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Ms Margaret Ritchie (South Down) (SDLP)
It is a pleasure to serve under your chairmanship today, Mrs Brooke.
In the debate on the future nuclear programme, our inability to learn from past mistakes is sometimes staggering. I well remember the 2008 Public Accounts Committee report that drew attention to the vastly underestimated cost of nuclear power and highlighted the nuclear industry’s tendency to lumber the taxpayer with an ever-increasing and seemingly endless bill. The fallacy of committing billions more pounds of public expenditure to nuclear energy has never been more apparent than it is now. Whether it is the disastrous consequences of the Japanese earthquake, Germany’s decision to end investment in nuclear or, closer to home, the billions of pounds of subsidies being squandered at the uneconomical mixed oxide—MOX—plant at Sellafield and the decision of RWE, SSE and E.ON to pull out of the market, it is clear that nuclear is not the energy source on which the Government should be concentrating.
Hon. Members may be wondering why an MP from a constituency in Northern Ireland has a particular interest in this subject. I represent the constituency of South Down, which is straight across the Irish sea from Sellafield, and we have had many concerns over the years. I am very pleased that the Minister is here to respond to the debate. Although its main focus will be the economic costs, I must mention the impact of nuclear on public safety, which cannot be separated from the economic argument.
The real point in looking at a disaster such as Fukushima in Japan is not necessarily to try to draw a direct parallel to what might happen here, but rather to use it to illustrate the fact that nuclear power can never be made entirely safe. There will always be unforeseen contingencies that have potentially disastrous consequences. People in my constituency and across Ireland have been living in the shadow of such a possibility because of the Sellafield plant, which has been considered the most radioactive site on the planet for more than 40 years.
Over the plant’s lifespan, there have been hundreds of recorded safety breaches and high levels of indiscriminate discharges of radioactive waste into the Irish sea. The MOX plant at Sellafield, which was built to process spent fuel from the old thermal oxide reprocessing plant or THORP—itself the subject of an international nuclear event scale level 3 leak—has also required high levels of hazardous transportation of plutonium dioxide through the Irish sea to Cumbria. All this for a plant that was disastrously inefficient and had to be closed following its financial failure. It is not therefore surprising that public opinion in my constituency has been consistently anti-nuclear, and it must be recognised that a major incident will not heed, or relate to, any borders on our island. There is also concern about the possibility of underground storage for the world’s radioactive waste.
It was against the backdrop of such catastrophic risk, as demonstrated by the disaster at Fukushima, and with a more realistic appraisal of the spiralling cost of nuclear power provision, that Chancellor Angela Merkel and the German Parliament decided to pull out of the nuclear market and to invest in a truly secure, low-carbon renewable energy future. Given where I come from, I want this Parliament to move in a similar direction.
Nuclear power development has always required high levels of public subsidy. The Minister should know better than anyone the deferred cost of an ill-thought-out nuclear programme, as the Nuclear Decommissioning Authority spends £1.7 billion a year on managing nuclear waste and other liabilities from Britain’s current nuclear power programme. That amounts to more than half the budget of the Department of Energy and Climate Change, which is a staggering legacy for the taxpayer and one to which the previous Secretary of State frequently alluded.
The Nuclear Decommissioning Authority was also responsible for closing the MOX plant at Sellafield. That plant cost the taxpayer £1.6 billion, and was another disastrous legacy of the nuclear programme. Its existence also meant that a constant stream of hazardous material was being shipped daily through the Irish sea and along the Irish coast. That was all for a plant designed to process 120 tonnes of MOX a year, but which instead produced the grand total of six tonnes over its entire lifespan.
On the draft Energy Bill 2012 and the future nuclear programme, sadly, there are warning signs that this Government are prepared to repeat the same mistakes. I fear that people will be having a similar debate in 20 years’ time. It could not be clearer, given current record oil and petrol prices, that reliance on imported fossil fuels is not serving customers, business or the wider economy. Although I commend the stated aim in the Government’s draft Energy Bill to decarbonise the electricity sector, the path set out in the legislation seems to prioritise subsidising nuclear fuel, and people will continue to be vulnerable to high prices.
In Northern Ireland, more people every year are falling into fuel poverty, and the draft Bill was an opportunity to make the bold changes necessary to reform the energy market with a view to the long-term needs of the economy. Consumers and businesses are suffering and they need a coherent strategy that delivers clean, green jobs and sustainable fuel prices. Sadly, the draft Bill appears to do little more than nod to the renewable industry, while winking at the nuclear industry. The Government seem intent on delivering more of the same, especially in their continued obsession with the expensive and ultimately unsafe energy source that is nuclear power.
Mr Andrew Smith (Oxford East) (Lab)
I congratulate the hon. Lady on securing this important debate, and I agree with all the points in her extremely cogent argument. Is not one of the many risks that consumers, and the economy generally, will get locked into artificially high prices for electricity as the only means of making it viable for energy companies to undertake the huge investment necessary to build nuclear plants?
Ms Ritchie
I thank the right hon. Gentleman for his intervention, and I agree with that thesis. I want to make a little progress.
David Mowat (Warrington South) (Con)
I, too, congratulate the hon. Lady on securing this debate. She is talking about the level of subsidy in relation to the current Bill and in general. Does she not agree that the level of subsidy that will be proposed for nuclear is considerably lower than that for solar, offshore wind or, indeed, onshore wind? How does that equate with her concerns about fuel poverty, because that seems a little odd?
Ms Ritchie
I thank the hon. Gentleman for his intervention. I take what he says, but I am obviously putting forward a different thesis. I disagree with his fundamental point, but perhaps I can provide some explanation, if he will let me continue.
The Government are clearly going in the face of the energy industry, given the decision by various companies to pull out of the future nuclear programme. Even EDF, the only remaining player in the game, has seemingly adopted a lukewarm approach to the new build programme and has postponed its commitment to it, saying only that it will decide at the turn of the year. To answer the hon. Gentleman’s question on cost, I come from the position of favouring renewables; I have a strong belief in them, as opposed to nuclear, given the geographical position that I come from. EDF’s approach is hardly a ringing endorsement, from the only company that has even tentatively committed to the future nuclear programme. It seems that no serious player in the industry thinks that future investment can go ahead without a serious public subsidy. Indeed, no nuclear plant has ever been developed without large amounts of public subsidy, and it is obvious that the companies will not enter into the future nuclear programme without such assurances.
The Government’s proposal in the draft Energy Bill for contracts for difference appears to be little more than a subsidy through the back door. CFDs allow utility firms to levy a top-up charge should the price fall below a certain level. If the cost of nuclear power is to be cheaper than the current market rate, or at least competitive, as EDF and the Government maintain, why is the complex mechanism of CFDs required at all? In the words of Keith MacLean, policy director of Scottish and Southern Energy, which has itself pulled out of the future nuclear programme:
“This complex and messy CFD policy looks like an attempt to try to hide the state aid from the European Commission and the subsidy from political opponents of new nuclear.”
David Mowat
CFDs are necessary because nuclear is considerably more expensive than either coal or gas, even though it is many multiples cheaper than most large-scale renewables. I find the hon. Lady’s position difficult to understand, given her concern about fuel poverty.
Ms Ritchie
I thank the hon. Gentleman for his intervention. I have made it clear that I am opposed to nuclear power, which, as he has said, is very expensive—it has required Government subsidy to sustain it, and I fundamentally disagree with that.
Guto Bebb (Aberconwy) (Con)
I congratulate the hon. Lady on securing this debate. Her position is contradictory, because she seems to be complaining about subsidy for the nuclear industry, yet applauding it for the renewable sector. Surely we should have a level playing field. I share the hon. Lady’s concerns about fuel poverty, but in my part of north Wales we have poverty because our nuclear industry is closing down. If we do not get a replacement for the nuclear capacity in north Wales, we will see real poverty in many parts of north-west Wales.
Ms Ritchie
I understand the concerns of hon. Members whose constituencies have nuclear facilities, but I see the issue from a different perspective. We have witnessed the harmful effects of nuclear on the environment. I will not talk about its harmful effects on health, because I do not think that the evidential base has been built up sufficiently, but it has definitely had an effect on the environment. There has been too much public subsidy for nuclear, and I firmly believe in and support renewables.
How can CFDs be seen as anything other than a veiled subsidy, and how is that coherent with the coalition agreement, which ruled out any such subsidy? Has the Minister consulted on the potential conflict with European Union state aid rules? Is he able to rule out a potential long-running wrangle with the EU, which would do nothing other than bring more uncertainty to the sector and to renewable energy investment at this vital time?
No nuclear plant has ever been built without state subsidy, and such plants simply cannot exist in the open market. There is a pattern of activity to underscore that, because every statement from and move by the industry is a tacit admission of that fact. We must learn from past mistakes and acknowledge that the headline price attached to nuclear power is always far below the eventual cost once decommissioning and waste disposal have been accounted for. It not only presents a potential environmental catastrophe, but leaves a radioactive economic legacy. It is not good enough to buy now and leave taxpayers and future Governments to foot the bill years down the line.
In summary, is the Minister not concerned that three of the four major players in the nuclear new build programme have pulled out; that the fourth, EDF, has expressed serious concerns; that no nuclear plant and subsequent decommissioning has ever been achieved without a large Government subsidy; and that the draft Energy Bill’s proposals have been considered by many in the industry as tacit admission that the new build programme is little more than a subsidy through the back door that may contravene EU state aid regulations?
It is often said in relation to energy policy that the Government should not try to pick winners, but it seems as though they are determined to pick a loser. I do not want us to be left with a potential environmental catastrophe that we will have to subsidise for years to come. Instead, we need a lasting commitment to truly renewable energy sources and a green new deal. The coalition Government have underscored a commitment to the Green investment bank and to green and renewable resources. I am firmly committed to that and I look forward to the Minister’s response to the various issues that I have raised. I understand the points made by hon. Members who reside in Britain and have nuclear facilities in their constituencies that provide jobs, but I see the issue from a different geographical and political perspective.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
It is a pleasure to serve under your chairmanship, Mrs Brooke, and I am grateful to the hon. Member for South Down (Ms Ritchie) for securing this timely debate. Transparency and openness are an important part of the discussions that we need to have about nuclear. In that context, I want to start by making a couple of corrections to what she said. We are not down to just one major nuclear player alongside EDF. Centrica, the UK’s biggest energy company, is a partner in its consortium, and other major European players, such as Gaz de France and Iberdrola, as well as other international players, are considering how they can be part of the nuclear renaissance in the United Kingdom. This is an area that has attracted a significant amount of investment from major companies, and it continues to do so.
On another issue of transparency—to pick up on a point made by my hon. Friend the Member for Warrington South (David Mowat)—I hope that the hon. Lady would also accept that, if she rules out the least costly large-scale, low-carbon source of generation, the consequence for her constituents, particularly those who are off-gas-grid customers and have a greater reliance on electricity, would be a rise in their bills, because of their reliance on higher-cost sources of generation. That is an integral part of understanding the economics of this debate.
The challenge of building new nuclear is undoubtedly significant. Since 1995, when Sizewell B began generating electricity, no new nuclear power station has been built in Britain, which demonstrates the challenge of ensuring that the first new nuclear power station is followed by a full nuclear programme. Although new nuclear power stations are being built elsewhere around the world, some of them have gone over time and over budget.
Tackling the nuclear legacy is a national priority, as the hon. Lady has said. We are keen to see it dealt with with a degree of vigour that has never been seen before. We want to ensure that the current and previous UK nuclear fleet is cleaned up and decommissioned properly as the various sites cease operation. To do that, we must understand and learn from the lessons of the past on nuclear decommissioning.
That is why the previous Secretary of State, the right hon. Member for Eastleigh (Chris Huhne), commissioned a report, which was published in March, by Professor Gordon MacKerron of the university of Sussex, on the history of managing nuclear wastes and decommissioning. Professor MacKerron paints a warts-and-all picture of the UK’s nuclear history and explains why we have such a difficult legacy of old facilities and waste to manage. He found that delays by Government and public bodies in tackling nuclear liabilities led to a progressive escalation of costs and a deterioration in facilities, which has only begun to be addressed in recent years.
The cost of decommissioning those old nuclear facilities today is high for two primary reasons. The first is the post-war military and research origins of the UK nuclear industry as this country raced to build a nuclear deterrent. We are dealing with many of those costs today. The second reason is that those responsible—in Government and industry—gave too little priority to clean-up. As the hon. Lady has said, half the Department of Energy and Climate Change budget is spent on that, and the amount will rise to two thirds of our budget in due course. We are absolutely adamant that there should be no financial constraints on dealing with those legacy matters. To all of us involved in these policy issues, an unparalleled commitment to clearing up the legacy of the past is an integral part of having permission for a new-build nuclear programme in the future.
It is necessary to understand that the UK’s civil nuclear legacy is quite unique, as it is made up of a range of experimental facilities created up to 50 years ago. The poor condition of some of the estate and the high cost of dealing with it now reflects the unfortunate fact that, historically, decommissioning challenges were overlooked and ignored. However, that also means we are moving into the sector ahead of many other countries. There is a very important business opportunity for British companies in the sector to win international contracts as other countries start their decommissioning programmes as well.
Of course, with new nuclear power will come nuclear waste. The cost of managing our existing nuclear liabilities is significant. The current discounted estimate of the cost of managing that programme is some £50 billion. That is why we are so committed to finding a long-term, cost-effective solution for managing and disposing of our radioactive waste going forward. The Government’s policy for the longer term is a safe and secure management of higher-activity radioactive waste by placing it in a geological disposal facility. That is the internationally accepted way forward and it is the Government’s policy, which continues on from the work of the previous Administration.
Ms Ritchie
On the potential disposal site for radioactive waste, will the Minister indicate where it might be located and which countries the waste might come from? There are concerns in my constituency about that because of the geological fault line that lies in Cumbria and the clear, direct parallel with my constituency straight across the Irish sea in South Down.
Charles Hendry
Let me give the hon. Lady a complete assurance that we are looking at managing our own legacy waste, which includes one of the biggest stockpiles of plutonium in the world. Alongside that we are looking at whether there are ways to reuse that plutonium as a fuel. We are looking for volunteer communities and have identified some in Cumbria who are prepared to work with us to see where appropriate sites might be. However, that would only happen if we are absolutely clear about the geological safety of the sites being proposed. We are just beginning to carry out such a process. We want to move it forward faster than has been the case so far, but that can only happen if we are absolutely satisfied about the environmental, geological and geographical matters that relate to it. Builders of new plant will have to put funds into an independent fund to ensure that their own costs associated with their nuclear waste in due course can be managed within that programme. This is an integral part of the process moving forward.
I want to focus now on why I believe we need new nuclear in this country and how that ties in with the concerns the hon. Member for South Down has raised about market reform and why that is such an important part of this process. We estimate that in order to have a low-carbon economy where we have sufficient generation to ensure security of supply we will need up to 70 GW of new low-carbon generation by 2030. To put that in context, the ambition of the industry in the nuclear sector is for 16 GW by 2025. The overwhelming focus, therefore, is on a range of other low-carbon technologies alongside nuclear, including carbon capture and harnessing our own renewables. It is completely wrong to suggest that we are focusing only on nuclear. We see that as a very important element within a much wider and more balanced programme.
Guto Bebb
The point my hon. Friend has just made is extremely important because sometimes the debate is structured in terms of renewables versus nuclear. That is not the issue. For example, in north-west Wales, the commitment has been made to develop all sorts of energy sources, not just nuclear.
Charles Hendry
I am delighted to respond to my hon. Friend’s point. I recently had the chance to be in Anglesey, which is close to his constituency, to see its vision as an energy island. An immense amount of work is going on there by a range of industrial and educational partners, the local authority and others to create a very compelling case for investment in renewables alongside nuclear as part of a balanced mix.
The process of market reform is fundamental to achieving that. We have structured things in a way that we believe delivers the necessary investment at the lowest cost to consumers. The hon. Lady highlighted one part of the contract for difference and said that if the price drops, more will be paid. However, the corollary of that is that if the price is high, we will claw back the contribution. Investors will have continuity, certainty and predictability of income stream, which reduces the cost of capital and of the building programme to consumers.
In answer to the point made by the right hon. Member for Oxford East (Mr Smith) in his intervention, such an approach is necessary because we must secure twice as much investment each and every year of this decade, compared with the previous decade, to keep the lights on. The matter is a national emergency in terms of our energy security and is absolutely critical.
Charles Hendry
I hope that my hon. Friend will understand if I do not give way in the last remaining moments. I think that I have picked up on some of his points. I completely agree with him that market reform is the best way of delivering for consumers and that having a range of policies and technologies is the best way of delivering security of supply.
On new build, as on decommissioning, we are keen to control costs. The progress of construction of the first new nuclear power station in the UK will be watched carefully by potential investors and developers. We know that an inability to deliver to time and on budget will affect the level of interest in nuclear new build in the future, and that would severely limit the potential for a new nuclear programme.
If we are to maintain strong public support—this is one of the few countries where public support for nuclear has grown since the Fukushima accident in Japan—we must continue to demonstrate that we are learning from experiences around the world. Implementing lessons from other nuclear power plant construction projects has the potential to reduce the cost in the United Kingdom, reduce the construction risks, help to validate timings and identify design changes that will allow for more efficient construction practices. Some of those are already being dealt with, and the whole process of the generic design assessment programme has been absolutely at the heart of that. We must ensure that we have identified the exact nature of the new reactors to be built before we start taking that forward.
One of the most important aspects of the whole programme has been the work to take the matter out of politics and carry on Lord Hutton’s work when he was Secretary of State. He did an enormous amount to identify the challenges and give security to investors in enabling them to understand that there is a continuity of Government approach here that will secure the investment.
Finally, I want to deal with the issue of subsidy. Let me make it absolutely clear where we stand on the matter. The coalition agreement set out clearly that nuclear power plants should be taken forward without public subsidy and, in a written statement to Parliament in October 2010, we reconfirmed that policy. There will be no market support to a private sector new nuclear operator for electricity supplied or capacity provided unless similar support is also made available more widely to other types of generation.
Within that, it is implicit that we recognise that nuclear is the lowest-cost large-scale, low-carbon source of generation and that, therefore, additional support will need to be made available to those emerging technologies in the renewable sector. They will be a very important part of the process. Any such change requires state aid approval. We have started to engage with the European Commission on that and we believe that approval will be achieved because the Government are not providing support; they are providing a mechanism whereby investors can get a return on their investment.
We see nuclear as an important part of our energy future, which has the potential to bring an enormous number of jobs to the United Kingdom. We have already seen the university of Oxford, which is represented in part by the right hon. Member for Oxford East, harnessing its own nuclear skills and working in coalition and partnership with the university of Bristol. Many other universities are coming forward, and a tremendous number of companies recognise that they can benefit from the programme.
I assure the hon. Member for South Down that we are looking at the matter very much in the round. We see the benefits of nuclear power, but we will only take that forward when we are completely convinced about the wider issues. Market reform is an important part of that process and will be critical to securing the necessary investment. The wider range of issues—safety and security matters and long-term waste management—are also important. We have a programme in place that comprehensively addresses those and I hope that I have been able to help to reassure her on those points.