All 5 contributions to the Nuclear Energy (Financing) Act 2022 (Ministerial Extracts Only)

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Nuclear Energy (Financing) Bill

(Limited Text - Ministerial Extracts only)

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2nd reading
Wednesday 3rd November 2021

(9 months, 2 weeks ago)

Commons Chamber
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This text is a record of ministerial contributions to a debate held as part of the Nuclear Energy (Financing) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Greg Hands Portrait The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
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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 Portrait Greg Hands
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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 Portrait Alan Brown
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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 Portrait Greg Hands
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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 Portrait John Redwood (Wokingham) (Con)
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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 Portrait Greg Hands
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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 Portrait Neil Parish (Tiverton and Honiton) (Con)
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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 Portrait Greg Hands
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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 Portrait Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
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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 Portrait Greg Hands
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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.

Mark Tami Portrait Mark Tami (Alyn and Deeside) (Lab)
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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.

Mark Tami Portrait Mark Tami
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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 Portrait Greg Hands
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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 Portrait Greg Hands
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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 Portrait Mark Tami
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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 Portrait Greg Hands
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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 Portrait Greg Hands
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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 Portrait Mark Tami
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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 Portrait Greg Hands
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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 Portrait Mark Jenkinson (Workington) (Con)
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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 Portrait Greg Hands
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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—

Jonathan Edwards Portrait Jonathan Edwards
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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 Portrait Jill Mortimer (Hartlepool) (Con)
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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?

--- Later in debate ---
Greg Hands Portrait Greg Hands
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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.

Desmond Swayne Portrait Sir Desmond Swayne (New Forest West) (Con)
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When will I be able to get one of these little modular, Rolls-Royce reactors?

Greg Hands Portrait Greg Hands
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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 Portrait David Morris (Morecambe and Lunesdale) (Con)
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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 Portrait Greg Hands
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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.

Alan Brown Portrait Alan Brown
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Will the Minister give way?

Jonathan Edwards Portrait Jonathan Edwards
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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 Portrait Greg Hands
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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.

Jonathan Edwards Portrait Jonathan Edwards
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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 Portrait Greg Hands
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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 Portrait Greg Hands
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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 Portrait Greg Hands
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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 Portrait Angus Brendan MacNeil
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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 Portrait Greg Hands
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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.

Alan Brown Portrait Alan Brown
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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.

Angus Brendan MacNeil Portrait Angus Brendan MacNeil
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Will the Minister give way?

Greg Hands Portrait Greg Hands
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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.

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Alan Brown Portrait Alan Brown (Kilmarnock and Loudoun) (SNP)
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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.

George Freeman Portrait The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)
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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 Portrait Alan Brown
- Parliament Live - Hansard - - - Excerpts

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.

--- Later in debate ---
George Freeman Portrait The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)
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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—

Alan Brown Portrait Alan Brown
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Will the Minister give way?

George Freeman Portrait George Freeman
- Hansard - - - Excerpts

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.

18:36

Division 101

Ayes: 319


Conservative: 263
Labour: 53

Noes: 44


Scottish National Party: 23
Liberal Democrat: 9
Labour: 4
Independent: 3
Alliance: 1
Social Democratic & Labour Party: 1
Plaid Cymru: 1
Green Party: 1
Alba Party: 1

Question accordingly agreed to.
--- Later in debate ---
18:52

Division 102

Ayes: 256


Conservative: 255

Noes: 80


Labour: 52
Scottish National Party: 20
Liberal Democrat: 4
Independent: 2
Alliance: 1
Social Democratic & Labour Party: 1
Alba Party: 1

nuclear energy (financing) bill: MONEY

Nuclear Energy (Financing) Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
Report stage & 3rd reading
Monday 10th January 2022

(7 months, 1 week ago)

Commons Chamber
Report stage Page Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 10 January 2022 - (10 Jan 2022)

This text is a record of ministerial contributions to a debate held as part of the Nuclear Energy (Financing) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Alan Whitehead Portrait Dr Whitehead
- Hansard - - - Excerpts

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.

Greg Hands Portrait The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
- Parliament Live - Hansard - - - Excerpts

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.

Greg Hands Portrait Greg Hands
- Parliament Live - Hansard - - - Excerpts

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.

--- Later in debate ---
Alan Brown Portrait Alan Brown
- Hansard - - - Excerpts

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 Portrait Greg Hands
- Hansard - - - Excerpts

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.

Alan Brown Portrait Alan Brown
- Hansard - - - Excerpts

Will the Minister give way once more?

Greg Hands Portrait Greg Hands
- Hansard - - - Excerpts

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.

Wera Hobhouse Portrait Wera Hobhouse
- Parliament Live - Hansard - - - Excerpts

Will the Minister give way?

Greg Hands Portrait Greg Hands
- Hansard - - - Excerpts

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.

Greg Hands Portrait Greg Hands
- Hansard - - - Excerpts

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 Portrait Alan Brown
- Parliament Live - Hansard - - - Excerpts

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.

--- Later in debate ---
18:54

Division 152

Ayes: 204

Noes: 316

Clause 6
--- Later in debate ---
19:07

Division 153

Ayes: 207

Noes: 315

More than two hours having elapsed since the commencement of proceedings on the programme motion, the proceedings were interrupted (Programme Order, this day).
--- Later in debate ---
19:19

Division 154

Ayes: 207

Noes: 315

--- Later in debate ---
Kwasi Kwarteng Portrait The Secretary of State for Business, Energy and Industrial Strategy (Kwasi Kwarteng)
- Hansard - - - Excerpts

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 Portrait Jonathan Edwards
- Hansard - - - Excerpts

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?

--- Later in debate ---
Kwasi Kwarteng Portrait Kwasi Kwarteng
- Hansard - - - Excerpts

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.

Andrea Leadsom Portrait Dame Andrea Leadsom (South Northamptonshire) (Con)
- Hansard - - - Excerpts

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 Portrait Kwasi Kwarteng
- Parliament Live - Hansard - - - Excerpts

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 Portrait John Redwood
- Hansard - - - Excerpts

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 Portrait Kwasi Kwarteng
- Hansard - - - Excerpts

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.

Alan Brown Portrait Alan Brown
- Hansard - - - Excerpts

Will the Secretary of State give way?

Kwasi Kwarteng Portrait Kwasi Kwarteng
- Hansard - - - Excerpts

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 Portrait Alan Brown
- Hansard - - - Excerpts

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 Portrait Kwasi Kwarteng
- Hansard - - - Excerpts

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.

--- Later in debate ---
20:00

Division 155

Ayes: 458

Noes: 53

Bill read the Third time and passed.

Nuclear Energy (Financing) Bill

(Limited Text - Ministerial Extracts only)

Read Full debate

This text is a record of ministerial contributions to a debate held as part of the Nuclear Energy (Financing) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Moved by
Lord Callanan Portrait Lord Callanan
- Hansard - - - Excerpts

That the Bill be read a second time.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
- Hansard - - - Excerpts

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.

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Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Baroness Bennett of Manor Castle (GP)
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I thank the Minister for giving way. Very briefly, can he identity those four areas?

Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord McNicol of West Kilbride (Lab)
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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 Portrait Lord Callanan (Con)
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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.

Bill read a second time and committed to a Grand Committee.

Nuclear Energy (Financing) Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
Committee stage
Tuesday 8th March 2022

(5 months, 2 weeks ago)

Grand Committee
Committee stage Page Read Hansard Text Amendment Paper: HL Bill 89-I Marshalled list for Grand Committee - (4 Mar 2022)

This text is a record of ministerial contributions to a debate held as part of the Nuclear Energy (Financing) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Lord Oates Portrait Lord Oates (LD)
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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.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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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.

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Baroness Wilcox of Newport Portrait Baroness Wilcox of Newport (Lab)
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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 Portrait Lord Callanan (Con)
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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.

Baroness Watkins of Tavistock Portrait The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
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There is a Division in the House. The Committee will adjourn and resume as soon as agreed after the Members present have voted.

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Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord Foster of Bath (LD)
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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.

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Lord Foster of Bath Portrait Lord Foster of Bath (LD)
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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 Portrait Lord Callanan (Con)
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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.

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We support including sensible transparency requirements in the Bill and are yet to be convinced that the current draft strikes the right balance. Amendment 25 would require the Secretary of State to lay before Parliament a statement on proposed licence modifications, under Clause 6. Given that the use of the power is limited to facilitating the design, construction, commissioning and operation of nuclear projects, the statement would essentially have to show the Secretary of State’s working out and wider thinking. We hope the Government will take some of these suggestions seriously and come forward with proposals between now and Report.
Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord Oates (LD)
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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.

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Baroness Wilcox of Newport Portrait Baroness Wilcox of Newport (Lab)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Oates (LD)
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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.

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Lord Foster of Bath Portrait Lord Foster of Bath (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Foster of Bath (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Baroness Wilcox of Newport (Lab)
- Hansard - - - Excerpts

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

(Limited Text - Ministerial Extracts only)

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Report stage
Thursday 24th March 2022

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This text is a record of ministerial contributions to a debate held as part of the Nuclear Energy (Financing) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
- Hansard - - - Excerpts

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.

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Lord Oates Portrait Lord Oates (LD)
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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 Portrait Lord Callanan (Con)
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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.

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16:54

Division 6

Ayes: 107


Labour: 48
Liberal Democrat: 41
Independent: 8
Crossbench: 8
Green Party: 2

Noes: 126


Conservative: 116
Crossbench: 6
Independent: 3
Ulster Unionist Party: 1

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17:14

Division 7

Ayes: 93


Labour: 42
Liberal Democrat: 36
Crossbench: 5
Independent: 4
Green Party: 2

Noes: 123


Conservative: 114
Crossbench: 6
Independent: 2
Ulster Unionist Party: 1

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Lord Oates Portrait Lord Oates (LD)
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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 Portrait Lord Callanan (Con)
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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.