The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I would like to make a statement on the UK’s nuclear energy programme. I am pleased to inform the House that the Government and EDF have reached broad commercial agreement on the key terms of a proposed investment contract for a new nuclear power station at Hinkley Point in Somerset. This paves the way for the construction of Hinkley Point C—the first nuclear power station in the UK for a generation.
Nuclear power has been part of Britain’s energy mix since the 1950s, responsible at points for as much as a quarter of our electricity, but since Sizewell B connected to the grid in 1995, no new nuclear power stations have been commissioned. Eight of the nine operational nuclear power stations in the UK will reach the end of their planned life in the next decade. So the agreement today is a demonstration of the Government’s commitment to a new fleet of nuclear power stations to replace those due to close and to protect Britain’s future energy security.
A contract for Hinkley Point C under the key terms set out today would provide significant benefits for the UK, including up to 25,000 jobs for skilled workers over the course of construction and 900 long-term jobs during the 60-year lifespan of the plant; and a £16 billion injection into the economy, with the potential for British firms to get the majority of the work, and over £4.5 billion paid in corporation tax. EDF estimates that £100 million will go into the local economy every year during peak construction.
Hinkley Point C would supply a stable source of low-carbon, climate-friendly power to nearly 6 million homes—nearly twice the number of homes in London—and would supply 7% of the United Kingdom’s electricity by 2025. It would reduce emissions by the equivalent of about 5% of the UK’s annual carbon dioxide emissions from energy supply compared with unabated gas-fired generation. It would increase energy security and resilience from a safe, reliable, home-grown source of electricity, reducing electricity bills by about 10% compared with a non-nuclear future. With clean-up costs included from the outset, we would be avoiding the mistakes of the past. This is good news for jobs, good news for the economy, good news for bill-payers, good news for energy security, and good news for the environment.
This announcement also represents a significant vote of confidence in the Government’s reforms to the electricity market. We are creating one of the most attractive electricity investment markets in the world, driving an increase in low-carbon technology, and delivering the modernised infrastructure that will provide energy security and cut carbon emissions in the years to come.
Before I go into the details of the terms of the agreement, I want to put on record my gratitude to all who have worked so hard to bring us to this point, in EDF and in the Government, including those in my Department. I specifically thank Lord Deighton and his team for the strong contribution that they have made supporting the DECC negotiating team. I believe that, working together, we have agreed the basis of an arrangement that would provide a good deal for UK consumers. It would meet the requirement for value for money, accord with our “no public subsidy” policy, and provide an attractive proposition for EDF and its investors, offering a reasonable rate of return for the risks that they are taking.
Let me set out the key terms on which broad commercial agreement has been reached. Hinkley Point C would be the first nuclear power station to be built under the new system of contracts for difference that is being introduced by the Energy Bill. CfDs provide low-carbon energy suppliers with predictable future revenues, making it easier and cheaper to secure development investment and finance while protecting consumers should prices rise. The duration of the payments under the CfD for Hinkley Point C would be 35 years, which is about 60% of the 60-year operating life of the plant. That is proportionally similar to the length of the CfDs that are being offered to most renewable technologies.
Under CfDs, low-carbon generators receive a stable price for the electricity that they sell, which is known as the strike price. We have agreed a strike price of £89.50 per megawatt-hour, fully indexed to the consumer prices index. Hinkley Point C will be the first of the new European pressurised reactors in the United Kingdom. This strike price benefits from an upfront reduction of £3 per megawatt-hour, on the basis that EDF’s subsidiary NNB Generation Company Ltd would share the “first of kind” costs of the European pressurised reactors on the Hinkley Point C and Sizewell C sites. If a final investment decision on Sizewell C were not made, the strike price for Hinkley would be £92.50.
An agreement on those terms meets the Government’s value for money requirement. Hinkley Point C would compete with other low-carbon technologies, including onshore wind—the cheapest large-scale renewable—and with new unabated gas plant, including carbon costs, that commission in the same time frame.
Other terms on which broad commercial agreement has been reached provide a series of protections for both sides that together represent an appropriate allocation of risks, including gain share arrangements whereby, if the developer achieves savings during construction or through refinancing or equity sales, the strike price will be reduced; operational cost review arrangements, including reviews after 15 and 25 years to reassess operating costs and adjust the strike price in either direction if necessary; “change in law” arrangements whereby the strike price would be adjusted to reflect cost changes arising from certain changes in law; and compensation arrangements in the event of Hinkley Point C’s being shut down as a result of a political decision, rather than a decision on, for instance, safety grounds.
Separately, and for the first time ever, to deal with the clean-up costs of new nuclear, developers will be required to put money aside in a protected clean-up fund to pay for eventual decommissioning and a share of the waste management costs. This is anticipated to account for around £2 of the strike price. The Funded Decommissioning Programme would need to be approved by the Secretary of State before construction starts. All the terms are subject to contract and form the basis for further negotiation. EDF and Her Majesty’s Treasury will continue discussion regarding the terms of a potential UK guarantee. Ultimately, an investment contract would only be offered to NNBG if we consider the contract to be value for money and in line with our no public subsidy policy. Any investment contract would also be conditional on any required state aid clearance being obtained, and on Royal Assent of the Energy Bill. If agreed, the contract would be laid before Parliament in accordance with the Bill.
EDF has announced today the intent of two Chinese companies, CGN and CNNC, to invest in Hinkley Point C as minority shareholders. This follows the signing last week of a memorandum of understanding on civil nuclear co-operation between the UK and Chinese Governments. The UK and China have a long-standing bilateral agreement to co-operate on the peaceful uses of nuclear power. Chinese companies have an established track record in delivering safe nuclear power over the past 30 years. Any company getting involved in the UK’s nuclear power industry does so in accordance with the most stringent regulations in the world and, on this basis, we welcome companies that can demonstrate the capability to contribute to safe nuclear power generation in the UK.
In conclusion, I respect those who have long been opposed to nuclear technology on principle. As the record shows, I personally have had my concerns in the past, and so has my party, but I am satisfied—and I am sure Opposition Members who have had their concerns in the past are satisfied—that the safety and legacy issues relating to the new nuclear power programme are manageable, particularly with the protected clean-up fund.
With regards to the issue of cost, I am clear: this is not a deal at any price. This is a deal at the right price. Consumers will not have to pay over the odds for new nuclear. The price agreed for the electricity is competitive with the projected costs for other plants commissioning in the 2020s, not just with other low-carbon alternatives, but with unabated gas. As set out to Parliament in October 2010 and again in February this year, new nuclear will receive no support unless similar support is also made available more widely to other technologies. Nuclear will get no special favours
We have a huge challenge ahead of us. With many old and dirty power stations closing down over the next decade, the capital investment required to replace that electricity generating capacity is around £110 billion between now and 2020, the largest infrastructure programme in Government. This agreement is a vote of confidence in the measures this Government are putting in place to attract investment into the system, to make the market work, and to ensure we keep the lights on. We need to decarbonise our electricity sector to meet our emissions targets and our responsibilities to the next generation, and we need a revolution in home-grown energy generation to protect bill-payers from price rises caused by volatile world gas markets.
Nuclear power is a key part of the Government’s energy security strategy. This announcement is another step on the path to realising a safe and dependable source of clean power for millions of homes, jobs for thousands of skilled workers, a boost to the economy and reductions in electricity bills over the long-term. I commend this statement to the House.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
As the Secretary of State is aware, there have been severe disruptions on the railway line today between Doncaster and London, owing to a power failure, which have prevented my right hon. Friend the Member for Don Valley (Caroline Flint) from being here—she sends her apologies to the House, Mr Speaker.
I thank the Secretary of State for giving me early notice of his statement and congratulate him on making it back from Hinkley this morning looking slightly less damp and dishevelled than he did earlier. At the outset, let me make it clear that we support new nuclear power in Britain as part of a balanced, diverse and lower-carbon energy mix. Of course, we will look in detail at the agreement, and those aspects of the agreement yet to be concluded, but in principle we believe that nuclear power is safe, and that it contributes to our energy security, reduces our carbon emissions and makes us less vulnerable to the vagaries of wholesale gas prices.
Today, I want to ask the Secretary of State about three aspects of his statement, the first of which is the very important one of value for money. He has announced a strike price of £92.50, of which £3 will be shared as “first-of-a-kind” costs with Sizewell C, should that development go ahead. Can he explain how that figure was arrived at, and why he believes it represents good value for money for consumers? Will he also confirm that any change to an investment contract will be published, and that any change which results in an increase in cost to consumers in the view of the panel of independent experts will be classed as a “varied investment contract” and therefore laid before Parliament for debate? EDF has also said that its £16 billion budget included a contingency fund. If that fund is not used, or if costs underrun, what mechanism will there be to ensure that compensation goes to consumers, rather than to the general Treasury pot?
Secondly, let me turn to the impact of the announcement on our environment, on the local community and for the economy. The Secretary of State will be aware that the Energy Act 2008, passed by the last Labour Government, means that before consents for new nuclear power stations are granted, the Government have to be satisfied that effective arrangements exist, or will exist, to manage and dispose of the waste they will produce. In January, although Copeland and Allerdale borough councils were in favour, Cumbria county council voted to withdraw from the process to find a host community for an underground radioactive waste disposal facility. I understand that his Department has started a new consultation exercise to find a host site, so is he satisfied that the arrangements to manage and dispose of the waste produced at Hinkley Point C are in place?
There is also agreement across the House that communities that host nationally significant infrastructure should be compensated. In July, the Government announced a package of community benefits, but those come into force only when the plant is operational and not during the construction phase, when disruption is likely to be greatest. What consideration has the Secretary of State given to the Select Committee’s recommendation, which I know is shared by Sedgemoor district council, to extend community benefit to the construction period?
The Secretary of State also mentioned the wider economic benefits of the investment. We share his desire that today’s announcement will help to create a strong British supply chain and secure highly skilled engineering, construction and operating jobs. Last week, the Government signed a memorandum of understanding allowing Chinese companies to take a minority stake in nuclear developments in Britain. Given the nuclear expertise that exists in this country, can the Secretary of State tell the House what provisions were made to allow British firms to advise on and be involved in nuclear build in China?
Thirdly, we hope that today’s announcement is the first in a series of new nuclear projects in Britain, so let me finish on the lessons of these negotiations and today’s agreement. Today’s announcement is subject to EU state aid approval, so will the Secretary of State tell the House whether he has received any indication from the Commission about whether approval is likely to be granted and in what time scale? What are the Government doing to ensure that other potential nuclear sites are developed? Does he also accept that today’s agreement shows that long-term certainty is what really matters to unlock the investment we need, not allowing overcharging to continue now? The Government say that they cannot freeze electricity prices for 20 months, but he has just set them for 35 years for companies producing nuclear power. So does he therefore further accept that when on 24 September he said that our 20-month price freeze proposal would put “investment in doubt”, today’s announcement shows him to have been completely wrong?
Finally, as this comes on the same day as npower became the third big energy company to announce another price rise, and in light of the potential costs of this agreement, does the Secretary of State now accept that it is all the more crucial that we reform the retail energy market so that it is clear, fair and transparent, and so that consumers can have confidence that prices as well as investments provide value for what is, after all, their money?
Mr Davey
I am grateful to the hon. Gentleman for his response and, of course, we understand that the right hon. Member for Don Valley (Caroline Flint) has been detained through no fault of her own. I think the power failure shows that we need this investment in our economy.
I welcome the support of the hon. Gentleman and of the Labour party. Let me go through his questions. He asked first about value for money and how the figure was arrived at. We have had a huge amount of negotiations. The hon. Gentleman will have noticed that many people thought that we would end up with £100, £97 or £95 per megawatt-hour. We have done a lot better than that—we have got the figure under £90, and I do not think that anyone thought that we would do that. We have got a good figure through hard, tough negotiations.
As for the hon. Gentleman’s question about value for money tests, he will know that as we have said on the record we have compared what we have achieved with the price of low-carbon generation and gas plus the carbon price. We believe that we will be able to show, both now and when we sign the final investment contract, that we have met that test. He asked whether any changes in the future would be published and I am sure that that will happen. It is very important that Parliament is kept abreast of those big changes.
The hon. Gentleman asked what would happen if the construction costs, including the contingency fund, were not used. If EDF and NNBG make savings on the construction plan, as projected, the good news is that we have negotiated a gain-share for the consumer. The consumer will have no pain-share: if the construction costs go higher, that risk is taken by the developer, by EDF, but if the construction costs are lower, the consumer will benefit. That has not happened before, and it is a welcome protection for the consumer.
The hon. Gentleman rightly asked about waste. I can tell him and the House that I am satisfied that arrangements are in place to deal with the nuclear waste, both in the interim and in the long term. He mentioned the consultation and that is part of that process.
The hon. Gentleman asked about community benefits and he is right that the package we announced last July comes into play only when the power station is operational. We have heard the Select Committee’s recommendation and, although I cannot prejudge our response to it, we will listen to it carefully. I will only say that EDF is already benefiting the community, investing in skills and young people in the area, and economic benefits will flow during the construction phase. EDF has already said that during the peak construction £100 million will go into the local economy every year. The local community will benefit even before the community benefit package is in place.
The hon. Gentleman asked about the memorandum of understanding and how it relates to UK companies going to China. He is absolutely right: the purpose was to ensure that UK nuclear companies, and there are many, get some benefits from exports and from working in China and other markets. That is important.
The hon. Gentleman made an important point about state aid. Of course, we were in touch with the Commission before the notification. Now we have formally notified, we will continue that contact. The Commission does not tell a member state ahead of notification whether it will grant approval—of course it does not—and it will not commit itself to a time scale. I am pleased that Commissioner Almunia has told us that a team will be in place in a timely fashion and will treat the issue with the priority it deserves.
The hon. Gentleman went on to ask how other nuclear sites are doing. I could go into a lot of detail, but let me simply give him one example. He will know that Hitachi bought the Horizon site and its nuclear reactor design is in the generic design assessment phase with the Office for Nuclear Regulation. Hitachi wants to proceed with its investments and, in due course, will enter negotiations.
The hon. Gentleman wanted to relate today’s deal with Labour’s price fix con. He was trying to argue that Labour’s price fix con must be possible if we can offer a fixed price for nuclear for 35 years. Once again, the Labour party shows its economic illiteracy. Given that the Leader of the Opposition did my job, he ought to know that even if a part of the electricity generation mix has a fixed price, the majority of generating costs remain variable and will be for some time. The fact that generating costs and wholesale costs are variable, often unpredictably so, means that prices sometimes have to change to avoid firms going bust. The fact that the Opposition’s energy price fix con cannot address this is bad news for consumers, bad news for competition and bad news for investment. It is genuinely worrying that the Opposition cannot see that.
Finally, the hon. Gentleman referred to npower’s decision today, which is extremely disappointing. I would say to npower’s customers, as I have said to British Gas customers: thanks to this Government there is a choice. Under the previous Government, who created the big six, there was not a choice of independent suppliers. There are now 15 independent suppliers taking on the big six. There is a real choice now—real competition—and that is a new development. It was not the case under Labour. So we are reforming the market in the Energy Bill, creating competition and getting a much better deal for the consumer. This is a good deal for the consumer. The only thing that would not be are the Labour party’s policies.
Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)
I thank the Secretary of State and my right hon. Friend the Prime Minister for coming this morning to see exactly what is going to happen at Hinkley C. This is very good, not only for my constituents, but for the United Kingdom. I have with me the prospectus for Sedgemoor district council, which the Opposition spokesman mentioned. We are open for business and this decision is important for upping skills, upping engineering and upping inward investment, not just for Bridgwater and West Somerset, but for the United Kingdom. Does the Secretary of State agree that today is a very good day for the British economy and for nuclear power in Britain?
Mr Davey
I pay tribute to my hon. Friend, who has championed this investment over a number of years. I saw on my rather wet visit this morning to Hinkley Point C that he is well known on the plant. The fact that he is focusing on the skills agenda, and that the Prime Minister and I met a lot of young apprentices who are looking forward to working at Hinkley Point C for many years, shows the potential for this development—what it means for the community that my hon. Friend represents, the wider economy and the British economy. It is indeed a good day for the British economy.
Mr Peter Hain (Neath) (Lab)
Even accepting the case for Hinkley, why is the Secretary of State not giving in-principle support to the Severn barrage, which would deliver clean green energy at half the price, at a similar strike price, over three to four times the lifespan of Hinkley and with three times the number of jobs? I just do not understand it.
Mr Davey
I am grateful for the right hon. Gentleman’s persistence in this issue. He knows that I have met him and looked at the figures that have been produced by those who want to see a Severn barrage created. It would not be at half the price; it would probably be at double the price; it is extremely expensive. No one would be more delighted than I if we could see tidal power in the Severn. I believe it will come, but the price will have to come down because we must protect the consumer.
Mr Tim Yeo (South Suffolk) (Con)
Does my right hon. Friend agree that this news has been very long awaited and is therefore all the more welcome for that? Does he also agree that the prospect of Chinese investment in the nuclear industry in this country is extremely welcome, not least because China entirely shares Britain’s objectives of trying to reduce its dependence on fossil fuels for electricity generation, and also because China recognises that the safety and inspection regime of the nuclear industry in this country is the most stringent in the world?
Mr Davey
I am grateful for my hon. Friend’s support in this matter. He is right to make it clear that Chinese investment into Britain, and in this case into our electricity supply system, is very welcome. We already have it. There are billions of pounds of Chinese money invested in the UK’s electricity industry and in our wider industry. I talked to EDF today, which has been working in China for more than 30 years. EDF has been partnering Chinese nuclear firms for a long time, so this partnership ought to be welcomed in the UK.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I welcome this announcement, but the departmental press release said that up to 50% of the work would be available for employment in this country. Can the Secretary of State clarify whether 43% will not be available? Given the rundown in capacity in the construction industry and the shortage of our engineers, can he say what is being done to maximise the employment potential?
Mr Davey
I am grateful to the hon. Gentleman for his welcome. He is right that we have negotiated a deal so that 57% of the value will go to UK firms, ensuring that they can get the benefit and develop their skills and that UK employees can be a big part of the project. We would have liked the figure to be higher, but unfortunately not a lot has happened in the nuclear industry for many years. I wonder whether Opposition Members might like to explain why that is. This Government have looked forward to ensure that there will be a better future for British nuclear firms, not only as a result of this deal, but because earlier this year my right hon. Friend the Secretary of State for Business, Innovation and Skills and I published an industrial strategy for the UK’s nuclear industry, looking at all aspects, so that British firms and British people can benefit as we develop clean, low-carbon nuclear power in this country.
Mrs Anne Main (St Albans) (Con)
I welcome the statement and, in particular, the fact that there will be a degree of protection for the environment because the nuclear industry will be responsible for the clean-up. Will the Minister give a little more detail on how much will be taken in the protection fund and whether there will be Government oversight of its administration?
Mr Davey
My hon. Friend makes an important point. One aspect of the arrangements that I believe will be particularly welcomed by consumers and taxpayers is that the operator will have to start meeting the clean-up costs from day one of generation, which has not been the case in the past. Two thirds of my Department’s budget is spent meeting the decommissioning costs of past nuclear power stations that have long finished generating electricity. That was a scandal and past Governments failed. This Government have learnt the lessons and ensured that the decommissioning costs are up front. There will be oversight of how the fund is operated to ensure that we protect future generations and taxpayers.
Caroline Lucas (Brighton, Pavilion) (Green)
A 35-year contract that locks UK consumers into paying around double the market price for power does not sound like a good deal to me. If the Minister genuinely thinks that it is fair, will he agree to full examination of the terms by the National Audit Office? He talked about the developers being required to share waste management costs, so can he tell us how big the share will be that the public will have to pay for and what the expected cost of that additional subsidy will be? Finally, since there is a cap on the costs that EDF would have to pay for managing the radioactive waste, can he confirm that if those costs increase above the cap, the British taxpayer will have to pay for any top-up costs, however high they escalate?
Mr Davey
I thank the hon. Lady for her question. She might have missed it, but the NAO put out a press release earlier today stating that it will be looking at the details of our commercial agreements, which we welcome, because we are very happy for our proposals to be scrutinised. We have encouraged transparency because we believe that we can make our case. Unlike in previous generations, when the costs were not transparent, we are prepared to be transparent. She might be surprised, because she probably did not realise that the NAO would be looking at this so early. She asks about the public share of waste management. The truth is that the public will have to shoulder a large amount of the cost of nuclear waste, because a vast amount of nuclear waste that has to be dealt with is from the past, from the first two generations of nuclear power stations and from the military’s nuclear programme. That was paid for by the taxpayer and no provision was made for cleaning it up. That is why this deal is different and so good for the taxpayer.
Gordon Birtwistle (Burnley) (LD)
As one Liberal Democrat who supports nuclear power and always has, and who understands the need for mixed energy provision, may I ask my right hon. Friend to advise me on whether this will secure our electricity supply in future? Also, does he agree that this should have been done 10 years ago, because we have been pushed to the brink by the previous Government?
Mr Davey
I strongly agree with my hon. Friend. I will make two points in response to his comments. First, 7% of Britain’s electricity needs will be secured when the two reactors are working at capacity, which is expected in 2025. That is a huge bonus for our long-term plans for energy security in this country, and something that was not happening before the coalition Government came to power. Secondly, on his point about the Liberal Democrats, our party changed its policy at our recent conference in Glasgow, and I will explain to the House why we did that. The reasons are similar to those that led me to change my view. Climate change is a huge challenge for our country and for the world. Some people believe that we can combat it simply by using renewables and energy efficiency, but I do not believe that we can. I believe that it is such a serious threat to our world that all forms of low-carbon electricity need to be used. I urge environmentalists in the House to reflect on that.
Mr Michael Meacher (Oldham West and Royton) (Lab)
The strike price of £89 per megawatt-hour is twice the current market rate and more than twice what the Department of Energy and Climate Change was confidently predicting just five years ago. If that were inflation proofed over the whole 35-year period, as the Secretary of State has said, will that not end up costing taxpayers more than £200 per megawatt-hour by the end of the period? What proportion of the loan guarantee for the debt to build two £14 billion reactors is also going to be backstopped by the British taxpayer? Will not the project end up as a colossal financial disaster for the UK taxpayer?
Mr Davey
I think the right hon. Gentleman has been saying that for a number of years. He was predicting a much higher strike price, but we have a very good strike price. Let us be clear to the House, because the issue is important. EDF and its co-investors will not receive a single pound, and consumers’ bills will not be touched, until the power stations start generating. The earliest expected time for that will be in 2023—10 years’ time. I have to say to the Labour party that the world will be very different in 10 years’ time, and future electricity and energy prices will be very different. I am pleased that Labour party Front Benchers have welcomed the proposal. Clearly, they support what we have done on prices, and people will have noticed.
Mr Speaker
Order. Approximately 45 Members are seeking to catch my eye on this extremely important matter. I am keen to accommodate as many of them as possible, but if I am to do so, brevity will be of the essence. That can now be exemplified by a man of great experience and long service in the House of Commons: the right hon. Member for Hitchin and Harpenden (Mr Lilley).
Mr Peter Lilley (Hitchin and Harpenden) (Con)
I am grateful, Mr Speaker.
Can my right hon. Friend confirm that the reason we are dependent on foreign companies to build these nuclear power plants is that the last Labour Government sold off Westinghouse to the Japanese and then sold British Energy to the French when the current Leader of the Opposition was Secretary of State for Energy and Climate Change?
Given that the one area in which we retain nuclear expertise is in building small nuclear generators, will my right hon. Friend look closely at the proposals put forward by the noble Lord Ridley for building small nuclear reactors in future, to provide electricity and possibly an export market as well?
Mr Davey
My right hon. Friend makes some pertinent and relevant points. I am not aware of the noble Lord Ridley’s proposal, but I am aware that Rolls-Royce has been doing a lot of research and development into small modular nuclear plants, and clearly that is extremely interesting. It shows that there are British nuclear firms with skills and expertise, and they are welcoming our proposals today.
Mr Pat McFadden (Wolverhampton South East) (Lab)
On the issue of the supply chain and its capacity to do the maximum amount of work under today’s announcement, does the Secretary of State regret undermining the UK nuclear supply chain by withdrawing the loan to Sheffield Forgemasters? That limited this country’s capacity to do nuclear work domestically and for export. In the light of today’s announcement, does that not look like a stupid, short-sighted decision?
Mr John Redwood (Wokingham) (Con)
I welcome the decision to have more power capacity, which we greatly need. However, given the generous financial terms to the investors, did the Secretary of State consider the possibility of reserving some part of the financial investment and provision of capital for British interests? I am sure that many of them would like those sorts of returns.
Mr Davey
First, 57% of the value of this project will go to UK firms, and I hope that the right hon. Gentleman welcomes that. I do not believe that these terms are generous at all. We have had hard negotiations to get them down, and EDF realises that. Some of the benefits of the deal we have negotiated need to be held up in the headlights. There is the construction gain share, so that if the construction costs are lower, the consumer gains. If there is a refinancing by the investors in 10 years’ time from which they make a lot of money, the consumer will gain from that refinancing. That never happened with private finance initiative deals when Labour was in power; rather, the taxpayer lost out. We have the refinancing gain share for the consumer, and I doubt that would have happened if that lot had been in power.
Barry Gardiner (Brent North) (Lab)
How much of the £16 billion of construction costs will the developers of Hinkley Point C be able to offset in tax reliefs and capital allowances? Does the Secretary of State consider it ironic that EDF has insisted on an insurance clause against his own party’s future policy by stipulating that the strike price will rise to reflect any future tax on or shutdown of the industry? While he is at it, will he explain why the strike price for the Flamanville sister plant in France is only £64—some 30% of the £92.50 he has negotiated?
Mr Speaker
I think that the hon. Gentleman should seek an Adjournment debate on the matter; in fact, on reflection, I think he has already had it.
Mr Davey
I said in my statement that the UK taxpayer can expect to gain £4.5 billion in corporation tax as a result of this, paid for by the investors, but it is even better than that; I have some very good news for the hon. Gentleman. Because we wanted to make sure that these companies could not rearrange their tax affairs after the deal and somehow reduce the tax funds that we were expecting to come to Her Majesty’s Treasury, we undertook a very unusual clause in our deal to make sure that, should they do exotic tax deals to shelter their tax liabilities, the strike price will reflect that and be adjusted downwards. That is how far we have gone to make sure that the taxpayer and the consumer are protected.
Sheryll Murray (South East Cornwall) (Con)
I am sure that my constituents and other people in Cornwall will welcome this because it will stop us having to have another 6,000 wind turbines to generate the same amount of energy. Does my right hon. Friend agree that this will benefit the countryside?
Mr Davey
I was agreeing with a lot of what my hon. Friend said. I say to her and to all right hon. and hon. Members that we need a diverse energy mix. If we go for one form of electricity generation, that is far too risky. We need nuclear; we need renewables in all their shapes, forms and sizes; we need carbon capture and storage; and we need energy efficiency. The electricity security challenge is massive, and we need every aspect. The low-carbon challenge is massive, and we need everything to be low-carbon. Onshore wind has a role to play along with nuclear.
Joan Walley (Stoke-on-Trent North) (Lab)
Given that the Government have stated that the two really important conditions are value for money and no public subsidy, will the Secretary of State set out how all the details of the negotiations will now be made available to the National Audit Office so that Parliament can scrutinise them? If there is an overrun in construction or time delays, how will the £10 billion loan guarantee work? Will it be a taxpayer grant or a grant for Chinese and other companies?
Mr Davey
I have already made it clear to the House that this is going to be the most transparent deal ever. When my ministerial colleagues discussed the issue with Labour Front Benchers during the proceedings on the Energy Bill, we did not undertake to do what we are doing today. We are being more transparent than we promised. We have said that when the final investment contract is signed, we will publish it, and we have committed to that in the Bill. There will be very evident transparency not only on value for money and no public subsidy but an awful lot more. Of course, because we have not concluded the commercial negotiation, there are one or two commercial issues that we will not be publishing at this point, but there will be an awful lot more to see when we come to signing the final investment contract. As for cost overruns, I have made it clear to the House that by negotiating a tough deal, we have ensured that the consumer is protected from those. That did not happen in the past. We have seen cost overruns in nuclear projects time and again, and I was determined that that would not happen this time.
Alistair Burt (North East Bedfordshire) (Con)
As the former secretary to the Conservative party Back-Bench energy committee of 1983, may I welcome this long-awaited announcement of a welcome increase in the United Kingdom’s energy mix and security? Will my right hon. Friend say in particular how he intends to use this boost to the United Kingdom’s nuclear expertise abroad to add to our reputation, which is much enhanced by our skill in this particular area? Also, although he is welcome to his views on onshore wind, does he agree that some areas, such as north Bedfordshire, have done their bit and there need not be any new decisions made to add to our wind-power capacity?
Mr Davey
My hon. Friend needs to address his last point to his local planning authority, because he knows that I do not take those decisions.
The nuclear opportunity for UK companies is, indeed, very big. Many of our companies are already partnering with nuclear companies from other countries to bid for nuclear deals in, for example, the Czech Republic and Turkey. Companies such as Rolls-Royce, Babcock and AMEC are very active in the international sphere, and I think that this project and our ambitions for the nuclear industry supply chain will only further their ambitions.
Stewart Hosie (Dundee East) (SNP)
The Secretary of State said that there would be no public subsidy, but this project will be eligible for consumer-funded payments —subsidies by any other name—of up to £1 billion year, and not for the 15 years offered to renewables, but for 35 years, which is a scandal. Will he confirm that the total cost of this project—£43 billion—is comparable to the entire energy technology budget between now and 2021, and that this single project risks squeezing out domestic energy technologies in favour of imported and expensive nuclear technology?
Mr Davey
I am afraid the hon. Gentleman could not be more wrong. Not only do I not recognise his figures, but I am surprised that he is so confident as to be able to suggest them. I admire those in and outside the House who are able to estimate how much this is going to cost, because they clearly know more than me, my officials and the industry. They are clairvoyants, because they know what energy prices will be in 30 or 40 years’ time. I am in awe of the hon. Gentleman. This is a good deal for the consumer and for the economy, and, given that it also delivers on our low-carbon agenda, he ought to welcome it.
Sir Gerald Howarth (Aldershot) (Con)
I welcome my right hon. Friend’s damascene conversion, which is growing by the minute, and this bold, long-term decision, which stands in stark contrast to 13 years of indecision by the Labour party that put security of supply in this country seriously in jeopardy.
Mr Davey
I am grateful for my hon. Friend’s remarks, but I say to him gently that I hope everyone on the Conservative Benches will also understand why I have changed my mind: it is because of the threat of climate change. I hope that all Conservative Members will look at the Intergovernmental Panel on Climate Change report—its fifth annual assessment—and accept the scientific consensus of 269 experts from 39 countries. The evidence that climate change is happening and that man is responsible for it is overwhelming and we need to take action on climate change. If I am prepared to change my views on nuclear, I hope that some on the Conservative Benches are prepared to accept that climate change is something we have to face up to.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State intend to present to the House the arrangements he has arrived at in the form of the varied investment contract, as set out in the Energy Bill? If so, will he set out the terms under which the strike price can be varied upwards under the varied investment contract, as well as the terms of the forfeiture of such a contract should the subject to it not deliver within the window set out by the contract when it is signed?
Mr Davey
I think I followed that question. The hon. Gentleman is an expert in this area and his points are important. I said in my statement that there will be operation expenses reopeners at 15 years and 25 years, but they will be symmetrical, so if operation costs have reduced, the strike price will come down, and if they have increased and that can be proven, the strike price will go up. That is the only way to manage such a contract over such a long period; otherwise the initial strike price would have to be much higher in order for the investors to undertake those risks. We will be transparent, so over the coming weeks and months the hon. Gentleman and the Select Committee will be able to look in detail at many of the issues he has raised.
Mr Stephen O'Brien (Eddisbury) (Con)
As a former industrialist who has long argued for the renewal of our fleet of nuclear power stations, I warmly welcome this agreement between the parties. It will provide constant base load electricity generation, which is necessary for competitiveness. I hope that many other areas will shortly follow suit, not least the north-west. Bearing in mind the reasons for his “conversion”, as he put it, will the Secretary of State try to persuade our European partners that this low-carbon method of producing energy should count towards our renewables obligations?
Mr Davey
I am grateful for my right hon. Friend’s comments. Britain is working with a significant number of like-minded member states that wish to develop their nuclear programmes. I believe that nuclear needs to be seen as a low-carbon technology in the European debate, because it will be critical to meeting our climate change objectives in the UK, Europe and the world. I recommend to him and to other right hon. and hon. Members the book by the chief scientist in my Department, “Sustainable Energy—Without the Hot Air”, which is this House would benefit from.
Derek Twigg (Halton) (Lab)
Towards the end of the statement, the Secretary of State said that
“we need a revolution in home-grown energy generation”.
Given that the station is being built by the French and the Chinese, that was an interesting comment. What steps are the Government taking to ensure that British companies can build power stations?
Mr Davey
Earlier this year, my right hon. Friend the Secretary of State for Business, Innovation and Skills and I published an industrial strategy for the nuclear industry in the UK to do just that. On the home-grown point, the danger is that if we do not produce energy in this country, whether through nuclear or renewables, we will be increasingly dependent on imports of gas from the other side of the world. That would leave our economy vulnerable to the supply of that gas and to vulnerable wholesale gas prices, which could hit consumers badly. That is why we need more home-grown, low-carbon energy.
Sir Tony Baldry (Banbury) (Con)
Will my right hon. Friend confirm that at £89.50, the strike price for Hinkley will be lower than the strike prices for offshore and onshore wind?
Mr Davey
My hon. Friend is right about the comparison with offshore wind. We hope to reduce the costs of offshore wind over the next few years. I hope that in the 2020s, as it grows to be a significant low-carbon generating sector, offshore wind will be much more cost-competitive. We are having to subsidise it as a new immature technology. The costs of onshore wind have come down significantly. Although the nuclear deal is competitive, onshore wind is a very cost-competitive, low-carbon generator in comparison with nuclear. People often think that onshore wind is not cost-competitive, but when one considers the carbon costs, it is becoming very cost-competitive.
Mr Jamie Reed (Copeland) (Lab)
It has taken many people many years to get the policy to this point. I warmly welcome the announcement that has been made by the Secretary of State. Will he join me in acknowledging the contribution of people such as the late Malcolm Wicks, a former Member of this House, in getting the policy to this point? Does he also share my view that we need urgently to develop the other sites that have been identified for nuclear development in this country? Will he consider publishing a critical path development strategy to establish how and when those other sites will be developed?
Mr Davey
It is right that the hon. Gentleman mentions the late Member of this House, Malcolm Wicks. He was respected on both sides of the House. I believe that he was an Energy Minister twice. He was respected by officials in the Department who worked with him. He played a role in this policy and it is right to mention him.
The hon. Gentleman also asked whether I would publish a new plan. We already have a lot of plans involving a lot of nuclear power stations. I do not want to anticipate what will come next quite yet, but we are on the way.
Mr Tobias Ellwood (Bournemouth East) (Con)
May I join other Members in welcoming the Government’s determination to make up for a decade of neglect by the Labour party and to ensure that we can keep the lights on? Will the Secretary of State confirm that there is a lot of international interest in Britain’s nuclear energy programme? However, will he also confirm that no matter which country takes an interest, it is the National Grid that will have the ultimate responsibility for any new nuclear reactor?
Mr Davey
I am grateful for the hon. Gentleman’s question, and he is right to say there is a lot of international interest, as I saw on recent trips to Korea, Japan and China. Right hon. and hon. Members will also know about interest not only from France, but from north America, including Canada, and Russia. I am not sure, however, that that international interest all depends on National Grid because I think a lot of the work depends on my Department and the Government. National Grid has a critical role, but the negotiations were done by my Department.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Earlier, the Secretary of State reflected on why there has been a delay in building new nuclear. When I was shadowing his position, I was approached by nuclear companies who asked about political commitment in this country. I gave resounding support from the Labour party, so I think the dithering came from his side. While he talks about a 35-year plan and a power station that will open in more than a decade, does he still advise my constituents to put a jumper on when they cannot pay the bills?
Mr Davey
The hon. Lady demeans herself because she knows I did not say that on “Newsnight” recently. More importantly, she is not taking responsibility and neither is the Labour party. She may not know this, but this is the first time the Liberal Democrat party, or its predecessor, has been in power in peacetime for about 90 years, so blaming my party for not delivering on nuclear power takes some cheek.
Damian Collins (Folkestone and Hythe) (Con)
I welcome today’s statement and hope this is the start of a series of investments in new nuclear power stations. Does the Secretary of State agree that we should keep an open mind on breakthroughs in new technology, and particularly smaller reactor types that might suit sites such as Dungeness in my constituency?
Mr Davey
The hon. Gentleman is a doughty champion of Dungeness, and it may have a role to play in the future. I cannot see beyond current plans, but perhaps some of the new technology we have heard about could be part of such a role, although he knows I cannot commit to that today.
Mr Jim Cunningham (Coventry South) (Lab)
What the Secretary of State has announced is for the future, but his energy policy for today is a shambles. He is recommending that people either wear pullovers or shop around, but if they shop around they find energy prices rising by about 10%. What will he do about those cartels? He should not blame the previous Labour Government because he is responsible now.
Mr Davey
We are responsible, and we are sorting out the cartels that we inherited from the previous Government. The big six were created by the Labour party’s failed reforms of the electricity market, but because we have been deregulating and improving competition, the hon. Gentleman’s constituents have more choice. He does his constituents a disservice if he does not explain that they no longer have to stick slavishly to the big six, and that there are 15 independent suppliers. I thought he would want to help his constituents by recommending that they shop around.
Charles Hendry (Wealden) (Con)
I congratulate my right hon. Friend and his colleagues and officials on this historic and incredibly important achievement. Taken together with the more than doubling of renewable electricity generation in this country since 2010 and the huge interest in developing carbon capture and storage, does this nuclear renaissance not show that the market reforms he has championed have been exactly what investors have required to invest in the plant that our long-term energy security requires?
Mr Davey
My hon. Friend is right to say that the market reforms that the coalition Government have championed are already bearing fruit. He points to the fact that renewable energy has doubled under this Government, and that we are seeing a push forward on carbon capture and storage and now nuclear. I must say, however, that he played an important role in all of that.
Mr Dave Watts (St Helens North) (Lab)
Is it clear from today’s announcement that the British energy industry is broken and that we need a change? Why is all the risk being taken by the public and the Government, and none by EDF?
Mr Davey
The hon. Gentleman is wrong on every count. We are fixing the broken market we inherited because we have a lot more competitors, not just in supply and retail, but in wholesale. A lot more independent generators have been coming in, which he should welcome. The idea that all change has stopped—we are the Government changing the electricity market—[Interruption.] He asks about risk, but the risks have been transferred to EDF, not the consumer.
Mike Weatherley (Hove) (Con)
I have grave concerns about today’s announcement. The cost of clean-up for existing nuclear is more than £100 billion. Will my right hon. Friend assure me and the House that such costs will not be borne by future generations? What contingency plans will be in place should EDF not exist in 35 years’ time?
Mr Davey
My hon. Friend makes an important point. The cost of decommissioning is one reason I was concerned about nuclear power in the past. As I have told the House, two thirds of my Department’s budget is spent on decommissioning past nuclear power stations. It was a scandal that we had to clean up the mess of previous Governments who failed to tackle decommissioning costs. That is why this deal is so different from what has gone before. The decommissioning costs are included in the strike price we announced. EDF and its partners must provide, from day one of generation, for a funded decommissioning plan, which will be independently overseen. I can therefore tell my hon. Friend that we have made a big step forward in dealing with decommissioning.
Paul Flynn (Newport West) (Lab)
Without the deal, EDF faces bankruptcy, with £38 billion of debt and only two contracts: the first, at Flamanville, is three years late and more than three times over budget, rising from £3 billion to £8 billion; and the other, in Finland, is twice over budget and seven years late. How does the Secretary of State expect EDF to do at Hinkley what it has never done before, namely deliver on price and on budget?
Mr Davey
The hon. Gentleman is not as well informed as he might be on EDF contracts. For example, it has a contract in China, where, with the Chinese, it is building a nuclear power plant at Taishan. That is on budget and on time. I tell him gently that EDF has a huge amount of experience and is a good partner for the UK. Unlike the deals he mentions, we have ensured that the consumer is protected from construction cost overruns. He ought to welcome that.
Dr Phillip Lee (Bracknell) (Con)
I am a nuclear enthusiast and broadly welcome the details of the plan, but I harbour national security concerns in respect of foreign state involvement. In the light of that, will the Secretary of State say whether a UK public sector pension fund would be able to invest in a Chinese nuclear reactor? If not, why does he believe that the Chinese Government would not be interested in receiving such an investment in their critical energy infrastructure?
Mr Davey
My hon. Friend is aware that my right hon. Friend the Chancellor recently signed a memorandum of understanding with the Chinese Government to ensure that we can work together more in the area of civil nuclear power. That means Chinese companies investing in the UK and British investors and companies investing in China. I will not say that the markets will open overnight—that would be unrealistic—but we are moving into a new era in which we can work with the Chinese and other foreign states.
One odd thing about the debate is that a Hong Kong Chinese company owns UK Power Networks, which owns three of our district network operating companies, including London. So the electricity supplies to London—the cables and the networks—are owned by a Chinese company. I have not heard questions on that at Department of Energy and Climate Change oral questions. Perhaps I will in future, but the evidence—the lights have stayed on—suggests that people should not worry.
Mark Hendrick (Preston) (Lab/Co-op)
The Secretary of State says that the deal is not a deal at any price. How can he anticipate that the decommissioning, clean-up and waste disposal costs will be around £2—that is what he said in his statement—when there is no identifiable or accepted disposal site in this country, and when the project is on a scale this country has never seen before?
Mr Davey
There is already a lot of decommissioning expertise in this country because we are spending so much money on it. We have a lot of technology in that area. If we build those costs into the strike price early on—[Interruption.] If the hon. Gentleman listens, I will answer his question. We can do it for £2 early on, from day one of generation, because we are putting money aside over a 60-year period of generating. I believe the funded decommissioning plan lasts for 40 years—[Interruption.] I am getting nods, so I must be right. However, the plant is expected to generate electricity for 60 years. It is rather like a pension fund. If we make sensible provision early on, the costs can be kept very low.
Mr John Whittingdale (Maldon) (Con)
Will the Secretary of State confirm that it is the Government’s ambition that this should be the first of a series of investments in new nuclear generation? What are the Government doing to attract other potential investors who may be persuaded to look at designated sites, such as Bradwell-on-Sea in my constituency, which is already a model of successful decommissioning?
Mr Davey
Yes, we envisage a series of new nuclear power stations being built. I and other members of the Government have, on various trips, engaged in commercial diplomacy, meeting potential investors and nuclear companies in other countries, and there is huge interest in the nuclear market. When German companies RWE and E.ON put the Horizon consortium on the market everyone said, “This is a disaster. It shows that nuclear policy isn’t working.” Far from it. We had huge interest from around the world. Hitachi ended up paying nearly £700 million for the privilege of having the consortium, even before it had got its reactor design through the generic design assessment. That is the level of interest and the vote of confidence in our policy.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Should energy transmission infrastructure developments, which accompany such energy generating developments as this, be constructed underground?
Mr Davey
The detail of transmission infrastructure is sorted out by National Grid under legislation passed some time ago. In many areas, particularly in areas of rural beauty, people want more undergrounding of cables. The hon. Gentleman will know that that can be expensive. There are a number of inquiries at the moment, not least in Wales, and it would be inappropriate for me to comment on them.
Martin Horwood (Cheltenham) (LD)
Will my right hon. Friend share with the House complete details of the compensation agreement he mentioned, which, on the face of it, might be interpreted as an attempt to bind this Parliament’s successors, financially if not politically, and prevent a future democratic decision to abandon nuclear?
Mr Davey
We will of course be publishing a lot of these details, but I have to say to my hon. Friend that, given the experience in Japan and Germany, it is not unreasonable for a company wanting to invest in nuclear to have some protection against a future Government changing the policy completely. I think that if he was a shareholder of a company wanting to invest in UK nuclear, he would be looking for that sort of protection too. In many ways, I regret that we have had to give that protection, but it was a reasonable request and I think it would have been a show-stopper if we had not been able to meet it.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
I listened carefully to the Secretary of State on where future savings could be made, but if the reference price comes in below the strike price, EDF will make even more than its 35-year guaranteed return. The Government rejected Labour’s proposals to ensure that any difference between the reference price and strike price would be passed back to consumers. How will the Government ensure that hard-pressed bill payers get the best deal for their energy?
Mr Davey
We have started that process by our announcement today. I am not sure what strike price the hon. Lady and the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) mentioned in the Bill Committee proceedings, but few people thought we would achieve the strike price we did. What she fails to mention is that because we have gone through the investment contract—the contract for difference—we have protected the consumer yet again. If the wholesale price is above the strike price, the generators have to pay back to the consumer—yet another protection for the consumer.
Mrs Cheryl Gillan (Chesham and Amersham) (Con)
May I congratulate the Secretary of State on reaching this point, because I know it has been a long and difficult road? He will know that a lot of our nuclear capability lies in north Wales, with Wylfa and the decommissioning of Trawsfynydd. I am particularly concerned that the future of Wylfa is secured. Does he agree that this deal paves the way for a deal on Wylfa? Will he assure me that he will do everything he can to speed up the route for a successful new build at Wylfa?
Mr Davey
I can reassure my right hon. Friend, who championed the case for Wylfa when she was Secretary of State for Wales, that we are on the case. I know that Hitachi, is keen to make progress on that, and it and others will be cheered by today’s announcement. They know that the Government are leading the way, taking the tough decisions and developing the most attractive market in the world for new nuclear.
Roberta Blackman-Woods (City of Durham) (Lab)
I heard the Secretary of State announce this development on BBC radio this morning, but his estimate of the number of jobs to be created seemed to vary with each question asked. What exactly does “up to 25,000 jobs” mean and how many will be likely to go to UK residents?
Mr Davey
That is a fair question. I mentioned three figures on jobs: over the lifetime of construction, we expect 25,000 jobs to be created; at peak, on site, there will be 5,600; and when the plant is finished and starts generating at full capacity, we expect there to be 900 full-time permanent jobs. They are different figures, but they are also very impressive figures.
I am afraid we have not done the analysis on how many of those jobs will be done by UK passport holders, but we expect a lot of them to be British. One reason EDF is investing in the local college is to bring on apprentices and young people in the area so that they can be the trained nuclear engineers of the future, working at Hinkley Point C and beyond.
Andrew Bridgen (North West Leicestershire) (Con)
My right hon. Friend rightly stated that energy security relied on diversity of supply, so does he agree that consumers and the industry will be relieved that, thanks to his decision, new nuclear will form a large and reliable proportion of that supply?
Mr Davey
My hon. Friend is right that diversity is critical if we are to keep prices down. I am obsessed with ensuring that we get a good deal for the consumer and British industry, and part of that strategy is to ensure we have diversity, so that technologies and companies are competing and we are also applying downward pressure on prices.
Diana Johnson (Kingston upon Hull North) (Lab)
Does this announcement prove that the Government do not mind British taxpayers paying for and subsidising Government-owned utilities, but only as long as they are foreign-owned Government utilities?
Mr Nigel Evans (Ribble Valley) (Ind)
Many converts become zealots to the cause. May I encourage the Secretary of State to be turbo-charged in his zealotry for nuclear energy in the future so that we can have more announcements like today’s? Anything that makes us less reliant on imported energy, particularly French nuclear energy, has got to be a good thing, and anything that protects England’s green and pleasant land from the invasion of yet more wind turbines has got to be a good thing.
Mr Davey
The hon. Gentleman was doing so well. I have to tell him that there are zealots on all sides of this argument, as I have found, which is why I take, I think, a more balanced, pragmatic approach in favour of a mixed, diversified electricity supply focused on low carbon. I am a zealot not about nuclear, onshore or any particular renewable technology; I am a zealot about climate change. That is what every Member needs to be a zealot about. Climate change is one of the big challenges for this political generation, and we have to face up to it, so I plead guilty to being a zealot about tackling climate change.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I have long been a mild supporter of nuclear energy, but I am concerned and nervous about today’s statement, because I have not got the competence—I do not think most people in the Chamber have the competence—to judge whether this is really a good deal. But let me say this: owing to the botched privatisations of the ’80s and ’90s, we have not got the capacity in the energy sector to do this deal ourselves; it will be led by French technology and manufacturing and backed by Chinese finance. What sort of humiliation is this for Britain?
Mr Davey
It is not a humiliation, but a big triumph, actually, that many other countries want to put their money into the UK market to build nuclear. I hope the hon. Gentleman is moving from mild to enthusiastic support and that my earlier point to the hon. Member for Brighton, Pavilion (Caroline Lucas)—that the National Audit Office will look at this—reassures him that the details will be properly scrutinised both in this House and by the NAO.
Ben Gummer (Ipswich) (Con)
I congratulate my right hon. Friend the Secretary of State and the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Sevenoaks (Michael Fallon) on the excellent, careful deal that they have struck with EDF. The Secretary of State will know that many people in Suffolk are keen to see a similar deal for Sizewell, which is in the constituency of my hon. Friend the Member for Suffolk Coastal (Dr Coffey). What progress has his Department made towards making that a reality?
Mr Davey
I know that EDF wants to pursue that matter, but my hon. Friend will not be surprised to learn that it has been focusing on Hinkley Point C. We are now entering the final stages of the negotiations and we hope to secure the final investment contract next year, at which point I think EDF will turn more towards the question of the Sizewell C opportunity. He will know that, because the European pressurised reactor has gone through the generic design assessment process for Hinkley Point C, it will not have to do so again for Sizewell C. That should shorten the period involved. EDF is hoping to be in a position, after obtaining consents from us, regulatory approvals and so on, to make a final investment decision on Sizewell C towards the end of this decade. It is obviously not going to commit to that yet, but it is now focusing on that matter more than it was before.
Mr Speaker
Order. If we are to mitigate the pressure on time, there must now be a particular premium on brevity in the remaining questions and, of course, in the Secretary of State’s answers.
Graham Stringer (Blackley and Broughton) (Lab)
The Secretary of State uses his fight against climate change and the need to reduce emissions to justify charging twice the market rate for energy, but this country has one of the largest carbon footprints in the world and it is increasing because of emissions input. Why does he not talk about that failure of his policy? Will he tell us what he is going to do about it?
Mr Davey
I think the hon. Gentleman is talking about the fact that a lot of the products we import come from countries with high carbon intensity production processes. It might be a little harsh to describe this as a failure of my policy, but I know that the Select Committee and the Committee on Climate Change are interested in looking at that issue, and they should do so. In fact, this simply shows that we need a global treaty on climate change. One country cannot tackle it alone. We live in an interdependent world that has an interdependent economy and an interdependent climate. That is the answer for the hon. Gentleman: he needs to get behind the push for a global treaty on climate change.
Mr Robin Walker (Worcester) (Con)
It is a matter of regret that this announcement has come as late as this. The decades of missed investment in nuclear mean that we do not have a UK generator that is capable of delivering a project of this scale. The Secretary of State has mentioned his industrial strategy for nuclear, and what it can do for the supply chain. Can he assure me that, in 10 years’ time when another Secretary of State might be announcing further nuclear investment opportunities, there will be UK companies that are able to compete for them?
Mr Davey
I very much share that vision. It was certainly the vision that the Secretary of State for Business, Innovation and Skills and I published in our industrial strategy. We want to ensure that British companies and British people get the benefit as we move towards more low-carbon technologies. That is why we have also published an industrial strategy for offshore wind.
Christopher Pincher (Tamworth) (Con)
I congratulate my right hon. Friend on putting 6,000 wind turbines under one roof. Given that there are 60 nuclear power stations under construction around the world, and about 150 planned for construction, is he confident that the international supply chain for reactors and turbines—which Labour did nothing about—is sufficiently robust to allow this important project to remain on track?
Mr Davey
I believe it is, and the investors certainly do as well. One of the things that gives me confidence about today’s decision is the high degree of planning that has gone into the project. We will benefit from the fact that the reactor design has already gone through a long period of generic design assessment in the Office for Nuclear Regulation, and that EDF has learned lessons from Finland, France and China. My hon. Friend should therefore not worry that the supply chain will not be capable of meeting the demands. This is all in EDF’s plan.
Bob Stewart (Beckenham) (Con)
The Chinese have developed a whole division concerned with cyber-security. The Chinese already own three electricity transmission grids in this country and they will now substantially own Hinkley. Will my right hon. Friend assure us that as much safety as possible has been put into this plan? We are in a benign environment at the moment, but if that changed, I would be concerned about running risks with our infrastructure.
Mr Davey
Of course the Government have considered the national security implications; we looked at them in some detail. My right hon. Friend the Foreign Secretary and, indeed, others have looked at cyber-security as a whole to make sure that this country is protected, not just from potential investors in the UK but more broadly. I believe that this Government have put in place the sort of protections that I think my hon. Friend is seeking.
Mr Philip Hollobone (Kettering) (Con)
If all goes well and the plant is built to time, it will generate its first electricity in 10 years’ time, in 2023. If we have a blocking high-weather pressure system with no winds and freezing temperatures this winter, the plant margin could be as low as 5%. What is the risk of the lights going out some time over the next 10 years due to the lack of investment in our generating capacity by the previous Government?
Mr Davey
I do not believe there is a risk, but that is no credit to the Labour party. It has happened because this Government have got their act together on energy security in the short term, the medium term and the long term. Today’s announcement will help energy security in the long term, but we had two announcements in July—one from Ofgem and the National Grid to look at the short term and make sure that we have the balancing extra reserves ready to come on line at the peak; and then my Department’s announcement on next year’s capacity market, which was about ensuring capacity in the medium term. If we put the short-term, medium-term and long-term strategy together, I can reassure my hon. Friend that the lights will stay on.
Rehman Chishti (Gillingham and Rainham) (Con)
By and large, I welcome the Secretary of State’s statement. Does he agree that there is no national security risk in this case, that the National Grid Company will have oversight of this plant when it is built and that the Chinese will not have control?
David Rutley (Macclesfield) (Con)
I welcome today’s announcement, and I am delighted that this Government take seriously the role of nuclear in safeguarding our energy supply for decades to come. Given the opportunity presented by Hinkley Point, will my right hon. Friend tell us what steps are being taken, working with our partners in this project, to improve the UK skills base so that we have skills in this vital sector for decades to come?
Mr Davey
A huge amount is being done. EDF is investing in the local college to make sure that some local people get to benefit from Hinkley Point C. We also have the national skills academy for nuclear, which is taking forward skills for the wider industry. Many of our universities are more engaged in research and development, too. If my hon. Friend looks at the industrial strategy that we launched, to which I have referred several times, he will see that there is a big role in it for developing skills.