majority of people I have spoken to, and I have spoken not only to those who are opposed to nuclear but to those involved in the nuclear industry. Certainly, the international view and the international experience is that such a GDF is required.
All I would ask of the Committee and the Government is, if they are intent on going down the road of nuclear—I am quite open that I am opposed to it, not for some ideological reason or from radiophobia but for some very practical reasons relating to the problems; they are not about encased waste, which you can standby or store for 100, 200 or possibly 300 years, but about long-term disposal, as talked about by my noble friend Lord Stunell, the noble Baroness, Lady Bennett, and others—
Lord Foulkes of Cumnock (Lab Co-op)
Is it not the case, when we are dealing with the disposal of waste, that more than 90% of it is already there, coming from the old Magnox reactors, and the new nuclear reactors produce relatively small amounts of nuclear waste?
Lord Oates (LD)
I have heard this from others, and the argument seems to be, “Well, we’ve created such a mess already that it doesn’t make much difference if we create any more.” They may create less waste than the old Magnox reactors, but all I am asking is that, before we create more of that waste, we have a way of disposing of it. It is important that we take that seriously, whether we are pro-nuclear or anti-nuclear. We will not convince people unless we deal with this sensibly. In terms of this Bill, we cannot know the real costs unless we understand the costs of construction and operation.
Lord Oates (LD)
I say with respect to the noble Baroness, Lady Worthington, that she has intervened on many occasions and we probably need to move on. I just ask that these matters be taken seriously and that when people discuss nuclear waste they think about it in terms of the very long term over which it has to be dealt with and the fact that we do not yet have that GDF and cannot possibly know the costs of it. I beg leave to withdraw the amendment.
Lord Foster of Bath
Member’s explanatory statement
This amendment would require the Secretary of State to provide stronger evidence that the project will result in value for money through publication of such assessments carried out to date.
Lord Foster of Bath (LD)
My Lords, I begin by declaring a couple of interests. First, I should place on record that I live quite close to Sizewell. I say to the noble Lord, Lord Howell, that if only the current construction of Sizewell C were done in the way in which they built Sizewell B, with much of the material brought in from Sizewell A, some of the objections in the locality—not all of them—would certainly disappear. Secondly, and I say this particularly to the noble Baroness, Lady Worthington, for whom I have enormous respect as she knows a great deal about this, I know a little bit because I used to be a physics teacher, but I do not think that that holds much water these days—it was a long time ago.
My amendment is in a long grouping of amendments, but all seem to cover roughly the same theme, that of transparency and trying to ensure that we have as much information available to us as we can before fundamental decisions are made and this Bill goes through. There are many amendments covering issues to do with the designation procedures and so on. I note, for instance, that my noble friend Lord Oates in his Amendment 13 asks not only for more information on what impact the RAB will have on consumer bills but for that to be independently checked—something that Citizens Advice, for instance, has long been campaigning for.
My noble friend also raises a really interesting issue in Amendment 6. It is about getting some assurances that the station or generation system to be built will be able to deliver and will not have a number of outages, or perhaps will not even work at all. Of course, that is already being experienced by the Taishan EPR new build in China, which has been offline for the past eight months after only two and a half years in operation.
Lord Howell of Guildford (Con)
My Lords, I am second to none in my concern for the escalating costs of past nuclear projects—large-scale projects, that is. That is why my hope is that more and more emphasis will be put on returning to smaller modular reactors and new technologies, where the opportunities for vast cost escalation over a long period of time are reduced. One cannot help coming to that conclusion from the experience of Flamanville, where there was a huge cost overrun—the noble Viscount, Lord Hanworth, will remember that because we visited it together—and, of course, that of Olkiluoto, where the cost and time overruns are colossal.
So large scale does not have a good story. The sooner we can face up to that and give full support—even more support than at present—to the development of SMRs, borrowing foreign technology if we have to but hoping that Rolls-Royce has got it right and is on the right lines, the better. In a way, the regulated asset base will work all the better for these smaller and much more financeable projects, which are much more attractive to the private sector than large-scale projects. However, the large-scale project at Sizewell C is already under way, so perhaps my prayers are not going to be answered for that one; I just hope that they are for the future.
My problem with Amendment 4 is the emphasis on the concept of value for money, which is of course something that the Treasury talks a great deal about. Can the noble Lord who moved the amendment enlighten us later on what he means by “value”? Part of the argument all along—it has never been stronger than it is now—for building nuclear is national security, as the noble Baroness, Lady Wilcox, rightly mentioned at the beginning of the day. National security is the case for an element: you cannot go completely for national security on the basis of autarky—that would be absurd—but we do know that events happen, and have happened.
Right now, we face tremendous problems because of not being able to mobilise a system that is less prone to colossal price increases, causing enormous damage, hurt, suffering and danger to the economy, as a result of the more than tripling—the sevenfold increase—in the price of gas. Only yesterday morning, I was listening to the noble Lord, Lord Duncan, say on the radio that, in the two hours before he had come on the radio, the price of gas had risen from being five times as high as last year to nine times as high. It is a crazy situation, arising entirely from a lack of diversity and support because we have let our low-carbon, reliable nuclear sector run right down from the 35% it was in its heyday to something in the mid-20s; it is going to be 7% until we get it started again.
Is national security part of the value? Is there the back-up capacity of having a reliable sector of low carbon when renewables, however much we love them, falter? They do falter, and can fail completely at times. Is that built into the value? Is the fact that this is an enormous future source of clean, green hydrogen built into the value? Is the fact that nuclear itself is low carbon and therefore should be backed, and justifies subsidy in the way that other low-carbon renewable sectors have all received substantial support in their time—although their costs are coming down—included in the value? Unless we are able to get some realisation that value is a disputable, subjective point, and that behind it lie much deeper assessments of the defence of the nation and our national security in the next 30 to 40 years and further ahead, it is impossible to lay down rigid rules about how some kind of assessment of value for money should be reached. That is my problem with this entire amendment.
As I say, although we cannot go for autarky—that would be absurd—we must have reliable electricity for what everyone says is going to be an electric future. We are going to use 12 times as much electricity in the western world in 2050 as we use now, so we must have electric reliability. For that, we must have a nuclear sector that is strong, effective, reliable and, one hopes, more affordable. In the meantime, what is the value? That is my question.
Lord Foster of Bath (LD)
I have enormous respect for the noble Lord—indeed, I think that he has asked some very pertinent questions—but he has spent his time criticising the amendment when the Bill that he is perhaps going to support later currently says that
“the Secretary of State is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”
So the value for money is already there; my amendment seeks to have it published so that we can see what basis has been used. I think that the noble Lord should be addressing his questions to the Government, not to me.
Lord Howell of Guildford (Con)
What I am saying is that, if the Secretary of State decides to publish his value for money assessment, that assessment will of course include the long-term national security concerns of this nation and a variety of other advantages of moving into a proper low-carbon electric age. That kind of value is not one that the noble Lord is going to agree with, so the disagreement will continue. Value is a totally subjective aspect; that is so with many national projects, but particularly with this one.
If I may say to the noble Lord, Lord Stunell, the rather endearing Lib Dem concept that no public subsidy could possibly be involved—that is, nuclear is all right but there must be no public subsidy—is an absurdity. Of course there is going to be public concern about the national security of this nation; public concern is something that will have to be paid for, either through subsidy by the taxpayer or by ordaining the Government to raise the money in some other way. The latter was the proposition for Hinkley C, which was allowed to have a strike price that was at that time almost twice the going rate for electricity kilowatts per hour from coal, oil or anything else, including renewables. Things have changed since then; now that electricity and gas have soared, perhaps the strike price is quite reasonable compared with other fossil fuels. That raises the question of contracts for difference; perhaps it was not quite such a bad prospect as some of us thought.
Anyway, that is beside the point. The main point is that value is utterly subjective and must contain all kinds of assessments by the Secretary of State, his colleagues and the Government about national security and its contribution to our long-term aim of a decarbonised world, as well as a vast range of other considerations—all of which have to be balanced out in taking these difficult political decisions. We can argue until kingdom come but the reality is that judgments have to be made, and they are much bigger than value in the narrow sense.
Viscount Hanworth (Lab)
I quite agree with what the noble Lord, Lord Howell, has just said; indeed, I feel somewhat pre-empted. However, before I address the amendment, I shall talk about cost overruns.
The cost overruns have been substantial in Flamanville and Olkiluoto but they are mainly attributable to the fact that there was a long hiatus in the process of constructing nuclear power stations, so the skills that constructed the majority of the French and our own power stations had evaporated. It is worth looking back at the history of our original nuclear programme to recognise both how rapid and effective it was and that it was not accompanied by the kinds of problems we have witnessed on these large power stations.
Be that as it may, Amendment 4 from the Liberal Democrats is predicated on their opposition to nuclear power and the proposal that nuclear power projects should be assessed in terms, as we have heard, of their value for money. I presume that they wish the assessment to be based on commercial accountancy, and that they hope and expect that on that basis the projects will be judged to be too expensive to pursue. The proposers of the amendment should know that when a nuclear project is financed by commercial funds, the likelihood is that more than 50% of the cost of the project will be attributable to interest costs.
In other words, the costs of projects pursued in this manner will comprise a substantial transfer payment by the beneficiaries of the project, who are the consumers of electricity, in favour of the financial sector. Are the Liberal Democrats happy to see major investments in social and economic infrastructure evaluated according to the criteria of commercial accountancy? If so, they are aligning themselves with a political ideology that I would have expected them to reject.
Viscount Hanworth (Lab)
Be that as it may, when we talk of value for money, we usually have in mind the amount of money we would be paying for an item that is subject to immediate use or consumption. The concept loses its meaning, as we have heard, when considering something where consumption is to be deferred and is liable to take place over an extended period. In such cases, we must attempt to envisage the circumstances likely to prevail in the future. This is surely the case for a nuclear power station, the construction of which may take a decade and which is intended to provide a carbon-free supply of electricity for many years. It is envisaged that such power stations will be able to supply the plentiful electricity needed to power a carbon-free economy and to assist in averting climate change.
The appropriate means of determining the value of a nuclear project is to consider the associated opportunity cost. Opportunity cost is a technical term in economics that denotes the opportunities that are forgone by pursuing—or not pursuing—a particular project. It requires a degree of imagination to assess the opportunity cost of a nuclear project, which far exceeds the imagination required in pursuing an exercise in commercial accountancy. I invite the Liberal Democrats to assess the opportunity cost of forgoing nuclear power. In particular, I encourage them to envisage the consequences in terms of economic and social misery that will arise if we fail to create an ample and carbon-free supply of electricity. Their policies are inviting such a failure.
Lord Teverson (LD)
There is a concept in economics—which I am sure the noble Viscount is aware of—of opportunity cost.
Lord Teverson (LD)
Exactly. My point about it is that, first, it is the Government’s Bill says there will be this assessment. We are trying to find out is what it actually is, in the interests of transparency—which I am sure the noble Viscount would not disagree with. In terms of costs, there are opportunity costs of other forms and ways of meeting climate change targets. That is the point. You can reject opportunity cost, which means other ways of doing this. I do not think the noble Viscount’s enthusiasm for nuclear—which I understand—should disregard some of the other ways of achieving these objectives.
Viscount Hanworth (Lab)
Let me answer that. Looking at the alternatives proposed by the Liberal Democrats, I could go into a long discourse to outline what will happen to our industries if we forgo an ample supply of electricity to power them and maintain our economy. This is what the Liberal Democrats are inviting. They simply have not faced up to the realities of their proposals. The noble Lord says the Bill already asks for an assessment; I think that is a trivial point, because I am trying to tell him that such an assessment is probably not the appropriate way of proceeding—as we have heard very eloquently from the noble Lord, Lord Howell. I am not defending the proposal that a value for money assessment should be made. I am suggesting that such an assessment should be put aside because it is irrelevant and inappropriate.
Baroness Bennett of Manor Castle (GP)
I am sorry to intervene on the noble Viscount’s private discussion with the Liberal Democrats, but he referred to opportunity costs and may not be aware of the study from the University of Sussex Business School and the International School of Management—ISM—of 123 countries over 25 years, which was published in Nature Energy. It showed that nuclear and renewable energy programmes do not operate very well together and that nuclear crowds out renewable. That is the opportunity cost when going for nuclear; you lose the renewables.
Viscount Hanworth (Lab)
My discourse on renewables would have been on the extraordinary cost of having to accommodate intermittence. I am afraid there are other things to discuss. I have already discussed this in another forum, so I think we can leave that point.
Baroness Worthington (CB)
My Lords, I will speak briefly on Amendment 4, as much of what I was going to say has already been covered. I have some sympathy with this amendment, as transparency is nearly always good and it would benefit the industry to have a thorough description of the value of investing in nuclear on this and other scales, so that we have it as an option as we combat climate change and seek to deliver affordable power to the nation.
As the noble Lord, Lord Howell, pointed out, value is subjective. Therefore, it would be hard to use it as an objective way of saying that this should not go ahead. What value does Switzerland currently place on its electricity grid, which is almost 100% hydro and nuclear? That means that, despite its location in the centre of Europe, Switzerland is feeling incredibly safe in these troubled times. What value does it place on that? It is of huge value to Switzerland.
Similarly, the social cost of carbon rapidly needs to be revised as we realise that the impacts of climate change are happening far faster and at far greater cost than we ever thought. How do we factor that into value? Transparency is important and I would welcome a much more open discussion about the value that these large-scale nuclear power projects deliver for us. You can look at the levelised cost of electricity, but I suggest it is not the most important factor. You can pay a lot less for a tricycle than for a tractor, but they do not perform the same job. You must compare like with like.
With renewable technologies you have rapid deployment but very diffuse sources of energy, large land take and intermittency, which then requires a substantial extra cost on the grid for levelling when the sun is not shining or when we have periods of no wind, which does happen in Europe—it happened recently, actually, and contributed to the high gas prices we have seen. Let us have that discussion. I feel confident that the project we are talking about here, Sizewell C, will provide a great value for the money we are about to spend, not least because 50% of its additional cost comes from its financing, as has already been stated. That is a huge overhead, because these are capital-intensive long projects. This Bill will help reduce that and increase the value for money.
We now have two reactors under construction today. We can look at the costs of those to see how they transfer to subsequent projects that are funded under this more efficient mechanism. I have been informed about and questioned EDF about its cost overruns. The costs of the two reactors being built today are in line with what you would expect if you were building a huge construction project through the period of Brexit and Covid. Nearly all the inflated costs are true of all big infrastructure projects and are not unique to the nuclear project currently under way. So I would welcome having this conversation. I think transparency would be a friend of the industry and I therefore have some sympathy with this amendment.
Lord Oates (LD)
My Lords, I will concentrate in particular on Amendment 6, addressing nuclear outages, and Amendment 37, which would protect recipients of universal credit from being liable to the levies under this Bill. I support the amendments in the name of my noble friend Lord Foster of Bath, and I am slightly bemused about why it is not recognised that we should understand the basis of the value for money test, given that it is in the Bill.
Baroness Worthington (CB)
When we embarked on our nuclear build, we also took government money to build our hydroelectric pumped storage units, which were designed specifically to compensate and were built alongside the nuclear units. We are losing nuclear units, but we still have our hydroelectric pumped storage. The noble Lord can speak to National Grid. As we are not going to be seeing the same parity of nuclear output even after we have built the next round because we are losing the AGRs, we have more than enough capacity on the grid to cope with those fluctuations.
Viscount Hanworth (Lab)
I regard this amendment as a complete blind. Indeed, the figures that have been quoted do not tally with the ones to which I am privy. Large nuclear power plants are the only proven technology available today to provide a continuous and reliable source of low-carbon electricity. They have never been afflicted by major unplanned outages, albeit that as nuclear power plants—
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
My Lords, there is a Division in the Chamber. The Committee will adjourn and return as soon as agreed after Members present have voted.
Viscount Hanworth (Lab)
As I was saying, large nuclear power stations are the only proven technology available today which provide a continuous and reliable source of low-carbon electricity—
Viscount Hanworth (Lab)
Can I please proceed uninterrupted, then we can have a real set-to later?
Nuclear power plants have never been afflicted by significant unplanned outages, albeit that, as they have aged, their maintenance needs have increased. These have been fully accommodated by planned outages. Nevertheless, the closure of the Magnox reactors has led to an increase in load factors, which are now considerably above their historical average. The average has risen from an historical 60% to its current level in the high 70s. The recent unplanned outage at Hunterston B, which can be blamed on the age of the plant, limited its nuclear power generation for much of 2018. It was accompanied by an average load factor throughout the industry of 72.4%.
This amendment flies in the face of reality. We must turn the matter around by asking the Liberal Democrats and the Greens, who are averse to nuclear power, how they propose to accommodate the intermittence and unreliability of the renewable sources of power they are so keen to advocate. Perhaps I should not raise the temperature by declaring this, although I fear I must, but this amendment is a blind and is a transparent piece of nonsense.
Lord Teverson (LD)
I will not respond to that hugely, except to say that the really important amendment, which I think we will all treat seriously, is the one on the cost of energy and the fact that this will add to energy prices. The proposition that we should exempt fuel-poverty households from this is serious; we should discuss it, because it is very current and important.
I gently suggest to the noble Viscount, Lord Hanworth, with whom I have enjoyed serving on the committee for many years, and the noble Baroness, Lady Worthington, that they have somehow fallen into the wrong idea that it is renewables versus nuclear. That is how the argument has gone.
Viscount Hanworth (Lab)
If I could interject, we are objecting to the complete exclusion of nuclear, which is the agenda of the Liberal Democrats. It is madness.
Lord Teverson (LD)
The answer to intermittency comes back to opportunity cost. As I said at Second Reading, the most effective way of reducing it is energy efficiency. That should be the prime objective. Does the noble Viscount disagree about energy efficiency?
Lord Teverson (LD)
There are all sorts of ways of dealing with intermittency. Interconnectors have been quite effective, and I congratulate the Government on their policy of increasing those. Energy storage has been mentioned, in terms of hydro. On baseload, I agree that there are other ways of doing that in terms of geothermal starting, although I understand that is very young. There is a whole plethora of other strategies that work here.
I purely wanted to suggest that one of the most important matters here to the people outside this Room is the cost of energy and how we deal with fuel poverty in terms of this specific financial model, and to emphasise that the argument is not just around nuclear versus renewables.
Lord Howell of Guildford (Con)
My Lords, surely no one is suggesting that these are alternatives, or if they are then that is not what any sensible assessment would allow. Of course the aim for a decarbonised world has to be sought through many forms. All that is being said is that to leave out one of the major areas of decarbonised electricity is asking for trouble, unless one can begin to assess the enormous costs of trying to fill it in in areas where it may not even be available.
The example of Germany is one that the noble Lord should perhaps bear in mind. The rumour is that, having tried to do without nuclear power and got down to its three remaining nuclear stations, there is strong talk that if it is to move into the new world that we are facing now, which has all sorts of implications for the future, a large chunk of reliable low-carbon nuclear capacity must be either retained or developed to add to all the other highly desirable things for net zero and all the other projects, including of course energy efficiency and a far greater use of every kilowatt of electricity for output, which is the secret of considerable improvement without too much electricity. If that is what is being argued, we are all for it, but nuclear electricity is an unavoidable part and to drop it seems a bit odd and very high-cost indeed.
Baroness Worthington (CB)
The noble Lord, Lord Teverson, has talked about the cost of energy. I agree with him that it is very important that we take this issue seriously. The reality is that the CfD mechanism, which will still be part of the financing mechanism under the RAB model, will pay back when we see these very high prices—some of those CfD models are paying back to consumers. My question for the Minister is: under the RAB model, if it pays back in future, will that revenue flow back to consumers or will it sit with the Treasury?
One of the criticisms that could be levelled at this idea is that it is regressive. If it were a tax, those who could afford to pay it would pay more while those who could not would pay less. The universal credit amendment is trying to say that the regressive nature of this needs to be thought about. If you exclude someone from the payments then you might be excluding them from the repayments if the CfD provides revenue back, so this needs thinking through. There is a real question here about its regressive nature. If the CfD is paying back in, are we holding that in the Treasury or could it go back to the consumer?
Lord Wigley (PC)
My Lords, before the Minister concludes this debate—oh, I beg your pardon.
Baroness Bennett of Manor Castle (GP)
Sorry, I have been trying to find a space to get into a number of amendments here. On the debate we have just been having, I shall quote Steve Holliday, the CEO of National Grid, who said in 2015 that the idea of nuclear for baseload was “outdated” and that:
“From a consumer’s point of view, the solar on the rooftop is going to be the baseload. Centralized power stations will be increasingly used to provide”
variable power.
In the interests of taking us forward, I will speak fairly briefly to my Amendments 7, 8 and 23 in this group. I apologise if Amendments 7 and 8 might have been better grouped with Amendment 2, which I did not spot at the time.
Amendment 7 seeks to ensure that nuclear companies be either a not-for-profit entity, a co-operative, a community-interest company or wholly owned by UK public authorities. This comes back to the point about the ownership of the designated nuclear company and a point I made earlier. I will not replay it at length, but we have very often seen through our whole system of privatised public services—railways, power companies, et cetera—the socialisation of costs and the privatisation of profits. This is an attempt to say that this is a core public service: this is not a competition, and it should be provided through that means of ownership.
Lord Wigley (PC)
My Lords, I will speak very briefly indeed. I hate to disagree with my friends in the Green Party and in the Liberal Democrats, but the question has been asked about the impact on those on lower incomes. It is absolutely a fair question, but it must surely be resolved through the social security systems and the underpinning of people who are in that position. Surely, the crunch here is that, if there is one thing that is worse for those people than the impact of the cost of energy, it is there being no energy available: no electricity available when you put the switch down. That is the real, stark possibility that we could be facing in the world that is coming. We have to gear up for that, and then we have to arrange matters in such a way that those on the lowest incomes are protected from it. That surely must be our priority when facing the challenges of global warming.
Baroness Wilcox of Newport (Lab)
My Lords, as in the previous group, we have heard a variety of views trenchantly expressed. The Labour Party has tabled four amendments in this group: Amendments 10, 16, 29 and 38. Amendment 10 would require the Secretary of State to gain assurances about the delivery of a project.
Baroness Wilcox of Newport (Lab)
I have started so I will finish. Amendment 10 would require the Secretary of State to gain assurances about the delivery of a project before designating a nuclear company to undertake it. We hope that a designated nuclear company will not fail and that projects will be delivered without a hitch, but experience teaches us that complex infrastructure projects often encounter bumps in the road. There will always be scenarios that cannot be planned for but the aim of this amendment is to ensure that the Government can demonstrate the existence of contingency plans for the most obvious obstacles.
Amendment 16 is designed to probe plans for promoting the production and capture of hydrogen as part of nuclear power generation. Various methods are outlined in the UK hydrogen strategy but the next steps are limited to awaiting further innovation and developments in the 2020s. Have the Government assessed the potential benefits of utilising by-products from nuclear processes, and have they now modelled costs and other impacts?
Amendment 29 would require the Secretary of State to lay before Parliament a statement outlining the steps taken to prevent further charges being imposed on revenue collection contracts when cost caps are revised. We understand that the Government would not necessarily want to rule out imposing further charges on consumers if it is the only way a project can come to fruition, but I hope that the Minister can clearly state today that it is by no means the department’s preferred option.
Finally, Amendment 38 would bring legacy benefits within the scope of Amendment 37 in the name of the noble Lord, Lord Oates. Many legacy benefits remain active. If we were to insulate recipients of universal credit from additional costs, that same protection should be extended. Again, I am sure that the Government will not want to rule anything out, but I hope that the Minister can demonstrate how they will shield the least well-off from relevant levies on energy bills. They are a constant source of worry and concern given the cost-of-living issues we face at this time and will face in future.
Lord Callanan (Con)
I thank everybody who has spoken in yet another wide-ranging debate on energy policy—I definitely have all my lines ready now for the next time we have Oral Questions in the House. At the risk of agreeing with almost everybody, I just want to say that what we need in this country is a diverse mix of supply—yes, we need new nuclear; yes, we need more renewables; yes, we need interconnectors; yes, we need pump storage—which is the best way to keep bills low and supply reliable. It is absolutely not a question of renewables or nuclear; government policy is that we need both.
There is a long list of amendments in this group. They have been tabled respectively by the noble Baroness, Lady Bennett, and the noble Lords, Lord Foster, Lord Teverson, Lord Oates and Lord McNicol. We have taken them together because they are of similar intent and similar subject matter.
Let me start by replying to the noble Lord, Lord Foster, and his comments on the designation statement. He is of course right that the department is still developing the statement, given that we do not want to pre-empt any of the debates we are currently having in Parliament on this Bill; the noble Lord would be one of the first to criticise us if we decided all these things in advance. We want to listen to what parliamentarians say and gather all opinions before finalising the statement.
Before coming on to the individual amendments, let me remind the Committee of the commitment we made in the 2020 energy White Paper to bring at least one large-scale nuclear project to a final investment decision by the end of this Parliament, subject to value for money and all the relevant approvals. I thank my noble friend Lord Howell and the noble Baroness, Lady Worthington, for their thoughtful contributions setting out all the considerations that we need to take into account when making decisions about the value for money of new nuclear projects.
The Bill has been introduced with this objective in mind. It seeks to introduce a funding model that can lower the cost of finance for the large-scale nuclear that most of us agree we need; help to invigorate the UK nuclear industry; encourage, ideally, investment from British institutional investors and pension funds; and support our desire—shared by everyone, I think—for a decarbonised, resilient energy system.
Amendments 7 and 8 seek to clarify the types of company that may benefit from the nuclear RAB model. Amendment 7 would severely inhibit our ability to achieve the objectives I have just set out by restricting those able to benefit from the RAB model to not for profit, co-operatives, community-interested companies or companies wholly owned by a UK public authority. I understand the political intent of the amendments tabled by the noble Baroness, Lady Bennett, but I point her to the brilliant examples of energy companies that have been set up by a multiplicity of local authorities across the country in recent years. Without exception, every one of them has gone bankrupt, with considerable costs to local taxpayers. These things are not as easy to do in the public sector as the noble Baroness might imagine. If it was so easy and simple, all those companies would be prospering and returning funds to the taxpayer. In fact, a number of—mainly Labour—local authorities have lost millions of pounds for local taxpayers in attempting to do things better than the market. Public is not always good.
With regards to Amendment 8, I am pleased to confirm that Clause 14 already provides that “a company” means a company that is registered under the Companies Act 2006 in England and Wales or Scotland. The amendment is therefore unnecessary.
On Amendment 23, I can confirm to the noble Baroness, Lady Bennett, that, irrelevant of ownership, if a designated nuclear company ceases to meet the designation conditions set out in the Bill, the Secretary of State has the power to revoke its designation. Provision is already made for this in Clause 5(1); for that reason, the noble Baroness’s amendment is unnecessary.
Amendments 6, 10 and 29 seek to tackle scenarios whereby a nuclear station may not be built or suffer from cost overruns, or there are issues with its generation output. Those things can happen in the real world but all these scenarios are fairly unlikely to occur. The approvals process for nuclear projects, of which designation for the purposes of the RAB model will form a part, is designed precisely to ensure that the Secretary of State must be sufficiently confident that the proposed project would be able to complete construction. In due course, we will publish a statement to provide details of exactly how the Secretary of State expects to determine whether the designation criteria have been met.
Once construction is under way, we will want to make sure that the project company is incentivised to manage its costs and schedule. It will be overseen by Ofgem as the independent regulator. However, in the unlikely and remote circumstance that a project looks as though it may exceed the cap on construction costs set out in its modified licence, it is important that there is a mechanism in place to allow additional capital to be raised to ensure completion of the project. The aims of that, of course, are to ensure that consumers can continue to benefit from their investment and to minimise the risk of sunk costs.
With regard to Amendment 6 and the first part of Amendment 16, I assure the Committee that the RAB model will be designed to ensure that the appropriate incentives are placed on the company to maximise plant availability. Nuclear reactors have an extremely good record of availability and delivery but we want to make sure that that is maintained. On broader generation capacity security, I draw the Committee’s attention to the Great Britain security and quality of supply standard and the Great Britain capacity market. Both these essential tools ensure that security of supply is met in GB and that we have resilience in the day-to-day operation of the GB electricity system should generation outages occur.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
There is a Division in the House. The Committee will adjourn and resume as soon as agreed after the Members present have voted.
Lord Callanan (Con)
Moving on to the second part of Amendment 16, the Government are in full agreement that nuclear could have a role in low-carbon hydrogen production. I was delighted to discuss this in a meeting with the noble Baroness, Lady Worthington, earlier this week—or was it last week? I have lost track of when it was. Of course, this could potentially include the Sizewell C project if it goes ahead. It is for this reason that the Government are looking to stimulate private investment in new low-carbon hydrogen production. We have consulted on the appropriate hydrogen business model, and we included a lot of this in the UK’s first hydrogen strategy, which was launched in August last year.
However, as I made clear to the noble Baroness, I do not consider that this Bill is the right place for such an amendment. The purpose of the Bill is to facilitate investment in the design, construction, commissioning and operation of nuclear energy generation projects. It is therefore more appropriate, in my view, that hydrogen production specifically should be taken forward using a different vehicle. It is for this reason, and those given previously with regard to incentivising plant availability, that I am not in a position to accept Amendment 16.
Prior to turning to the next amendments, let me address the questions asked by the noble Baroness, Lady Worthington, and confirm for her benefit that any payments received by a nuclear company above its allowed revenue would not be received by the Treasury. Instead, they would be returned to the suppliers who were levied in the first place. They who would then have the choice of whether to refund the payments to consumers in a competitive market situation. As the noble Baroness mentioned, the process is similar to the CfD model under which consumers will ultimately benefit from a cheaper system.
Amendments 4, 13, 37 and 38 were tabled by the noble Lords, Lord Foster, Lord Teverson, Lord McNicol, and the noble Baroness, Lady Bennett. Each amendment addresses the important subject of consumers and value for money. On Amendments 37 and 38, I of course agree on the importance of protecting vulnerable consumers from increases in their energy bills, but let me reassure all noble Lords that the need to protect consumers’ interests is very much at the heart of the Bill. The nuclear RAB model will be regulated by Ofgem, whose principal objective, as enshrined in statute, is to protect the interests of all existing and future consumers, including consumers who are claiming universal credit and other legacy benefits.
Ofgem is also a statutory consultee for significant decisions in the Bill relating to whether a nuclear company should benefit from the RAB model. In addition, the Bill requires the Secretary of State to have regard to the interests of existing and future consumers when making any modifications to a nuclear company’s licence. So I make it clear that the Government intend to protect all our most vulnerable energy consumers in what is a very difficult market at the moment, given the record high gas prices, but we believe that Amendments 37 and 38 are not the best way of ensuring this and that a more holistic strategy for supporting vulnerable energy customers is preferable, as the noble Lord, Lord Wigley, commented in the debate.
The Government are taking a number of actions to help low-income households. I will list them for the Committee. They include the warm homes discount, which provides eligible households with a £140 discount, and the Chancellor confirmed on 3 February the Government’s plans to expand the scheme by almost one-third, raising the number of beneficiaries from 2.2 million vulnerable households to more than 3 million. We are further supporting consumers through the cold weather fund and the household support fund. I think that those measures are a more appropriate way of protecting vulnerable consumers, and I hope that I have been able to reassure noble Lords who tabled these amendments that the design of the RAB model and the revenue stream that will flow from that are such that the interests of vulnerable consumers are and will be the highest priority for us.
On Amendments 4 and 13, I stress to the Committee that we have sought to establish a transparent designation process that requires the consideration of whether designation of a nuclear company is likely to result in value for money. This process requires the Secretary of State to prepare draft reasons for designation, to consult on those reasons with specified persons, including independent regulators such as Ofgem, and to publish a designation notice setting out the final reasons for designation. This final notice would include designation against the criteria of being likely to result in value for money, which the noble Lord, Lord Foster, asked about in the debate.
Given all that, I am confident that the process is sufficiently transparent. Through consultation with Ofgem we will ensure that consumer impacts are fully taken into consideration and accounted for. Value for money is and always will be a core part of government approvals beyond the designation of a nuclear company as a designated company’s licence conditions are negotiated and as part of any capital raised for a project. Therefore, I hope the noble Lords who tabled Amendments 4 and 13 will not press them.
Finally, on Amendment 26 from the noble Lord, Lord Foster, let me gently point out that the amendment would remove the obligation for the Secretary of State to have regard to whether the nuclear company has appropriate incentives. I am not sure that that was the intention of the noble Lord, so perhaps he will have another look at it and will feel able not to press it because ensuring that projects have appropriate incentives forms a vital part of the RAB model. We have learned from the experience of projects in the US—the noble Lord quoted them to me at one of our meetings—and elsewhere that incentivising developers to deliver to cost and schedule will be important to ensure value for money for consumers. As the noble Lord, Lord Foster, questioned in the debate, we expect that such incentives will include an appropriate risk-sharing mechanism between consumers and the nuclear company and its investors. We would not expect the bill payer to bear all the risk.
We expect that incentives would be included in the modified licence conditions for the nuclear company, and so would be consulted on and published as set out under the provisions of the Bill. These incentives would be overseen by Ofgem in its role as the independent regulator.
In conclusion, I hope I have been able to satisfy noble Lords on all these measures and provided the appropriate reassurance that the Bill introduces a robust and transparent process for the approval and awarding of the benefits of a RAB model to nuclear companies, and that there are appropriate checks and incentives in place to protect consumer interests—which should be at the forefront of our thinking. Therefore, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Foster of Bath (LD)
My Lords, I am enormously grateful for the opportunity to listen to so many noble Lords who have contributed to the debate. It has been a masterclass in what we mean by value for money. I am enormously grateful; I have learned a great deal about whether or not we should be just using commercial accounting or incorporating opportunity costs. Should we define opportunity costs in the way that the noble Baroness, Lady Bennett, and others have defined them? It has been incredibly illuminating.
My amendment was very simple indeed. The Government said they were going to do an assessment; all I wanted them to do was publish it. I am enormously grateful that I got the support of the noble Baroness, Lady Worthington, for that. Sadly, despite all the Minister subsequently said, we have not yet heard whether the value for money assessment is or is not going to be published—and, if it is, when that would be.
We then come to the interesting issue of the amendments surrounding the designation process. I am enormously grateful to the noble Lord the Minister, who enables me to sit down while we vote again.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
There is a Division in the House. The Committee will adjourn and return as soon as agreed after Members present have voted.
Lord Foster of Bath (LD)
As I was saying, we come to the second string of things that were debated, in relation to the criteria surrounding the designation process. We heard something wonderful: a Government who admit that they are a listening Government. “The reason we haven’t published the designation criteria is that we are listening to what you lot have got to say.” Well, I say to the Minister that by the end of this evening at 8.45 pm he will have heard what has been said not only in the other place but in this place, so presumably there will be the opportunity to draft the designation criteria in time for the further stages of the Bill. So I hope that, before I sit down, he will intervene on me and make a clear promise that we will get at least a draft of the designation criteria before the final stages of this Bill are passed. I happily give way to the Minister.
Lord Callanan (Con)
Like all government documents, they will be published at the appropriate time, and I will be sure to let the noble Lord know when that is.
Lord Foster of Bath (LD)
We have had a masterclass in defining things such as the value for money study; we are getting a masterclass in ministerial obfuscation. My question to the Minister was, “Are we going to see it before we complete all stages of the Bill?” To which the Minister replied that it would be published at an appropriate time. I think we can draw our own conclusion: we are not going to see it, and that is deeply worrying.
The Minister followed exactly the same procedure in relation to the issue of appropriate incentives. He is absolutely right that my amendment would remove them altogether from the Bill, but I began by saying that it was purely a probing amendment so that we could actually get some information from the Government about another issue about which we do not know very much. I am grateful that the Minister says that appropriate incentives will include the appropriate sharing method between the developer and the consumer, and I am grateful that we now know that that is going to be part of it. Of course, however, he has not told us what that percentage sharing would be—another piece of information that we do not have.
In relation to a more general point, we got this wonderful statement from the Minister that the Committee can be assured—and I feel so much better for this now—that appropriate incentives will be imposed. That is jolly good, but I would certainly like to know—and I suspect other Members of the Committee would as well—what is being imposed and how it is going to work. It is deeply disappointing: there is so much information that the Government should be providing but have failed to provide. They expect us to stand up and vote for this piece of legislation when most of the basics are simply not being provided. Nevertheless, we will have another opportunity to raise this, so I beg leave to withdraw the amendment.
Lord Oates
(i) an estimate of the electricity price payable to the company over the period during which the nuclear energy generation project is generating electricity, and the modelling, assumptions and all relevant material underlying such an estimate;(ii) an estimate of the regulated asset base charge payable by consumers in each year until the nuclear project is generating electricity, including the modelling, assumptions and all relevant material underlying such an estimate;(iii) an estimate of the costs of decommissioning the project, how such costs will be met, and the modelling, assumptions and all relevant material underlying such an estimate.”Member’s explanatory statement
This amendment would require the Secretary of State to publish a report setting out the reasons for their opinion that designating the nuclear company is likely to result in value for money.
Lord Oates (LD)
My Lords, I will speak in particular to my Amendment 5, but I support all the amendments in this group aimed at greater transparency and accountability, particularly those in the name of my noble friend Lord Foster of Bath. I will speak briefly, as we have already discussed many of the issues on which Amendment 5 touches. As we heard previously, Clause 2(3)(b) of the Bill requires that the Secretary of State
“is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”
The opinion of the Secretary of State is, no doubt, valuable, but what would be even more valuable for Parliament and the public is to understand what that opinion is based on, in order to be reassured that it is not simply an assertion of policy preference.
We spoke in Group 3 about the vast, full-life costs of nuclear generation when decommissioning is taken into account. The public would want to know that these costs are fully taken into account in the calculations of the Secretary of State when arriving at his opinion. In addition, it would be important to understand how the possibility of significant cost and time overruns would be factored in as well.
Amendment 5 seeks to address these issues by requiring the Secretary of State to publish a report setting out the reasons for their value-for-money opinion. Such a report would, hopefully, give Parliament and the public reassurance that these matters have been properly considered before a decision is taken to impose further costs on energy bills. I beg to move.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
Before I formally call this amendment, I need to inform the Committee that there is a mistake on the Marshalled List. Amendment 11 should begin:
“Page 2, line 14, at end insert—”.
In relation to Amendment 5, the amendment proposed is:
“Page 2, line 14, at end insert”
the words on the Marshalled List—and Amendment 11 would come at the end of that.
Lord Teverson (LD)
My Lords, I rise very briefly. In the last group, I mentioned some of the countermeasures to the variability of renewables, including interconnectors, energy efficiency, demand-side management and many more. But I also mentioned battery storage and I should have declared an interest: I was not expecting to get on to battery storage, but I am a director of a company involved in the development of battery storage. I apologise to the Committee that I did not raise that interest during the debate.
Lord Wigley (PC)
My Lords, I will speak very briefly indeed. I have added my name to Amendment 27 in this group alongside that of the noble Lord, Lord Foster; I did so with particular regard to my strong feelings on new paragraph (e), proposed by the amendment, which concerns
“how decommissioning costs of the project will be met”.
Of course, this issue appears in sub-paragraph (iii), proposed by new Amendment 5, which refers to
“an estimate of the costs of decommissioning the project”.
As I indicated in our earlier debates, I feel that this is a critical aspect of the Bill that needs to be covered and where assurance needs to be given, whatever the mechanism of doing so. I would have thought that the Government could recognise that and say that, whether or not these amendments meet the standards that are acceptable to them, there may be some way of giving an assurance that the questions asked by these amendments can be answered—and that the answers will be forthcoming to this Committee.
Lord Foster of Bath (LD)
My Lords, I am afraid that I cannot be quite as brief as the noble Lord because I have a number of amendments in my name. I am also conscious of the pressure on the Committee’s time, so I will do my very best to be as quick as I possibly can. I will concentrate rather more on Amendment 12 than on any other of the amendments in my name, that of my noble friend Lord Teverson and those of other noble Lords.
Basically, Amendment 12 would require the department to define “sufficiently advanced” in its guidance. What we know is that designation will come at a certain point. We have already debated the fact that we have no idea what the criteria will be and that we may or may not see them before we finish our deliberations on this Bill. However, we are at least grateful that the Minister is apparently listening to what we have to say. I hope that he will listen to this particular bit because the designation can come only when the Secretary of State is satisfied that the project is sufficiently advanced; this amendment merely requires the Secretary of State to be clear about what that means.
Earlier, I referred to the fact that I live near Sizewell so it is a particularly good example to use, not least because it is the only project in the offing that might use this methodology. In the case of Sizewell, it is worth being aware that the planning application has been submitted and is awaiting the decision of the Secretary of State. Yet, at the conclusion of the planning examination, numerous issues were outstanding. They still have not been sorted out.
They include the crucial issue of the design of the hard coastal defences. If you live near Sizewell, as I do, you know that the coast there is eroding incredibly rapidly. Three weeks ago, I went for a walk on the clifftop and saw, in a field where the crops were planted this year, that some of the initial plants have already fallen over the edge of the cliff. The erosion is very rapid; appropriate measures must therefore be put in place, yet this has not been done.
Moreover, nothing has been done to ensure that there will definitely be potable water. Frankly, if you have a nuclear power station with no guarantee of potable water, it is a completely pointless exercise; that work has not been done. Also, there has been no work to look at soil mixing and ground anchor trials, which are vital because a huge hole will be dug in the ground and we have to be sure that the whole thing is not going to collapse. There are numerous issues that have not yet been sorted at this stage.
Using those three examples, my question for the Minister is this: does he see that a designation could take place without those three things having been addressed, or not? Will there be sufficient progress? I seek a definition and an understanding. I have given some specific examples for the Minister to consider; I hope that he can tell me whether they have gone on.
The other amendment in this group, Amendment 18, aims to provide further transparency about how taxpayers’ money is going to be allocated and what taxpayers’ money is being used. The recent announcement of £100 million of taxpayers’ money being given to the project at this stage, before any decision has been made, does not look good locally. It almost appears as if the green light has been given to Sizewell before any of the issues that I have been raising have been taken into account. We need to have more transparency about the taxpayer contribution to projects.
Amendment 27 picks up an issue that was raised on an earlier amendment by my noble friend Lord Oates, so I will not go through it in any detail. It requires the Secretary of State to provide a report about the up-front and overall expected cost of the project, the likely cost of electricity going on to the national grid and decommissioning costs, which have already been the subject of much debate, so I shall not repeat that.
The subject of Amendment 28 was also raised in an earlier amendment by my noble friend Lord Oates. It is something that various consumer organisations have been calling for, which is that before final agreements are made, there should be an independent assessment of the information that is being provided to the Government. It would require an independent impact assessment to be conducted and to be approved by the House of Commons before licence modifications could be permitted.
The amendments in my name are all about transparency. If I go away at the end of the proceedings with one message, it is that at the moment the Government seem unable or unwilling to provide a great deal of information about the Bill. This is not about being pro or anti nuclear but about transparency, and at the moment I do not think we are getting anything like enough of it from the Government.
Baroness Bennett of Manor Castle (GP)
I rise to speak briefly to Amendments 5 and 12 in the name of the noble Lord, Lord Foster of Bath, to which I have added my name. On defining “sufficiently advanced” in guidance, two projects come to mind: Crossrail and HS2. We were told everything was fine and that there was a fixed budget. One of the most interesting discussions in the other place was when the Minister argued that the possibility of costs exceeding the cap as predicted was remote, which was a triumph of hope over experience. It is important that we have that amendment.
Coming back to some of our earlier debates, because this is news just in literally in the past hour, I have to note that the director-general of the International Atomic Energy Agency has expressed grave concerns about the safety of the Chernobyl nuclear plant where staff have not been able to move since the Russian takeover.
“I’m deeply concerned about the difficult and stressful situation facing staff at the Chornobyl nuclear power plant and the potential risks this entails for nuclear safety. I call on the forces in effective control of the site to urgently facilitate the safe rotation of personnel”.
I hope some people who contributed earlier in the debate will not be in a much worse situation when we come to Report.
Baroness Wilcox of Newport (Lab)
My Lords, this group relates to a broad range of transparency measures relating to project cost, the use of taxpayers’ money and the use of delegated powers. I refer to the Minister’s previous reply: if he wants to find out how to get a building delivered on time, within cost and with less cost to the taxpayer, he should speak to Edwina Hart, the former Minister in the Welsh Government who got the Senedd building built on time and within cost.
Lord Callanan (Con)
I will start with Amendments 5 and 27, laid by the noble Lords, Lord Foster, Lord Wigley, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett. It will not surprise the Committee to know that I have reservations about how these amendments would operate in practice. On Amendment 5, for example, the requirement to publish estimates of the costs payable by consumers at the point of designation would risk undermining the independence of Ofgem, which has responsibility for determining a nuclear company’s allowed revenue in accordance with its modified generation licence.
Moreover, the obligations to report on the price of electricity, or the minimum floor price, referred to in Amendment 27, simply do not align with the reality of how we expect the RAB model to operate in practice. Under the model, there is no minimum floor price. Ofgem, in its role as the regime’s economic regulator, will need to determine the revenue the project is entitled to receive, in accordance with its modified electricity generation licence.
Finally, on decommissioning costs, we already have robust legal requirements in place in the Energy Act 2008, which require an operator to have a funded decommissioning programme in place before construction can commence on a new nuclear project. This must set out the operator’s costed plans for dealing with decommissioning and waste management. For these reasons, I am unable to accept the amendments.
Turning to the comments made earlier in the debate by the noble Lord, Lord Wigley, under the RAB model, the regular price reviews would provide an opportunity to assess the performance of the FDP, and adjustments to the operator’s allowed revenue can then be made should any potential deficiency in the fund be identified. This will deal with the noble Lord’s concern, minimise any chances of a fund shortfall and ensure the operator retains its responsibility to meet the costs of decommissioning so they do not fall on local communities. I hope that this provides the reassurance that the noble Lord was seeking.
Amendments 12, 18, 25 and 32, from the noble Lords, Lord McNicol, Lord Foster, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett, are aimed at obliging the Secretary of State to publish various pieces of information related to the functioning and implementation of the RAB regime. I fully understand noble Lords’ desire for more information, but think this is already addressed in the Bill.
On the publication of licence modifications, Clause 6(9) already provides that modifications made under Clause 6 would not come into effect unless a revenue collection contract was entered into with the nuclear company. Publishing them as soon as reasonably practicable will provide adequate opportunity for scrutiny.
On Amendment 12, the Bill already obliges the Secretary of State to publish a statement setting out how they expect to determine whether the designation criteria have been met. This statement will provide further explanation as to how the Secretary of State expects to determine whether the development of a project is “sufficiently advanced”. While, as I said, we will publish a statement in due course, I can tell the noble Lord, Lord Foster, and the Committee that we would expect it to include consideration of a number of factors, including, for example, the progress of the prospective project through the important planning process.
On Amendment 18, where it is assessed that it would be appropriate for development funding to be included in the calculation of a nuclear RAB company’s allowed revenue, this would in turn be reflected in the company’s modified licence. Outside of the RAB structure, the Government may choose to provide development funding to projects to mature technologies and de-risk the development and construction phases. However, as this is not intended to be funded through the RAB scheme, it would be inappropriate to include information requirements about it in the Bill. They will be published in other quarters.
On Amendment 25, Clause 6(2) already states that the licence modification powers can be used only for the purpose of facilitating investment in the design, construction, commissioning and operation of nuclear energy generation projects. The Secretary of State may not exercise the powers for any other purpose. This is aligned with the consideration that the amendment discusses. I believe that the transparency processes already included in the Bill, the obligation to publish a statement on the designation criteria and the opportunity for scrutiny before the designation and licence modification powers may be exercised render these amendments unnecessary.
The final amendment on transparency is Amendment 28 from the noble Lords, Lord Foster and Lord Oates. It seeks to make the licence modifications necessary to implement the RAB model for a nuclear company contingent on approval by the House of Commons of a report about consumer bill impacts.
Bringing a project to the point where licence modifications can be made is likely to require significant investment. I submit that making a project subject to a parliamentary vote at that very late stage of licence modification would add huge uncertainty to the outcome of developers’ investment. This additional uncertainty would make it very much harder to bring forward projects —which is possibly the purpose of the amendment—and lead to either an absence of new projects or the costs of financing being raised significantly to take account of the increased risks. That would inevitably result in much worse value for consumers. The amendment could therefore defeat the policy objective of the Bill: to secure financing for new nuclear projects in a way that could deliver better value for money for consumers.
To reiterate, in rejecting the amendments put forward, the Government are not attempting to hide from challenge or scrutiny. Through this Bill, we have created a clear and transparent process for implementing the RAB model. It will allow for the voices of experts and stakeholders to be heard and appropriate consultation to be carried out. That will help ensure that the model works for the industry and, above all, for consumers. I therefore hope that noble Lords will not press their amendments.
Lord Oates (LD)
My Lords, I will speak briefly as time is marching on. I think the Minister told us that the reason why Amendment 5 would not work is basically that the Government cannot tell us how much this will all cost the consumer, which is one of our key worries about this means of financing.
On Amendment 12 and the definition of “sufficiently advanced”, my noble friend Lord Foster raised a number of specific issues in relation to Sizewell C and asked whether, in view of those, the project would be regarded as sufficiently advanced. The Minister notably did not answer that question but repeated his previous statement that the Government will publish the designation criteria “in due course”. Again, what he is telling us is that the Government will not tell us what those are before they expect noble Lords to vote on the Bill. As my noble friend said, whatever one’s views for or against nuclear power, that is surely not a way to do legislation.
I hope that the Minister will consider carefully all the issues that have been raised in this group. If you are pro nuclear, I would have thought that transparency was a good thing, but, certainly, I hope that he will consider these issues and come back with some clearer answers for us on Report. With that, I beg leave to withdraw my amendment.
Lord Foster of Bath
“(fa) the relevant upper tier local authority covering the site for the nuclear project;”Member’s explanatory statement
This amendment would require the Secretary of State to consult the relevant upper tier local authority before designating a nuclear company under section 2(1).
Lord Foster of Bath (LD)
My Lords, quite rightly, the Bill before us requires a degree of consultation. In the designation process, the Secretary of State is required to consult a number of people, with the nuclear company that he proposes to designate included among them. My amendment simply proposes that, in that list of persons or organisations with whom the Secretary of State must consult, the relevant upper-tier local authority should be included. The Minister may respond by reminding me to look at Clause 3(3)(g), which says
“such other persons as the Secretary of State considers appropriate”.
I imagine that that might well include the local authority, but so important do I believe it is that the relevant upper tier local authority be consulted that I think it should be added to the list.
To illustrate how important it is that people who are directly affected, or those who represent them, be consulted, it is worth considering the impact on local people in the area if the decision is made to go ahead with Sizewell C—incidentally, I note that the noble Baroness, Lady Bennett, has tabled another amendment about consulting local people. Of course, I support that, but a mechanism for doing that far more easily is by having in the list a representative body, which the upper-tier authority is.
Let us think about the impact that the construction of Sizewell C will have on local people. Of course, there are those who will argue that they will have the long-term benefit of nuclear power being provided and all the things that go with that—I take that on board—but, during the process, there will be some 6,000 construction workers, 76% of them coming from outside the area and requiring accommodation. A campus for 2,400 people will be built right on the boundary of an area of outstanding natural beauty and within half a kilometre of a small, beautiful hamlet of just 50 people. The impact on that hamlet will be quite unbelievable. Thousands of people are expected to commute to the two large park-and-ride sites that are going to be built north and south of the site. There are going to be 12,000 vehicles a day on the unimproved A12 and 600 HGV journeys a day through local villages for the first two years before the new relief road is built. It is going to have a significant impact on local businesses, including tourism; the tourism losses are estimated to be in excess of £40 million a year.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow that powerful and clear exposition by the noble Lord, Lord Foster of Bath. I declare my position as a vice-president of the Local Government Association.
Consulting the upper-tier local authority is certainly an important factor. It is one way of addressing local consultation; the noble Lord has set out all the reasons why that is needed. However, we are talking here not just about Sizewell C but about a potential model for the future. It is possible that a site might be located right on a boundary where it is within one local authority but covers a substantial number of people in the adjoining one. That is the reason why I went for a radius of 50 miles in my amendment.
If the Committee is wondering why I chose 50 miles, I would be happy to debate what it should be. There are of course significant construction impacts, as the noble Lord outlined, but also, after the Fukushima disaster, the US Nuclear Regulatory Commission recommended that the evacuation area around a nuclear power plant, should there be a serious issue, should be 50 miles. Obviously that has an impact on people’s lives, on their feelings about their locality and even, dare I say it, on property prices. That is why I picked 50 miles. The people in the immediate vicinity are affected and they should be consulted as a simple matter of democracy.
Lord Wigley (PC)
My Lords, I support the amendments and the principle of consultation, particularly with local authorities. I, too, declare my interest as a vice-president of the Local Government Association.
The point made a moment ago by the noble Lord, Lord Foster, with regard to the impact of the workforce is of significance; the proposed 50-mile radius is relevant to that. I draw the Minister’s attention to the construction scheme of the Dinorwig pumped storage scheme in Snowdonia. It started in 1973 and was built, remarkably, with hardly any industrial disputes at all. More than 2,000 people were in that workforce; it was believed that they could not be recruited locally but, in actual fact, some 86% of the hourly paid were recruited locally while more than 70% of the office staff were recruited from within a radius of about 50 miles, which is the definition used for that purpose.
The outcome—it is relevant for the Minister to consider this when any new nuclear programme goes forward—was that there were remarkably good labour relations on that site, with close co-operation between the then CEGB and the trade unions. At a time when the Ince B project, for example, which will be known to the Minister, was suffering from tremendous labour problems, with strikes all the time, these were overwhelmingly avoided on the Dinorwig scheme. In other words, consultation with the trade unions, local authorities and representatives in the area enabled those dangers to be avoided. I believe that it is in the interests of everybody—the local community and the Government themselves, as well as the company—that the maximum degree of consultation is built in.
Baroness Neville-Rolfe (Con)
My Lords, there has been a lot of consultation about Sizewell C and there is, of course, a nuclear power station next door to the proposed site. I remember visiting it many years ago when I was a director of John Laing which built it, so I went inside. The whole process of getting to this proposal for a new nuclear power station has taken forever, for reasons we will not go into this evening. As a result, we have an emerging energy crisis, which is obviously not helped by wider world events.
There will, I assume—and I am sure the Minister can confirm this—be a planning requirement for new nuclear power stations to be built under these new powers. Any good builder of nuclear power stations will consult and consider the needs of the employees because that is the way these things are done, otherwise you do not get them through planning, as I know well from experience.
I am against adding extra statutory consultees to the Bill. The proposal for a 50-mile radius suggests that the new nuclear power stations might actually be dangerous, which would make people more fearful, whereas we are planning to build safe nuclear power stations learning from things in the past, so I would be against that.
My main point is that we need to get on with this. We cannot go round and round in circles. There is real opportunity, not only in East Anglia but in places such as Wales and, potentially, even in the Lake District, for investments that would be good for local communities, the staff and employees who will work in the power stations.
Baroness Wilcox of Newport (Lab)
I am grateful to noble Lords for tabling their amendments on consultation. I declare that I too am a vice-president of the LGA and—for about another six weeks or so—a member of Newport City Council. I am curious yet not surprised to see the amendment from my noble friend Lord Foulkes, who has apologised that he has had to leave, seeking to disapply the requirement to consult the Scottish Government.
I am sympathetic to some of the arguments made. Any infrastructure project is easier to deliver when there is community consent for it. Communities and local representatives are likely to have very strong views on these matters, as I know of old. I hope that the Minister can outline existing requirements and any additional ones imposed by the Bill and say whether she thinks that the system is sufficient.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lords, Lord Foster and Lord Foulkes, and the noble Baroness, Lady Bennett, for their amendments relating to consultation with different persons. Regarding the amendments tabled by the noble Lord, Lord Foster, and the noble Baroness, Lady Bennett, I understand their desire to bring the local community into the process. However, the Bill is not the place to do this. It is concerned with the financing of nuclear projects, rather than planning and other regulatory approvals.
While the publicly available information about a project’s progress in seeking these approvals is likely to be relevant to decisions about which projects should benefit from the RAB model, the decisions themselves are separate and independently made. A company benefitting from the RAB model would receive revenue payments funded by licenced suppliers in Great Britain as a whole and, through them, consumers. It would therefore be wrong to grant a different status to either the local authority or particular groups of persons in respect of decisions made by the Secretary of State under the Bill’s provisions.
Both local individuals and authorities would be able to express their point of view regarding any new project through the planning process. They would, for example, have the opportunity to input their views during the hearings that would take place as part of the consideration of a project’s application for development consent. That is the right place and process for those concerns to be considered, rather than in discussions about a financing model that will impact all consumers.
I remind noble Lords of my noble friend Lord Callanan’s comments on, I think, the second group of amendments today about the productive conversations we have been having with the Sizewell C project team during the ongoing negotiations. It is our understanding that the Sizewell team intends to replicate the commitments made in the Hinkley Point C solidarity agreements, which represent a new and innovative approach to industrial relations. Our industrial relations at Hinkley Point have been extremely good and, while I take the point about Sizewell C, this is a Bill for a financing model that is supposed to be for generic nuclear financing; it is not specifically about Sizewell C. Were it to be used, for example, for Wylfa, I am sure that there would be different considerations but, again, that is not the specific intention of the Bill. This is about creating a generic financing model to finance any large-scale nuclear power plant in the future.
Amendment 30 was tabled by the noble Lord, Lord Foulkes. I understand the noble Lord’s concern about the different position on nuclear energy that is held by the Scottish Government, but ultimately it is right that the relevant devolved nations have equal rights under the Bill. It would be wrong to allow the Secretary of State solely to have the power to exclude Scottish Ministers while retaining an unqualified obligation with regard to Welsh Ministers. While this provision requires consultation with those persons, it does not require that they agree with the proposed modifications for those modifications to be made. I further point out to the noble Lord that nothing in the Bill will change the fact that Scottish Ministers are responsible for approving planning applications for large-scale onshore electricity generating stations within Scotland.
I hope that I have shown noble Lords that their amendments are inappropriate in the wider context. I therefore ask noble Lords not to press them.
Lord Foster of Bath (LD)
My Lords, I am grateful to the Minister for her response, but I genuinely did not understand it and I apologise for that. The clause is about the designation of a nuclear company. That power rests in the hands of the Secretary of State, who will make the decision based on a number of criteria. As we pointed out, we do not yet know what those criteria are and we are not sure that we are ever going to find out. However, it is also going to be done after consultation, and the consultees are required to be a number of people, as specified in the legislation.
I sought to have local authorities included as a specified group to be consulted. The Minister’s response was that they would get their opportunity to raise their issues of concern in other fora, and that this is not the right place. However, I am absolutely certain that my amendment was intended to ensure that local authorities, representing local people impacted by the decisions that are taken, should be able to be involved in the designation of a company. It is, after all, they who will have done all the work and they who will have brought forward the planning application and the various modifications to it and sought money and received money from central government to help them get on with the task and so on. The designation of the company is critical. I therefore genuinely do not understand why the Minister says that it is inappropriate for this particular aspect of activity. I may be being stupid, in which case I will have time to reflect before the next stage and get a bit more informed before I come back. In the meantime, I beg leave to withdraw the amendment.
Lord Oates
“(A1) The primary duty of the Secretary of State is to publish all material relevant to—(a) costs that may be incurred by the taxpayer arising from any provision of this Act,(b) the determination of the regulated asset base charge that may be levied on consumers under the powers in this Act, and(c) the cost to consumers of electricity produced by the project.” Member’s explanatory statement
This amendment would place a primary duty on the Secretary of State to publish all material relevant to (a) costs that might be incurred by the taxpayer arising from any provision of the Act; (b) the determination of the regulated asset base charge that may be levied on consumers under the powers of this Act; and (c) the cost to consumers of electricity produced by the project.
Lord Oates (LD)
My Lords, Amendment 33 and the subsequent amendments in this group seek to ensure that the Government cannot refuse to publish information that is in the public interest without compelling grounds. As it is currently written, Clause 13(2)(a) allows the Secretary of State to withhold any relevant material which he or she believes
“would … prejudice the commercial interests of any person”.
This is an enormously wide loophole which makes no attempt to qualify the degree of prejudice to the commercial interests of that person or to balance that with the public interest in the disclosure of such information.
Amendment 33 would establish a primary duty on the Secretary of State to publish all relevant material. Amendment 34 provides that material may be excluded only in exceptional circumstances. Amendment 35 would insert the word “seriously” so that the test is whether disclosure would seriously prejudice commercial interests, not the much weaker test currently in the Bill. Amendment 36 would require that, should the Secretary of State exclude material on the grounds of serious prejudice to commercial interests, he or she must make
“a statement to Parliament that the prejudice to commercial interests”
set out in subsection (2)(a)
“is of such seriousness that it outweighs the”
overwhelming
“public interest in … the publication of material relevant to any”
costs that may be incurred by the taxpayer
“arising from any provision of this Act … the determination of the regulated asset base charge that may be levied on consumers under the powers in this Act, and … the cost to consumers of electricity produced by the project.”
It is critical for proper public scrutiny that Ministers cannot decline to provide information behind claims of prejudice to commercial interests. These are projects being funded by consumers, and they have the right to know all relevant material except in the most exceptional of circumstances. We already know how reluctant government and its agencies are to provide information on costs which are overwhelmingly in the public interest. One such example is the apparent unwillingness of the Nuclear Decommissioning Authority and GDF to provide information on the breakdown of costs for cleaning up Sellafield and how the costs of GDF are accounted for in the NDA’s figure for overall nuclear liabilities.
For example, the Nuclear Decommissioning Authority and the Radioactive Waste Management company, which is a subsidiary of the NDA, have been seemingly unwilling to provide a breakdown of how the estimated £96 billion clean-up costs at Sellafield were arrived at and what they account for. Likewise, there is no explanation of whether the nuclear liabilities costs include the additional figures of £20 billion to £51 billion for GDF that was announced in the NDA’s annual report. I noticed, when we debated the GDF issues, that the Minister did not respond to my question about how that is accounted for within the overall NDA liabilities. We already have a reluctance to share information that is overwhelmingly in the public interest.
The record of transparency in these matters is very poor. This amendment would prevent it getting even worse. It is particularly incumbent on the Government to respond and provide assurance to the public, given that they are going to have these costs imposed on their bills for new nuclear power generation, and share all relevant information unless exceptional circumstances prevent that being possible. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, I should have started by apologising for not being able to speak at Second Reading. I have a problem in that I am following two or three Bills at present and there have been some unfortunate clashes. I want to speak on this amendment because I am well known as a supporter of proper and transparent costings. To that extent, I was pleased to see the amendment of the noble Lord, Lord Oates.
However, I thought Clause 13 was quite narrow. It seemed to be concerned with matters that are commercially sensitive or need to be excluded on national security grounds. As a former businessperson, that seemed quite reasonable to me. Obviously, it would be good to know that we will have a proper understanding of costs, particularly to the consumer, which might occur as proposals are developed. I associate myself with the wish to understand the costings, although I am not convinced this amendment is appropriate or necessary.
Baroness Wilcox of Newport (Lab)
I am grateful to the noble Lord, Lord Oates, for tabling these amendments, which bring us back to transparency. We are sympathetic to the argument that, generally, information should be made public unless there is a compelling reason for that not to be the case. However, we understand that these are arrangements with commercial partners and that this reality needs to be reflected in the final transparency provisions.
Lord Callanan (Con)
I realise that time is getting on, so I will be as brief as possible. I thank the noble Lords, Lord Oates and Lord Foster, for Amendments 33, 34, 35 and 36. As most of the material is similar, I will take them together, starting with Amendments 33 and 36.
By way of background, I will explain the purpose of Clause 13. Four amendments have been tabled to it, but I reassure noble Lords and my noble friend Lady Neville-Rolfe that this clause is in no way designed to act as a “free pass” for the Government. It is a narrowly drawn provision, allowing for the exclusion of specific, sensitive, commercial and national security information only. I want to be upfront and clear about that. From looking at their detail, I do not believe these amendments will achieve what I suspect is noble Lords’ goal to increase transparency. Actually, they could cause extra confusion.
Amendment 33 makes the publication of relevant material the “primary duty” of the Secretary of State, and so would effectively place transparency above the protection of national security. I submit that this is intuitively wrong; it would be dangerous to subordinate national security concerns to publication concerns.
Amendment 36 would require the Secretary of State to make statements to Parliament about the seriousness of the potential impact of the release of information on the commercial interests of companies and how this is balanced against the public interest in disclosure. This creates ambiguity around the protection of commercial interests, which could have a serious impact on the ability of a project to raise the necessary investment. It would either make it harder to bring forward new projects or, alternatively, raise the cost of financing those projects; either way would result in worse value for consumers. I submit that it also goes against a basic tenet of commercial negotiations and operations: that an investor’s commercial interests will be treated respectfully and confidentially.
Amendments 34 and 35 similarly seek to restrict what information can be excluded from publication or disclosure under Part 1 on the grounds of national security or prejudicing commercial interests. Similar to the previous amendments, the suggestions made in these amendments would add unnecessary and unhelpful ambiguity to an otherwise straightforward provision. Again, this would introduce additional uncertainty for both the Government and potential developers.
Looking first at the addition of “in exceptional circumstances”, there is no obvious legal understanding or definition of what such circumstances would be. This would create uncertainty as to when the provision could be used and what information could be redacted. The circumstances in which Clause 13 applies are already sufficiently set out in its subsection (2). Similarly, given that “seriously” has no clear definition in this context, I submit that the addition of this term would add to the uncertainty and ambiguity about whether legitimate commercial interests would be respected for potential investors. I think that it would make them less likely to go on to be involved in projects.
I understand the desire for increased transparency behind these amendments, but I hope that, given the legal uncertainty of the wording used, I have been able to reassure noble Lords that the Government have no intention of hiding any information that we do not strictly need to in order to respect commercial confidences, so I hope that noble Lords will feel able to withdraw or not press their amendments.
Lord Oates (LD)
My Lords, I thank the Minister for his reply. I am afraid that I am not entirely reassured by it, because there is a lot of talk in this Bill about protecting commercial interests but there seems to be little about protecting consumers’ interests. This Bill imposes burdens on consumers, and it is only right that they have available to them information to understand how decisions are made.
I will certainly go away and think about the points that the Minister made. I make it clear that the aim of this amendment was not to compromise the Secretary of State’s ability to exclude material on grounds of national security; I fully accept that that may well be necessary. It may be that the current Minister would not use this test to withhold large amounts of material, but that certainly seems possible, and I think that there needs to be a much firmer test to protect the consumer. No doubt we will come back to these amendments, or versions of them, on Report. In the meantime, I beg leave to withdraw my amendment.
“(5A) If the Secretary of State is of the opinion that a relevant licensee nuclear company cannot be rescued as a going concern, or that a transfer of the undertaking to a wholly owned subsidiary will not result in the establishment of a going concern, the Secretary of State must, as soon as practicable—(a) undertake an assessment of the merits of establishing a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued, and(b) lay the outcome of the assessment before both Houses of Parliament.”Member’s explanatory statement
Where the Secretary of State is of the opinion that a failed company cannot be rescued as a going concern or successfully have its assets transferred to a subsidiary, this amendment would require the Government to assess the case for establishing a state-owned company to continue operations.
Baroness Wilcox of Newport (Lab)
I am moving Amendment 39 in the name of my noble friend Lord McNicol. It would require the Secretary of State to undertake an assessment of the case for establishing a state-owned entity to take over the delivery or operation of a nuclear project in the event that a nuclear company fails and cannot be saved or have its assets transferred. Having such safeguards is familiar to me from my time in local government, where every project brought risks of overrun and rising costs, despite our best efforts to nail down the terms and conditions.
However, let us not deviate from the ultimate aim of this Bill: to get power generated and distributed to homes and businesses across the UK. We sincerely hope that firms will not fail, but if they do there needs to be a clear process to ensure that plants are built and continue to operate. The Minister may well argue that the special administration regime does this, but there is still potential for further steps to be needed. Surely, we should define options in legislation now rather than wait for the worst to happen. “Fail to prepare”—I am sure noble Lords know the remainder of that phrase.
Lord Foster of Bath (LD)
My Lords, very briefly, there are two amendments in my name and that of my noble friend Lord Oates. I think we are all conscious that things can go wrong and there may need to be procedures to pick things up and move forward. We accept that might be the case. Sadly, it is the case for Taishan 1, as I mentioned before; after only a couple of years, it suddenly went offline. They do not even know what is wrong with it, and somehow they have to pick up the pieces.
I absolutely accept that there is a need to have procedures in place, such as a special administration regime. I merely suggest in Amendment 40 that, if that is the case and action needs to be taken, there should be a report covering the issues I have referred to in the amendment—the liabilities associated with the nuclear company, the estimated cost of getting it going again if it has been temporarily shut down, the lifespan of the nuclear power station and so on. It seems fairly straightforward.
Of course, the Minister will say that he cannot do it because that would be providing information which is somehow sensitive or commercial and it should not be done. In those circumstances, I cannot see anything commercial or sensitive about it, and it is something the public need to know; they will find someone else to do it or find a way of supporting the existing company to carry on doing it. It will be the taxpayer’s money, and the taxpayer has a right to know what it will be used on. That is why, in Amendment 43, I am basically saying that any payments that would come out in that process ought to be approved by an independent body—in this case I have suggested, perhaps slightly surprisingly, that the House of Commons should have the opportunity, as the elected body, to decide whether or not the money proposed to be spent is being spent wisely. With that, I look forward to the Minister’s response.
Lord Callanan (Con)
My Lords, I thank noble Lords for their brevity. I know that time is getting on, so I will attempt to be as brief as possible in providing noble Lords with the information that they properly seek.
Amendments 39, 40 and 43 from the noble Lords, Lord Foster, Lord Oates and Lord McNicol, have been grouped because they all relate to the special administration regime set out in Part 3. I remind the Committee of the purpose of the SAR. It is imperative that in the—hopefully, vanishingly—unlikely event of an insolvency we would be able to act quickly to ensure that a plant could commence or continue electricity generation. That gives an important protection to consumers. The special administrator has a duty, as per the Bill, to achieve this objective as quickly and efficiently as is reasonably practicable. I must add that these are powers that we hope never to have to use, but I agree with the noble Baroness, Lady Wilcox, that it is important to prepare in case we do. There is a very low probability of insolvency under a RAB model, but we need to prepare just in case.
It is for these reasons that I cannot accept Amendment 39. If the rescue of the company cannot be achieved, the special administrator will need to consider all options for a transfer, including, very possibly, a transfer to a publicly owned company. This may be supported by the Secretary of State where it would provide clear value for money for both consumers and taxpayers. The amendment implies that the special administrator would consider a transfer to a publicly owned company only if a transfer to a privately owned company were not feasible, so we would simply want to have more flexibility, or rather give more flexibility to the administrator in those circumstances.
It is essential that the administrator and the Secretary of State retain the ability to act quickly if all options to achieve the objective of the special administration have been exhausted. It is highly likely that in meeting their objectives, the administrator will consider various ownership structures for the project and their various relative merits. In placing a new reporting requirement on the Secretary of State to make this assessment and to publish it before acting, the amendment could frustrate this process and potentially delay exit from administration, which could cause additional cost to both consumers and taxpayers.
Lord Foster of Bath (LD)
The Minister just said that publishing a report could frustrate the way forward. Can he explain with an example how that would happen?
Lord Callanan (Con)
This is not a direct example, but, of course, the special administration regime has recently been used in the case of one particular energy company. I do not need to go into the specific example, but I was aware of a lot of the discussions that went on before it. Some of those were extremely commercially confidential because, of course, discussing possible outcomes results in potentially prejudicial publicity and might perhaps bring about the objective that we did not want. The company eventually went into a special administration regime, and information was published as soon as practicable about that. It is important in those circumstances to retain the flexibility. The Secretary of State’s discretion to act expediently would obtain the best outcome for consumers and taxpayers during the special administration.
Amendments 40 and 43 seek to place an additional reporting requirement on the Secretary of State which we consider would also impede the ability of the special administration to achieve its objective. In the case of Amendment 40, I remind the Committee that a special administration is a court-administered procedure and, in the circumstances, a nuclear administrator would be an appointee of the court. It is therefore important that we retain the established process and do not seek to put in place reporting requirements which could oblige the Secretary of State potentially to publish commercially sensitive material, which would then jeopardise a transfer. I cannot, of course, seek to predict the court process, but it is possible that that some aspects of the information that Amendment 40 seeks to have published would also be publicly available, such as through companies publishing their financial statements.
In the circumstances, should any licence modifications be made by the Secretary of State during the administration, the legislation determines that such modifications will—correctly—need to be published, except for any matters which are commercially sensitive or would be contrary to the interests of national security.
There are already statutory arrangements in place with regard to the costs of decommissioning in the Energy Act 2008. This requires an operator to have in place an approved funded decommissioning programme— as already discussed—before construction on a new project can commence. I expect that, as was done for Hinkley Point C, the FDP for any future projects would be published along with relevant supporting documentation —again, apart from material of a sensitive nature.
Turning to Amendment 43, again, I am unable to accept this amendment, because it would risk the ultimate operability of the special administration regime and consequently risk consumers being unable to realise the benefit of the plant they have helped to build. As we have seen during the recent energy supplier crisis, it is imperative, as in the example that I just gave to the noble Lord, Lord Foster, that a fully operational special administration regime can be stood up in the quickest possible timeframe to protect consumers. This includes allowing for requisite funding from the Secretary of State to be provided efficiently. In addition, if insolvency occurred when perhaps the House was not sitting, I am sure that the noble Lord would accept that this would also cause unnecessary further delay.
The amendment would also cause a level of uncertainty that could deter potential administrators from undertaking the appointment under the special administration regime. The administrator would need to be assured that funding would be available from day one of the SAR to ensure its operability and ability to deliver its objectives, which of course are to continue or commence the generation of electricity. If there are delays in accessing the required funding, that could result in outages and problems with security of supply. In the case of a nuclear power station, there are also safety considerations. Any lapse in funding could result in some safety-critical expenditure not being met.
I thank noble Lords for all their amendments and in particular for their consideration of these matters with regard to the special administration regime. I hope that I have been able to provide appropriate reassurance that we hope never to use the regime, but it is there to serve the crucial purpose of protecting the interests of consumers. We need to make sure in that case that it is fully operable, efficient and able to meet its objective that energy generation will commence or continue in the unlikely event of an insolvency. I hope therefore that the amendments will not be pressed.
Baroness Wilcox of Newport (Lab)
I thank the Minister for his reply and recognise the points that he has made regarding SARs. Nevertheless, I still feel that greater safeguards need to be in place. However, at this point, I beg leave to withdraw the amendment.
Nuclear Energy (Financing) Bill
Thursday 24th March 2022
(2 years ago)
Lords ChamberRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 89-R-I Marshalled list for Report - (22 Mar 2022)
16:54 - Division on Amendment 2 - Ayes: 107 / Noes: 126 - Amendment 2 disagreed.
17:14 - Division on Amendment 10 - Ayes: 93 / Noes: 123 - Amendment 10 disagreed.
Lord Oates
Member’s explanatory statement
This amendment would require the Secretary of State to provide stronger evidence that the project will result in value for money through publication of such assessments carried out to date.
Lord Oates (LD)
My Lords, I shall speak to all the amendments in this group. They deal with value for money for the taxpayer and for bill payers, the impact on consumer bills of the regulated asset base charge, and the final amendment relates to excluding those on universal credit and other legacy benefits from such impacts.
Amendment 1 requires that the Secretary of State is of the opinion that designating a nuclear company will result in value for money, as evidenced by the publication of the value-for-money assessment. In this sense, it is about both value for money and transparency, which we will also touch on in later groups. We want to know not just that such a designation will result in value for money but on what basis that decision has been arrived at. We know from the history of the nuclear industry that promises about costs have rarely been kept and that finances have been opaque, to say the least. If there was one advantage of energy sector privatisation, it was that the costs which had previously been fairly buried in the accounts of the Central Electricity Generating Board became much clearer. That is a significant part of the reason why nuclear power ceased to be attractive, because it was clear that it did not offer value for money either for the taxpayer or for the consumer.
As my noble friend Lord Foster said when he spoke to this amendment in Committee, the Government have said already that they are going to conduct a value-for-money assessment. All we are asking is that that assessment is published as part of the process of the Minister being clear that it is his position that the designation would represent value for money. In Committee, the Minister notably failed to give any such commitment that the value-for-money assessment would be published, so I ask him to tell the House directly in his response whether the Government will publish that assessment. If he does, he will satisfy many of our concerns on this matter. If he does not, he will simply confirm our belief that the result of the Bill will be that the public are going to be landed with eye-wateringly expensive power generation which does not offer value for money and for which they will be forced to pay on their bills in advance.
Amendments 3 and 10 deal with the impact on consumer bills. Amendment 3 requires the Secretary of State to be of the opinion that designating a nuclear power company will not have a significant and material impact on consumer bills and to lay a report before Parliament setting out the reasons and evidence for that opinion. Again, this is about both the protection of the consumer and transparency over decision-making.
Amendment 10 seeks to exclude recipients of universal credit and legacy benefits from the regulated asset base charge, and I am grateful for the support of the noble Lord, Lord McNicol of West Kilbride, and the noble Baroness, Lady Bennett of Manor Castle, on this amendment. It would guarantee in law that the most financially vulnerable in our country do not see an additional increase in their energy bills to finance the exorbitant costs of nuclear power generation. The most indefensible part of the Bill is that the cost of nuclear generation and the way the RAB charges work would have a disproportionate impact on those who are already struggling to pay their bills. With the energy price cap already set to increase by 54% and with further increases very possible, indeed likely, in the autumn, this is no time to place further burdens on those least able to meet them, as the Bill does. On the Liberal Democrat Benches, we believe that we have an absolute duty to protect those least able to meet these costs at such a difficult time.
As finance expert Martin Lewis has said, the financial strain on families is already the worst he has known. He describes the increase in energy bills as a
“fiscal punch in the face”,
and adds:
“I am out of tools to help people now … It’s not something money management can fix … we need political intervention.”
But what we have in this Bill is political intervention to make the situation worse. Reports from the Joseph Rowntree Foundation have added that the case for support
“to help people on the lowest incomes could not be clearer”—
so why are we doing the opposite? As we all know, the number of people in fuel poverty is increasing at alarming rates; it is estimated that it will have tripled in the space of two years.
Citizens Advice finds that 55% of universal credit claimants are already going without basic essentials. The Government are proposing to increase benefits by just 3.1% at a time when inflation is forecast to peak at 8% to 9%. Many, including the CBI, believe that peak may be sustained over a significant period. This Bill would exacerbate the problem even further. Amendment 10 would at the very least make sure that the most financially vulnerable people in our country are not forced to bear further costs on their energy bills as a result of this unfair policy.
Viscount Hanworth (Lab)
My Lords, I wish to speak to Amendment 1. The noble Lord, Lord Howell, disposed of the previous version of this amendment most effectively in an eloquent speech in Committee, yet the Liberal Democrats persist in asking for an unequivocal value-for-money assessment of any project to build a new nuclear power station. It is not clear on what basis such an assessment should be made.
They may be inspired by the expectation that an assessment conducted according to commercial accountancy would cast doubt on the economic benefits of building new nuclear power stations. It has been pointed out to them that such a valuation would entail the commercial cost of capital funds, which are available from the financial sector only at an exorbitant rate of interest. It is precisely for the purpose of overcoming this impediment that the financial device of a regulated asset base, which is what this Bill advocates, has been devised.
Commercial accountancy—if that is what the Liberal Democrats have in mind—would be a most inappropriate means of assessing the value of investment in social and economic infrastructure that would provide us with a carbon-free source of electricity for the long term. Not only will this electricity be making a vital contribution to our climate change agenda but it will serve to sustain our industries in the absence of fossil fuels. Surely the Liberal Democrats should support such objectives.
The Liberal Democrats have been enjoined to tell us how they envisage that we might satisfy these objectives in the absence of the secure and reliable supply of electricity that would be provided by nuclear power stations. They have failed to do so. They have failed to tell us how the problems of the insecurity and intermittence of the supply of electricity could be addressed if it were dependent on the wind, the sun and imports from abroad. We must assume, in the absence of any declaration from them, that this is what they envisage. The truth is that they have failed to address the logistics of the energy supply in a meaningful way.
The value of renewable sources of power must be assessed not only on the costs of what they are able to produce but on the costs of what they fail to produce. At times when this power is not available, other sources must be found. In the absence of a baseload of electricity, they are liable to become exorbitantly expensive when there is a dearth in power. Wind and solar power will not satisfy the demand for a greatly increased supply of electricity, which must arise if our industries and our transport are to relinquish fossil fuels. The renewable sources of power would serve to satisfy the demands only of a wholly deindustrialised and socially immiserated version of the United Kingdom.
Lord Howell of Guildford (Con)
My Lords, I rise to oppose this amendment. It is not that I am out of sympathy with the concerns and motives behind it; I am all for any moves that create a more explicit explanation of the real, full value of modern nuclear power and the way in which it is developing. Nevertheless, I oppose the amendment because, if you are talking about value for money, it is wildly unrealistic and out of touch with reality, as the noble Viscount, Lord Hanworth, rightly indicated.
Let us certainly have a good argument about value, but what is the value, first, of national security? What is the value of building up a large chunk of our electricity power for low-carbon reliability in the future when, although we all want to see more wind and sun and so on in the package, we know that any part of a complex energy system can go down or be disrupted at any time? There has to be diversity and a large block of reliable, low-carbon power from modern nuclear, with full provision for taking care of the difficult problems of waste which we discussed in Committee, and all the rest. But there is a value in the national security of having a large section of our power coming from nuclear, ready to come in—at a cost, yes—when the wind does not blow, when there are interruptions in oil or gas supplies, and all the rest, as we are experiencing now, when prices go crazy, when LNG, the frozen gas on which we rely, is beckoned by higher bids from China and turns away from us.
What on earth is the value of having this provision? What is the value of diversity in our system, in having conserved the system which we have now which, alas, is grossly overconcentrated either on renewables, which can go down occasionally, or on gas? We were never meant to have as much gas in our electricity production as we have now. When I was looking after these matters a long time ago—and I should declare my registered interest on that—1% of British electricity came from gas, and Sir Denis Rooke, the then chairman of British Gas, was very opposed to an increase. Now it has gone to the other, mad extreme: we are now at 45% to 50%, and when gas problems go badly wrong internationally, as they have, and we have a sevenfold increase in the gas price, we are hit directly through our gas and electricity prices. So the case for a large chunk of renewable energy through nuclear increases by the day, particularly now that we may get an acceptance that nuclear electricity is green electricity and is approved under ESG rules and so on.
I put it to our Liberal Democrat friends that they must face the issue that there is a value—yes—but it cannot be put into money, because it has to be measured in terms of security, diversity, back-up for wind when the wind does not blow, hydrogen production and a variety of other things. There must be some realism in the stance of great political parties in addressing this issue: that is all I plead for. Therefore, I think this amendment is unrelated to the real needs of our security and our national prosperity, and to the whole helping of the poorest and the most vulnerable in society in the future. It cannot be the right amendment to make.
Viscount Trenchard (Con)
My Lords, as acknowledged by the noble Lord, Lord Oates, Amendment 1 was debated in Committee. And, as acknowledged by the noble Viscount, Lord Hanworth, just now, I also thought that my noble friend Lord Howell explained very well, both in Committee and today, that value for money is totally subjective. The judgments that have to be made will, of course, take account of the financial plans for projects. I thought that the noble Baroness, Lady Worthington, was spot on in referring to Switzerland, whose electricity grid depends almost entirely on hydro and nuclear. It is hard to put a price on the huge value that energy security gives that country.
Amendment 3, in the names of the noble Lords, Lord Oates and Lord Stunell, is unnecessary, because the Secretary of State will clearly consider this point in assessing any applicant company under the designation process. Furthermore, Ofgem is bound to protect consumer interests as part of the consultation process. I recognise that electricity bills are already rising exponentially, and I expressed concern in Committee that payments under the RAB model will further increase the subsidies that consumers are required to pay. The solution here is to reduce the subsidies paid to renewables projects, to provide a more even balance between support for those sectors and support for the nuclear sector, which has been left out in the cold until very recently.
As for Amendment 10, in the name of the noble Lord, Lord Oates, and others, I fear that the costs of administering such a complicated exemption would far outweigh any possible benefits to the particular groups of people concerned. Besides, there are other groups facing difficulty in meeting higher electricity bills, such as pensioners, who are seriously disadvantaged by the suspension of the triple lock. The best way to assist the people whom noble Lords who put their names to this amendment seek to assist is to enable a stable, well-funded energy mix, including a significant amount of nuclear, both large gigawatt plants and smaller, more flexible SMRs and AMRs. On the latter, the Government are trying to reinvent the wheel and are moving much too slowly in the case of JAEA’s HTGR technology, which has been operating for 10 years and is inherently safe.
I hope that the Prime Minister’s much greater enthusiasm for nuclear, revealed in recent weeks, will lead to rapid changes to the very cautious current plans of BEIS, in three phases, merely to establish a demonstration by the early 2030s. We need this technology yesterday, and we should be rolling it out commercially before the end of the decade. The Times reported last week that Ministers are exploring the creation of a state-owned nuclear company that would take stakes in future nuclear projects, to reduce our reliance on foreign energy. That is very welcome. What a pity it is that such a company was not in existence before Hitachi made the decision to cancel the Horizon project in September 2020.
Baroness Bennett of Manor Castle (GP)
My Lords, I speak in favour of Amendments 1 and 3 in the name of the noble Lord, Lord Oates, and in favour of Amendment 10, also in his name and to which I have attached my name.
Speaking for the first time on Report on the Bill, I am getting something of a sense of déjà vu. I do not know whether the ministerial Front Bench has brought its snacks this time, but it can sit and watch the show as we see enthusiasm from both Labour and Tory Benches for new nuclear power.
It is interesting to go back to the Explanatory Notes. The policy background that explains the purpose of this Bill is
“a clean energy system that is reliable and affordable for energy consumers”.
These three amendments particularly address that last point—although the comments of the noble Lord, Lord Howell, on reliability were also interesting. The words that he used were interesting: “decentralised”, “security” and “stability”. Why put all your eggs in a few large baskets rather than into an extremely decentralised system of renewables, storage and, particularly, energy conservation? That is a genuinely diverse and secure supply. Ask the Japanese about what happened after Fukushima, and they will tell you that, if nuclear goes wrong, you can lose the lot—and then you have a very large problem, as the Japanese did.
With regard to security and affordability, there is an interesting letter in the Financial Times this morning, headed:
“Arguing for more nuclear power was wrong then too”,
from Andrew Warren, chair of the British Energy Efficiency Federation, in Cambridge. It picks up my point that the cleanest, greenest energy that you can possibly have is the energy you do not use. It also comes to the point about value for money and the argument that new nuclear is essential. Mr Warren says that
“back in 2006, when the then Labour government … committed to a ‘family’ of further nuclear power stations”,
it was on the basis that our usage of electricity was going to go up enormously and therefore we needed new nuclear power stations, which of course did not happen. The letter points out:
“UK electricity consumption has in fact gone down by over 15 per cent since 2006. In other words, all that expectation of demand growth which was used to justify new nuclear power stations was grossly exaggerated … by over 30 per cent.”
As Mr Warren notes,
“no new nuclear power stations have been added to the system. The system hasn’t collapsed, and it’s also far less carbon intensive.”
I can imagine that many noble Lords might say at this point, “Well, yes, but we have to electrify transport and home heating”. However, if—to use a word associated with the Prime Minister—we went gung-ho on energy efficiency and a modal shift to walking, cycling and public transport instead of private cars, we could greatly reduce the kind of assumptions that are made. The policy background suggests that the UK electricity supply will need to double and low-carbon sources quadruple by 2050. If we build a different kind of society that needs less power, that is an extremely cost-effective way forward.
To come back to cost effectiveness, I have looked at some figures on this. The Nuclear Industry Association has suggested that the proposed new nuclear plants at Sizewell, Wylfa and Bradwell could come in at £60 per megawatt hour. We have just seen, in the most recent offshore wind projects selected for round 3 of the contract for difference allocations, strike prices as low as £39.65 per megawatt hour. The noble Viscount, Lord Trenchard, referred to concerns about green subsidies. These do not need subsidies because they are cheaper than any other source of power. That is offshore wind, without even coming to the fact that onshore wind, which I am delighted to see the Government now moving towards, is much cheaper again, as indeed is solar.
Of course there is Hinkley Point C, with a £92.50 contract. The nuclear industry says, “Oh, it will all get better eventually”. It is confident about the £60 figure—and we know how confidence about the cost of nuclear power has worked out in the past—and that over the long term it will eventually get to £40, which is what offshore wind is delivering now.
I particularly want to address Amendment 10, as the noble Lord, Lord Oates, did so effectively in introducing this group, to which I have attached my name, and to look at where we are with fuel poverty. From 1 April, 27% of UK households are expected to be in fuel poverty—and that is a watered-down definition of fuel poverty—so that is 6.3 million households. Each year around 10,000 people die prematurely as a result of cold homes. Again with regard to the policy landscape, if we insulated those homes, those people would not die prematurely. It is interesting that the charity National Energy Action notes that this seems to be within the bounds of some perverse statistical acceptability; we just accept it as being normal and continue to go on as we are.
Baroness Worthington (CB)
My Lords, I shall speak to this group of amendments, particularly Amendment 1, moved by the noble Lord, Lord Oates. As I said in Committee, I have some sympathy with the greater transparency of the assessment of the value for money of new nuclear, partly because it will prove once and for all that there is a very strong case for pursuing reinvestment in our nuclear capabilities at every scale, whether the large-scale reactors that we are considering at Sizewell and Hinckley Point, or the SMRs, which I hope will be pursued with a considerable increase in speed as we address our needs for secure, affordable and zero-emission electricity.
As noted by the noble Baroness, Lady Bennett, we will be seeing a greater need for electricity. We will, I hope, see a huge increase in energy efficiency as we move to electric vehicles, because they are inherently more efficient than the combustion engine fuel supply chain, but there will be a greater load on the grid so we will need vastly more electricity, even as we get more efficient. We need a varied set of technologies providing power reliably and with resilience throughout the year. Nuclear can clearly play an excellent role alongside greater increases in solar, wind and other forms of renewable electricity. There is no need for these to be seen as competing; they complement each other very well.
I suspect that the Minister will reply that it is not necessary and that there will be information in the public domain about the choice. The noble Lord, Lord Howell, made a very compelling case for how difficult it would be to provide a full value-for-money assessment when such things as national security are so hard to translate into a sum of money. As we noted in Committee, there are countries much less concerned by the terrible events in Ukraine because of the nature of their electricity supply. It is right and proper that the UK should pursue the Bill—that we get on with it and see money flowing in the sector, which has been very stop-start. If we get this going, can sustain our interest and not do stop-start, the value for money will increase. The Bill is all about making these investments less costly for the taxpayer and the consumer and I support it. I am sympathetic to the amendment, but I do not support it.
Lord Stunell (LD)
My Lords, there were a couple of paper tigers dancing around in the Chamber today. I will deal with one of them straightaway. We are not unique in this Chamber in thinking that it is a good idea to do a value-for-money study on these projects. In Clause 2(3)(b), one of the criteria for designation is that
“the Secretary of State is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”
Given that the Government themselves believe it is appropriate to have a value for money study, those who think we have somehow dreamt up something totally unfeasible, ridiculous and stupid need to address their remarks to the author of the clause, not the authors of the amendment. The two amendments actually say two things, the first of which is that we believe the Secretary of State thinking it likely to result in value for money is not a sufficiently high level of evidence. It needs to be that it
“will result in value for money”.
I would express that as being the difference between “the balance of probabilities” in a civil case and “beyond reasonable doubt” in a criminal case. Basically, we want a better than 50% chance that the value for money guess comes out right. I do not think that unreasonable or contrary to the spirit of value for money, as Governments ought to be exercising it when spending public money. That needs to be considered quite carefully by those who think that value for money is somehow a Liberal Democrat evil which has been conjured out of nowhere.
The second of our Amendments says that when that has been done it should be published. My noble friend Lord Oates drew on examples in the nuclear industry in the past 60 years of evidence and material being gathered and kept very, very quiet. Of course, eventually it all comes out, if only in the decommissioning costs or from the actual unit cost of producing the electricity, which nobody can any longer avoid. The first generation was built on the basis that the electricity would be so cheap we would not need to have electricity meters. We tend to forget that those kinds of claims were ever made, but they were never supported by evidence because the evidence was never published at a relevant time when it could have affected the decisions being made.
The two amendments the Liberal Democrats have put into play are based on making sure that the Secretary of State does a proper value for money exercise and that they base their decision not just on the balance of probabilities—“If we’re lucky it’ll be all right; if we’re unlucky, well there we go”—but with some reasonable level of certainty that the exercise has produced the right result. Making it transparent and putting it on the public record is a good way of making sure that those who make a professional evaluation of value for money are well aware that what they put into their report will be in the public eye and open to challenge and discussion.
If only that had been the case with previous generations of nuclear generation decision-making, we would have got a better outcome. I do not mean that there would be no nuclear plants built, but we would have perhaps avoided what the noble Baroness, Lady Bloomfield, speaking on behalf of the Government, complained about in relation to the decommissioning process. The noble Baroness, Lady Worthington, said that it is necessary to avoid “gold-plating” decommissioning costs
“that deliver millions of pounds to contractors unnecessarily”.—[Official Report, 8/3/22; col. GC 434.]
I thought those were powerful words. She was talking about decommissioning costs, but should we not be doing the same with commissioning costs? What can be wrong with testing that out?
Also, value for money is not something that can be assessed anyway, because there are impenetrable questions which make valuing the outcome completely unfeasible. When one looks at the value for money of any project, there are two issues. The first is the actual cost of the project. Have the costs been realistically assessed and are they properly built into the estimates being presented? For generation after generation of nuclear plants, it has been perfectly obvious that the cost of building them has not been correctly assessed. Indeed, that is true of the plants currently under construction.
The second thing that needs to be quantified is the nature of the rewards that one gets from the project when it has been built. What are they? The rewards from a nuclear plant consist of the electrical output and the security factor. The noble Lord, Lord Howell, made an excellent contribution on that topic in Committee, the essence of which he repeated just now. I do not reach quite the conclusion that he did, but I will say how I think we might best analyse it.
We know that at the moment, the electricity that will be produced will be at least 50% more expensive than if it came from offshore wind power, for example. The noble Baroness, Lady Bennett, gave some of the figures. This plant will not come on stream for another 15 years. We do not know what the unit cost of offshore wind will be in 15 years’ time but, if you follow the graph, it is reasonable to suppose that it will be quite a lot cheaper than it is now. So it is a competition where nuclear starts 50% ahead; it will probably be more like 70% ahead when it comes online. I am setting aside any consideration of whether any allowance should be made for decommissioning costs.
Then, we get to the security argument: what happens when the wind does not blow? Well, we have a strike price that is nearly double that of offshore wind. It is therefore obviously a premium product. It is not something you would indulge in unless you could see a substantial value that was related not to its electrical output but to something else. The carbon reduction is real and not to be neglected but, of course, other renewables—certainly offshore wind, solar and onshore wind—have those carbon savings. It is a matter of debate whether they provide more or fewer savings per gigawatt than nuclear but, as I understand it, nobody is really saying that other renewables would not deliver the same carbon savings. So security of supply is the point in play. For me, the exam question, therefore, is this: can we get that security of supply in any other way that is cheaper and faster, with less or no impact on the RAB figures, which consumers will have to pay at the end of the day?
By coincidence, yesterday morning, I attended a presentation given by National Grid. It was asked some quite poky questions about whether it thought that the national grid would have the resilience for all the electrical power that will be demanded to flow through the system. Its answer was surprisingly upbeat. It said that it would be relaxed about the grid’s capacity if, for instance, there were 15 million or 20 million electric-powered vehicles dispersed widely throughout the United Kingdom, and, incidentally, concentrated in the places where electrical demand is greatest, such as the south-east of England. It sees the grid as a fundamental element of the storage of power to cover the times when it is needed. It did say, however, that there will have to be additional investment by the distributive network organisations, or DNOs, to reinforce the local distribution grid.
Lord McNicol of West Kilbride (Lab)
My Lords, this Bill is about finance as much as it is about nuclear power. Labour believes that new nuclear has an important supporting role to play in the energy mix, alongside the decisive shift to renewables needed to deliver the climate transition and low-carbon energy and secure our energy for the future. As set out by the Climate Change Committee, we need all the low-carbon sources at our disposal to deliver that rapid and fair transition.
The fundamental point is: if we are to build new nuclear power stations, how are we to fund them? Labour supports the building of them for a number of reasons. Nuclear energy is the only proven technology which can supply low-carbon baseload electricity at scale. At a time when we face a global climate crisis, the further rolling out of nuclear energy will also play a crucial role in the UK meeting its climate targets.
I am grateful to the noble Lord, Lord Oates, for tabling Amendments 1, 3 and 10 in this group and was pleased to add my name to Amendment 10, following the extension of the scope into legacy benefits. We are in agreement on the importance of achieving value for money but, given the Government’s track record on their use of taxpayers’ money, it is no surprise that many noble Lords want to see stronger requirements in the Bill. Amendments 3 and 10 bring us to the core issues here: the impact of the RAB model on consumer bills and the practical impact on people on very low incomes.
For weeks the Government have been promising meaningful action to help people across the country through the ever-worsening cost of living crisis. Try as the Government might to blame rising inflation, energy bills and Ukraine, the OBR’s stark warning about living standards shows that the problem faced by many is an issue around the British economy. In meetings over recent weeks, we have been told that protecting claimants of universal credit and other social security benefits is simply too difficult, particularly as we are talking about saving only £1 or £2 a week, but in these circumstances £1 or £2 a week will be critical for many families and households.
However, yesterday’s Spring Statement did nothing to support pensioners and benefit claimants and we must consider Amendment 10 against that backdrop. If we had faith that the most vulnerable in society would be protected, there would have been no need for the noble Lord, Lord Oates, to table this amendment. In less than two weeks’ time, pensions and other social security payments will be cut in real terms. People are already having to choose between heating and eating.
We support the use of the RAB model to finance new nuclear projects and we very much hope that having a more reliable energy baseline will make costs more predictable. However, it is our duty to look at those who are disproportionally impacted by this decision. We have only to look at the newspaper headlines this morning about the deepest cost of living crisis since the 1950s. On that basis, we hope that the noble Lord, Lord Oates, will test the opinion of the House when we come to Amendment 10 and that MPs will have the opportunity to debate this important matter.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank all noble Lords who have contributed to the debate. There was a certain element of déjà vu about it from the discussions in Committee. In particular, the noble Baroness, Lady Bennett, rehearsed her well-documented and faintly nonsensical views. She will be pleased to know that I will resist the temptation to tackle them again as we did in Committee, not least because it was done fairly expertly by my noble friends Lord Howell and Lord Trenchard, the noble Baroness, Lady Worthington, and the noble Viscount, Lord Hanworth, who made some very good points. If I would leave her with one word in response it would be “intermittency”, which is the key argument against her point.
Starting with Amendments 1 and 3, I remind noble Lords that designation is only one step in a rigorous process to ensure that a potential nuclear RAB project is sufficiently scrutinised, evaluated and subject to all relevant approvals prior to a final investment decision. As discussed in Committee, we have set out a transparent designation process which requires the Secretary of State, at the point of designation, to be of the opinion that designation is likely to result in value for money. This process requires the Secretary of State to draft reasons for designation and to consult on those reasons with consultees as set out in the Bill. Importantly, as my noble friend Lord Trenchard reminded us, they will include Ofgem, which, as per its principal objective to protect the interests of existing and future consumers, will ensure that consumer impacts are fully considered at the point of designation.
I reassure noble Lords that the Bill requires the final designation notice to be made publicly available. It will include the reasons for designation, which will incorporate details of the value-for-money assessment made to support the designation decision. We would expect that a value-for-money assessment at this stage would consider the potential impact of designation on consumers, using all relevant information available at the time.
However, as per my previous comment, designation is only one of a number of approvals that will mature our understanding of a project’s costs, alongside intensive negotiations. I feel therefore that Amendment 3, tabled by the noble Lords, Lord Oates and Lord Stunell, perhaps comes too prematurely in the overall process of approving a project to receive the benefit of the RAB funding model.
It is important that we retain our flexibility in how we negotiate with different project companies that are designated for the purposes of the RAB model. We can therefore commit that, at the point of directing a revenue collection counterparty to offer to enter into a revenue collection contract with a designated nuclear company, the Secretary of State will publish a value-for-money assessment of the project and its impact on consumers, along with all the appropriate documentation, save for information which the Secretary of State considers would be likely to prejudice someone’s commercial interests or would be contrary to the interests of national security. I can confirm that this would mean that value-for-money considerations would be published at two key points in the approval process: both when designating a project company in its final designation notice, as I outlined previously, and once the outcome of negotiations and market engagement have been reflected in project costs. I am not sure that even two value-for-money assessments would convince the Liberal Democrats of the value of this, but nevertheless I am prepared to give it a go.
On Amendment 10, I will begin by slightly correcting the figures used by the noble Lord, Lord McNicol. I value the noble Lord’s support for the principles of the Bill and Labour’s support for new nuclear. I think that the noble Lord used the figures of £1 to £2 per week for this model. Our estimate is closer to £1 per month. This will obviously depend on the negotiations, but it is not quite as drastic as the noble Lord implied.
I understand and share the desire from noble Lords to protect vulnerable consumers. Of course, we all want to do that. The Government agree on the importance of supporting low-income households, particularly at this time of high energy prices. I will remind noble Lords of the commitments which we have made to supporting households to meet the costs of energy bills. This includes the energy bills rebate scheme, worth a total of £9.1 billion and covering a £150 non-repayable rebate for households in England in council tax bands A to D, as well as an additional £144 million of discretionary funding for billing authorities to support households that are in need but do not meet the council tax criteria. This is in addition to the actions we are taking through the warm homes discount, cold weather payments and the household support fund, which the Chancellor announced yesterday will be doubled to £1 billion from April this year. All of these are aimed at providing immediate support for vulnerable households.
Over the longer term, we are helping to lower energy prices by supporting increases in energy efficiency through the energy company obligation, the sustainable warmth programme, the local authority delivery scheme and the home upgrade grant. I know that the noble Baroness, Lady Bennett, does not want to be reminded of this, but the Government are spending considerable funds, of up to £6.6 billion in this Parliament, on energy efficiency schemes. To that extent, I agree with the noble Baroness that energy efficiency is a good thing to do, and indeed we are doing it. Noble Lords will see from this programme that the Government take the support of low-income households at this time incredibly seriously. However, it is our strong view that this challenge is best tackled holistically.
On the specifics of Amendment 10, as my noble friend Lord Trenchard said, the RAB model charges suppliers rather than consumers. The amendment means that suppliers could be required to pay their full share of the RAB charges but not pass the cost down to consumers on universal credit. Suppliers would be very unlikely to meet those costs themselves. Instead, they would most likely spread the additional charge among other consumers who are not exempt, placing addition burden on, for example, low-income households and those who were not on benefits. The amendment would also create a substantial administrative burden, as suppliers would need to accurately identify and verify benefits recipients—information which could be difficult for them to access. Again, it is likely that they would choose to pass the administrative costs of this on to other consumers, including other vulnerable groups, such as pensioners.
I also have concerns about the compatibility of the amendment with a scheme which, if implemented, could last for many decades over the life of nuclear projects. For instance, the amendment specifically references universal credit and “any legacy benefits”, and it is likely that alternative benefits will be brought forward during this period. Referring to universal credit on the face of the Bill would result in updates to the legislation being needed whenever changes to the existing benefits system were made. I hope that noble Lords will accept that this would clearly be impractical.
Lord Oates (LD)
My Lords, I am grateful to all noble Lords who took part in the debate. I thank the Minister for his response. The issue of value for money, as my noble friend Lord Stunell pointed out, is a central part of the Bill. All we are asking is that the value-for-money assessments the Government rely on are published. I am pleased that the Minister said that they will be published, albeit not at the stage we would wish them to be. That is some progress at least, but it puts the slightly bizarre argument that this is not an issue for amendment in that context.
Regarding universal credit, the Minister said that it would be administratively difficult because the electricity suppliers are charged the RAB charge and would have to pass it on to consumers. It would, of course, potentially be possible for the Government to exclude the relevant amount for universal credit and other legacy benefit users. It would also be possible and open for the Government, if they wanted to, to assess whatever the RAB charge is and give that as an additional benefit to those people. But the essential issue is that we cannot put further burdens on people who are already suffering enormously with the cost of energy and cost-of-living increases. This has to be solved. I am sure it is not beyond the Minister and his colleagues, if he says that there are technical problems with putting universal credit or other legacy benefits into the Bill, to correct that when it goes back to the Commons and bring forward an amendment that they think would work.
Overall, we have to take some action to protect these very vulnerable consumers. I think we can all agree on that and I hope the House will support the amendment when we come to it. As I said to the Minister, I am grateful on the issue of value-for-money assessments. I am sorry he could not go further on the impact on consumers’ bills as a whole. We really need more transparency on that.
Finally, I say to the noble Viscount, Lord Hanworth, that I am absolutely delighted by his interest in Liberal Democrat policy. Knowing his deep and clear affection for the Liberal Democrats, as shown in these debates, I am surprised that he has not already read our excellent policy paper Tackling the Climate Emergency, which sets out in comprehensive detail, as only a Liberal Democrat policy paper can, how to decarbonise the grid without the need for new nuclear. However, if by any chance he has not had the chance, I would be very happy to send it to him. With that, I beg leave to withdraw Amendment 1.
“(c) the nuclear company is not owned, wholly or in part, by a foreign power or entity listed in regulations made under section (Barring of certain foreign powers or entities from involvement in UK civil nuclear projects).”Member’s explanatory statement
This amendment makes clear that a company may not be designated by the Secretary of State if it is owned, wholly or in part, by a foreign power or entity specified in regulations laid by the Secretary of State.
Lord McNicol of West Kilbride (Lab)
My Lords, I shall speak also to Amendment 6 in this group.
Amendment 2
“makes clear that a company may not be designated by the Secretary of State if it is owned, wholly or in part, by a foreign power or entity specified in regulations laid by the Secretary of State.”
In Grand Committee, my noble friend Lady Wilcox of Newport very ably, in my Covid absence, introduced two Labour amendments that would have severely restricted foreign involvement in the UK’s civil nuclear industry. During the course of that debate, she suggested that if the Government were sympathetic to the arguments but uneasy with the mechanism, they could come forward with an alternative. In responding, the Minister confirmed this. These adapted amendments following Committee take on board the considerations that we debated and, although weakening the original amendments, retain their essence.
It is with that in mind that I hope the Minister will consider Amendments 2 and 6 favourably. They now provide alternatives—rather than banning foreign involvement completely, they would require the Secretary of State to establish and maintain a list of foreign powers and entities that are barred from involvement in UK nuclear projects. This feels both proportionate and reasonable. As we see it, the list would operate in a similar manner to the financial action task force’s list of high-risk countries for money laundering, which is part of our domestic law via regularly updated SIs.
The amendments do not specify criteria for including states or entities on the list; it could be national security, but the Secretary of State could also choose to bar a company that has a questionable track record in other respects—be it a poor delivery record or safety concerns. It may be that the department wishes to bar the involvement of some individuals or entities currently subject to sanctions but who may not necessarily still be on the sanctions list at the time of a future designation.
The Minister told us in Committee that this was an interesting idea and that the department would study it closely. We are grateful that he made BEIS officials available to us for discussion on this and other topics last week, but that meeting took place just hours before the deadline for tabling government amendments, and final agreement could not be reached. The Minister knows we are supportive of the Bill, but our general support should not diminish the importance of our concerns. The feeling of colleagues in Grand Committee and in private discussions since has been that the protections under the National Security and Investment Act 2021 are not sufficient in this area. We feel that Amendments 2 and 6 offer a sensible way forward, building on a system already used by other departments—Her Majesty’s Treasury, for example—and familiar to financial and other institutions across the country.
Should the amendments be accepted, I am sure the department will be free to address any drafting deficiencies, but we on these Benches believe that this is an important point of principle and will test the opinion of the House if the Minister does not accept Amendment 2. With that, I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I speak to Amendments 4, 7 and 8 in this group in my name, but, before I do that, I will quickly say that I also support Amendments 2 and 6, in the name of the noble Lord, Lord McNicol of West Kilbride. In Committee, I said I was unable to support his amendments because I felt that a blanket ban on foreign state involvement in our nuclear programme went much too far, so I am delighted that he has now found a more flexible formulation, which would enable the Secretary of State to decide who should be barred from the nuclear programme.
The amendments in my name are intended to cover a similar point, but perhaps more widely and slightly more flexibly. Last week, we spent a lot of time discussing the importance of being able to identify the ultimate beneficial owners of property in the UK. It seems to me considerably more important that we should always be certain of the identity of any party that may be able to exercise significant control over a nuclear company, either directly or indirectly, and that we should be able to take action to prevent undesirable parties, should they attempt to obtain significant control of a nuclear company. My amendments simply seek to achieve that.
As I mentioned in Committee, it was ruled out of scope when I tried to introduce an amendment that would have allowed the Secretary of State to revoke the licence of a nuclear company if an undesirable party obtained significant control. My amendments here are restricted to the designation under the Bill, but the comments I am about to make apply every bit as much to the licensing regime, and I ask the Minister to keep that in mind.
I have revised my amendments from Committee so that my three amendments now introduce a regime for designated nuclear companies that is similar to that which applies to persons with significant control of UK companies. They further give the Secretary of State the ability—not the obligation—to revoke the designation of a nuclear company either where the Secretary of State is not satisfied that the identity of a party with significant control has been verified, or if a party later obtains significant control and the Secretary of State is not satisfied that they are a fit and proper party to own or control a company.
I am very grateful to the Minister and his team for their helpful engagement on this point—again, unfortunately, just before the deadline for submitting the amendments. They have pointed me towards the National Security and Investment Act 2021—the NSI Act—as providing the protections that I am seeking and, to an extent, they are right. But there remain important gaps, and I want to raise them and hear what the Minister thinks.
First, the NSI Act comes into play only if there is a notifiable transaction, so it does not apply at the point when a nuclear company is applying to be designated. It seems to me important that we designate companies only where we are satisfied that we know the identity of all parties that might have significant control, so Amendment 4 adds a new condition that the Secretary of State is satisfied that the identity of any party with significant control has been verified.
I am sure the Minister will tell us that the Government will of course carry out this verification as part of their due diligence—he is nodding—before a designation is granted. If the Government intend to carry out this step anyway, why not accept the amendment? Secondly, it is, sadly, not uncommon for due diligence not to be completed as thoroughly as we might like—1 am sure we can all think of examples of that. The amendment would not add any burden to the Government, but it would ensure that this critical verification step must be included in the due diligence, so why not accept it?
There is another reason. If the due diligence failed to identify such a party for some reason, without Amendments 4 and 7 taken together there would be no mechanism in the Bill to remedy the situation after the designation had been granted. The NSI Act would not apply, because no qualifying transaction would have taken place. So we would be stuck with a party that we had not verified, which cannot be right.
The next problem with relying on the NSI Act is that the first remedy under the Act is that, if a notifiable transaction takes place without authorisation, it is void. But that can apply only to UK companies. If, for example, a nuclear company has a 51% shareholder that is a Japanese company, and a Chinese company later takes a stake in that Japanese company, there is no way we can void that transaction, regardless of what the NSI Act says.
Viscount Trenchard (Con)
My Lords, the noble Lord, Lord McNicol, tabled an amendment similar to Amendment 2 in Committee. The Minister could not accept it because it appeared to rule out EDF as an investor in Hinkley Point C or Sizewell. It also attempted to restrict sourcing of nuclear fuel to domestic producers, which the noble Lord has dropped from his revised amendment. My noble friend explained that the Government do not support investment in our critical infrastructure at the expense of national security, which was good to hear. I ask the Minister to tell your Lordships what progress the Government have made on replacing proposed Chinese investment in Hinkley Point C and Sizewell C.
Amendment 2 is an improvement on the version debated in Committee, but the link to Amendment 6 requires the Secretary of State to establish a list of foreign powers or entities that are barred from involvement in the UK’s civil nuclear sector. Amendment 2 covers nuclear companies owned wholly or in part by a power or entity included on this list, but ownership in part could mean just one share. Surely this amendment should restrict only significant shareholdings; perhaps 5% would be an appropriate trigger.
Furthermore, the requirement on the Secretary of State imposed by Amendment 6 would clearly be massively burdensome, if not impossible. It is quite adequate that the Secretary of State should deal with each application separately and assess the shareholders at the time of application.
I said in Committee that I was inclined to support the amendments in the name of the noble Lord, Lord Vaux of Harrowden, who has experience in these matters and always takes a well-considered view. He has persisted in seeking more safeguards in the Bill by bringing back his amendments, but now aligned with the generally accepted definition of “persons of significant control” of UK companies. Those are usually persons holding more than 25% of the shares in a company or having the right to appoint a majority of the board of directors.
The noble Lord, Lord Vaux, is also surely right in his purpose in tabling Amendments 7 and 8 that designated nuclear companies should promptly notify the Secretary of State of any change in persons of significant control. However, I am not sure that it is necessary to state this explicitly in the Bill, and there could well be cases where the Government welcome changes in the shareholding structure of nuclear companies. As my noble friend explained to your Lordships in Committee, the Secretary of State may attach any conditions he deems appropriate to the designation of a nuclear company, and I believe that this will give him the flexibility to make whatever stipulations he needs to with regard to the balance of shareholdings in such a company.
The noble Lord, Lord Vaux, made some further good points today, although I must say that I consider his suggestion that a Chinese company might take a 51% stake in a Japanese company to be very unlikely, based on my experience of working in the Japanese stock exchange. Nevertheless, I look forward to the Minister’s reply to those points.
Lord Oates (LD)
My Lords, this group addresses the foreign ownership and transparency issues which we have just heard about, and it includes the amendment in my name and that my noble friend Lord Stunell, on transparency issues.
I very much support the compelling arguments made by the noble Lord, Lord Vaux, and I hope that the Minister will be able to address them. I was also pleased in Committee to support the amendment in the name of the noble Lord, Lord McNicol. He has brought back one that addresses the concerns that were raised in Committee, and he will certainly have the support of the Liberal Democrats. I think it fair to say that Peers on all sides of the House are concerned about the foreign ownership issue, so I hope the Minister can give us some comfort on this. However, if he cannot accept the amendment and if the noble Lord, Lord McNicol, chooses to divide the House, he will have our support.
Amendment 9, in my name and that of my noble friend Lord Stunell, deals with transparency. As drafted, Clause 13(2)(a) allows the Secretary of State to withhold any material which they believe would
“prejudice the commercial interests of any person”.
As I said in Committee, this is an enormously wide loophole which does not take any account of the degree of prejudice to the public interest of withholding that disclosure. Surely it is only proper in order to ensure effective public scrutiny that Ministers are not able to hide information behind claims of prejudice to commercial interests through wide loopholes such as this. These projects are being funded by the public and they have the right to know all relevant material, except in exceptional circumstances.
We already know how reluctant the Government and their agencies are to provide information on costs which is overwhelmingly in the public interest, but it goes wider than that. I note that in a reply to a Written Question from the noble Lord, Lord Alton, about meetings between Ministers and the China General Nuclear Power Group, the response was that no minutes were kept of that meeting. I am not clear whether that is within the Ministerial Code, but it goes to show that there is a reluctance to share information here.
The record of transparency in nuclear affairs is poor. This amendment would require the Secretary of State, if he withholds information, to make it clear that it was seriously prejudicial to commercial interest and to set out to Parliament his reasons for withholding it. I hope that the Minister can address those issues in his response.
Lord Callanan (Con)
My Lords, I thank all noble Lords for their contributions to the debates. As all the amendments in this group, tabled by the noble Lords, Lord McNicol, Lord Vaux, Lord Oates and Lord Stunell, are linked, I will address them together.
I start with those tabled by the noble Lord, Lord McNicol. As the noble Lord has described, the amendments seek to create an obligation for the Secretary of State to bring forward a list of foreign powers and entities that should not be allowed to invest in nuclear projects, and to use this as the basis for a new designation criteria under the Bill. I appreciate the sentiment behind the amendment but, as the noble Lord will understand, I cannot agree to it for a number of reasons. The amendment is too broad; it does not specify the range of companies that it could cover or the reasons that a foreign power or entity could be included on a list, and the excluded activities are extremely wide—all participation in all projects. This is an extremely broad-brush approach which could severely affect our ability to bring in finance and to deliver new nuclear projects. We would expect the amendment to have a chilling effect on investment, ultimately leading to a higher cost for consumers.
In addition, I am concerned about the further impacts of the amendment. In the noble Lord’s explanation of the amendment, he mentions that the list should act
“in a similar way to the Financial Action Task Force’s list of high-risk countries.”
However, the main focus of that list is to encourage enhanced due diligence in respect of these countries, rather than to provide an outright ban as this amendment seeks to do.
There is also an inconsistency between the amendment to Clause 2 and the proposed new insertion after Clause 3. While Clause 2 is targeted at preventing listed entities from having full or partial ownership of a nuclear company under the RAB model, the proposed new clause discusses barring entities’ involvement in the whole civil nuclear sector. If this wider approach were taken, it could limit our options for international co-operation on this sensitive issue, including obtaining technical advice.
By highlighting these problems, I do not suggest that I disagree with the sentiments behind the amendments. Indeed, as the noble Lord will know from the numerous discussions that I have had with him, the Government know that the protection of our national security must be the top priority. The Government already have strong oversight of foreign ownership in nuclear projects as a result of the NSI Act 2021, as the noble Lord, Lord Vaux, reminded us, which includes the ability to call in for assessment any qualifying acquisition if the Secretary of State reasonably suspects that it may give rise to national security concerns.
Importantly, certain acquisitions of entities operating in the civil nuclear sector require mandatory notification and clearance before the acquisition can be completed. This is set out in Schedule 4 to the notifiable acquisition regulations made under the Act, which specifically include entities which hold, or are in the process of applying for, a nuclear site licence or development consent under the Planning Act 2008 in relation to a nuclear reactor.
To provide an illustrative example, this means that if a new entity wanted to acquire over 25% of the shares in a nuclear project company, this would have to be notified to the Secretary of State and could not be completed until, or if, the Secretary of State agreed it. Indeed, the Secretary of State could require that the transaction was not progressed, assuming the relevant tests in the Act were satisfied. If the acquisition was completed without first being approved by the Secretary of State, or in breach of an order from the Secretary of State, it would be void and not legally effective.
Lord McNicol of West Kilbride (Lab)
I am very grateful to the Minister for his detailed response to these amendments and to the noble Lord, Lord Vaux, who ably introduced his amendments and made many powerful arguments in their favour. I appreciate the sentiment and tone of the Minister’s response. It is unusual to hear a Minister not taking up the powers that we are looking to give the Secretary of State and being constrained. In the world that we live in today, and given the importance of the civil nuclear sector, we think that these amendments—the Secretary of State having this power—is so important.
The Minister is right—this is about due diligence—but I think he is wrong when he talks about an outright ban. That would come in on an entity or designated organisation only if the Secretary of State wished it. It would come to Parliament only if it was recommended by the Secretary of State. Amendments 2 and 6 as written give that power to the Secretary of State.
I am also very pleased to hear about the special share. It was in one of the amendments that we laid in Committee, and we fully support moving forward with Sizewell and the Government taking a special share. We would love it to be retrospective as well, for Hinkley, but we understand the difficulties with doing that.
We on these Benches fundamentally believe that Amendment 2 and, consequentially, Amendment 6 set important principles, so notwithstanding the Minister’s response I would like to test the opinion of the House with regard to Amendment 2 and, consequentially, Amendment 6.
“(5A) Where conditions are imposed under subsection (5)(c), these may include duties on the nuclear company to—(a) collect data relating to the quantity and value of domestically produced goods and fuel utilised during the construction and operation of the nuclear project, and(b) make such data available to the Secretary of State to publish in a manner, and at a frequency, that the Secretary of State deems appropriate.”Member’s explanatory statement
This amendment would allow the Secretary of State to compel a nuclear company to collect data relating to domestically produced goods and fuel, with such data to be shared with (and published by) the Secretary of State.
Lord McNicol of West Kilbride (Lab)
My Lords, I am sure this group will be very brief. Amendment 5 does exactly what it says: it instructs
“the Secretary of State to compel a nuclear company to collect data relating to domestically produced goods and fuel, with such data to be shared with (and published by) the Secretary of State.”
When tabled in Committee, this amendment was far broader and wider, but I have edited it down in the hope that the Minister will accept it. If it is not technically quite right, we could bring back some wording for Third Reading. We believe the actions required would not be onerous on industry, as much of the data already exists within its procurement process.
The reasons for tabling this amendment are twofold. First, as was said in relation to amendments in the previous group, in my name and those of the noble Lords, Lord Vaux and Lord Oates, the nuclear industry is a highly sensitive one. Parliament and the Secretary of State knowing where the component parts originate is just a sensible approach. With the war in Ukraine and problems with Russia, China and other nations, being clear on where goods and component parts originate makes good sense.
Secondly, we are unashamedly in favour of government, Parliament and the Secretary of State supporting the development and promotion of British goods, skills and jobs. To do that and to invest in relevant areas, it helps—and they should be required—to know what is and is not domestically produced, and thus where the gaps are.
We have just completed Report on the Subsidy Control Bill, which replaces the historic EU state aid scheme. If implemented well and properly by devolved authorities, local authorities and national government, the Bill will assist in the direction of subsidies to help the UK industry. With those few words, I beg to move Amendment 5.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise briefly to speak in support of Amendment 5 and particularly to pick up an aspect of it that we did not really discuss in Committee. It was brought to my attention by a foreign visitor. If we are talking about the source of the fuel, it is not just about whether the fuel going into the reactor is manufactured in the UK but where the raw material, the uranium, comes from. As the noble Lord, Lord McNicol, just said, there are issues of security here, as well as issues of human rights et cetera. Looking down the list of the world’s top uranium producers, Kazakhstan is number one and Russia, China—according to an estimated figure—and Ukraine are also in the top 10. I have been trying to establish what the current situation is—perhaps the Minister will tell me, or write to me later—about our current fuel and the origin of the supplies, but it is important in the context of this amendment that we consider that.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lord for his continued and constructive engagement with the Bill. I state clearly to him and to the noble Baroness, Lady Bennett, that I share the ambition to maximise the opportunities for UK industry in the nuclear supply chain. We are taking steps actively to support and develop the UK nuclear supply chain, including our world-leading nuclear fuel industry, which the recent spending review confirmed will be supported up to £75 million to preserve and develop the UK’s nuclear fuel production capability. We expect developers to play their part in this, supporting UK businesses to compete for opportunities in new projects, and to share their plans with government. For example, EDF has set out that, if the Sizewell C project is approved, it will aim to place 70% of construction contracts with UK companies—up from 64% at Hinkley Point C—and has engaged with the department on its plans for the plant’s supply chains.
For those projects that proceed to construction and operation, we expect that data on their supply chains, including what opportunities are being won by UK businesses, will continue to be shared with the department. Specifying that a nuclear company must use UK nuclear fuel would create a significant risk of putting the UK in breach of its obligations under the TCA, and potentially also of our obligations under the WTO and other international agreements—but we do expect developers to be transparent with the public about UK content in their effective supply chains during construction, as EDF has been with the Hinkley Point C project. We will support developers to make this information public where it does not prejudice commercial interests.
We believe that the matter is best taken forward through negotiations on new projects seeking the support of a RAB funding model and ongoing partnership working with the sector. Therefore, I do not believe that it is appropriate to accept the noble Lord’s amendment today. However, I accept the spirit in which the amendment was tabled, and I hope that I have given some assurance that we will actively aim to maximise the opportunities for UK companies as we deliver on our ambitions for nuclear power. As for the specific question from the noble Baroness, Lady Bennett of Manor Castle, I need to check with my officials to make sure that that can be divulged and, if it can, I will write to her after this stage of the Bill. In the meantime, I ask the noble Lord to withdraw his amendment.
Lord McNicol of West Kilbride (Lab)
I thank the Minister for her response and for her assurances. It is good to hear that the information on where the products come from is shared with the department. We were hoping that it could be shared more widely and publicly to help promote our industries. With that, I beg leave to withdraw the amendment.
Lord Oates
“(4A) Revenue regulations must make provision to prevent electricity suppliers from recovering the costs of paying a revenue collection counterparty from customers claiming Universal Credit, or any legacy benefits specified in the regulations.”Member’s explanatory statement
This amendment would mean that electricity bill payers who qualify for Universal Credit, or certain legacy benefits, would not be liable for levies on their bills that pay into the RAB revenue collection fund.
“(3A) Nothing in this Part prevents the Secretary of State establishing a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued.”Member’s explanatory statement
This amendment makes clear that nothing in Part 3 of the Bill (the special administration regime) prevents the Secretary of State from taking a project into public ownership, where that would allow electricity supply to be commenced or continued.
Lord McNicol of West Kilbride (Lab)
My Lords, Amendment 11 would require the Secretary of State to undertake an assessment of the case for establishing a state-owned entity to take over the delivery and operation of a nuclear project in the event that a nuclear company fails and cannot be saved or have its assets transferred:
“This amendment makes clear that nothing in Part 3 of the Bill (the special administration regime) prevents the Secretary of State from taking a project into public ownership, where that would allow electricity supply to be commenced or continued.”
The ultimate aim of the Bill is to get power generated and distributed to homes and businesses across the country. We hope that firms will not fail, but if they do, there needs to be a clear process to ensure that plants are able to be built or continue to operate. I am sure the Minister will argue, as he did in Committee, that the special administration regime does this, but there is still potential for steps that may be needed, and surely, options should be defined in legislation now, rather than waiting until the worst should happen.
Amendment 12, in the name of the noble Lord, Lord Ravensdale, is fundamental to how nuclear energy is seen in the green mix. The Prime Minister has made this argument in favour of the wording within this amendment: I realise that we on these Benches do not often call for the Prime Minister’s words to be turned into law, but in this case we do. In fact, the government briefing and policy background to this Bill states, in paragraph 2:
“The Government has made high-level commitments to eliminate its contribution to greenhouse gas emissions. This includes the passage of legislation that requires the UK to bring all greenhouse gas emissions to net zero by 2050, as well as subsequent commitments to reduce carbon emissions by 78% and to decarbonise the electricity system by 2035.”
That is all commendable. It goes on:
“This will require rapid, significant changes in the energy sector: total UK electricity supply will need to double by 2050 and electricity from low-carbon sources will need to quadruple, in order to deliver the UK’s commitment to become a Net Zero emissions economy by that year.”
This is the important bit; it goes on, in paragraph 3:
“A key part of this will be to secure the transition to a clean electricity system that is reliable and affordable for energy consumers. This will require a substantial deployment of renewable technologies, alongside technologies such as nuclear which can provide energy to consumers when the wind is not blowing or the sun does not shine.”
Finally, paragraph 4 says:
“Large scale nuclear power plants are the only proven technology available today to provide continuous, reliable and low carbon electricity.”
I think the Government’s words speak for themselves, and I am happy to support the noble Lord, Lord Ravensdale, in his amendment. With that, I beg to move my Amendment 11.
Lord Ravensdale (CB)
My Lords, I will speak to Amendment 12 in my name. I thank the noble Baroness, Lady Neville-Rolfe, for highlighting this issue to me and for working with me to develop this amendment. I also declare my interest as a project director and engineer in the nuclear industry working for Atkins. I apologise to noble Lords for not being able to be present in Grand Committee and thank the noble Lord, Lord McNicol, for his support with the amendment too.
This is a probing amendment designed to highlight a key issue with the way that nuclear projects under the RAB model under the provisions of the Bill are to be financed. The RAB will change the dynamics of capital rates for new nuclear projects by allowing pension funds and other institutional investors to fund large nuclear projects. There are three aspects relating to financing of new nuclear that need to be highlighted here.
First, the focus of Amendment 12 is that investors are constrained by ESG criteria that apply to their funds, as the noble Lord, Lord Howell, referred to earlier. The Government are due to consult on a UK green taxonomy this year, with a target to legislate by the end of the year. Our concern is that nuclear will not be considered sustainable or taxonomy aligned under this scheme. This concern comes from previous positions on nuclear and similar EU schemes, and that the Treasury did not include nuclear within its recent green financing framework.
This all comes back to technology independence. Nuclear is a low-carbon technology, along with many other low-carbon technologies, and the Government should not be picking winners in the race to net zero but enabling a level playing field. If nuclear is not considered as taxonomy aligned under the UK green taxonomy, there is a real risk that Sizewell C will not be viable under the RAB model. ESG alignment is now a key factor in capital raises for pension funds and institutional investors. In this case, a large non-ESG technology simply may not be able to attract capital in a sufficient quantity. I would be most grateful if the Minister could provide some assurance that nuclear will be considered as taxonomy aligned under the UK green taxonomy.
Secondly, I referred earlier to the UK Government Green Financing Framework, which describes how the UK Government plan to finance expenditures through the issuance of green gilts and the retail green savings bond. Currently, this excludes investment in nuclear, but again I urge the Government to reconsider. The Government need to take the lead here in defining what counts as sustainable within their frameworks. This is so important in leading the markets in the right direction and in allowing these schemes to finance future government investment in nuclear.
Thirdly, Solvency II rules govern the amount of illiquid assets which can be held by pension funds and insurance companies. This is another factor which could limit the ability of these market participants to invest in nuclear projects under the RAB model. Given that I understand the EU is undertaking reform in this area, can the Minister say what plans there are to reform Solvency II for the UK to ensure that sufficient capital is available to invest in infrastructure such as nuclear projects under the RAB model?
I note that these proposals on finance for nuclear are one of the five steps needed to make nuclear happen outlined last week by the APPG on Nuclear Energy, of which I am a vice-chair. Having the RAB model in place will be a huge step forward for the industry and is the key that will unlock nuclear new builds. The Government need to consider some more enabling steps within this model to ensure the market is able to provide the required capital and move these critical projects for our future energy system forward.
Baroness Neville-Rolfe (Con)
My Lords, I support the noble Lord, Lord Ravensdale, and Amendment 12, which is also in my name. It has been a pleasure to work with him again. I will be brief but, I hope, compelling.
One month has changed the world, and we have found ourselves in an unparalleled period of energy price volatility. The West has realised the dangers of relying on Russia for energy. Energy security is now an even greater priority. This is a sad but welcome change. Energy security has been a major concern of mine since I served as an Energy Minister in 2016 and appreciated the risks inherent in our energy policies of that time, both in terms of keeping the lights on and of inflation when things go wrong. I ploughed a lonely furrow at that time.
We need nuclear investment to replace our ageing fleet and to deal with the ups and downs of solar and wind power, as the noble Baroness, Lady Worthington, mentioned in relation to Amendment 1. I was also delighted and amused to listen to the noble Lord, Lord McNicol of West Kilbride, on the Prime Minister —we often agree across the divide. We need this investment fast, and we need several investments in large reactors and in small modular reactors. Nuclear power stations are long-lasting and, like renewables, have very low carbon emissions, and are therefore helpful in reaching net zero.
This welcome Bill edges things forward, but there is a problem, as the noble Lord, Lord Ravensdale, has highlighted. We need to find investors in new British nuclear installations, to replace the Chinese investment planned at Sizewell, and to attract investment from elsewhere. However—and here is the rub—the conventions on ESG and climate-friendly investments do not allow nuclear to count as green. With so much investment from the City and elsewhere now being directed at green options, this is a real risk to our nuclear ambitions. The rules ought to be changed and we must change them today.
Amendment 12 is a modest but important one. I look forward to a firm promise on green taxonomy from my noble friend the Minister, who is doing so much to make the nuclear revival a reality.
Baroness Bennett of Manor Castle (GP)
My Lords, I will speak very briefly to Amendments 11 and 12, and chiefly to Amendments 13 and 14 in my name.
On Amendment 11, the noble Lord, Lord McNicol, perhaps predictably, stole the line I was going to use, so I will just note how this amendment demonstrates the practical reality that the state always ends up the last guarantor—the structure having to pick up the pieces. In so many areas of our economy we have privatised the profits and socialised the costs. This is a reminder that that is ultimately what always has to happen, but it is important that it is in the Bill.
On Amendment 12, it is interesting that the noble Lord, Lord Ravensdale, and I can agree on this. The whole question of whether nuclear can be included in the UK green taxonomy is something that I am sure we will continue to debate on another day, just as I will continue to debate with the Minister about intermittency. However, being aware of the time on a Thursday afternoon, I will spare everyone by not venturing in that direction.
My Amendments 13 and 14 would prevent financing being made available to nuclear companies until a plan exists for the safe treatment and disposal of the nuclear waste generated. In Committee, the noble Baroness, Lady Worthington, suggested that this was a “wrecking amendment”. I would say that it is a precautionary amendment. You do not start something until you know how you will finish it off. That is how we think about our existing and previous nuclear plants: given the huge decommissioning costs that our society is bearing today, we wish that people in the past had applied that principle, but they did not. They did not think about what would happen with decommissioning, and now we bear the costs.
In Committee, the Minister referred to the Energy Act 2008 and its legal requirement that all proposed new nuclear power stations have in place a decommissioning plan, approved by the Secretary of State, before any nuclear-related construction can commence on site. I put it to the Minister—whose comments I am interested to hear—that decommissioning surely must include dealing with the waste. This includes higher-level waste which, as the Minister said in Committee, is the waste which has to be “treated and stored safely” until there is a geological disposal facility available.
We had a considerable discussion about geological disposal facilities in Committee. There, the Minister spoke—and then wrote to me—about the three proposed sites in Cumbria and the one in Lincolnshire. I said extensively in Committee, and I will not repeat it now, just how resistant Cumbria was the last time there was an attempt to put a geological disposal facility there. I have seen no reason to think that there will not be the same reaction this time as there was last time.
It is interesting to look at what has happened at Theddlethorpe, in Lincolnshire. There is a really valuable local report from Lincolnshire Live, which reminds us of the importance of local media in helping people to know what is happening—as an aside, it is tragic that so much of that has been lost. The report, apparently quoting the Nuclear Waste Services, says that
“people would have the final say … in a binding referendum”
before a geological disposal facility goes ahead. So it appears that the people will be given the right to decide.
What timeframe do we have here? The Nuclear Waste Services people say that the feasibility studies which have just started now will take two to three years to complete. After that, if it passes that two or three-year process, we will start drilling more holes to seriously look at the geology. The Nuclear Waste Services is attributed as saying that the “first trainloads of waste” would not roll out
“until the 2040s at the earliest”.
I come back to the requirement under the Energy Act 2008. If we do not have a plan for decommissioning, which must involve geological disposal facilities, and if this is something which is going to take a decade or more, how can we possibly go forward? What we are talking about here is putting the money in. How can we do that without, as it would appear, a legal route forward?
I feel that I should probably say at this point that I am aware of the time on a Thursday afternoon. For anyone who is thinking about their train, I have no intention of moving these amendments this afternoon—for the avoidance of doubt. I am well aware of the position of the largest opposition party, so I know where that vote would end up. However, this is an issue which needs a great deal more exploration and discussion, very clear timelines and an understanding that, if we must have a binding referendum before we have a geological disposal facility, this will be a pretty remote prospect.
Lord Howell of Guildford (Con)
My Lords, I support Amendment 12 from the noble Lord, Lord Ravensdale, and my noble friend Lady Neville-Rolfe, because I am really quite keen to know what the Government’s thinking is on this fascinating and key issue.
First, can they tell us what is going on in Brussels, in the European Commission, where there is a great debate about this very subject? Furthermore, can we get some good information about where German official minds are turning on this issue? As we know, there is a thought going around that Germany, and indeed Switzerland as well—I have been talking to the Swiss and they have confirmed this—are going to delay further closure of their nuclear power which they had turned against. Austria is also following them. Now, as members of the EU, they are all discussing whether in fact the status of investment in future nuclear should be changed in this—to me—desirable way: ESG qualified. There is a very interesting and important matter to be clarified here, and it would be good to hear what the Government are thinking.
Secondly, the whole situation reminds us that the gigantic energy transformation which is being attempted across the planet—to decarbonise energy completely—is an entirely international and global issue. It is a vast undertaking. In fact, it is much bigger than the scale of the Industrial Revolution. It is the biggest change, after 200 years of embedded fossil fuels, not only in the energy industry but in the entire social and industrial structure of countless countries. We are moving on to an entirely new situation, and clearly the status of investment, and the taxonomy concerned in investing huge sums of money through the capitalist system, is absolutely central to this.
Baroness Worthington (CB)
My Lords, I rise to speak in support of Amendment 12 in the names of the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Neville-Rolfe. I will not detain the House for too long.
The question of whether nuclear should be classed as a green investment and therefore within the taxonomy should not be in doubt in any way. The reason it is even discussed is that the European Union turned it into a highly political question and ignored the advice of its own research agency, the Joint Research Centre, which was commissioned to assess whether nuclear should be considered sustainable and therefore be included. It unequivocally found that it should but, for political reasons—mostly centring on Austria’s vehement objection and the politics of Germany—this issue has been dragged out and treated separately, alongside another controversial aspect of the EU taxonomy: whether natural gas should be considered a green investment. To my mind, this was entirely regrettable and could have been avoided.
Since we have left the European Union, we have the good fortune of being able to set the record straight and make it absolutely clear that nuclear should be considered sustainable and green, and should therefore be included in our green finance definitions and the taxonomy. I look forward to the Government and the Treasury confirming as such, because to do anything else would be a great shame and would fly in the face of science. If anyone has had the pleasure of going through a pension screening survey to assess the greenness of their investments, they will note that, in many cases, nuclear is still listed alongside arms trading and pornography; this is a hangover from a different era and needs updating. I look forward to the UK setting the record straight and therefore sending a strong signal to other countries and the European Union.
I will not go into Amendment 14; my view on whether it is the right way to approach the waste issue was clear in Committee. It is a serious issue but we should not overexaggerate it in any way just to achieve the slowing down of this investment.
Viscount Trenchard (Con)
My Lords, I wish to speak in support of Amendment 12, ably proposed by the noble Lord, Lord Ravensdale, and my noble friend Lady Neville-Rolfe. I tried to put my name to it on Tuesday but, because the Marshalled List was printed on Tuesday, it does not appear.
I do not think I need to repeat the arguments that have already been explained, but I want to ask the Minister how quickly the Government can take action to correct the situation in which nuclear projects are excluded from green financing. It was surprising and deeply disappointing that when the Treasury published the UK Government Green Financing Framework in June last year, nuclear projects were specifically excluded. Page 18 of the document states:
“Recognising that many sustainable investors have exclusionary criteria in place around nuclear energy, the UK Government will not finance any nuclear energy-related expenditures under the Framework.”
Does my noble friend not agree that this exclusion sent entirely the wrong signal to the market? The whole point is that “sustainable investors”, as the paper describes them, take their lead from the Government, which influences their ESG policies. Is it not now a matter of some urgency to withdraw this framework and replace it with one that rightly includes nuclear so that this damaging market distortion is removed?
Even the EU, despite continuing opposition from Germany, introduced a Complementary Climate Delegated Act on 2 February. The objective of the EU taxonomy is to step up the transition away from fossil fuels by drawing on all possible solutions to help the union reach its climate goals. The Commission has acknowledged that there is a role for private investment in gas and nuclear activities in the transition. It still does not acknowledge a continuing significant role for nuclear in a climate-neutral future, which it still maintains will be mostly based on renewable energy sources. The technical screening criteria contained in the EU delegated Act and the equivalent regulation referred to in the amendment are still concerned with transition to net zero rather than what is at least as important: to secure the continued supply of energy and electricity that rely on reliable sources of firm baseload power, such as nuclear, which are not dependent on whether the sun shines or the wind blows.
As for Amendments 13 and 14, the noble Baroness, Lady Bennett, exaggerates the nuclear waste issue. My noble friend Lady Bloomfield explained in Committee that the Energy Act 2008 already requires nuclear projects to have in place a funded decommissioning programme. Besides this, as your Lordships are aware, progress is being made in identifying suitable sites for geological disposal facilities.
I remind the noble Baroness that all the used nuclear fuel ever produced in the world since the 1950s would fit into one football pitch to the height of approximately 10 yards, so I do not think the trains she talked about will have very many wagons. Has she ever expressed any concern about the massive costs and energy requirement that will be incurred in disposing of millions of wind turbines and solar panels when they reach the end of their operational lives? Furthermore, France and some other countries reprocess and recycle nuclear fuel, which can make it even more productive. Some advanced reactor technologies are designed to run on used fuel. Happily, the noble Baroness has said she will not move her Amendments 13 and 14, which is good news, but if she had I would have voted against them.
Lord Oates (LD)
My Lords, I am happy to give Amendment 11, in the name of the noble Lord, Lord McNicol, the support of these Benches. It is particularly important given the failures of the early cost recovery model in the United States. Whatever one’s view of nuclear energy, we really do not want to end up spending more than $20 billion, like they did, and getting no new nuclear plants at all. South Carolina in particular spent $9 billion before Westinghouse went bankrupt. If we are to go ahead with this, we certainly need to ensure that it delivers something at the end of it.
On Amendment 12, I will not go into the detailed debate about the taxonomy issue. The one thing I will say, in the context of the amendments from the noble Baroness, Lady Bennett of Manor Castle, is that whether or not nuclear is regarded as a sustainable means of producing energy, it is certainly not clean. It produces significant amounts of waste that have to be dealt with. Nearly 70 years after our first nuclear plant came online, there has been a scandalous failure to provide a permanent solution. We heard from the noble Viscount, Lord Trenchard, that discussions are ongoing about the geological disposal facility. I am sure we will hear more from the Minister on that. This has been going on for years and years and there is no permanent solution.
I note that the noble Baroness, Lady Bennett, is not going to move her amendments. We certainly discussed this in some detail in Committee so I will not dwell on it further, but the nuclear industry’s failure to take its responsibilities seriously in this way is notable. Indeed, until the Nuclear Decommissioning Authority was set up there was no national plan to deal with waste at all. It has done a great job trying to quantify the level of the situation—of course, we have seen bills and disposal costs go up and up year on year—but it is a really important point and I am grateful to the noble Baroness for bringing her amendments to the attention of the House.
Lord Callanan (Con)
I thank noble Lords for their contributions to what will hopefully be the final grouping on this Bill. I thank all the hardy souls who have lasted throughout the Committee and Report stages to get to this final stage.
Let me start with Amendment Neville—you can tell it is the final stage; the amendment of the noble Lord, Lord McNicol, is what I should have said. Why did I say that? In my mind, they sounded the same: Lord McNicol and Amendment 11.
Let me state to the noble Lord that I share his ambition to maximise the chances that a nuclear RAB project will commence or continue generation in the unlikely event of an insolvency, therefore preventing sunk consumer costs. It is for this very reason that we have introduced a special administration regime for nuclear RAB projects, with the aim of ensuring that consumers reap the benefits of the low-carbon electricity generated from a nuclear power station which they helped to build. In light of Amendment 11, I consider that it would be helpful to provide the noble Lord with a clear explanation as to the exit routes available to a special administrator under this legislation, and how these would not impinge on the ability to bring a nuclear power station under public control, if that is in the best interests of consumers and taxpayers.
Let me first reaffirm that special administration is a court-administered process and a nuclear administrator would be an officer of the court. It is the nuclear administrator, under the supervision of the court, who would be tasked with exploring all viable options for ensuring that the objectives of the administration are met. This is supported by the Secretary of State, who is able to provide funding and does have options for bringing the administration to an end in certain circumstances, as I will now explain.
The first route available to the administrator is that the company is rescued as a going concern. This is the preferred option for achieving the objective, save in certain circumstances, and would ensure that normal service was resumed and the plant would continue construction or generation. If this is the case and the objective can be achieved, then the Secretary of State, Ofgem or the administrator may then apply to the courts to end the special administration order.
Should this not be feasible, the administrator’s second option would be to seek to transfer the company’s assets and liabilities to a privately or publicly owned company or companies. This is called an energy transfer scheme and is provided for by Schedule 21 to the Energy Act 2004, as applied by Clause 33 of the Bill. While the Secretary of State must approve an energy transfer scheme, the court retains overall responsibility for the process as it appoints the time from which a scheme would take effect.
It is considered that, as the nuclear administrator will need to achieve the objective of the administration order as quickly and efficiently as possible, in practice this may mean that an energy transfer scheme is explored immediately if this is the most viable means to achieve the objective of the administration. This may be supported by the Secretary of State where, amongst other matters, it is in the public interest.
Should neither of the options I mentioned be possible or in the best interests of taxpayers or consumers, Section 40 of the Energy Act 2004 would establish the option of a nuclear transfer scheme. This is subject to approval from Her Majesty’s Treasury and is intended to deal with circumstances where, for example, during the plant’s operational phase, for reasons of public safety or to minimise the costs to the taxpayer, the Nuclear Decommissioning Authority is given responsibility for decommissioning the plant.
Lord McNicol of West Kilbride (Lab)
My Lords, I am really looking forward to reading Hansard tomorrow and I compliment the Minister on hiccuping his way through the whole of his response, as with his introduction.
I thank the Minister for his detailed explanation and response to my Amendment 11 and for committing those words to your Lordships’ House. I also thank all other noble Lords for their participation in the debate, especially the noble Baroness, Lady Neville-Rolfe, on the next steps. Hinkley has been a good start; RAB, if this measure makes it through both Houses, is a vast improvement on CfDs; and, hopefully, Sizewell will be another step forward. But there is still more to do. The noble Baroness’s mention of SMRs and future large-scale civil nuclear developments is important. With that, I beg leave to withdraw the amendment.
Nuclear Energy (Financing) Bill
Wednesday 30th March 2022
(2 years ago)
Lords ChamberRead Full debate Nuclear Energy (Financing) Act 2022 Read Hansard Text Amendment Paper: HL Bill 89-R-I Marshalled list for Report - (22 Mar 2022)
Royal Assent
Thursday 31st March 2022
(2 years ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: HL Bill 140-I Marshalled list for Committee - (30 Mar 2022)