Tuesday 8th March 2022
(2 years, 9 months ago)
Grand CommitteeNuclear Energy (Financing) Act 2022 View all Nuclear Energy (Financing) Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 89-I Marshalled list for Grand Committee - (4 Mar 2022)
The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)
My Lords, Members are encouraged to leave some distance between themselves and others and to wear face coverings when not speaking. If there is a Division in the Chamber, I will adjourn the Committee for 10 minutes. At 4.40 pm the Committee will adjourn, as will the Chamber, until about 5.15 pm for Members to go to the Commons to listen to President Zelensky.
Clause 1: Key definitions for Part 1
Amendment 1
Lord Wigley
“(2A) “Nuclear energy generation” includes the generation of energy by either nuclear fission or nuclear fusion.”Member’s explanatory statement
This subsection is to clarify that the provisions of the Bill may extend to nuclear fusion electricity generation if that process becomes viable.
Lord Wigley (PC)
My Lords, it is an honour to be moving the first amendment in our Committee deliberations on the Nuclear Energy (Financing) Bill. It is fair to say that this is a probing amendment in the true meaning of the term. If I had received an answer on the issues relating to nuclear fusion when I raised them at Second Reading, I would not have needed to have tabled this amendment now.
Amendment 1 proposes to insert the definition that
“‘Nuclear energy generation’” includes the generation of energy by either nuclear fission or nuclear fusion.”
The Bill is clearly intended to serve as a long-term framework for the financing of nuclear projects. It could hardly be otherwise, since the cycle of agreeing a location for a new nuclear facility, securing all the necessary consents, getting a credible financial package into place and then building the facility, testing it and engaging it with public electricity networks takes over a decade, and probably two, to bring to full fruition. It is by definition a long-term project, and all the uncertainties arising from such long-term gestation periods are what make this Bill necessary.
It is in this context that I tabled Amendment 1, relating to nuclear fusion. Many people may mutter, “Nuclear fusion? But surely we’re many decades away from that becoming an economic possibility.” Yes, it is true that for most of my lifetime nuclear fusion has been the big white hope lurking just over a distant horizon. Back in the 1950s we were told about what I think was then called the Zeta project, which could harness abundant fuel made from seawater, as was quoted, in a process that was far safer than nuclear fission and whose waste product had a half-life of less than 100 years. That project stuttered on through the 1960s, seen as having the possibility of producing an inexhaustible source of energy for future generations, but with scientific and engineering challenges that seemed then to be insurmountable.
Then in 1997 there was a breakthrough, and, excitingly, only last month scientists at the Joint European Torus project, JET, at Culham near Oxford, succeeded in generating by fusion 11 megawatts for five seconds—a small amount, yes, but an indication of things to come. This came shortly after American scientists, using the world’s largest laser, achieved burning plasma, a major stride towards self-sustaining nuclear fusion energy, and in America the National Spherical Torus Experiment will be fired up in the autumn of this year. So at long last we are at a credible position where nuclear fusion may be a practical proposition for the second half of this century. As such, that possibility should be on our agenda as we map out the means of funding the production of electricity with a very low carbon footprint.
However, there is a problem as far as we in Britain are concerned. Last year EUROfusion decided to end JET’s operations at Oxford next year after 40 years, and according to reports the UKAEA intends to decommission the experiment. The focus of research is sadly moving from the UK to France, where the International Thermonuclear Experimental Reactor—abbreviated as ITER—is being built, funded by the European Union, the United States, China and Russia. When it is fired up in 2025, it will be the world’s largest fusion reactor. If it works, it will make fusion power a viable source of energy, with realistic hopes of it being in commercial operation between 2030 and 2035. It will generate usable electricity without carbon emissions and with low levels of radioactivity.
So we are falling off the bus just as it moves towards its destination. Does this not just encapsulate the botched manner in which successive UK Governments have dealt with the nuclear industry? I want to see a pledge from the Government that they have some commitment to nuclear fusion technology and that they would be prepared to put their money on the table to help make this happen.
In the context of this Bill, Amendment 1 would ensure that projects related to nuclear fusion would be fully entitled to seek funding through the avenues opened by the proposed legislation before us today. The best way of ensuring that this possibility does not fall by the wayside is to accept Amendment 1 and provide that nuclear fusion is included on the face of the Bill. I beg to move.
Lord Teverson (LD)
My Lords, I will make just a brief intervention. I do not disagree at all with the noble Lord’s amendment, except that clearly we should not use this form of funding for research until we know that we are building something that is going to work. It would be absolutely wrong to use this sort of funding for the research side. In defence of this Government and previous ones, in the area of fusion we have probably been more consistent in terms of our policy and research than we have with nuclear power— so that was probably slightly unfair criticism of the Government in that regard.
At this stage, without getting into heavy weather, the point I want to make is that we have an energy crisis at the moment, which makes this Bill slightly less relevant than anything else. I would be interested to have a statement—just a short sentence—from the Minister on what BEIS is doing at this moment to accelerate the alternative forms of energy that we have in the UK, particularly renewables, given the situation that we are now seeing: not just even higher energy prices but energy prices that will probably remain high for a long time, and the wish and absolute need of the West—Europe and the UK—to disinvest from supplies of Russian energy. I realise that is not great in terms of the UK, but we are as much subject to these global markets as anyone else.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, before we begin, I understand that the noble Lord, Lord McNicol, is unfortunately unwell and therefore unable to join us here today. I wish him a speedy recovery and look forward to welcoming him back to the House soon. It is a pleasure to open for the Government in response to the amendment tabled by the noble Lord, Lord Wigley. Mae’n ddrwg gen i am beidio a roi ateb i chi yn barod—I am very sorry that we have not given you an answer already. I think that somehow passed me by after Second Reading.
The Government share the noble Lord’s enthusiasm for the potential of fusion energy to play a role in our future energy system. However, I do not believe that the noble Lord’s amendment is necessary or appropriate here. First, the term “nuclear energy” is sufficiently broad that fusion projects can be regarded as already falling in scope. This makes a specific amendment on this point unnecessary.
I also want to make clear to the noble Lord that, despite recent technological advances and increases in private investment, fusion remains a comparatively early-stage technology; prototypes are not expected to be deployed until the 2030s or the 2040s. The Government are supporting the development and deployment of fusion demonstrator facilities by investing in R&D programmes and facilities and developing a proportionate regulatory framework. Indeed, there is already significant private investment in a number of fusion projects both here in the UK and in the US.
None the less, the Government intend to develop an appropriate funding model for commercial fusion energy facilities in due course, as fusion energy moves closer to commercial deployment. This funding model will reflect the nature of this means of energy generation. I hope that I have provided adequate reassurance for the noble Lord, Lord Wigley, that the Government share his goals and that this amendment is not necessary for achieving them. I therefore hope that the noble Lord will feel able to withdraw his amendment.
On our support for renewables, we have enunciated the breadth of work that we are doing in this area a number of times. We have made numerous statements in the House on this issue recently. I would be happy to write to the noble Lord with more information about the Government’s plans, but I do not think it is appropriate just to give a brief statement of our current intent.
Lord Teverson (LD)
What I was trying to ask is whether BEIS is getting itself into gear—and I realise that the Government will probably look wider than renewables—and getting its act together now to really look at how we move forward in this area. Can the Minister assure noble Lords on this?
Baroness Bloomfield of Hinton Waldrist (Con)
I am sure that this is upmost in the minds of the Secretary of State and the Energy Minister. The Prime Minister has also made statements to this effect, and it is very much on every morning’s agenda. We have a ministerial meeting and it is the first topic at every one of them.
Baroness Wilcox of Newport (Lab)
Before the Minister sits down, I had hoped that she would have said that the Bill had been drafted in a technology-neutral manner and that the amendment was therefore not necessary, so receiving a clarification would be useful. We cannot afford to fall off the bus again.
Baroness Bloomfield of Hinton Waldrist (Con)
I take the noble Baroness’s point. Indeed, the Bill has been drafted in a technology-agnostic way to cover all forms of energy infrastructure.
Lord Wigley (PC)
My Lords, I am very grateful to the noble Baroness for her response and for the interventions on the points that I raised. A moment ago, the noble Lord, Lord Teverson, appeared in the uncharacteristic role of being a protector and defender of the Government on these matters, and I am sure that that will be bankable by the Government at some stage. This is not a party-political point because it is not party politics; I am speaking on my behalf, as my own party has divisions on these issues. Over the past 30 years, we have had “stop-start-stutter” with regard to nuclear; if you do not want nuclear, perhaps “stutter” and “stop” are good options. But if nuclear is going to play a role, it has to be treated in a serious and coherent manner. It needs to be transparent, and we will be coming on to questions of transparency in a number of later amendments.
Returning to the core of my amendment—
Lord Teverson (LD)
I hesitate to interrupt, but I was relating only to fusion, rather than fission, in my comments.
Lord Wigley (PC)
I accept that clarification, of course. With regard to fusion, I accept that successive Governments have been generous in helping to sponsor research but, over the last couple of years, we seem to have had some difficulty with our European partners as to the ongoing role of Oxford, which apparently is coming to an end, and the fact that the Russians, Americans and Chinese are providing finance for the location in France where the major project is going forward. I very much hoped that we would have been involved in this, because so much of the work on fusion has been done in the United Kingdom. It is something that we should be proud of.
I hope that, when this eventually comes through, it is something that is of benefit. That is why I want to see, if this Bill goes forward—and it has shortcomings, but any such Bill is bound to, because of the uncertainties that we have in this area—that we have full provision for fusion as one of the nuclear alternatives. The Minister stated quite categorically that fusion is included in this Bill, so that anyone who is considering fusion projects for the future may be able to rely—other things being equal—on this Bill as a source of finance and a framework within which to operate. That is a helpful clarification and, on that basis, I beg leave to withdraw the amendment.
“(6) “Owned by a foreign power” means owned by a company controlled by a foreign state and operating for investment purposes.”Member’s explanatory statement
This amendment provides a definition of foreign ownership and is linked to a further amendment to Clause 2 in the name of Lord McNicol of West Kilbride.
Baroness Wilcox of Newport (Lab)
My Lords, I begin my comments by thanking my noble friend Lord McNicol for the substantial work he has already done on this important Bill, and by conveying his apologies to the Committee for being unable to attend because of his continuing isolation with Covid. I had just a passing knowledge of the Bill until yesterday, and my interest, as always, was fired by the attention given to the outcomes for Wales, which is my main shadow portfolio brief. Nevertheless, I shall do my best to substitute for my noble friend Lord McNicol’s wide and detailed knowledge of the subject, ably supported by our team of advisers, who have supplied me with excellent briefing notes on this significant Bill.
Lord Vaux of Harrowden (CB)
My Lords, first I should apologise for not being able to take part in the Second Reading of the Bill. I therefore start by stating that I generally support the Bill, for two reasons: first, because I believe that nuclear power will be essential if we are to meet our net-zero goals; and, secondly, because I believe that it is essential that we become more self-sufficient in our energy needs and, in particular, reduce our reliance on other countries that may not share our values—this has been starkly demonstrated in the past couple of weeks.
The three linked amendments in my name in this group, Amendments 11, 22 and 24, are intended to address that last point. In order to ensure that we are not reliant on potentially hostile parties for our energy needs, we must be able to identify the ultimate beneficial owners or controllers of any companies that own a material part of our key energy providers. I hope that that is not a controversial statement. Indeed, the Government are in the process of putting rules in place for the identification of owners of UK property and I would argue that it is much more important for owners of nuclear-generating assets to be identified.
However, I can find nowhere in the legislation where identification of the ultimate beneficial ownership or control is a requirement. The nearest that I could find are the persons of significant control rules, but they do not always apply; they apply only to UK companies, for example, and in any event are easily avoided. These three amendments therefore try to address that shortcoming. I tried to introduce a clause that required all holders of nuclear generation licences to identify their ultimate beneficial owners, but it was not allowed. It was apparently out of scope of the Bill. I think that the Minister might want to consider that. Therefore, I have had to restrict these amendments simply to the designation process.
Amendment 11 ensures that, before a nuclear company can be designated under the Bill, the Secretary of State should be satisfied that the identity of any party that owns or controls, directly or indirectly, more than 10% of a nuclear company has been verified. Amendment 22 then allows the Secretary of State to revoke that designation if at some future point they are no longer satisfied that those identities have been verified. Amendment 24 adds a further duty on the nuclear company to notify the Secretary of State of the identity of any party that later gains ownership or control of more than 10% of it, again directly or indirectly, and allows the Secretary of State to revoke the designation if the nuclear company fails to make such notification or if the Secretary of State considers the new party not to be a fit or proper person to own or control a nuclear company.
I have deliberately not put in any prohibition of ownership in these amendments. I would not, for example, go as far as the noble Lord, Lord McNicol of West Kilbride, or the noble Lord, Lord Oates, in Amendment 9, which would prohibit the designation of a nuclear company that has any foreign power as a shareholder. As we heard, there are plenty of countries—France, for example—where it would be perfectly acceptable for them to own a stake and there are many others where it would clearly not be acceptable.
We should not be looking at state shareholdings only. There are many non-state parties that I would think would not be fit and proper to own nuclear assets. I think that it is appropriate that we look at each case on its merits and allow the Secretary of State to decide if the ownership is acceptable in the particular circumstances. The critical thing is that we should be able to identify the ultimate ownership and control and take appropriate decisions based on that, including the right to revoke the designation.
I am sure that the Minister will point out his statement at Second Reading that the Government intend to take a special share in all future nuclear new-build projects, but that is only an intention and, as the Minister pointed out, is subject to negotiation; no details of the rights attached to such special share have been provided. I therefore think that some safeguard is required in the legislation. While I would be happy to discuss the details of these amendments—for example, whether 10% is the right level—I hope that the Minister can see the attraction of the principles set out in Amendments 11, 22 and 24. I also hope that, as I said, he will consider the wider point that these rights and duties should apply with respect to all nuclear power generation licences, not just those that wish to be designated.
Lord Howell of Guildford (Con)
My Lords, we are getting to the important issue—quite rightly raised by the noble Lord, Lord Vaux—of control, the involvement of foreign companies and, behind them, possibly foreign Governments in this vital part of our energy security. There is one thing that I would like to know before the Minister replies. He will remember, as will most of your Lordships, that my right honourable friend Theresa May, back in 2016 after she became Prime Minister, ordered a review of Hinkley Point C, in particular the involvement of Chinese interests in that vast project, which is now going ahead. Everyone got quite agitated at the time. I remember the Chinese ambassador walking around saying, “Has there been a coup? What’s happened? What’s gone wrong? Was the Chancellor of Exchequer not in Beijing the other day agreeing that this was a new golden area of co-operation between China and the United Kingdom and, in the words of Xi Jinping, that there was going to be ‘unlimited’ partnership in all sorts of investments?” The Chinese, along with EDF and the French, were welcomed with open arms to get the Hinkley Point C project off the ground.
After a while, there was a review, which concluded that Hinkley Point C should go ahead, to the great delight of the Chinese. The whole thing was a very good bargain for them: not only did they get involved in Hinkley Point C, but they had a promise of involvement in Sizewell C and, even better for them, a promise of bringing in Hualong technology and managing their own project at Bradwell-on-Sea. This was a great delight and was going to be the poster boy project for the Chinese, as they moved into massive sales of Chinese technology and development, which would go well beyond a GDA for Bradwell into the possibility of building and managing a nuclear power station right at the middle of our system.
The review that Theresa May authorised was thorough and went into considerable detail into the conditions that there should be on the Chinese going forward. I would like to know from the Minister whether those conditions still prevail or whether they have been modified 10 years later, under further pressures, when the public attitude towards Chinese involvement has changed 180 degrees. We have moved from an age of loving everything Chinese to getting rid of everything Chinese. Has there been a change? It would be helpful if he could describe to what extent we have moved on that and to what extent those review conditions of 2016 still prevail.
Viscount Trenchard (Con)
My Lords, I agree with the amendments put forward by the noble Lord, Lord Vaux of Harrowden. The noble Baroness, Lady Wilcox, introduced the amendments in the name of the noble Lord, Lord McNicol, extremely impressively, but I agree with the noble Lord, Lord Vaux, that they go too far by effectively excluding all companies owned by foreign powers.
It is a matter of great regret to me that, in collaborating with Japan on nuclear energy, the projects at Wylfa, Ynys Môn, of Hitachi’s Horizon, and at Moorside, Sellafield, of Toshiba, were both cancelled. Perhaps if the Bill before the Committee had already been on the statute book, there would have been a good chance that either or both might have been rescued. If either project had gone ahead, it was expected that one or both of the state-owned banks in Japan—the Japan Bank for International Cooperation, on which I declare my interest as a consultant to that bank, and the Development Bank of Japan—would have provided both or part of the equity and debt for those projects. On the face of it, if the amendments tabled by the noble Lord, Lord McNicol, were enacted, it would be impossible for those banks to participate, which would have killed the projects by another means.
Baroness Bennett of Manor Castle (GP)
My Lords, I offer support to Amendments 11, 22 and 24 in the name of noble Lord, Lord Vaux of Harrowden, although I start from a very different position from him on nuclear power and perhaps where my areas of concern lie. It is important that we are talking here about ultimate ownership and control identified and verified. We are looking at ensuring that any change of ownership is clear. When I looked at the amendments, I inevitably thought about what has happened with our water companies and indeed with some privatised elements of our NHS, where we have seen GP surgeries sold off through a chain and sometimes the ownership and the sale have become clear only several times down the track. When we are talking about something as crucial, strategic and potentially dangerous as nuclear power generation, we need to ensure that there is clarity about where control lies—obviously, I am looking at that not just from a national perspective but much more broadly.
I shall comment particularly on Amendment 19 in the name of the noble Lord, Lord McNicol, and the important elements in that about transparency of costs and ensuring that those costs and the spending are fully declared. I talked last night in relation to the Health and Care Bill about instances where public money that is paid in supposedly for care—in this case, it might be paid in for power—is pumped out into dividends through complex financial instruments.
Since this is the first time that I have risen to speak in this Committee, I want briefly to pick up one point raised by the noble Baroness, Lady Wilcox: we are now in unprecedented times in European history. Since Second Reading, the events in Ukraine have taken place. At Zaporizhzhia, the largest nuclear power plant in Europe, a building—not the reactor—was set on fire during a bombardment from all sides, on the Ukrainian account, by Russian forces. The International Atomic Energy Agency has expressed grave concerns about its safety. It is worth noting that, even after those reactors are switched off, they will need weeks of cooling down. There are pools of spent fuel rods which require safe storage for several years. As the noble Baroness said, this has put us in a different situation from that of even weeks ago.
I will point to something else, for reasons which will take a second to become clear. There is an Australian town called Lismore that I know very well. It is a town that floods; it has always flooded. A hundred years ago, they built a church high on the hill to make sure that it would not flood—a couple of decades ago, they built a shopping centre that was flood-proof. Lismore has just flooded, with significant loss of life; both the shopping centre and the church have flooded. We are in unprecedented times.
I ask the Committee to think about how, when we put public money into a nuclear power plant, we have to guarantee political, military and climate stability—the last of which we know we will not have—for six or seven decades at a minimum. Does anyone in the Committee truly believe we can guarantee that we can continue to safely operate a nuclear power plant in six or seven decades in the world we live in? That has to underlie all of our debates today.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, as well as of course supporting the amendments spoken to by my noble friend Lady Wilcox, I support the amendments spoken to by the noble Lord, Lord Vaux. In fact, he is in danger of changing my views about hereditary Peers—these debates are difficult things.
I support him on two counts. The first is in relation to beneficial ownership. Could the Minister say if this would cover ensuring that we could check whether countries we do not want to own these power stations are setting up companies in tax havens—particularly the Crown dependencies and overseas territories we have responsibility for? That has been happening far too often and we need to clamp down on that.
Secondly, I support him because I too was concerned about the scope of the Bill. I support what he said, and I am sorry that he was not allowed to table the amendment he suggested; I hope it will be picked up. I had a little problem in tabling my amendment; I had to change it and the one I have got down is not exactly what I wanted. I will come back to that later. The scope of the Bill has unfortunately been drawn far too narrowly. It deals with the purposes the Government want and are concerned about, but it does not allow us to deal with some of the wider aspects. So there we are—I support a hereditary Peer on two counts. It is a red letter day.
Lord Oates (LD)
My Lords, I will speak briefly on this group, particularly to Amendments 2 and 9 in the name of the noble Lord, Lord McNicol of West Kilbride, which I have also signed. I also support the amendments in the name of the noble Lord, Lord Vaux. Like the noble Baroness, Lady Bennett, I come at this from a different perspective from him, but it surely must be right that we are able to identify and verify the ultimate ownership.
As the noble Baroness, Lady Wilcox, set out, Amendments 2 and 9 seek to ensure that a nuclear power station cannot be owned or part-owned by a company controlled by a foreign state and being operated for investment purposes. However, I was a little surprised to hear her say that the amendment would cover EDF, because that was not my understanding. My understanding was that the amendments would not cover EDF, which is not operating for investment purposes, and that is why
“and operating for investment purposes”
is critical in the definition—but it would cover China General Nuclear Power Group, which does operate for investment purposes. I understood that was why the amendment was tabled and drawn in that specific way, but we can perhaps discuss that further later.
The main point here is the general concern that has been expressed on all sides of the Committee about the involvement of the Chinese state in critical national infrastructure, particularly nuclear. As we know, it currently has a 35% stake in Hinkley C and will have a proposed 20% stake in Sizewell C if that goes ahead. So I imagine that, regardless of our wider views on nuclear, we are all concerned about this issue and need some clarity from the Government on their position on this. I hope that the Minister will be able to tell us how the Government intend to proceed with regard to these matters and also answer the important questions asked by the noble Lord, Lord Howell.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
First, I thank everyone who contributed to this important and well-structured debate. I also pay tribute to the noble Baroness, Lady Wilcox, for her valuable contributions and for stepping in at the last moment to substitute for the noble Lord, Lord McNicol; having picked up a difficult and complicated subject at such late notice, she did extremely well in moving the amendment.
This group includes Amendments 2, 9, 11, 19, 22 and 24, originally tabled by the noble Lords, Lord McNicol, Lord Oates and Lord Vaux. They have been grouped together because they all address in different ways the ownership of nuclear companies that ultimately may benefit from the RAB model. Let me be clear at the outset, as I was at Second Reading, that the Government emphatically do not support investment in our critical infrastructure at the expense of national security. There is no compromising on that point and I hope to reassure all noble Lords who have spoken during this discussion shortly.
The general purpose of this Bill is to broaden our options when financing new nuclear projects and to widen the pool of potential investors; that is widely understood. It is our expectation that doing this will reduce our reliance on state-owned developers to finance the construction of new nuclear power stations. So I do not consider that Amendment 11 and, as a consequence, Amendment 22 are necessary, for the reason that designation is a robust and transparent process. I make a similar case with regard to Amendment 24. The Committee can be assured that appropriate and robust due diligence will be carried out through to the financial close of every single project, in particular following a capital raise where the financing structure of the project may change as new investment is introduced.
I assure noble Lords—particularly my old sparring partner, the noble Lord, Lord Foulkes—that the Government have strong oversight of foreign ownership in nuclear projects as a result of the National Security and Investment Act, which includes a wide-ranging ability to call in for assessment qualifying acquisitions if, in our opinion, there are any national security concerns. These are wide-ranging powers. The noble Lord will be aware that we deliberately did not define “national security” during the passage of what became that Act to give ourselves a wide range of flexibility on this subject.
I should add that the Secretary of State may also apply any conditions that he deems appropriate to the designation of a nuclear company—conditions that, if not met, may lead to the company having its designation revoked. Let me also stress—I made this point in a letter to the noble Lord, Lord McNicol—that it is the Government’s intention to take a special share in the Sizewell C project, assuming that the negotiations are successful and the project proceeds to a final investment decision.
I note the intention of the noble Lord, Lord Vaux, that we should legislate for this sort of safeguard, but I caution him that it is right that the terms of the special share should be negotiated as a commercial agreement, according to the circumstances of every particular RAB project. The projects might be different when they are negotiated, so I think that imposing constraints in primary legislation would be too severe.
Baroness Wilcox of Newport (Lab)
I thank the Minister for his reply and the noble Lord, Lord Vaux, for agreeing with me that we must address the shortcomings. I beg leave to withdraw the amendment.
Lord Foster of Bath
(b) a geological disposal facility for the disposal of high-level nuclear waste has been constructed in the United Kingdom and is operational, such that the full life costs of construction and decommissioning of a nuclear energy generation project can be accurately quantified prior to designation.”Member’s explanatory statement
This amendment would prevent the Secretary of State from designating a company under the Act until such time as a geological disposal facility for the disposal of high-level nuclear waste has been constructed in the United Kingdom and is operational.
Lord Foster of Bath (LD)
My Lords, on behalf of my noble friend Lord Oates and—I am sure—with his agreement, I beg to move Amendment 3 in his name.
Lord Wigley (PC)
My Lords, I wish to speak to Amendments 17 and 20 in my name, which have been linked with this group headed by Amendment 3 which—I have written here—has been spoken to with considerable force by the noble Lord, Lord Oates. That may need to be adjusted a little, but I agree with the principles put forward in Amendment 3. However, my Amendment 17, which paves the way for Amendment 20, writes into the Bill—
The Deputy Chairman of Committees (Lord Lexden) (Con)
My Lords, there is a Division in the Chamber. The Committee stands adjourned for 10 minutes.
The Deputy Chairman of Committees (Lord Lexden) (Con)
My Lords, in the circumstances, all voting having taken place, let us resume. The noble Lord, Lord Wigley, can continue his speech and perhaps the noble Lord, Lord Oates, might follow.
Lord Wigley (PC)
I am grateful to you, Lord Chairman. As I was saying, my Amendment 17 paves the way for my Amendment 20, which writes into the Bill, on page 3, line 13, a duty on the Secretary of State to impose conditions that provide: first, for pinpointing responsibility for the eventual decommissioning of a project; secondly, for specifying the extent of the nuclear company’s liability for decommissioning and rendering the site safe; and, thirdly, for providing that all residual costs for decommissioning, over and beyond those shouldered by the nuclear company, are paid by Parliament.
This amendment deals head on with one of the arguments used, sometimes very effectively, by the opponents of nuclear power concerning the cost of decommissioning nuclear power stations and the danger, of which local communities are understandably fearful, of the site of a nuclear power station being left as a radioactive hulk. They are also concerned that under- takings given at the time when planning consent was approved might just be abandoned, with the local community being left to deal with a problem way beyond its ability to handle.
We see at Trawsfynydd today, over three decades after the ending of the generation of electricity, the hulk of the station still there. It is still radioactive and still awaiting full decommissioning. In 2020, it was announced that there would be a new programme for the demolition of the reactor buildings and that the site would be fully cleared by 2083—yes, another 60 years. If the Government are serious about bringing forward another programme of nuclear power stations—as colleagues will know, I support that, because I believe that it is the way to tackle the global warming issue—they must show that they are prepared to take on the ultimate responsibility of rendering the site safe, clean and in a condition acceptable to the local community.
Part of the responsibility for securing this must, of course, be placed on the plate of the nuclear company; after all, if it is to make money from the site, it has a moral duty to clear up the station when it has ended the generation of electricity. But such companies can easily walk away from their responsibilities and the buck must surely stop with Parliament for the residual work of clearing up and rendering safe the site that the Government and Parliament have approved.
This amendment tests the Government’s resolve on this issue. If they are serious about having a new programme of nuclear power stations, they must grasp the nettle and write these, or equivalent provisions, into the Bill. I look forward to their response and, in the event of them failing to give adequate, bankable assurances, I give notice of my intention of returning to this issue on Report and pressing an amendment along these lines to be written on the face of the Bill for MPs to further consider.
Lord Oates (LD)
My Lords, I apologise for my delay in arriving; I misunderstood and thought that the Committee was adjourned until the end of the special session, which was slightly delayed.
I am pleased to follow the noble Lord, Lord Wigley. Amendment 3 in my name and that of my noble friend Lord Teverson would require a geological disposal facility, or GDF, to have been constructed in the United Kingdom and be operational before the Secretary of State could designate a nuclear company under this Bill. The amendment’s objective is to bring some focus to the issues of nuclear waste and decommissioning, which were largely and curiously absent from the debate at Second Reading.
Viscount Hanworth (Lab)
The proponents of this amendment are trenchantly opposed to nuclear power. They are proposing as a condition for allowing a company to construct a new nuclear plant that a facility for the disposal of high-level nuclear waste should be available. Presumably they imagine they are proposing a condition that cannot be met. The proposers should be aware, albeit that they may have missed the point, that work is already under way to establish a geological facility for such waste. Three locations have been proposed, and there have been favourable responses from the people in the areas concerned. This was announced in a symposium that was held in November in Methodist Central Hall, a stone’s throw away from Parliament by Nuclear Waste Services, which is a branch of the Nuclear Decommissioning Agency. In fact, the Liberal Democrats have strongly opposed the establishment of a geological disposal facility. They have recently organised a petition of local residents to oppose a tentative proposal that such a facility might be created on the south coast under Romney Marshes.
Just a month ago, the Liberal Democrats ago voiced the old trope that nuclear waste is highly radioactive and highly hazardous and that the hazards will endure for millennia. They cannot have it both ways. Nuclear radiation is subject to a geometric or exponential process of decay. The more intense the radiation, the shorter lived it will be. On the other hand, a substance that has a half-life of thousands of years is only weakly radioactive. The methods that have been devised for the storage of nuclear waste can accommodate all these circumstances in a manner that can render the waste harmless. We have had various figures quoted for the cost of this enterprise, but the proponents of the amendment are proposing these figures as if they are a cost to be borne immediately. In fact, that cost will be distributed over a long period. If you take that into account, a very different conclusion arises.
This is an ill-conceived amendment and should be dismissed without further ado. We should not allow the legislative process to be entrammelled by such groundless objections and impediments.
Lord Foulkes of Cumnock (Lab Co-op)
I am not sure why my noble friend is so surprised that the Liberal Democrats have moved this amendment. They are always looking in two directions, and this is absolutely typical of them. My noble friend has been in the House of Lords long enough, and he ought to have got used to it by now.
Viscount Hanworth (Lab)
Yes, indeed. In 2010, the Liberal Democrats in the coalition Government proposed that 10 new nuclear plants should be built. Of course, they have totally changed their opinion.
Lord Teverson (LD)
Perhaps the noble Viscount will explain how the Labour Party in government has made some of the biggest U-turns on nuclear power ever seen in this country.
Viscount Hanworth (Lab)
No, I am not in the business of explaining that. There has never been consensus in the party but, right now, I think there is consensus as never before. The party is facing up to realities. I hope I shall have the opportunity to describe what those realities may be if we were to follow the prescriptions of the Liberal Democrats. I think that we would be looking at a scenario of misery and—
Lord Teverson (LD)
We all agree with the principle that the polluter pays. I believe that we also have a principle in life that we should not pollute if we have no way of solving that pollution during the time for which we are planning. The issues here are complex, but I do not think they are necessarily quite so straight- forward as the noble Viscount describes.
Lord Howell of Guildford (Con)
My Lords, I had rather a nice time working with the Liberal Democrats in the Cameron Government, when, in an enlightened way, they were strongly in favour of nuclear power. It appears that they chop and change from time to time, but those were the days.
Before I speak further, my noble friend Lord Trenchard has reminded me that I should have made it absolutely clear that I have an indirect interest to declare, in that I advise Mitsubishi Electric, which is concerned with the power sector and indirectly therefore with nuclear construction. I suppose that I also have a sort of interest in the sense that I was Secretary of State 40 years ago and tried to build nine new reactors, of which only one, Sizewell B, was ever built. I think that I am allowed to reflect to this Committee that things would be much nicer for us if we had got the other eight built as well. They were all low-carbon and would have helped greatly in the present crisis, but that is all history.
On these amendments, it is absolutely true, as the noble Lord, Lord Oates, observed, that the radioactive waste issue requires careful handling and examination, and it must be addressed fully and with all the knowledge that we can bring to bear to establish and meet the many understandable concerns about it.
As for value for money, we will come to that in the next amendment. Of course, there are enormous difficulties in defining what value for what money, but we can debate that in more detail in a moment.
What is not true is to imply that there has been no technical solution to the absolutely safe—nothing is 100% but it is highly safe—burying of high-radioactivity nuclear waste for thousands of years. It is certainly more than 40 years since the late Walter Marshall explained to me that vitrification and burial two or three miles down in a stable geological formation was very nearly foolproof. There was a faint possibility of corrosion of the glass vitrification case around the radioactive material, but otherwise it would be safe for hundreds of thousands of years. He added, rather cynically, that if before then people wanted to dig it up and eat the glass, they may have more problems than radioactive waste. The vitrification option is there; it can be done.
In the great debate going on in America about the Yucca Mountain development as a waste disposal centre, I noticed that the statistics produced—I have the precise figure here—say that all but one in every 10,000 waste packages going into the repository, if it is built, would be secure for more than 150,000 years. So we are talking about the most minute dangers. The danger is there, but it is minute, and has to be weighed against all the other problems—we will come to value in a moment—of abandoning an area of low-carbon electricity which will be reliable, will stop a great deal of the suffering that we have today, and will be not only a stepping-stone to but a crucial adjunct and back-up of the renewable and clean energies that we all want to see dominate when conditions allow.
Lord Vaux of Harrowden (CB)
My Lords, my Amendment 42 to Clause 40 is loosely related to decommissioning, which is why it is in this group, but perhaps slightly niche or tangential.
It is important that there is clarity as to who is responsible for decommissioning. As I understand it, Clause 40 is intended to make it easier for nuclear companies to obtain debt finance by removing the risk that a lender might be caught by the definition of being associated and so potentially become liable for the decommissioning costs, which would not be appropriate for a debt provider. That makes perfect sense, and I fully support the clause in principle.
However, it seems to me that as currently drafted there is a risk that the exemption the clause sets out could create a loophole under which a party that should be treated as associated for decommissioning purposes is able to avoid that by doing some creative structuring of their holding using debt. This is often done, for example, by private equity companies, although more commonly for tax purposes, but it would not be hard to reduce a shareholding to just below the threshold of 20% while in fact retaining the ability to take control above 20% because of the rights attached to debt or quasi-debt. If a party has structured their investment to be 19.9%, and is thus not deemed associated and not liable for decommissioning costs, but it then goes over 20% through the exercise of rights arising due to debt holdings, that party should clearly be treated as associated and should not be able to utilise the exemption set out in Clause 40. However, as the clause is written, it would be able to.
It would be highly unusual for a genuinely arm’s-length debt provider such as a bank to own shares in a company as well as providing debt, apart from the share security rights that come with the debt. Amendment 42 would simply restrict the exemption to parties that did not own shares. That should close off the potential loophole while not changing the intended aim of Clause 40 to encourage debt financers to step up. I hope the Minister can accept it.
Baroness Bennett of Manor Castle (GP)
My Lords, I shall speak to Amendments 44 and 45 in my name. They have essentially the same aim as Amendment 3, moved by the noble Lord, Lord Oates, but would intervene in the Bill in a different place and at a different point in the process. The noble Lord was intervening at the designation stage; my amendments would intervene in Clause 44, at the stage of handing over the money.
We have had a very illuminating debate. I make the point that no one can accuse the Green Party of not having been being consistent through the decades about nuclear power.
Baroness Bennett of Manor Castle (GP)
Well, on many issues, such as the climate emergency, the nature crisis, concern about air pollution and whether we should have a living wage, we have won all those arguments over time, and I fully expect that we will make the same progress here.
The noble Viscount said, “Don’t worry, the costs won’t be borne immediately.” I point to your Lordships’ House having recently passed the Wellbeing of Future Generations Bill—an acknowledgment that we have already laid huge costs on future generations in terms of the destruction of the earth. What we are talking about here is like buying a property and then saying that the ground rent in future will be decided by a random number generator. We do not know what the costs will be, but those costs of trying to dispose of this material exist.
The noble Lord, Lord Howell, said, “Oh, we have the technological solutions”, and the noble Lord, Lord Deben, hinted at the issue when he asked, “Why would future generations dig this up?” We should think about what we have done to the pyramids and a great many ancient sites: here is this mysterious thing from the past and there might be treasures in there. One of the great challenges of trying to decide about deep geological disposal is the question of whether you should mark it or hide it. If you mark it then how do you convey, many centuries into the future, that this is a dangerous place? That is not a question that anyone has ever found an answer to because there is no answer to it.
I would be interested in the Minister’s answer to this. At Second Reading the noble Lord, Lord Oates, said there had not been much discussion of this issue, but when I raised the question of a geological disposal facility the Minister told me there were four places where this was being consulted on. I asked him to identify those places and he said he could not, so I would be interested to hear any updates on that. It rather contradicts the comments from the noble Lord in front of me, who said that three places had already decided. I spoke at Second Reading about my experience of being in Cumbria and seeing what resistance there was, even in a place that is broadly pro-nuclear power, to deep geological disposal.
You do not make a purchase, particularly with public money, without knowing what the costs will be. I have some sympathy with the amendments in the names of the noble Lords, Lord Wigley and Lord Vaux, about trying to make sure that the cost does not land on the public purse—except that the practical reality is that we have seen a great deal of socialisation of costs and privatisation of profits. The state will always be the organisation that has to pick up the costs because the clean-up and the storage have to happen and the state has to ensure the security of its people.
Baroness Worthington (CB)
My Lords, I apologise for not being present at Second Reading, and this is the first time I have spoken in Committee. I am speaking to Amendments 3, 44 and 45. Normally, when I speak on matters of climate change, there is not much distance between my position and those of the noble Lords, Lord Oates and Lord Teverson. However, on this issue, I totally oppose Amendment 3, which can be interpreted really only as a wrecking amendment designed to derail the Bill and the financing of this essential infrastructure, which we need to see built for the clean, affordable and secure sources of electricity that we will need in the future. Amendments 44 and 45 similarly seek to derail this effort and therefore should be opposed by the Government.
To pick up on some of the details, at heart, the difference between us is a sense of radiophobia. Noble Lords on the other side believe radiation to be a deadly, uncontrollable source of pollution that cannot be managed, which is just not true. We know how to manage this waste today and will know how to manage it tomorrow. If you know the source of radiation, and whether it is alpha, beta or gamma, and how it can be stopped by simple everyday materials—paper, metal and concrete—you can contain this waste. You can stand today in a disposal facility of high-level waste, in existing reactors above ground, and touch the sides of the casks containing that waste. It is that safe. In fact, the background radiation would be less than you would get if you were exposed to background radiation from visiting parts of Cornwall.
So please can noble Lords engage in this debate on the basis of science? Can you visit these facilities and engage in an understanding of how this currently operates and will operate in the future? If you drop this radiophobia, you will understand that this is essential in the fight against climate change—not only the existing reactors, but the new reactors and existing-design reactors. We need them all. We need to throw everything we can at this. We need to do it safely and securely, and that is what we have been and will be doing.
Please can we not accept this amendment, but have a dialogue and get to the root of noble Lords’ concerns? I am sure, as was pointed out by the noble Viscount, Lord Hanworth, that once you understand the nature of radiation and that the higher the radiation, the quicker it decays, you will understand that this is a manageable problem, unlike the completely unmanaged problem of CO2 emissions. CO2 is emitted every second of every day in every country, and is accumulating in the atmosphere with no one taking responsibility. No one is paying for its collection and storage. You have to put this in context, understand the science and visit the current management practices in this country and others. Then you will understand that these amendments are not in good faith; they are designed simply to slow this down, and I therefore cannot support them.
Baroness Bennett of Manor Castle (GP)
Before the noble Baroness sits down, perhaps she would acknowledge that the circumstances in which waste is currently being managed are stable—I do not think she was here when I was speaking to the earlier group of amendments, about Ukraine—and we have orderly government and an orderly economic system. We have controls. The world cannot be guaranteed to stay in that place. In another case, waste could look very different.
Baroness Worthington (CB)
Perhaps the noble Baroness would like to comment on the completely and utterly irresponsible spreading of misinformation around the Ukraine reactor. People are claiming that it would be 10 times worse than Chernobyl, which is utterly untrue. This is the largest reactor in Europe, yet it is so secure that it cannot be compared to Chernobyl in any way, shape or form, but all this misinformation is circling around it. We have seen that reactor being rendered to a safe point even under the conditions of war. What more proof do you need that this can be safely managed?
Baroness Bennett of Manor Castle (GP)
The noble Baroness directed that to me, so I will point out that, yes, the artillery shells did not hit the reactors, but they are designed to deal with aircraft strikes and earthquakes. They are not designed to deal with artillery shells.
Baroness Worthington (CB)
Which do you think is more impactful—an artillery shell, or an airliner or F14 fighter flying into the side of the reactor? They are designed for this. They have regular safety protocols and procedure which they go through in considering what should happen in a conflict situation like this. You are really not speaking from a position of information to understand this, I am afraid. I should not use pronouns; I should have said that the noble Baroness should really study this more before making proclamations such as this. It derails this essential effort.
Lord Teverson (LD)
My Lords, of course, the problem is actually flooding, as was shown at Fukushima—and bad maintenance, even in an organised society like Japan. The Tokyo Electric Power Company is probably seen as one of the most reliable companies in the world, but it did not do its job and caused a lot of the problem when there was the tsunami. I am not suggesting that a tsunami will hit Ukraine very soon, but there are issues.
I want to move away from the polemics. I thank Labour Members of the Committee for giving us a headline on opposing such facilities, but I admit that it is not the Liberal Democrats who have determined that they have not happened so far; it is the local communities that have rejected them. Maybe that will change. I have huge regard for the noble Baroness, Lady Worthington. I said this at Second Reading and will not go through it again: if you want nuclear, you do not do it this way. You do not build one big facility at 22 billion quid, and decide five years later to build another. You organise it in a different way, perhaps as South Korea did, with a fleet of the bloody things; sorry, I should not say that. This is the most inefficient and crass way of building nuclear power in this country.
Baroness Worthington (CB)
We are doing series building. The existing Hinkley Point is two reactors built in series, and these will be another two built in series. That is four, so that is not bad—and they are large reactors, double the size of the existing PWRs. You get what you pay for. You will get an enormous amount of reliable, secure and clean electricity that will be the backbone of our grid. It will flex to allow us to accommodate huge proportions of renewables, and it will be a system where we can produce hydrogen from nuclear. There is absolutely nothing for one to be concerned about in this proposal. I am a fan of alternative reactors; there are other ways of doing nuclear that are inherently safe and would not have led to the Fukushima accident, because they could have been designed differently. However, I ask the noble Lord: how many other reactors sustained themselves through that tsunami? It was unprecedented—10,000 people lost their lives—yet there was only one reactor problem, because it did not allow a release of pressurised air with water and vapour. That was what went wrong, not maintenance. There was a political call, and the reason for that was the world’s media focusing on it because of the radiophobia that has been spread, I am afraid, largely by the green movement over the last 30 years.
Lord Teverson (LD)
I can see the Government Benches starting to go for a refreshment break; never mind. I am trying to make a serious point. I have been to Hinkley C; I understand it all, believe me, but this is the wrong way to do it—the technology is obsolete. The question I want to ask the Minister outside the polemics is about the Nuclear Liabilities Fund, which he will be well aware of. Its current value in assets is £15 billion, largely through the Government’s sale of British Energy. We heard from my noble friend Lord Oates that the potential future liability is some £53 billion. EDF pays into the Nuclear Liabilities Fund at the moment.
My question is around the problem of there being a future liability that cannot be met. How does the Minister see that developing? Will the fund be able to meet the costs in the future? I am particularly interested in understanding whether the fund is in a bank account somewhere or is just an item on the Treasury’s balance sheet, so it is not really there and is just absorbed into public expenditure. It is a serious question. I would like to understand the previous methods that have been used to make sure that there is not a liability in the future. The figures just seem totally inadequate. Even if we do go through these types of facilities, how will we make sure that the liabilities can actually be met?
Baroness Wilcox of Newport (Lab)
My Lords, this group of amendments centres on the important aspects of nuclear waste and the decommissioning process. As we have heard, they give rise to polarised opinions. I will be brief, given the number of amendments that we are aiming to get through this afternoon.
A number of speakers raised issues around nuclear waste at Second Reading. The Minister acknowledged that work on a geological disposal facility to dispose of high-level waste permanently is still ongoing. It is doubtful that the Minister will be able to provide any meaningful updates on that project this afternoon, but I may be proved wrong.
There are genuine questions to be answered. However, whether they need to be answered in full through this Bill is less clear. The answer to that question may lie in the likely process once the Government are finally ready to proceed with their chosen long-term solution. Will separate legislation be required to get that project under way?
Lord Stunell (LD)
Yes, I know—it’s boring hearing the facts, isn’t it? I apologise for not catching the noble Baroness’s eye earlier but I want to contribute briefly to this debate with just a couple of historical facts that might help.
I thank the noble Lord, Lord Howell, for his words about the Liberal Democrats in the coalition. As one of the four people from the Liberal Democrat side who contributed to the agreement with the Conservatives, my recollection on that is that, as I am sure he will remember, nuclear power was to be at no cost to the public purse. That was very much the coalition’s starting and finishing point; I hope that it will continue to be so.
I have done most of the things that the noble Baroness, Lady Worthington, invited us to do to apprise ourselves of the facts. Indeed, back in 2001, with the active co-operation of BNFL—British Nuclear Fuels Ltd—I produced a short report, Cleaning Up the Mess, which looked specifically at what would be the best way to deal with nuclear waste; at that time, it was much more prominent in the headlines than it is now and just as intractable. We looked at some of the conditions needed. One is stable geology but the other, which the noble Baroness, Lady Bennett, mentioned, is stable politics. If you look at Europe, only two countries —England and Sweden—have had even 350 years of political stability. Of course, the events in eastern Europe at the moment are a reminder of that.
Lord Foulkes of Cumnock (Lab Co-op)
It seems to have been relatively stable in Scotland.
Lord Stunell (LD)
I am sure that the noble Lord’s colleagues from the Scottish National Party will remind him of the Act of Union, which was subsequent to that date. Yes, England was a deliberate choice, but I will accept other places; it is hard, however, to find another place other than Sweden that has had even 300 years, let alone however many thousands of years we are talking about, of stability.
Lord Stunell (LD)
Let us try Portugal. The Duke of Wellington was required to liberate Portugal from Spanish and Napoleonic domination. It is easy to forget Napoleon and Hitler and all sorts of things but—not that it is particularly relevant to this debate—political stability is important and rare. This country is one of the places that has been able to exhibit that despite our sometimes fractious debates on nuclear storage.
The conclusion of my report was that you need deep geological storage. It would be sensible for it to be in England. This is not, and never has been, Liberal Democrat policy, but my report pointed out that there was a big business opportunity because nobody else in the world—neither then nor, for that matter, now—had a good place to put their nuclear waste. I am certainly not opposed to having a deep geological disposal point.
The purpose of this is to establish the risk and the cost to the public purse. I go back to where I was in 2010—that there should be no cost to the public purse. We have gone backwards since 1999. Then we at least had a site and a plan—or BNFL did, which was strongly advocating it—but at the moment we have neither. We had a timescale; it would have been operational in 2024, which would have been very convenient for the passage of this Bill. Now it will probably not be for another 25 years, even if it gets a fair wind.
Lord Wigley (PC)
When the noble Lord says that there should be no cost to the public purse, is that in regard only to future projects or also to existing nuclear power stations? I mentioned in my intervention the situation in Trawsfynydd, the cost of decommissioning which could never have been anticipated when it was built. Is there not a case in those circumstances that the public purse is the only way to bail out that sort of situation?
Lord Stunell (LD)
The noble Lord is almost certainly right. That ship has sailed, to say the very least. In phases one, two and three of the nuclear programme, no adequate provision was made for decommissioning or any way of storing the waste. Unfortunately, that will clearly fall back on to the public sector in some form or another.
We are talking about a new generation. It is surely right and proper to learn from the mistakes of the last 60 years and make sure that that is properly costed in the formulation given for the construction and operation of these plants. I do not think that it is particularly controversial that we should learn from previous experience, although it is often very hard to do so.
Is the Minister satisfied that the public purse will be properly protected over a period of time from finally picking up the costs of geological disposal of nuclear waste from the plants that this Bill is intended to finance? The Government ought to answer that honestly and frankly so that there is no illusion on anyone’s part either about what is happening in terms of public subsidy or that the true costs of delivering a nuclear programme incorporate the costs of decommissioning, rather than shuffling them off at the start and delivering them as a bill of unknown but undoubtedly large size to the public purse.
Baroness Worthington (CB)
Before the Minister responds, I would be interested in whether we should have a review of the societal demands of how we treat the decommissioning and waste of nuclear, because it seems to me that we are operating against a set of principles that have become detached from the reality of how you can manage this more cost-effectively. A large body of evidence says that geological disposal is not needed, because you can just do subterranean management. If it were not for the widespread lack of understanding about the nature of the problem and the way it can be dealt with, we would not have to incur these costs. If there is a review, we should go back to basics.
The same is true of decommissioning. The simplest and cheapest way to decommission is to leave it alone and then decommission it. The desire to bring it back to greenfield status is utterly unnecessary. These are highly concentrated industrial sites that serve clean energy to millions of people. We should not be seeking to return them to greenfield on an accelerated timescale, unnecessarily incurring huge costs to the taxpayer. We should have a review, go back to basics and consider all of the above in terms of what we should do with our waste and decommissioning.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I shall speak to Amendments 3, 17, 20, 42, 44 and 45, laid by the noble Lords, Lord Oates, Lord Teverson, Lord Wigley and Lord Vaux, and the noble Baroness, Lady Bennett. They relate to decommissioning and it is appropriate that they are all discussed together.
Prior to doing that, I will address the comments of the noble Lord, Lord Teverson, on the Nuclear Liabilities Fund. The NLF is a segregated fund which has been set up to meet the costs of decommissioning nuclear power stations currently owned and operated by EDF. The fund is managed by an independent Scottish trust, the Nuclear Trust. The trustees are responsible for ensuring the sufficiency of the NLF to meet decommissioning liabilities. I hope that that answers his questions.
I return to new nuclear and make it clear to the Committee that there is already a robust and effective statutory regime in place that addresses the decommissioning costs of new nuclear power stations. Under the Energy Act 2008, it is a legal requirement that all proposed new nuclear power stations have a Secretary of State-approved funded decommissioning programme in place before nuclear-related construction can commence on site. This includes setting out how the operator will safely manage spent fuel and waste during operations and meet the costs of decommissioning and the clean-up of the site. I note with interest the comments made by the noble Lord, Lord Wigley, and welcome the opportunity to meet him if he would like to discuss this process further.
As part of the FDP approval process, the Secretary of State must consult the Office for Nuclear Regulation—the ONR—and relevant environmental regulators where their functions are concerned. The Government have also published FDP guidance, which clearly sets out the principles that the Secretary of State will expect to be satisfied in an FDP. I note that we expect any approved FDP for a new project to be available publicly, as was the case for Hinkley Point C, save for material of a sensitive nature.
Approximately 94% of legacy waste created by nuclear power stations in the UK is low-level waste, which is either recycled or disposed of safely and securely. Higher-activity waste is treated and stored safely and securely in nuclear-licensed sites around the country. This will then be disposed of in a geological disposal facility, which the Government are committed to developing. The noble Baroness, Lady Worthington, made these points eloquently and I thank her for her contribution. A GDF will ultimately allow the Nuclear Decommissioning Authority to complete the decommissioning and clean-up of the existing nuclear estate and to continue to manage radioactive waste effectively. This is the safest and most environmentally responsible option for managing higher-activity radioactive waste in the long term and there is a process under way to identify a suitable location for a GDF.
The noble Lord, Lord Callanan, recently wrote to the noble Baroness, Lady Bennett, on this very matter. A GDF working group, which is the first formal step in the process to identify a suitable location, has been formed in Theddlethorpe in Lincolnshire and is beginning discussions with the local community. In addition, the first three GDF community partnerships—the second formal step in the process—have been formed in Mid Copeland, South Copeland and Allerdale in Cumbria. These groups provide a platform for long-term community engagement, local investment funding and investigations to assess potential site suitability.
It is for these reasons that I cannot accept Amendments 3, 17, 20, 44 and 45. The FDP regime in the Energy Act 2008 already exists to ensure that new nuclear projects have effective arrangements in place before they begin construction to manage, pay for and dispose of the waste that they create. Amendment 3 in particular would prevent the Government from bringing forward new nuclear power using the nuclear RAB model that we need to decarbonise our power system and help meet our ambitious climate change goals. A GDF is the best option for the long-term management of radioactive waste and I thank the noble Viscount, Lord Hanworth, for his support for such a facility. I also thank my noble friend Lord Howell for his thoughtful reflections on this matter. As I said, a process is already under way to identify a suitable location with a community willing to host a GDF. It is imperative that we bring forward nuclear now, given that arrangements are in place for safe, secure interim storage of waste and its ultimate disposal.
The noble Lord, Lord Oates, made several comments on the potential costs of a GDF and how our understanding of these has developed. The earlier cost figure to which the noble Lord referred represented a lower-end single point estimate around some basic assumptions on the depth and type of rock in which the GDF would be constructed. It included only the cost of disposing of legacy waste. The revised cost range of £20 billion to £53 billion is a more mature and complete estimate based on credible scenarios. It includes figures for waste from new nuclear projects and materials such as uranium and spent fuel from earlier nuclear power stations, which may be declared as waste if no further use is found for them. It also accounts for factors including uncertainty and optimism bias. Uncertainty will be reduced as we progress through the siting process. We will understand the specific geology and associated engineering and technical requirements, allowing us to refine our cost estimates.
I turn to Amendment 42, which was laid by the noble Lord, Lord Vaux. It is our understanding that the intent of the definition of “associated” in Section 67 of the Energy Act 2008 was to provide the Secretary of State with the flexibility to impose decommissioning obligations on entities that would be expected to have a substantial degree of influence over the operator’s normal activities, such as the operator’s group companies and shareholders with an interest in the company significant enough to influence its decisions.
Lord Wigley (PC)
Will the Minister clarify her response on Amendment 20? If the cost of decommissioning, including of the site, goes beyond that which has been built in to the financial agreement at the origin of the scheme, is she saying that the Government would pick up the bill in those circumstances and that there is already a provision to provide for that, or is she saying that in no circumstances would the Government use public money for that purpose? If she is saying the latter, getting a nuclear power station such as Wylfa off the ground does not have a snowball’s chance in hell. There has to be a guarantee that ultimately the public purse will pick up the cost.
Baroness Bloomfield of Hinton Waldrist (Con)
All I can say is that all these issues will be negotiated up front in the agreement that we make with the potential operator of a new nuclear site.
Lord Wigley (PC)
I am sorry to press this further, but of course there will be negotiations and some sort of a deal will be made with those developers, but if the circumstances change, as happened at Trawsfynydd, and there are immense additional costs beyond what was anticipated, surely there has to be a public guarantee to those communities. Those communities have supported nuclear power on the basis that such an understanding exists. If it is not there, there will be a volte-face, and there will be a reaction against nuclear power. This assurance has to be given one way or the other. If the Government want to go away, think about what mechanism is appropriate and come back on Report, I accept that, but to say that in no circumstances would the Government pick up the tab is to kill off the prospect of those locations.
Baroness Worthington (CB)
I do not think that that assertion is correct, because my understanding is that once the nuclear industry stopped building new reactors it moved into decommissioning. What we had was a period in which the entire sector was making all its money from decommissioning costs. The reason that those costs kept rising was that we had a very poor regulator which allowed a reciprocal relationship with private contractors, who brought forward all sorts of faster decommissioning timetables. That was nothing to do with what society needed or required; it was to do with the profitability of the industry. I hesitate to say that there are these red lines where society will not accept a new reactor because of decommissioning. It is much more complicated than that. We must be careful that we are not gold-plating regulations that deliver millions of pounds to contractors unnecessarily.
Lord Wigley (PC)
I entirely accept what the noble Baroness is saying, but circumstances will change and there will be costs that have not been anticipated. Those will be picked up either by the local community or by someone else. If it is someone else, who else can it be but central government?
Baroness Bloomfield of Hinton Waldrist (Con)
What I can say is that the Government will meet all our obligations to communities in decommissioning the site.
Lord Vaux of Harrowden (CB)
When the Minister was answering on Amendment 42, I think that she confirmed the existence of the loophole that I had pointed out, so I will just ask her a direct question. If someone whose stake was, say, 30% managed to structure it so that it was 19% and debt, then that debt was subsequently rejigged to bring us back above the 20% threshold, should that person be treated as associated or not?
Baroness Bloomfield of Hinton Waldrist (Con)
I am told that Section 67 of the 2008 Act already provides for this, because the totality of the investment would be taken together. If it is over the threshold, it will be caught.
Lord Vaux of Harrowden (CB)
But the whole point of Clause 40 is to create an exemption, so that share security rights that arise from debt are not taken into consideration when deciding whether someone is over the 20% or not. That is the whole point of Clause 40 and is precisely the problem that I was alluding to. I am happy to meet the Minister to discuss it, if that is easier.
Baroness Bloomfield of Hinton Waldrist (Con)
I am happy to explore this further out of Committee.
Lord Oates (LD)
I thank noble Lords—some more than others—for their contributions to this debate. I particularly thank the noble Lord, Lord Howell, who, while we disagree strongly on these issues, addressed nuclear waste seriously. One of my purposes in tabling Amendment 3 was not only to expose issues about and have a proper discussion around the costs of a geological disposal facility but because it concerned me, at Second Reading, that there was little focus on waste.
I perhaps should have declared an interest at the beginning as, many years ago, I acted as an adviser to the NDA. While I do not pretend to be a scientist, I have some understanding of this and say gently that there are many people, on all sides of this debate, who have an understanding and take different views. Noble Lords should not make assumptions about their greater knowledge to underpin their enthusiasm for nuclear.
On the specific point of my party’s position on this—again, rather than addressing some of the issues, we seemed to get into a rather unnecessary partisan issue—different parties have different views. As my noble friend Lord Stunell pointed out, the agreement in the coalition was no public subsidy for new nuclear and that is the position we took.
The noble Viscount, Lord Hanworth, for whom I have great respect, was uncharacteristically partisan. He told me that I could not have it both ways, but I gently suggest that he cannot have it both ways either. If the issue of nuclear waste is of such marginal concern and I should not be bothering the Committee about it or the costs of it, why are we intending to spend potentially £51 billion—I imagine much more by the time we get to it—on a geological disposal facility? The noble Viscount said, “Well, there are things happening”, but there have been things happening for a long time on the GDF. As my noble friend Lord Stunell pointed out, we have gone backwards in many ways. I have also heard some argue, “Oh, actually, we do not need a geological disposal facility. That solves it, because then we do not have to worry about the costs of that or the difficulties of securing it.” That is not the view of the majority of people I have spoken to, and I have spoken not only to those who are opposed to nuclear but to those involved in the nuclear industry. Certainly, the international view and the international experience is that such a GDF is required.
All I would ask of the Committee and the Government is, if they are intent on going down the road of nuclear—I am quite open that I am opposed to it, not for some ideological reason or from radiophobia but for some very practical reasons relating to the problems; they are not about encased waste, which you can standby or store for 100, 200 or possibly 300 years, but about long-term disposal, as talked about by my noble friend Lord Stunell, the noble Baroness, Lady Bennett, and others—
Lord Foulkes of Cumnock (Lab Co-op)
Is it not the case, when we are dealing with the disposal of waste, that more than 90% of it is already there, coming from the old Magnox reactors, and the new nuclear reactors produce relatively small amounts of nuclear waste?
Lord Oates (LD)
I have heard this from others, and the argument seems to be, “Well, we’ve created such a mess already that it doesn’t make much difference if we create any more.” They may create less waste than the old Magnox reactors, but all I am asking is that, before we create more of that waste, we have a way of disposing of it. It is important that we take that seriously, whether we are pro-nuclear or anti-nuclear. We will not convince people unless we deal with this sensibly. In terms of this Bill, we cannot know the real costs unless we understand the costs of construction and operation.
Lord Oates (LD)
I say with respect to the noble Baroness, Lady Worthington, that she has intervened on many occasions and we probably need to move on. I just ask that these matters be taken seriously and that when people discuss nuclear waste they think about it in terms of the very long term over which it has to be dealt with and the fact that we do not yet have that GDF and cannot possibly know the costs of it. I beg leave to withdraw the amendment.
Lord Foster of Bath
Member’s explanatory statement
This amendment would require the Secretary of State to provide stronger evidence that the project will result in value for money through publication of such assessments carried out to date.
Lord Foster of Bath (LD)
My Lords, I begin by declaring a couple of interests. First, I should place on record that I live quite close to Sizewell. I say to the noble Lord, Lord Howell, that if only the current construction of Sizewell C were done in the way in which they built Sizewell B, with much of the material brought in from Sizewell A, some of the objections in the locality—not all of them—would certainly disappear. Secondly, and I say this particularly to the noble Baroness, Lady Worthington, for whom I have enormous respect as she knows a great deal about this, I know a little bit because I used to be a physics teacher, but I do not think that that holds much water these days—it was a long time ago.
My amendment is in a long grouping of amendments, but all seem to cover roughly the same theme, that of transparency and trying to ensure that we have as much information available to us as we can before fundamental decisions are made and this Bill goes through. There are many amendments covering issues to do with the designation procedures and so on. I note, for instance, that my noble friend Lord Oates in his Amendment 13 asks not only for more information on what impact the RAB will have on consumer bills but for that to be independently checked—something that Citizens Advice, for instance, has long been campaigning for.
My noble friend also raises a really interesting issue in Amendment 6. It is about getting some assurances that the station or generation system to be built will be able to deliver and will not have a number of outages, or perhaps will not even work at all. Of course, that is already being experienced by the Taishan EPR new build in China, which has been offline for the past eight months after only two and a half years in operation.
Lord Howell of Guildford (Con)
My Lords, I am second to none in my concern for the escalating costs of past nuclear projects—large-scale projects, that is. That is why my hope is that more and more emphasis will be put on returning to smaller modular reactors and new technologies, where the opportunities for vast cost escalation over a long period of time are reduced. One cannot help coming to that conclusion from the experience of Flamanville, where there was a huge cost overrun—the noble Viscount, Lord Hanworth, will remember that because we visited it together—and, of course, that of Olkiluoto, where the cost and time overruns are colossal.
So large scale does not have a good story. The sooner we can face up to that and give full support—even more support than at present—to the development of SMRs, borrowing foreign technology if we have to but hoping that Rolls-Royce has got it right and is on the right lines, the better. In a way, the regulated asset base will work all the better for these smaller and much more financeable projects, which are much more attractive to the private sector than large-scale projects. However, the large-scale project at Sizewell C is already under way, so perhaps my prayers are not going to be answered for that one; I just hope that they are for the future.
My problem with Amendment 4 is the emphasis on the concept of value for money, which is of course something that the Treasury talks a great deal about. Can the noble Lord who moved the amendment enlighten us later on what he means by “value”? Part of the argument all along—it has never been stronger than it is now—for building nuclear is national security, as the noble Baroness, Lady Wilcox, rightly mentioned at the beginning of the day. National security is the case for an element: you cannot go completely for national security on the basis of autarky—that would be absurd—but we do know that events happen, and have happened.
Right now, we face tremendous problems because of not being able to mobilise a system that is less prone to colossal price increases, causing enormous damage, hurt, suffering and danger to the economy, as a result of the more than tripling—the sevenfold increase—in the price of gas. Only yesterday morning, I was listening to the noble Lord, Lord Duncan, say on the radio that, in the two hours before he had come on the radio, the price of gas had risen from being five times as high as last year to nine times as high. It is a crazy situation, arising entirely from a lack of diversity and support because we have let our low-carbon, reliable nuclear sector run right down from the 35% it was in its heyday to something in the mid-20s; it is going to be 7% until we get it started again.
Is national security part of the value? Is there the back-up capacity of having a reliable sector of low carbon when renewables, however much we love them, falter? They do falter, and can fail completely at times. Is that built into the value? Is the fact that this is an enormous future source of clean, green hydrogen built into the value? Is the fact that nuclear itself is low carbon and therefore should be backed, and justifies subsidy in the way that other low-carbon renewable sectors have all received substantial support in their time—although their costs are coming down—included in the value? Unless we are able to get some realisation that value is a disputable, subjective point, and that behind it lie much deeper assessments of the defence of the nation and our national security in the next 30 to 40 years and further ahead, it is impossible to lay down rigid rules about how some kind of assessment of value for money should be reached. That is my problem with this entire amendment.
As I say, although we cannot go for autarky—that would be absurd—we must have reliable electricity for what everyone says is going to be an electric future. We are going to use 12 times as much electricity in the western world in 2050 as we use now, so we must have electric reliability. For that, we must have a nuclear sector that is strong, effective, reliable and, one hopes, more affordable. In the meantime, what is the value? That is my question.
Lord Foster of Bath (LD)
I have enormous respect for the noble Lord—indeed, I think that he has asked some very pertinent questions—but he has spent his time criticising the amendment when the Bill that he is perhaps going to support later currently says that
“the Secretary of State is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”
So the value for money is already there; my amendment seeks to have it published so that we can see what basis has been used. I think that the noble Lord should be addressing his questions to the Government, not to me.
Lord Howell of Guildford (Con)
What I am saying is that, if the Secretary of State decides to publish his value for money assessment, that assessment will of course include the long-term national security concerns of this nation and a variety of other advantages of moving into a proper low-carbon electric age. That kind of value is not one that the noble Lord is going to agree with, so the disagreement will continue. Value is a totally subjective aspect; that is so with many national projects, but particularly with this one.
If I may say to the noble Lord, Lord Stunell, the rather endearing Lib Dem concept that no public subsidy could possibly be involved—that is, nuclear is all right but there must be no public subsidy—is an absurdity. Of course there is going to be public concern about the national security of this nation; public concern is something that will have to be paid for, either through subsidy by the taxpayer or by ordaining the Government to raise the money in some other way. The latter was the proposition for Hinkley C, which was allowed to have a strike price that was at that time almost twice the going rate for electricity kilowatts per hour from coal, oil or anything else, including renewables. Things have changed since then; now that electricity and gas have soared, perhaps the strike price is quite reasonable compared with other fossil fuels. That raises the question of contracts for difference; perhaps it was not quite such a bad prospect as some of us thought.
Anyway, that is beside the point. The main point is that value is utterly subjective and must contain all kinds of assessments by the Secretary of State, his colleagues and the Government about national security and its contribution to our long-term aim of a decarbonised world, as well as a vast range of other considerations—all of which have to be balanced out in taking these difficult political decisions. We can argue until kingdom come but the reality is that judgments have to be made, and they are much bigger than value in the narrow sense.
Viscount Hanworth (Lab)
I quite agree with what the noble Lord, Lord Howell, has just said; indeed, I feel somewhat pre-empted. However, before I address the amendment, I shall talk about cost overruns.
The cost overruns have been substantial in Flamanville and Olkiluoto but they are mainly attributable to the fact that there was a long hiatus in the process of constructing nuclear power stations, so the skills that constructed the majority of the French and our own power stations had evaporated. It is worth looking back at the history of our original nuclear programme to recognise both how rapid and effective it was and that it was not accompanied by the kinds of problems we have witnessed on these large power stations.
Be that as it may, Amendment 4 from the Liberal Democrats is predicated on their opposition to nuclear power and the proposal that nuclear power projects should be assessed in terms, as we have heard, of their value for money. I presume that they wish the assessment to be based on commercial accountancy, and that they hope and expect that on that basis the projects will be judged to be too expensive to pursue. The proposers of the amendment should know that when a nuclear project is financed by commercial funds, the likelihood is that more than 50% of the cost of the project will be attributable to interest costs.
In other words, the costs of projects pursued in this manner will comprise a substantial transfer payment by the beneficiaries of the project, who are the consumers of electricity, in favour of the financial sector. Are the Liberal Democrats happy to see major investments in social and economic infrastructure evaluated according to the criteria of commercial accountancy? If so, they are aligning themselves with a political ideology that I would have expected them to reject.
Viscount Hanworth (Lab)
Be that as it may, when we talk of value for money, we usually have in mind the amount of money we would be paying for an item that is subject to immediate use or consumption. The concept loses its meaning, as we have heard, when considering something where consumption is to be deferred and is liable to take place over an extended period. In such cases, we must attempt to envisage the circumstances likely to prevail in the future. This is surely the case for a nuclear power station, the construction of which may take a decade and which is intended to provide a carbon-free supply of electricity for many years. It is envisaged that such power stations will be able to supply the plentiful electricity needed to power a carbon-free economy and to assist in averting climate change.
The appropriate means of determining the value of a nuclear project is to consider the associated opportunity cost. Opportunity cost is a technical term in economics that denotes the opportunities that are forgone by pursuing—or not pursuing—a particular project. It requires a degree of imagination to assess the opportunity cost of a nuclear project, which far exceeds the imagination required in pursuing an exercise in commercial accountancy. I invite the Liberal Democrats to assess the opportunity cost of forgoing nuclear power. In particular, I encourage them to envisage the consequences in terms of economic and social misery that will arise if we fail to create an ample and carbon-free supply of electricity. Their policies are inviting such a failure.
Lord Teverson (LD)
There is a concept in economics—which I am sure the noble Viscount is aware of—of opportunity cost.
Lord Teverson (LD)
Exactly. My point about it is that, first, it is the Government’s Bill says there will be this assessment. We are trying to find out is what it actually is, in the interests of transparency—which I am sure the noble Viscount would not disagree with. In terms of costs, there are opportunity costs of other forms and ways of meeting climate change targets. That is the point. You can reject opportunity cost, which means other ways of doing this. I do not think the noble Viscount’s enthusiasm for nuclear—which I understand—should disregard some of the other ways of achieving these objectives.
Viscount Hanworth (Lab)
Let me answer that. Looking at the alternatives proposed by the Liberal Democrats, I could go into a long discourse to outline what will happen to our industries if we forgo an ample supply of electricity to power them and maintain our economy. This is what the Liberal Democrats are inviting. They simply have not faced up to the realities of their proposals. The noble Lord says the Bill already asks for an assessment; I think that is a trivial point, because I am trying to tell him that such an assessment is probably not the appropriate way of proceeding—as we have heard very eloquently from the noble Lord, Lord Howell. I am not defending the proposal that a value for money assessment should be made. I am suggesting that such an assessment should be put aside because it is irrelevant and inappropriate.
Baroness Bennett of Manor Castle (GP)
I am sorry to intervene on the noble Viscount’s private discussion with the Liberal Democrats, but he referred to opportunity costs and may not be aware of the study from the University of Sussex Business School and the International School of Management—ISM—of 123 countries over 25 years, which was published in Nature Energy. It showed that nuclear and renewable energy programmes do not operate very well together and that nuclear crowds out renewable. That is the opportunity cost when going for nuclear; you lose the renewables.
Viscount Hanworth (Lab)
My discourse on renewables would have been on the extraordinary cost of having to accommodate intermittence. I am afraid there are other things to discuss. I have already discussed this in another forum, so I think we can leave that point.
Baroness Worthington (CB)
My Lords, I will speak briefly on Amendment 4, as much of what I was going to say has already been covered. I have some sympathy with this amendment, as transparency is nearly always good and it would benefit the industry to have a thorough description of the value of investing in nuclear on this and other scales, so that we have it as an option as we combat climate change and seek to deliver affordable power to the nation.
As the noble Lord, Lord Howell, pointed out, value is subjective. Therefore, it would be hard to use it as an objective way of saying that this should not go ahead. What value does Switzerland currently place on its electricity grid, which is almost 100% hydro and nuclear? That means that, despite its location in the centre of Europe, Switzerland is feeling incredibly safe in these troubled times. What value does it place on that? It is of huge value to Switzerland.
Similarly, the social cost of carbon rapidly needs to be revised as we realise that the impacts of climate change are happening far faster and at far greater cost than we ever thought. How do we factor that into value? Transparency is important and I would welcome a much more open discussion about the value that these large-scale nuclear power projects deliver for us. You can look at the levelised cost of electricity, but I suggest it is not the most important factor. You can pay a lot less for a tricycle than for a tractor, but they do not perform the same job. You must compare like with like.
With renewable technologies you have rapid deployment but very diffuse sources of energy, large land take and intermittency, which then requires a substantial extra cost on the grid for levelling when the sun is not shining or when we have periods of no wind, which does happen in Europe—it happened recently, actually, and contributed to the high gas prices we have seen. Let us have that discussion. I feel confident that the project we are talking about here, Sizewell C, will provide a great value for the money we are about to spend, not least because 50% of its additional cost comes from its financing, as has already been stated. That is a huge overhead, because these are capital-intensive long projects. This Bill will help reduce that and increase the value for money.
We now have two reactors under construction today. We can look at the costs of those to see how they transfer to subsequent projects that are funded under this more efficient mechanism. I have been informed about and questioned EDF about its cost overruns. The costs of the two reactors being built today are in line with what you would expect if you were building a huge construction project through the period of Brexit and Covid. Nearly all the inflated costs are true of all big infrastructure projects and are not unique to the nuclear project currently under way. So I would welcome having this conversation. I think transparency would be a friend of the industry and I therefore have some sympathy with this amendment.
Lord Oates (LD)
My Lords, I will concentrate in particular on Amendment 6, addressing nuclear outages, and Amendment 37, which would protect recipients of universal credit from being liable to the levies under this Bill. I support the amendments in the name of my noble friend Lord Foster of Bath, and I am slightly bemused about why it is not recognised that we should understand the basis of the value for money test, given that it is in the Bill.
Baroness Worthington (CB)
When we embarked on our nuclear build, we also took government money to build our hydroelectric pumped storage units, which were designed specifically to compensate and were built alongside the nuclear units. We are losing nuclear units, but we still have our hydroelectric pumped storage. The noble Lord can speak to National Grid. As we are not going to be seeing the same parity of nuclear output even after we have built the next round because we are losing the AGRs, we have more than enough capacity on the grid to cope with those fluctuations.
Viscount Hanworth (Lab)
I regard this amendment as a complete blind. Indeed, the figures that have been quoted do not tally with the ones to which I am privy. Large nuclear power plants are the only proven technology available today to provide a continuous and reliable source of low-carbon electricity. They have never been afflicted by major unplanned outages, albeit that as nuclear power plants—
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
My Lords, there is a Division in the Chamber. The Committee will adjourn and return as soon as agreed after Members present have voted.
Viscount Hanworth (Lab)
As I was saying, large nuclear power stations are the only proven technology available today which provide a continuous and reliable source of low-carbon electricity—
Viscount Hanworth (Lab)
Can I please proceed uninterrupted, then we can have a real set-to later?
Nuclear power plants have never been afflicted by significant unplanned outages, albeit that, as they have aged, their maintenance needs have increased. These have been fully accommodated by planned outages. Nevertheless, the closure of the Magnox reactors has led to an increase in load factors, which are now considerably above their historical average. The average has risen from an historical 60% to its current level in the high 70s. The recent unplanned outage at Hunterston B, which can be blamed on the age of the plant, limited its nuclear power generation for much of 2018. It was accompanied by an average load factor throughout the industry of 72.4%.
This amendment flies in the face of reality. We must turn the matter around by asking the Liberal Democrats and the Greens, who are averse to nuclear power, how they propose to accommodate the intermittence and unreliability of the renewable sources of power they are so keen to advocate. Perhaps I should not raise the temperature by declaring this, although I fear I must, but this amendment is a blind and is a transparent piece of nonsense.
Lord Teverson (LD)
I will not respond to that hugely, except to say that the really important amendment, which I think we will all treat seriously, is the one on the cost of energy and the fact that this will add to energy prices. The proposition that we should exempt fuel-poverty households from this is serious; we should discuss it, because it is very current and important.
I gently suggest to the noble Viscount, Lord Hanworth, with whom I have enjoyed serving on the committee for many years, and the noble Baroness, Lady Worthington, that they have somehow fallen into the wrong idea that it is renewables versus nuclear. That is how the argument has gone.
Viscount Hanworth (Lab)
If I could interject, we are objecting to the complete exclusion of nuclear, which is the agenda of the Liberal Democrats. It is madness.
Lord Teverson (LD)
The answer to intermittency comes back to opportunity cost. As I said at Second Reading, the most effective way of reducing it is energy efficiency. That should be the prime objective. Does the noble Viscount disagree about energy efficiency?
Lord Teverson (LD)
There are all sorts of ways of dealing with intermittency. Interconnectors have been quite effective, and I congratulate the Government on their policy of increasing those. Energy storage has been mentioned, in terms of hydro. On baseload, I agree that there are other ways of doing that in terms of geothermal starting, although I understand that is very young. There is a whole plethora of other strategies that work here.
I purely wanted to suggest that one of the most important matters here to the people outside this Room is the cost of energy and how we deal with fuel poverty in terms of this specific financial model, and to emphasise that the argument is not just around nuclear versus renewables.
Lord Howell of Guildford (Con)
My Lords, surely no one is suggesting that these are alternatives, or if they are then that is not what any sensible assessment would allow. Of course the aim for a decarbonised world has to be sought through many forms. All that is being said is that to leave out one of the major areas of decarbonised electricity is asking for trouble, unless one can begin to assess the enormous costs of trying to fill it in in areas where it may not even be available.
The example of Germany is one that the noble Lord should perhaps bear in mind. The rumour is that, having tried to do without nuclear power and got down to its three remaining nuclear stations, there is strong talk that if it is to move into the new world that we are facing now, which has all sorts of implications for the future, a large chunk of reliable low-carbon nuclear capacity must be either retained or developed to add to all the other highly desirable things for net zero and all the other projects, including of course energy efficiency and a far greater use of every kilowatt of electricity for output, which is the secret of considerable improvement without too much electricity. If that is what is being argued, we are all for it, but nuclear electricity is an unavoidable part and to drop it seems a bit odd and very high-cost indeed.
Baroness Worthington (CB)
The noble Lord, Lord Teverson, has talked about the cost of energy. I agree with him that it is very important that we take this issue seriously. The reality is that the CfD mechanism, which will still be part of the financing mechanism under the RAB model, will pay back when we see these very high prices—some of those CfD models are paying back to consumers. My question for the Minister is: under the RAB model, if it pays back in future, will that revenue flow back to consumers or will it sit with the Treasury?
One of the criticisms that could be levelled at this idea is that it is regressive. If it were a tax, those who could afford to pay it would pay more while those who could not would pay less. The universal credit amendment is trying to say that the regressive nature of this needs to be thought about. If you exclude someone from the payments then you might be excluding them from the repayments if the CfD provides revenue back, so this needs thinking through. There is a real question here about its regressive nature. If the CfD is paying back in, are we holding that in the Treasury or could it go back to the consumer?
Lord Wigley (PC)
My Lords, before the Minister concludes this debate—oh, I beg your pardon.
Baroness Bennett of Manor Castle (GP)
Sorry, I have been trying to find a space to get into a number of amendments here. On the debate we have just been having, I shall quote Steve Holliday, the CEO of National Grid, who said in 2015 that the idea of nuclear for baseload was “outdated” and that:
“From a consumer’s point of view, the solar on the rooftop is going to be the baseload. Centralized power stations will be increasingly used to provide”
variable power.
In the interests of taking us forward, I will speak fairly briefly to my Amendments 7, 8 and 23 in this group. I apologise if Amendments 7 and 8 might have been better grouped with Amendment 2, which I did not spot at the time.
Amendment 7 seeks to ensure that nuclear companies be either a not-for-profit entity, a co-operative, a community-interest company or wholly owned by UK public authorities. This comes back to the point about the ownership of the designated nuclear company and a point I made earlier. I will not replay it at length, but we have very often seen through our whole system of privatised public services—railways, power companies, et cetera—the socialisation of costs and the privatisation of profits. This is an attempt to say that this is a core public service: this is not a competition, and it should be provided through that means of ownership.
Lord Wigley (PC)
My Lords, I will speak very briefly indeed. I hate to disagree with my friends in the Green Party and in the Liberal Democrats, but the question has been asked about the impact on those on lower incomes. It is absolutely a fair question, but it must surely be resolved through the social security systems and the underpinning of people who are in that position. Surely, the crunch here is that, if there is one thing that is worse for those people than the impact of the cost of energy, it is there being no energy available: no electricity available when you put the switch down. That is the real, stark possibility that we could be facing in the world that is coming. We have to gear up for that, and then we have to arrange matters in such a way that those on the lowest incomes are protected from it. That surely must be our priority when facing the challenges of global warming.
Baroness Wilcox of Newport (Lab)
My Lords, as in the previous group, we have heard a variety of views trenchantly expressed. The Labour Party has tabled four amendments in this group: Amendments 10, 16, 29 and 38. Amendment 10 would require the Secretary of State to gain assurances about the delivery of a project.
Baroness Wilcox of Newport (Lab)
I have started so I will finish. Amendment 10 would require the Secretary of State to gain assurances about the delivery of a project before designating a nuclear company to undertake it. We hope that a designated nuclear company will not fail and that projects will be delivered without a hitch, but experience teaches us that complex infrastructure projects often encounter bumps in the road. There will always be scenarios that cannot be planned for but the aim of this amendment is to ensure that the Government can demonstrate the existence of contingency plans for the most obvious obstacles.
Amendment 16 is designed to probe plans for promoting the production and capture of hydrogen as part of nuclear power generation. Various methods are outlined in the UK hydrogen strategy but the next steps are limited to awaiting further innovation and developments in the 2020s. Have the Government assessed the potential benefits of utilising by-products from nuclear processes, and have they now modelled costs and other impacts?
Amendment 29 would require the Secretary of State to lay before Parliament a statement outlining the steps taken to prevent further charges being imposed on revenue collection contracts when cost caps are revised. We understand that the Government would not necessarily want to rule out imposing further charges on consumers if it is the only way a project can come to fruition, but I hope that the Minister can clearly state today that it is by no means the department’s preferred option.
Finally, Amendment 38 would bring legacy benefits within the scope of Amendment 37 in the name of the noble Lord, Lord Oates. Many legacy benefits remain active. If we were to insulate recipients of universal credit from additional costs, that same protection should be extended. Again, I am sure that the Government will not want to rule anything out, but I hope that the Minister can demonstrate how they will shield the least well-off from relevant levies on energy bills. They are a constant source of worry and concern given the cost-of-living issues we face at this time and will face in future.
Lord Callanan (Con)
I thank everybody who has spoken in yet another wide-ranging debate on energy policy—I definitely have all my lines ready now for the next time we have Oral Questions in the House. At the risk of agreeing with almost everybody, I just want to say that what we need in this country is a diverse mix of supply—yes, we need new nuclear; yes, we need more renewables; yes, we need interconnectors; yes, we need pump storage—which is the best way to keep bills low and supply reliable. It is absolutely not a question of renewables or nuclear; government policy is that we need both.
There is a long list of amendments in this group. They have been tabled respectively by the noble Baroness, Lady Bennett, and the noble Lords, Lord Foster, Lord Teverson, Lord Oates and Lord McNicol. We have taken them together because they are of similar intent and similar subject matter.
Let me start by replying to the noble Lord, Lord Foster, and his comments on the designation statement. He is of course right that the department is still developing the statement, given that we do not want to pre-empt any of the debates we are currently having in Parliament on this Bill; the noble Lord would be one of the first to criticise us if we decided all these things in advance. We want to listen to what parliamentarians say and gather all opinions before finalising the statement.
Before coming on to the individual amendments, let me remind the Committee of the commitment we made in the 2020 energy White Paper to bring at least one large-scale nuclear project to a final investment decision by the end of this Parliament, subject to value for money and all the relevant approvals. I thank my noble friend Lord Howell and the noble Baroness, Lady Worthington, for their thoughtful contributions setting out all the considerations that we need to take into account when making decisions about the value for money of new nuclear projects.
The Bill has been introduced with this objective in mind. It seeks to introduce a funding model that can lower the cost of finance for the large-scale nuclear that most of us agree we need; help to invigorate the UK nuclear industry; encourage, ideally, investment from British institutional investors and pension funds; and support our desire—shared by everyone, I think—for a decarbonised, resilient energy system.
Amendments 7 and 8 seek to clarify the types of company that may benefit from the nuclear RAB model. Amendment 7 would severely inhibit our ability to achieve the objectives I have just set out by restricting those able to benefit from the RAB model to not for profit, co-operatives, community-interested companies or companies wholly owned by a UK public authority. I understand the political intent of the amendments tabled by the noble Baroness, Lady Bennett, but I point her to the brilliant examples of energy companies that have been set up by a multiplicity of local authorities across the country in recent years. Without exception, every one of them has gone bankrupt, with considerable costs to local taxpayers. These things are not as easy to do in the public sector as the noble Baroness might imagine. If it was so easy and simple, all those companies would be prospering and returning funds to the taxpayer. In fact, a number of—mainly Labour—local authorities have lost millions of pounds for local taxpayers in attempting to do things better than the market. Public is not always good.
With regards to Amendment 8, I am pleased to confirm that Clause 14 already provides that “a company” means a company that is registered under the Companies Act 2006 in England and Wales or Scotland. The amendment is therefore unnecessary.
On Amendment 23, I can confirm to the noble Baroness, Lady Bennett, that, irrelevant of ownership, if a designated nuclear company ceases to meet the designation conditions set out in the Bill, the Secretary of State has the power to revoke its designation. Provision is already made for this in Clause 5(1); for that reason, the noble Baroness’s amendment is unnecessary.
Amendments 6, 10 and 29 seek to tackle scenarios whereby a nuclear station may not be built or suffer from cost overruns, or there are issues with its generation output. Those things can happen in the real world but all these scenarios are fairly unlikely to occur. The approvals process for nuclear projects, of which designation for the purposes of the RAB model will form a part, is designed precisely to ensure that the Secretary of State must be sufficiently confident that the proposed project would be able to complete construction. In due course, we will publish a statement to provide details of exactly how the Secretary of State expects to determine whether the designation criteria have been met.
Once construction is under way, we will want to make sure that the project company is incentivised to manage its costs and schedule. It will be overseen by Ofgem as the independent regulator. However, in the unlikely and remote circumstance that a project looks as though it may exceed the cap on construction costs set out in its modified licence, it is important that there is a mechanism in place to allow additional capital to be raised to ensure completion of the project. The aims of that, of course, are to ensure that consumers can continue to benefit from their investment and to minimise the risk of sunk costs.
With regard to Amendment 6 and the first part of Amendment 16, I assure the Committee that the RAB model will be designed to ensure that the appropriate incentives are placed on the company to maximise plant availability. Nuclear reactors have an extremely good record of availability and delivery but we want to make sure that that is maintained. On broader generation capacity security, I draw the Committee’s attention to the Great Britain security and quality of supply standard and the Great Britain capacity market. Both these essential tools ensure that security of supply is met in GB and that we have resilience in the day-to-day operation of the GB electricity system should generation outages occur.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
There is a Division in the House. The Committee will adjourn and resume as soon as agreed after the Members present have voted.
Lord Callanan (Con)
Moving on to the second part of Amendment 16, the Government are in full agreement that nuclear could have a role in low-carbon hydrogen production. I was delighted to discuss this in a meeting with the noble Baroness, Lady Worthington, earlier this week—or was it last week? I have lost track of when it was. Of course, this could potentially include the Sizewell C project if it goes ahead. It is for this reason that the Government are looking to stimulate private investment in new low-carbon hydrogen production. We have consulted on the appropriate hydrogen business model, and we included a lot of this in the UK’s first hydrogen strategy, which was launched in August last year.
However, as I made clear to the noble Baroness, I do not consider that this Bill is the right place for such an amendment. The purpose of the Bill is to facilitate investment in the design, construction, commissioning and operation of nuclear energy generation projects. It is therefore more appropriate, in my view, that hydrogen production specifically should be taken forward using a different vehicle. It is for this reason, and those given previously with regard to incentivising plant availability, that I am not in a position to accept Amendment 16.
Prior to turning to the next amendments, let me address the questions asked by the noble Baroness, Lady Worthington, and confirm for her benefit that any payments received by a nuclear company above its allowed revenue would not be received by the Treasury. Instead, they would be returned to the suppliers who were levied in the first place. They who would then have the choice of whether to refund the payments to consumers in a competitive market situation. As the noble Baroness mentioned, the process is similar to the CfD model under which consumers will ultimately benefit from a cheaper system.
Amendments 4, 13, 37 and 38 were tabled by the noble Lords, Lord Foster, Lord Teverson, Lord McNicol, and the noble Baroness, Lady Bennett. Each amendment addresses the important subject of consumers and value for money. On Amendments 37 and 38, I of course agree on the importance of protecting vulnerable consumers from increases in their energy bills, but let me reassure all noble Lords that the need to protect consumers’ interests is very much at the heart of the Bill. The nuclear RAB model will be regulated by Ofgem, whose principal objective, as enshrined in statute, is to protect the interests of all existing and future consumers, including consumers who are claiming universal credit and other legacy benefits.
Ofgem is also a statutory consultee for significant decisions in the Bill relating to whether a nuclear company should benefit from the RAB model. In addition, the Bill requires the Secretary of State to have regard to the interests of existing and future consumers when making any modifications to a nuclear company’s licence. So I make it clear that the Government intend to protect all our most vulnerable energy consumers in what is a very difficult market at the moment, given the record high gas prices, but we believe that Amendments 37 and 38 are not the best way of ensuring this and that a more holistic strategy for supporting vulnerable energy customers is preferable, as the noble Lord, Lord Wigley, commented in the debate.
The Government are taking a number of actions to help low-income households. I will list them for the Committee. They include the warm homes discount, which provides eligible households with a £140 discount, and the Chancellor confirmed on 3 February the Government’s plans to expand the scheme by almost one-third, raising the number of beneficiaries from 2.2 million vulnerable households to more than 3 million. We are further supporting consumers through the cold weather fund and the household support fund. I think that those measures are a more appropriate way of protecting vulnerable consumers, and I hope that I have been able to reassure noble Lords who tabled these amendments that the design of the RAB model and the revenue stream that will flow from that are such that the interests of vulnerable consumers are and will be the highest priority for us.
On Amendments 4 and 13, I stress to the Committee that we have sought to establish a transparent designation process that requires the consideration of whether designation of a nuclear company is likely to result in value for money. This process requires the Secretary of State to prepare draft reasons for designation, to consult on those reasons with specified persons, including independent regulators such as Ofgem, and to publish a designation notice setting out the final reasons for designation. This final notice would include designation against the criteria of being likely to result in value for money, which the noble Lord, Lord Foster, asked about in the debate.
Given all that, I am confident that the process is sufficiently transparent. Through consultation with Ofgem we will ensure that consumer impacts are fully taken into consideration and accounted for. Value for money is and always will be a core part of government approvals beyond the designation of a nuclear company as a designated company’s licence conditions are negotiated and as part of any capital raised for a project. Therefore, I hope the noble Lords who tabled Amendments 4 and 13 will not press them.
Finally, on Amendment 26 from the noble Lord, Lord Foster, let me gently point out that the amendment would remove the obligation for the Secretary of State to have regard to whether the nuclear company has appropriate incentives. I am not sure that that was the intention of the noble Lord, so perhaps he will have another look at it and will feel able not to press it because ensuring that projects have appropriate incentives forms a vital part of the RAB model. We have learned from the experience of projects in the US—the noble Lord quoted them to me at one of our meetings—and elsewhere that incentivising developers to deliver to cost and schedule will be important to ensure value for money for consumers. As the noble Lord, Lord Foster, questioned in the debate, we expect that such incentives will include an appropriate risk-sharing mechanism between consumers and the nuclear company and its investors. We would not expect the bill payer to bear all the risk.
We expect that incentives would be included in the modified licence conditions for the nuclear company, and so would be consulted on and published as set out under the provisions of the Bill. These incentives would be overseen by Ofgem in its role as the independent regulator.
In conclusion, I hope I have been able to satisfy noble Lords on all these measures and provided the appropriate reassurance that the Bill introduces a robust and transparent process for the approval and awarding of the benefits of a RAB model to nuclear companies, and that there are appropriate checks and incentives in place to protect consumer interests—which should be at the forefront of our thinking. Therefore, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Foster of Bath (LD)
My Lords, I am enormously grateful for the opportunity to listen to so many noble Lords who have contributed to the debate. It has been a masterclass in what we mean by value for money. I am enormously grateful; I have learned a great deal about whether or not we should be just using commercial accounting or incorporating opportunity costs. Should we define opportunity costs in the way that the noble Baroness, Lady Bennett, and others have defined them? It has been incredibly illuminating.
My amendment was very simple indeed. The Government said they were going to do an assessment; all I wanted them to do was publish it. I am enormously grateful that I got the support of the noble Baroness, Lady Worthington, for that. Sadly, despite all the Minister subsequently said, we have not yet heard whether the value for money assessment is or is not going to be published—and, if it is, when that would be.
We then come to the interesting issue of the amendments surrounding the designation process. I am enormously grateful to the noble Lord the Minister, who enables me to sit down while we vote again.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
There is a Division in the House. The Committee will adjourn and return as soon as agreed after Members present have voted.
Lord Foster of Bath (LD)
As I was saying, we come to the second string of things that were debated, in relation to the criteria surrounding the designation process. We heard something wonderful: a Government who admit that they are a listening Government. “The reason we haven’t published the designation criteria is that we are listening to what you lot have got to say.” Well, I say to the Minister that by the end of this evening at 8.45 pm he will have heard what has been said not only in the other place but in this place, so presumably there will be the opportunity to draft the designation criteria in time for the further stages of the Bill. So I hope that, before I sit down, he will intervene on me and make a clear promise that we will get at least a draft of the designation criteria before the final stages of this Bill are passed. I happily give way to the Minister.
Lord Callanan (Con)
Like all government documents, they will be published at the appropriate time, and I will be sure to let the noble Lord know when that is.
Lord Foster of Bath (LD)
We have had a masterclass in defining things such as the value for money study; we are getting a masterclass in ministerial obfuscation. My question to the Minister was, “Are we going to see it before we complete all stages of the Bill?” To which the Minister replied that it would be published at an appropriate time. I think we can draw our own conclusion: we are not going to see it, and that is deeply worrying.
The Minister followed exactly the same procedure in relation to the issue of appropriate incentives. He is absolutely right that my amendment would remove them altogether from the Bill, but I began by saying that it was purely a probing amendment so that we could actually get some information from the Government about another issue about which we do not know very much. I am grateful that the Minister says that appropriate incentives will include the appropriate sharing method between the developer and the consumer, and I am grateful that we now know that that is going to be part of it. Of course, however, he has not told us what that percentage sharing would be—another piece of information that we do not have.
In relation to a more general point, we got this wonderful statement from the Minister that the Committee can be assured—and I feel so much better for this now—that appropriate incentives will be imposed. That is jolly good, but I would certainly like to know—and I suspect other Members of the Committee would as well—what is being imposed and how it is going to work. It is deeply disappointing: there is so much information that the Government should be providing but have failed to provide. They expect us to stand up and vote for this piece of legislation when most of the basics are simply not being provided. Nevertheless, we will have another opportunity to raise this, so I beg leave to withdraw the amendment.
Lord Oates
(i) an estimate of the electricity price payable to the company over the period during which the nuclear energy generation project is generating electricity, and the modelling, assumptions and all relevant material underlying such an estimate;(ii) an estimate of the regulated asset base charge payable by consumers in each year until the nuclear project is generating electricity, including the modelling, assumptions and all relevant material underlying such an estimate;(iii) an estimate of the costs of decommissioning the project, how such costs will be met, and the modelling, assumptions and all relevant material underlying such an estimate.”Member’s explanatory statement
This amendment would require the Secretary of State to publish a report setting out the reasons for their opinion that designating the nuclear company is likely to result in value for money.
Lord Oates (LD)
My Lords, I will speak in particular to my Amendment 5, but I support all the amendments in this group aimed at greater transparency and accountability, particularly those in the name of my noble friend Lord Foster of Bath. I will speak briefly, as we have already discussed many of the issues on which Amendment 5 touches. As we heard previously, Clause 2(3)(b) of the Bill requires that the Secretary of State
“is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”
The opinion of the Secretary of State is, no doubt, valuable, but what would be even more valuable for Parliament and the public is to understand what that opinion is based on, in order to be reassured that it is not simply an assertion of policy preference.
We spoke in Group 3 about the vast, full-life costs of nuclear generation when decommissioning is taken into account. The public would want to know that these costs are fully taken into account in the calculations of the Secretary of State when arriving at his opinion. In addition, it would be important to understand how the possibility of significant cost and time overruns would be factored in as well.
Amendment 5 seeks to address these issues by requiring the Secretary of State to publish a report setting out the reasons for their value-for-money opinion. Such a report would, hopefully, give Parliament and the public reassurance that these matters have been properly considered before a decision is taken to impose further costs on energy bills. I beg to move.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
Before I formally call this amendment, I need to inform the Committee that there is a mistake on the Marshalled List. Amendment 11 should begin:
“Page 2, line 14, at end insert—”.
In relation to Amendment 5, the amendment proposed is:
“Page 2, line 14, at end insert”
the words on the Marshalled List—and Amendment 11 would come at the end of that.
Lord Teverson (LD)
My Lords, I rise very briefly. In the last group, I mentioned some of the countermeasures to the variability of renewables, including interconnectors, energy efficiency, demand-side management and many more. But I also mentioned battery storage and I should have declared an interest: I was not expecting to get on to battery storage, but I am a director of a company involved in the development of battery storage. I apologise to the Committee that I did not raise that interest during the debate.
Lord Wigley (PC)
My Lords, I will speak very briefly indeed. I have added my name to Amendment 27 in this group alongside that of the noble Lord, Lord Foster; I did so with particular regard to my strong feelings on new paragraph (e), proposed by the amendment, which concerns
“how decommissioning costs of the project will be met”.
Of course, this issue appears in sub-paragraph (iii), proposed by new Amendment 5, which refers to
“an estimate of the costs of decommissioning the project”.
As I indicated in our earlier debates, I feel that this is a critical aspect of the Bill that needs to be covered and where assurance needs to be given, whatever the mechanism of doing so. I would have thought that the Government could recognise that and say that, whether or not these amendments meet the standards that are acceptable to them, there may be some way of giving an assurance that the questions asked by these amendments can be answered—and that the answers will be forthcoming to this Committee.
Lord Foster of Bath (LD)
My Lords, I am afraid that I cannot be quite as brief as the noble Lord because I have a number of amendments in my name. I am also conscious of the pressure on the Committee’s time, so I will do my very best to be as quick as I possibly can. I will concentrate rather more on Amendment 12 than on any other of the amendments in my name, that of my noble friend Lord Teverson and those of other noble Lords.
Basically, Amendment 12 would require the department to define “sufficiently advanced” in its guidance. What we know is that designation will come at a certain point. We have already debated the fact that we have no idea what the criteria will be and that we may or may not see them before we finish our deliberations on this Bill. However, we are at least grateful that the Minister is apparently listening to what we have to say. I hope that he will listen to this particular bit because the designation can come only when the Secretary of State is satisfied that the project is sufficiently advanced; this amendment merely requires the Secretary of State to be clear about what that means.
Earlier, I referred to the fact that I live near Sizewell so it is a particularly good example to use, not least because it is the only project in the offing that might use this methodology. In the case of Sizewell, it is worth being aware that the planning application has been submitted and is awaiting the decision of the Secretary of State. Yet, at the conclusion of the planning examination, numerous issues were outstanding. They still have not been sorted out.
They include the crucial issue of the design of the hard coastal defences. If you live near Sizewell, as I do, you know that the coast there is eroding incredibly rapidly. Three weeks ago, I went for a walk on the clifftop and saw, in a field where the crops were planted this year, that some of the initial plants have already fallen over the edge of the cliff. The erosion is very rapid; appropriate measures must therefore be put in place, yet this has not been done.
Moreover, nothing has been done to ensure that there will definitely be potable water. Frankly, if you have a nuclear power station with no guarantee of potable water, it is a completely pointless exercise; that work has not been done. Also, there has been no work to look at soil mixing and ground anchor trials, which are vital because a huge hole will be dug in the ground and we have to be sure that the whole thing is not going to collapse. There are numerous issues that have not yet been sorted at this stage.
Using those three examples, my question for the Minister is this: does he see that a designation could take place without those three things having been addressed, or not? Will there be sufficient progress? I seek a definition and an understanding. I have given some specific examples for the Minister to consider; I hope that he can tell me whether they have gone on.
The other amendment in this group, Amendment 18, aims to provide further transparency about how taxpayers’ money is going to be allocated and what taxpayers’ money is being used. The recent announcement of £100 million of taxpayers’ money being given to the project at this stage, before any decision has been made, does not look good locally. It almost appears as if the green light has been given to Sizewell before any of the issues that I have been raising have been taken into account. We need to have more transparency about the taxpayer contribution to projects.
Amendment 27 picks up an issue that was raised on an earlier amendment by my noble friend Lord Oates, so I will not go through it in any detail. It requires the Secretary of State to provide a report about the up-front and overall expected cost of the project, the likely cost of electricity going on to the national grid and decommissioning costs, which have already been the subject of much debate, so I shall not repeat that.
The subject of Amendment 28 was also raised in an earlier amendment by my noble friend Lord Oates. It is something that various consumer organisations have been calling for, which is that before final agreements are made, there should be an independent assessment of the information that is being provided to the Government. It would require an independent impact assessment to be conducted and to be approved by the House of Commons before licence modifications could be permitted.
The amendments in my name are all about transparency. If I go away at the end of the proceedings with one message, it is that at the moment the Government seem unable or unwilling to provide a great deal of information about the Bill. This is not about being pro or anti nuclear but about transparency, and at the moment I do not think we are getting anything like enough of it from the Government.
Baroness Bennett of Manor Castle (GP)
I rise to speak briefly to Amendments 5 and 12 in the name of the noble Lord, Lord Foster of Bath, to which I have added my name. On defining “sufficiently advanced” in guidance, two projects come to mind: Crossrail and HS2. We were told everything was fine and that there was a fixed budget. One of the most interesting discussions in the other place was when the Minister argued that the possibility of costs exceeding the cap as predicted was remote, which was a triumph of hope over experience. It is important that we have that amendment.
Coming back to some of our earlier debates, because this is news just in literally in the past hour, I have to note that the director-general of the International Atomic Energy Agency has expressed grave concerns about the safety of the Chernobyl nuclear plant where staff have not been able to move since the Russian takeover.
“I’m deeply concerned about the difficult and stressful situation facing staff at the Chornobyl nuclear power plant and the potential risks this entails for nuclear safety. I call on the forces in effective control of the site to urgently facilitate the safe rotation of personnel”.
I hope some people who contributed earlier in the debate will not be in a much worse situation when we come to Report.
Baroness Wilcox of Newport (Lab)
My Lords, this group relates to a broad range of transparency measures relating to project cost, the use of taxpayers’ money and the use of delegated powers. I refer to the Minister’s previous reply: if he wants to find out how to get a building delivered on time, within cost and with less cost to the taxpayer, he should speak to Edwina Hart, the former Minister in the Welsh Government who got the Senedd building built on time and within cost.
Lord Callanan (Con)
I will start with Amendments 5 and 27, laid by the noble Lords, Lord Foster, Lord Wigley, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett. It will not surprise the Committee to know that I have reservations about how these amendments would operate in practice. On Amendment 5, for example, the requirement to publish estimates of the costs payable by consumers at the point of designation would risk undermining the independence of Ofgem, which has responsibility for determining a nuclear company’s allowed revenue in accordance with its modified generation licence.
Moreover, the obligations to report on the price of electricity, or the minimum floor price, referred to in Amendment 27, simply do not align with the reality of how we expect the RAB model to operate in practice. Under the model, there is no minimum floor price. Ofgem, in its role as the regime’s economic regulator, will need to determine the revenue the project is entitled to receive, in accordance with its modified electricity generation licence.
Finally, on decommissioning costs, we already have robust legal requirements in place in the Energy Act 2008, which require an operator to have a funded decommissioning programme in place before construction can commence on a new nuclear project. This must set out the operator’s costed plans for dealing with decommissioning and waste management. For these reasons, I am unable to accept the amendments.
Turning to the comments made earlier in the debate by the noble Lord, Lord Wigley, under the RAB model, the regular price reviews would provide an opportunity to assess the performance of the FDP, and adjustments to the operator’s allowed revenue can then be made should any potential deficiency in the fund be identified. This will deal with the noble Lord’s concern, minimise any chances of a fund shortfall and ensure the operator retains its responsibility to meet the costs of decommissioning so they do not fall on local communities. I hope that this provides the reassurance that the noble Lord was seeking.
Amendments 12, 18, 25 and 32, from the noble Lords, Lord McNicol, Lord Foster, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett, are aimed at obliging the Secretary of State to publish various pieces of information related to the functioning and implementation of the RAB regime. I fully understand noble Lords’ desire for more information, but think this is already addressed in the Bill.
On the publication of licence modifications, Clause 6(9) already provides that modifications made under Clause 6 would not come into effect unless a revenue collection contract was entered into with the nuclear company. Publishing them as soon as reasonably practicable will provide adequate opportunity for scrutiny.
On Amendment 12, the Bill already obliges the Secretary of State to publish a statement setting out how they expect to determine whether the designation criteria have been met. This statement will provide further explanation as to how the Secretary of State expects to determine whether the development of a project is “sufficiently advanced”. While, as I said, we will publish a statement in due course, I can tell the noble Lord, Lord Foster, and the Committee that we would expect it to include consideration of a number of factors, including, for example, the progress of the prospective project through the important planning process.
On Amendment 18, where it is assessed that it would be appropriate for development funding to be included in the calculation of a nuclear RAB company’s allowed revenue, this would in turn be reflected in the company’s modified licence. Outside of the RAB structure, the Government may choose to provide development funding to projects to mature technologies and de-risk the development and construction phases. However, as this is not intended to be funded through the RAB scheme, it would be inappropriate to include information requirements about it in the Bill. They will be published in other quarters.
On Amendment 25, Clause 6(2) already states that the licence modification powers can be used only for the purpose of facilitating investment in the design, construction, commissioning and operation of nuclear energy generation projects. The Secretary of State may not exercise the powers for any other purpose. This is aligned with the consideration that the amendment discusses. I believe that the transparency processes already included in the Bill, the obligation to publish a statement on the designation criteria and the opportunity for scrutiny before the designation and licence modification powers may be exercised render these amendments unnecessary.
The final amendment on transparency is Amendment 28 from the noble Lords, Lord Foster and Lord Oates. It seeks to make the licence modifications necessary to implement the RAB model for a nuclear company contingent on approval by the House of Commons of a report about consumer bill impacts.
Bringing a project to the point where licence modifications can be made is likely to require significant investment. I submit that making a project subject to a parliamentary vote at that very late stage of licence modification would add huge uncertainty to the outcome of developers’ investment. This additional uncertainty would make it very much harder to bring forward projects —which is possibly the purpose of the amendment—and lead to either an absence of new projects or the costs of financing being raised significantly to take account of the increased risks. That would inevitably result in much worse value for consumers. The amendment could therefore defeat the policy objective of the Bill: to secure financing for new nuclear projects in a way that could deliver better value for money for consumers.
To reiterate, in rejecting the amendments put forward, the Government are not attempting to hide from challenge or scrutiny. Through this Bill, we have created a clear and transparent process for implementing the RAB model. It will allow for the voices of experts and stakeholders to be heard and appropriate consultation to be carried out. That will help ensure that the model works for the industry and, above all, for consumers. I therefore hope that noble Lords will not press their amendments.
Lord Oates (LD)
My Lords, I will speak briefly as time is marching on. I think the Minister told us that the reason why Amendment 5 would not work is basically that the Government cannot tell us how much this will all cost the consumer, which is one of our key worries about this means of financing.
On Amendment 12 and the definition of “sufficiently advanced”, my noble friend Lord Foster raised a number of specific issues in relation to Sizewell C and asked whether, in view of those, the project would be regarded as sufficiently advanced. The Minister notably did not answer that question but repeated his previous statement that the Government will publish the designation criteria “in due course”. Again, what he is telling us is that the Government will not tell us what those are before they expect noble Lords to vote on the Bill. As my noble friend said, whatever one’s views for or against nuclear power, that is surely not a way to do legislation.
I hope that the Minister will consider carefully all the issues that have been raised in this group. If you are pro nuclear, I would have thought that transparency was a good thing, but, certainly, I hope that he will consider these issues and come back with some clearer answers for us on Report. With that, I beg leave to withdraw my amendment.
Lord Foster of Bath
“(fa) the relevant upper tier local authority covering the site for the nuclear project;”Member’s explanatory statement
This amendment would require the Secretary of State to consult the relevant upper tier local authority before designating a nuclear company under section 2(1).
Lord Foster of Bath (LD)
My Lords, quite rightly, the Bill before us requires a degree of consultation. In the designation process, the Secretary of State is required to consult a number of people, with the nuclear company that he proposes to designate included among them. My amendment simply proposes that, in that list of persons or organisations with whom the Secretary of State must consult, the relevant upper-tier local authority should be included. The Minister may respond by reminding me to look at Clause 3(3)(g), which says
“such other persons as the Secretary of State considers appropriate”.
I imagine that that might well include the local authority, but so important do I believe it is that the relevant upper tier local authority be consulted that I think it should be added to the list.
To illustrate how important it is that people who are directly affected, or those who represent them, be consulted, it is worth considering the impact on local people in the area if the decision is made to go ahead with Sizewell C—incidentally, I note that the noble Baroness, Lady Bennett, has tabled another amendment about consulting local people. Of course, I support that, but a mechanism for doing that far more easily is by having in the list a representative body, which the upper-tier authority is.
Let us think about the impact that the construction of Sizewell C will have on local people. Of course, there are those who will argue that they will have the long-term benefit of nuclear power being provided and all the things that go with that—I take that on board—but, during the process, there will be some 6,000 construction workers, 76% of them coming from outside the area and requiring accommodation. A campus for 2,400 people will be built right on the boundary of an area of outstanding natural beauty and within half a kilometre of a small, beautiful hamlet of just 50 people. The impact on that hamlet will be quite unbelievable. Thousands of people are expected to commute to the two large park-and-ride sites that are going to be built north and south of the site. There are going to be 12,000 vehicles a day on the unimproved A12 and 600 HGV journeys a day through local villages for the first two years before the new relief road is built. It is going to have a significant impact on local businesses, including tourism; the tourism losses are estimated to be in excess of £40 million a year.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow that powerful and clear exposition by the noble Lord, Lord Foster of Bath. I declare my position as a vice-president of the Local Government Association.
Consulting the upper-tier local authority is certainly an important factor. It is one way of addressing local consultation; the noble Lord has set out all the reasons why that is needed. However, we are talking here not just about Sizewell C but about a potential model for the future. It is possible that a site might be located right on a boundary where it is within one local authority but covers a substantial number of people in the adjoining one. That is the reason why I went for a radius of 50 miles in my amendment.
If the Committee is wondering why I chose 50 miles, I would be happy to debate what it should be. There are of course significant construction impacts, as the noble Lord outlined, but also, after the Fukushima disaster, the US Nuclear Regulatory Commission recommended that the evacuation area around a nuclear power plant, should there be a serious issue, should be 50 miles. Obviously that has an impact on people’s lives, on their feelings about their locality and even, dare I say it, on property prices. That is why I picked 50 miles. The people in the immediate vicinity are affected and they should be consulted as a simple matter of democracy.
Lord Wigley (PC)
My Lords, I support the amendments and the principle of consultation, particularly with local authorities. I, too, declare my interest as a vice-president of the Local Government Association.
The point made a moment ago by the noble Lord, Lord Foster, with regard to the impact of the workforce is of significance; the proposed 50-mile radius is relevant to that. I draw the Minister’s attention to the construction scheme of the Dinorwig pumped storage scheme in Snowdonia. It started in 1973 and was built, remarkably, with hardly any industrial disputes at all. More than 2,000 people were in that workforce; it was believed that they could not be recruited locally but, in actual fact, some 86% of the hourly paid were recruited locally while more than 70% of the office staff were recruited from within a radius of about 50 miles, which is the definition used for that purpose.
The outcome—it is relevant for the Minister to consider this when any new nuclear programme goes forward—was that there were remarkably good labour relations on that site, with close co-operation between the then CEGB and the trade unions. At a time when the Ince B project, for example, which will be known to the Minister, was suffering from tremendous labour problems, with strikes all the time, these were overwhelmingly avoided on the Dinorwig scheme. In other words, consultation with the trade unions, local authorities and representatives in the area enabled those dangers to be avoided. I believe that it is in the interests of everybody—the local community and the Government themselves, as well as the company—that the maximum degree of consultation is built in.
Baroness Neville-Rolfe (Con)
My Lords, there has been a lot of consultation about Sizewell C and there is, of course, a nuclear power station next door to the proposed site. I remember visiting it many years ago when I was a director of John Laing which built it, so I went inside. The whole process of getting to this proposal for a new nuclear power station has taken forever, for reasons we will not go into this evening. As a result, we have an emerging energy crisis, which is obviously not helped by wider world events.
There will, I assume—and I am sure the Minister can confirm this—be a planning requirement for new nuclear power stations to be built under these new powers. Any good builder of nuclear power stations will consult and consider the needs of the employees because that is the way these things are done, otherwise you do not get them through planning, as I know well from experience.
I am against adding extra statutory consultees to the Bill. The proposal for a 50-mile radius suggests that the new nuclear power stations might actually be dangerous, which would make people more fearful, whereas we are planning to build safe nuclear power stations learning from things in the past, so I would be against that.
My main point is that we need to get on with this. We cannot go round and round in circles. There is real opportunity, not only in East Anglia but in places such as Wales and, potentially, even in the Lake District, for investments that would be good for local communities, the staff and employees who will work in the power stations.
Baroness Wilcox of Newport (Lab)
I am grateful to noble Lords for tabling their amendments on consultation. I declare that I too am a vice-president of the LGA and—for about another six weeks or so—a member of Newport City Council. I am curious yet not surprised to see the amendment from my noble friend Lord Foulkes, who has apologised that he has had to leave, seeking to disapply the requirement to consult the Scottish Government.
I am sympathetic to some of the arguments made. Any infrastructure project is easier to deliver when there is community consent for it. Communities and local representatives are likely to have very strong views on these matters, as I know of old. I hope that the Minister can outline existing requirements and any additional ones imposed by the Bill and say whether she thinks that the system is sufficient.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lords, Lord Foster and Lord Foulkes, and the noble Baroness, Lady Bennett, for their amendments relating to consultation with different persons. Regarding the amendments tabled by the noble Lord, Lord Foster, and the noble Baroness, Lady Bennett, I understand their desire to bring the local community into the process. However, the Bill is not the place to do this. It is concerned with the financing of nuclear projects, rather than planning and other regulatory approvals.
While the publicly available information about a project’s progress in seeking these approvals is likely to be relevant to decisions about which projects should benefit from the RAB model, the decisions themselves are separate and independently made. A company benefitting from the RAB model would receive revenue payments funded by licenced suppliers in Great Britain as a whole and, through them, consumers. It would therefore be wrong to grant a different status to either the local authority or particular groups of persons in respect of decisions made by the Secretary of State under the Bill’s provisions.
Both local individuals and authorities would be able to express their point of view regarding any new project through the planning process. They would, for example, have the opportunity to input their views during the hearings that would take place as part of the consideration of a project’s application for development consent. That is the right place and process for those concerns to be considered, rather than in discussions about a financing model that will impact all consumers.
I remind noble Lords of my noble friend Lord Callanan’s comments on, I think, the second group of amendments today about the productive conversations we have been having with the Sizewell C project team during the ongoing negotiations. It is our understanding that the Sizewell team intends to replicate the commitments made in the Hinkley Point C solidarity agreements, which represent a new and innovative approach to industrial relations. Our industrial relations at Hinkley Point have been extremely good and, while I take the point about Sizewell C, this is a Bill for a financing model that is supposed to be for generic nuclear financing; it is not specifically about Sizewell C. Were it to be used, for example, for Wylfa, I am sure that there would be different considerations but, again, that is not the specific intention of the Bill. This is about creating a generic financing model to finance any large-scale nuclear power plant in the future.
Amendment 30 was tabled by the noble Lord, Lord Foulkes. I understand the noble Lord’s concern about the different position on nuclear energy that is held by the Scottish Government, but ultimately it is right that the relevant devolved nations have equal rights under the Bill. It would be wrong to allow the Secretary of State solely to have the power to exclude Scottish Ministers while retaining an unqualified obligation with regard to Welsh Ministers. While this provision requires consultation with those persons, it does not require that they agree with the proposed modifications for those modifications to be made. I further point out to the noble Lord that nothing in the Bill will change the fact that Scottish Ministers are responsible for approving planning applications for large-scale onshore electricity generating stations within Scotland.
I hope that I have shown noble Lords that their amendments are inappropriate in the wider context. I therefore ask noble Lords not to press them.
Lord Foster of Bath (LD)
My Lords, I am grateful to the Minister for her response, but I genuinely did not understand it and I apologise for that. The clause is about the designation of a nuclear company. That power rests in the hands of the Secretary of State, who will make the decision based on a number of criteria. As we pointed out, we do not yet know what those criteria are and we are not sure that we are ever going to find out. However, it is also going to be done after consultation, and the consultees are required to be a number of people, as specified in the legislation.
I sought to have local authorities included as a specified group to be consulted. The Minister’s response was that they would get their opportunity to raise their issues of concern in other fora, and that this is not the right place. However, I am absolutely certain that my amendment was intended to ensure that local authorities, representing local people impacted by the decisions that are taken, should be able to be involved in the designation of a company. It is, after all, they who will have done all the work and they who will have brought forward the planning application and the various modifications to it and sought money and received money from central government to help them get on with the task and so on. The designation of the company is critical. I therefore genuinely do not understand why the Minister says that it is inappropriate for this particular aspect of activity. I may be being stupid, in which case I will have time to reflect before the next stage and get a bit more informed before I come back. In the meantime, I beg leave to withdraw the amendment.
Lord Oates
“(A1) The primary duty of the Secretary of State is to publish all material relevant to—(a) costs that may be incurred by the taxpayer arising from any provision of this Act,(b) the determination of the regulated asset base charge that may be levied on consumers under the powers in this Act, and(c) the cost to consumers of electricity produced by the project.” Member’s explanatory statement
This amendment would place a primary duty on the Secretary of State to publish all material relevant to (a) costs that might be incurred by the taxpayer arising from any provision of the Act; (b) the determination of the regulated asset base charge that may be levied on consumers under the powers of this Act; and (c) the cost to consumers of electricity produced by the project.
Lord Oates (LD)
My Lords, Amendment 33 and the subsequent amendments in this group seek to ensure that the Government cannot refuse to publish information that is in the public interest without compelling grounds. As it is currently written, Clause 13(2)(a) allows the Secretary of State to withhold any relevant material which he or she believes
“would … prejudice the commercial interests of any person”.
This is an enormously wide loophole which makes no attempt to qualify the degree of prejudice to the commercial interests of that person or to balance that with the public interest in the disclosure of such information.
Amendment 33 would establish a primary duty on the Secretary of State to publish all relevant material. Amendment 34 provides that material may be excluded only in exceptional circumstances. Amendment 35 would insert the word “seriously” so that the test is whether disclosure would seriously prejudice commercial interests, not the much weaker test currently in the Bill. Amendment 36 would require that, should the Secretary of State exclude material on the grounds of serious prejudice to commercial interests, he or she must make
“a statement to Parliament that the prejudice to commercial interests”
set out in subsection (2)(a)
“is of such seriousness that it outweighs the”
overwhelming
“public interest in … the publication of material relevant to any”
costs that may be incurred by the taxpayer
“arising from any provision of this Act … the determination of the regulated asset base charge that may be levied on consumers under the powers in this Act, and … the cost to consumers of electricity produced by the project.”
It is critical for proper public scrutiny that Ministers cannot decline to provide information behind claims of prejudice to commercial interests. These are projects being funded by consumers, and they have the right to know all relevant material except in the most exceptional of circumstances. We already know how reluctant government and its agencies are to provide information on costs which are overwhelmingly in the public interest. One such example is the apparent unwillingness of the Nuclear Decommissioning Authority and GDF to provide information on the breakdown of costs for cleaning up Sellafield and how the costs of GDF are accounted for in the NDA’s figure for overall nuclear liabilities.
For example, the Nuclear Decommissioning Authority and the Radioactive Waste Management company, which is a subsidiary of the NDA, have been seemingly unwilling to provide a breakdown of how the estimated £96 billion clean-up costs at Sellafield were arrived at and what they account for. Likewise, there is no explanation of whether the nuclear liabilities costs include the additional figures of £20 billion to £51 billion for GDF that was announced in the NDA’s annual report. I noticed, when we debated the GDF issues, that the Minister did not respond to my question about how that is accounted for within the overall NDA liabilities. We already have a reluctance to share information that is overwhelmingly in the public interest.
The record of transparency in these matters is very poor. This amendment would prevent it getting even worse. It is particularly incumbent on the Government to respond and provide assurance to the public, given that they are going to have these costs imposed on their bills for new nuclear power generation, and share all relevant information unless exceptional circumstances prevent that being possible. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, I should have started by apologising for not being able to speak at Second Reading. I have a problem in that I am following two or three Bills at present and there have been some unfortunate clashes. I want to speak on this amendment because I am well known as a supporter of proper and transparent costings. To that extent, I was pleased to see the amendment of the noble Lord, Lord Oates.
However, I thought Clause 13 was quite narrow. It seemed to be concerned with matters that are commercially sensitive or need to be excluded on national security grounds. As a former businessperson, that seemed quite reasonable to me. Obviously, it would be good to know that we will have a proper understanding of costs, particularly to the consumer, which might occur as proposals are developed. I associate myself with the wish to understand the costings, although I am not convinced this amendment is appropriate or necessary.
Baroness Wilcox of Newport (Lab)
I am grateful to the noble Lord, Lord Oates, for tabling these amendments, which bring us back to transparency. We are sympathetic to the argument that, generally, information should be made public unless there is a compelling reason for that not to be the case. However, we understand that these are arrangements with commercial partners and that this reality needs to be reflected in the final transparency provisions.
Lord Callanan (Con)
I realise that time is getting on, so I will be as brief as possible. I thank the noble Lords, Lord Oates and Lord Foster, for Amendments 33, 34, 35 and 36. As most of the material is similar, I will take them together, starting with Amendments 33 and 36.
By way of background, I will explain the purpose of Clause 13. Four amendments have been tabled to it, but I reassure noble Lords and my noble friend Lady Neville-Rolfe that this clause is in no way designed to act as a “free pass” for the Government. It is a narrowly drawn provision, allowing for the exclusion of specific, sensitive, commercial and national security information only. I want to be upfront and clear about that. From looking at their detail, I do not believe these amendments will achieve what I suspect is noble Lords’ goal to increase transparency. Actually, they could cause extra confusion.
Amendment 33 makes the publication of relevant material the “primary duty” of the Secretary of State, and so would effectively place transparency above the protection of national security. I submit that this is intuitively wrong; it would be dangerous to subordinate national security concerns to publication concerns.
Amendment 36 would require the Secretary of State to make statements to Parliament about the seriousness of the potential impact of the release of information on the commercial interests of companies and how this is balanced against the public interest in disclosure. This creates ambiguity around the protection of commercial interests, which could have a serious impact on the ability of a project to raise the necessary investment. It would either make it harder to bring forward new projects or, alternatively, raise the cost of financing those projects; either way would result in worse value for consumers. I submit that it also goes against a basic tenet of commercial negotiations and operations: that an investor’s commercial interests will be treated respectfully and confidentially.
Amendments 34 and 35 similarly seek to restrict what information can be excluded from publication or disclosure under Part 1 on the grounds of national security or prejudicing commercial interests. Similar to the previous amendments, the suggestions made in these amendments would add unnecessary and unhelpful ambiguity to an otherwise straightforward provision. Again, this would introduce additional uncertainty for both the Government and potential developers.
Looking first at the addition of “in exceptional circumstances”, there is no obvious legal understanding or definition of what such circumstances would be. This would create uncertainty as to when the provision could be used and what information could be redacted. The circumstances in which Clause 13 applies are already sufficiently set out in its subsection (2). Similarly, given that “seriously” has no clear definition in this context, I submit that the addition of this term would add to the uncertainty and ambiguity about whether legitimate commercial interests would be respected for potential investors. I think that it would make them less likely to go on to be involved in projects.
I understand the desire for increased transparency behind these amendments, but I hope that, given the legal uncertainty of the wording used, I have been able to reassure noble Lords that the Government have no intention of hiding any information that we do not strictly need to in order to respect commercial confidences, so I hope that noble Lords will feel able to withdraw or not press their amendments.
Lord Oates (LD)
My Lords, I thank the Minister for his reply. I am afraid that I am not entirely reassured by it, because there is a lot of talk in this Bill about protecting commercial interests but there seems to be little about protecting consumers’ interests. This Bill imposes burdens on consumers, and it is only right that they have available to them information to understand how decisions are made.
I will certainly go away and think about the points that the Minister made. I make it clear that the aim of this amendment was not to compromise the Secretary of State’s ability to exclude material on grounds of national security; I fully accept that that may well be necessary. It may be that the current Minister would not use this test to withhold large amounts of material, but that certainly seems possible, and I think that there needs to be a much firmer test to protect the consumer. No doubt we will come back to these amendments, or versions of them, on Report. In the meantime, I beg leave to withdraw my amendment.
“(5A) If the Secretary of State is of the opinion that a relevant licensee nuclear company cannot be rescued as a going concern, or that a transfer of the undertaking to a wholly owned subsidiary will not result in the establishment of a going concern, the Secretary of State must, as soon as practicable—(a) undertake an assessment of the merits of establishing a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued, and(b) lay the outcome of the assessment before both Houses of Parliament.”Member’s explanatory statement
Where the Secretary of State is of the opinion that a failed company cannot be rescued as a going concern or successfully have its assets transferred to a subsidiary, this amendment would require the Government to assess the case for establishing a state-owned company to continue operations.
Baroness Wilcox of Newport (Lab)
I am moving Amendment 39 in the name of my noble friend Lord McNicol. It would require the Secretary of State to undertake an assessment of the case for establishing a state-owned entity to take over the delivery or operation of a nuclear project in the event that a nuclear company fails and cannot be saved or have its assets transferred. Having such safeguards is familiar to me from my time in local government, where every project brought risks of overrun and rising costs, despite our best efforts to nail down the terms and conditions.
However, let us not deviate from the ultimate aim of this Bill: to get power generated and distributed to homes and businesses across the UK. We sincerely hope that firms will not fail, but if they do there needs to be a clear process to ensure that plants are built and continue to operate. The Minister may well argue that the special administration regime does this, but there is still potential for further steps to be needed. Surely, we should define options in legislation now rather than wait for the worst to happen. “Fail to prepare”—I am sure noble Lords know the remainder of that phrase.
Lord Foster of Bath (LD)
My Lords, very briefly, there are two amendments in my name and that of my noble friend Lord Oates. I think we are all conscious that things can go wrong and there may need to be procedures to pick things up and move forward. We accept that might be the case. Sadly, it is the case for Taishan 1, as I mentioned before; after only a couple of years, it suddenly went offline. They do not even know what is wrong with it, and somehow they have to pick up the pieces.
I absolutely accept that there is a need to have procedures in place, such as a special administration regime. I merely suggest in Amendment 40 that, if that is the case and action needs to be taken, there should be a report covering the issues I have referred to in the amendment—the liabilities associated with the nuclear company, the estimated cost of getting it going again if it has been temporarily shut down, the lifespan of the nuclear power station and so on. It seems fairly straightforward.
Of course, the Minister will say that he cannot do it because that would be providing information which is somehow sensitive or commercial and it should not be done. In those circumstances, I cannot see anything commercial or sensitive about it, and it is something the public need to know; they will find someone else to do it or find a way of supporting the existing company to carry on doing it. It will be the taxpayer’s money, and the taxpayer has a right to know what it will be used on. That is why, in Amendment 43, I am basically saying that any payments that would come out in that process ought to be approved by an independent body—in this case I have suggested, perhaps slightly surprisingly, that the House of Commons should have the opportunity, as the elected body, to decide whether or not the money proposed to be spent is being spent wisely. With that, I look forward to the Minister’s response.
Lord Callanan (Con)
My Lords, I thank noble Lords for their brevity. I know that time is getting on, so I will attempt to be as brief as possible in providing noble Lords with the information that they properly seek.
Amendments 39, 40 and 43 from the noble Lords, Lord Foster, Lord Oates and Lord McNicol, have been grouped because they all relate to the special administration regime set out in Part 3. I remind the Committee of the purpose of the SAR. It is imperative that in the—hopefully, vanishingly—unlikely event of an insolvency we would be able to act quickly to ensure that a plant could commence or continue electricity generation. That gives an important protection to consumers. The special administrator has a duty, as per the Bill, to achieve this objective as quickly and efficiently as is reasonably practicable. I must add that these are powers that we hope never to have to use, but I agree with the noble Baroness, Lady Wilcox, that it is important to prepare in case we do. There is a very low probability of insolvency under a RAB model, but we need to prepare just in case.
It is for these reasons that I cannot accept Amendment 39. If the rescue of the company cannot be achieved, the special administrator will need to consider all options for a transfer, including, very possibly, a transfer to a publicly owned company. This may be supported by the Secretary of State where it would provide clear value for money for both consumers and taxpayers. The amendment implies that the special administrator would consider a transfer to a publicly owned company only if a transfer to a privately owned company were not feasible, so we would simply want to have more flexibility, or rather give more flexibility to the administrator in those circumstances.
It is essential that the administrator and the Secretary of State retain the ability to act quickly if all options to achieve the objective of the special administration have been exhausted. It is highly likely that in meeting their objectives, the administrator will consider various ownership structures for the project and their various relative merits. In placing a new reporting requirement on the Secretary of State to make this assessment and to publish it before acting, the amendment could frustrate this process and potentially delay exit from administration, which could cause additional cost to both consumers and taxpayers.
Lord Foster of Bath (LD)
The Minister just said that publishing a report could frustrate the way forward. Can he explain with an example how that would happen?
Lord Callanan (Con)
This is not a direct example, but, of course, the special administration regime has recently been used in the case of one particular energy company. I do not need to go into the specific example, but I was aware of a lot of the discussions that went on before it. Some of those were extremely commercially confidential because, of course, discussing possible outcomes results in potentially prejudicial publicity and might perhaps bring about the objective that we did not want. The company eventually went into a special administration regime, and information was published as soon as practicable about that. It is important in those circumstances to retain the flexibility. The Secretary of State’s discretion to act expediently would obtain the best outcome for consumers and taxpayers during the special administration.
Amendments 40 and 43 seek to place an additional reporting requirement on the Secretary of State which we consider would also impede the ability of the special administration to achieve its objective. In the case of Amendment 40, I remind the Committee that a special administration is a court-administered procedure and, in the circumstances, a nuclear administrator would be an appointee of the court. It is therefore important that we retain the established process and do not seek to put in place reporting requirements which could oblige the Secretary of State potentially to publish commercially sensitive material, which would then jeopardise a transfer. I cannot, of course, seek to predict the court process, but it is possible that that some aspects of the information that Amendment 40 seeks to have published would also be publicly available, such as through companies publishing their financial statements.
In the circumstances, should any licence modifications be made by the Secretary of State during the administration, the legislation determines that such modifications will—correctly—need to be published, except for any matters which are commercially sensitive or would be contrary to the interests of national security.
There are already statutory arrangements in place with regard to the costs of decommissioning in the Energy Act 2008. This requires an operator to have in place an approved funded decommissioning programme— as already discussed—before construction on a new project can commence. I expect that, as was done for Hinkley Point C, the FDP for any future projects would be published along with relevant supporting documentation —again, apart from material of a sensitive nature.
Turning to Amendment 43, again, I am unable to accept this amendment, because it would risk the ultimate operability of the special administration regime and consequently risk consumers being unable to realise the benefit of the plant they have helped to build. As we have seen during the recent energy supplier crisis, it is imperative, as in the example that I just gave to the noble Lord, Lord Foster, that a fully operational special administration regime can be stood up in the quickest possible timeframe to protect consumers. This includes allowing for requisite funding from the Secretary of State to be provided efficiently. In addition, if insolvency occurred when perhaps the House was not sitting, I am sure that the noble Lord would accept that this would also cause unnecessary further delay.
The amendment would also cause a level of uncertainty that could deter potential administrators from undertaking the appointment under the special administration regime. The administrator would need to be assured that funding would be available from day one of the SAR to ensure its operability and ability to deliver its objectives, which of course are to continue or commence the generation of electricity. If there are delays in accessing the required funding, that could result in outages and problems with security of supply. In the case of a nuclear power station, there are also safety considerations. Any lapse in funding could result in some safety-critical expenditure not being met.
I thank noble Lords for all their amendments and in particular for their consideration of these matters with regard to the special administration regime. I hope that I have been able to provide appropriate reassurance that we hope never to use the regime, but it is there to serve the crucial purpose of protecting the interests of consumers. We need to make sure in that case that it is fully operable, efficient and able to meet its objective that energy generation will commence or continue in the unlikely event of an insolvency. I hope therefore that the amendments will not be pressed.
Baroness Wilcox of Newport (Lab)
I thank the Minister for his reply and recognise the points that he has made regarding SARs. Nevertheless, I still feel that greater safeguards need to be in place. However, at this point, I beg leave to withdraw the amendment.