Community Energy Schemes

Alan Brown Excerpts

Tuesday 30th November 2021 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. Like other hon. Members, I commend the hon. Member for Bath (Wera Hobhouse) for bringing forward the debate. She set out clearly the benefits of community energy and how it would help on the path to net zero and to empower local communities. She also, importantly, set out the current barriers to setting up community energy companies. That was further illustrated by examples in the contributions of the hon. Members for North Devon (Selaine Saxby), for Brighton, Pavilion (Caroline Lucas), for Waveney (Peter Aldous) and for Strangford (Jim Shannon), and the right hon. Member for Leeds Central (Hilary Benn).

One barrier seems to be that it could cost upwards of £1 million to get set up for a generation licence. We have heard that the Licence Lite option under Ofgem simply is not working, so we need alternatives, and the Government must update rules that date back to the electricity network privatisation back at the end of the ’80s and the early ’90s. The hon. Member for Bath made important comments about bringing people on board. We need everybody to buy into the actions that we need to take to tackle climate change. If people get additional community benefits along the way, that is clearly a bonus.

[Ben Lake (Ceredigion) (PC)]

On that point, as my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) has alluded to, not only do we need that community buy-in to allow for measures but, for too long, the energy system’s centralised nature has led to a disconnect between the consumer and the generation. By bringing them closer together, we may find that the typical consumer gains an appreciation of what is entailed in energy generation, which may bring beneficial behavioural changes on top of everything else.

[Alan Brown]

I completely agree. Actually, that touches on the point made by the hon. Member for Leeds Central that we have a grid system and a grid charging system still fundamentally based on where coal-fired power stations or nuclear power stations are sited. That needs a complete overhaul. I may touch on that a wee bit later.

[Jim Shannon]

Strangford Lough Wildfowlers and Conservation Association in Newtownards came up with a small tidal scheme, which, with a small grant, generated some electricity for its use. The scheme has allowed the club to reduce its costs and keep running. That same process could be used in many cases across the whole of the United Kingdom. Has the hon. Gentleman got any similar examples?

[Alan Brown]

The hon. Member gives a good example. I do not have any specific ones to hand, although I will touch later on how some community energy projects have been held back because of the removal of the feed-in tariff.

It is clear that hon. Members are agreed on the importance of community energy generation, and I am sure that the Minister will stand up and say that he agrees with it as well. The key thing is not just agreeing with the principle but taking action to facilitate the growth of community energy projects.

I, too, am a signatory to the Local Electricity Bill, and I pay tribute to Steve Shaw for his campaigning, dedication and ability to get so many local authorities on board behind the Bill, as well as 282 MPs and 77 national organisations, including the Energy Saving Trust, Good Energy, Forum for the Future, the New Economics Foundation, ResPublica, Solar Energy UK, the British Hydropower Association, Triodos bank, the Transition Network, the Royal Society for the Protection of Birds, Friends of the Earth, the Wildlife Fund for Nature, Greenpeace and ClientEarth. That in itself suggests that the Bill is a good thing and should be implemented.

If we look at the energy retail market, we see how badly it is struggling. We just saw Bulb—the seventh largest company, with 1.7 million customers—go bust, so it is clear that we need alternative solutions for the provision of electricity. Clearly, local powering will not replace an organisation such as Bulb overnight, but, as I say, it is logical to try to facilitate local community-based renewable energy where possible.

Changing the regulations to make new community renewable energy businesses viable allows communities to bypass the large utility companies. It means significant additional value for local economies and, as we have heard already from other hon. Members, more money will then circulate in the local economy, leading to more skilled jobs, more viable local businesses and stronger local economies. As I touched on earlier, it empowers local people and companies to be part of the green revolution and part of the pathway to net zero. That can only help to focus minds and create the general buy-in for the need for collective action to tackle climate change.

Evidence suggests that community energy generation currently accounts for less than 0.5% of the UK total. It has been suggested that it has the potential to increase tenfold over a six-year period. As we have heard, figures from the Environmental Audit Committee suggest it could be a twentyfold increase by 2030. That would more than offset the need for new nuclear power generation, and it is something that the Government need to consider.

The Scottish Government have made strong progress towards community energy, but their efforts have been undermined by UK Government cuts. The Scottish Government had a target for 500 MW of community and locally-owned energy by 2020, which was exceeded and then increased to 1 GW by 2020. They have now doubled the target to 2 GW for 2030. Progress towards the bigger target has been positive, but, as I touched on in response to the intervention from the hon. Member for Strangford, the removal of feed-in tariffs has hindered the growth of those projects. There is a project in my constituency that never got off the ground because of the removal of the feed-in tariffs. By taking away those tariffs, the Government are blocking community energy projects, and they are not doing enough to help facilitate them in a different way so as to allow the sale of energy. That is why urgent action is needed.

The Scottish Government published an updated local energy policy statement in January. Of course, community energy projects in Scotland are further hampered at the moment by Scotland having the highest grid charges in Europe. Lucy Whitford, managing director of Renewable Energy Systems UK and Ireland, has said that

“it doesn’t feel as if charging is fit for purpose anymore for us to deliver net zero. We have worked up some examples of network costs. The additional cost per annum of a 22 MW wind farm in Argyll versus one in Essex could be £500,000. Continuing in the current direction of travel on charging reforms could add another £120,000 per year to a project, so it is very significant.”

That is why I have been calling for reform of the grid charging system.

At the moment we have the cost of living crisis, and the energy cap will increase by between £400 and £600 in April. We have the retail energy market in crisis, with 23 companies going bust since August. In 2018 there were more than 70 companies in the market, but now there are fewer than 30, so Government action is needed to reform the sector.

Meanwhile, the Tories have managed to find £1.7 billion to further develop proposals at Sizewell C, and they want to commit bill payers to a regulated asset base payment contract that will last for 60 years on top of the 10 to 15-year construction period. That is madness. The money would be much better spent on community energy growth, as we have discussed. The Local Electricity Bill is an alternative that will not cost the taxpayer or the consumer any money. In fact, it is intended to help create lower local energy costs. Like other hon. Members, I urge the Government to consider supporting the Local Electricity Bill and, if need be, work on a cross-party basis to improve the Bill and get it to a place where everybody is happy with it.

Nuclear Energy (Financing) Bill (Sixth sitting)

Alan Brown Excerpts

Committee stage
Thursday 25th November 2021 Public Bill Committees

Our amendment suggests that there needs to be an additional endgame possibility in the process that, under circumstances where the company has not revived as a going concern or been sold to another company, the Government are required to set up a new company to run that enterprise and allow it to operate properly as a nuclear production facility in the long term. It is not a complicated amendment; it effectively adds a bottom-line clause to the previous arrangements, which have been placed slightly slavishly into the Bill from the 2011 Act. We think that would be an improvement. It would place an absolute bottom-line block on the proceedings and, in the end, if all went wrong, and was not retrievable, would enable a route out to ensure that the plant operated properly in the bill payer’s interest.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Gray. Some of the other Labour amendments that we supported when they went to a vote have been about cost controls and have tried to provide protections for the consumer. Despite what the hon. Member for Southampton, Test said, I do not think the amendment protects consumers or customers, although we are not sure that clause 33 in itself would not provide this option. The explanatory statement says:

“this amendment would require”—

that is, compel—

“the Government to establish a Government-owned company to allow operations to continue”.

I am not sure of the benefits of compelling the Government to keep running a power station if a company goes bust and cannot be taken over as a going concern, because it is still loss-making and a transfer cannot be concluded. Why do we want to make it mandatory for the Government to take over a loss-making operation to continue to generate electricity?

It seems to me that in the event of such financial failure, the best value might be to shut the thing down and decommission it. Although the hon. Member for Southampton, Test said that this provides a final option—a final endgame—there is nothing on time scales here. The amendment does not say how long the Government would be expected to continue to run this loss-making power station to generate electricity. There is nothing that gives that certainty or end date. I think it actually places a burden on the Government and the consumers—the taxpayers. For that reason, it does not make sense to me. I do not think it achieves the ends it is supposed to.

I will quickly refer to new clause 5, which is in my name; I know we will debate it later.

[The Chair]

I would rather we did not debate it now, unless it is relevant to clause 32.

[Alan Brown]

New clause 5 does relate to clause 32. I will refer to it just briefly. All I would say is that the new clause sets out considerations that would need to be addressed before anyone contemplated taking over a nuclear power station. I will return to that when we debate the new clause.

I have concerns about clauses 32 and 33, when considered together with clause 41. We will return to this, but clause 41 possibly gives the Secretary of State an open-ended blank cheque to do what he wants to keep a power station operational; I dare say that ensuring security of supply will be the excuse given.

The hon. Member for Southampton, Test, referred to the provisions relating to the special administration regime under the Energy Act 2011, which have now been applied to Bulb Energy. It would be good if the Minister could enlighten us on how those provisions will operate with regard to Bulb Energy, and how the similar provisions in clause 32 would operate if they had to be used. Also, will he commit to reviewing how the special administration regime operates in the Bulb Energy scenario, and to making improvements to the Bill, if they are required, following that process?

[Greg Hands]

I thank hon. Members for their speeches for and against amendment 18. I remind the Committee that a relevant licensee nuclear company, or RLNC, is one that has had its licence modified under part 1, clause 6(1) of the Bill and has entered into a revenue collection contract. An RLNC administration order is made by the court in relation to an RLNC and directs that, while it is in force, the company is to be managed by a person appointed by the court. That is defined in part 3, clause 31(1), which we have just debated.

Amendment 18 addresses the course of action that the Government must take if an RLNC administration order is in force, but an RLNC cannot be rescued or a transfer envisaged by clause 32(4) effected, namely a transfer of the undertaking of the RLNC to a subsidiary that results in a going concern. The amendment seeks to ensure that, in this scenario, the plant will commence or continue electricity generation under public ownership. The amendment would require the Secretary of State to move the assets, liabilities and undertakings of the RLNC to a Government-owned company, even if a transfer envisaged by clause 32(3) to one or more companies would achieve the objective of the administration order. The amendment would put in place a new process. Although the amendment does not address who must make the assessment that the objective cannot be achieved by the means specified, it appears to limit the available options before the power plant is moved into public ownership.

First, obviously, I thank the hon. Members for Southampton, Test, and for Greenwich and Woolwich for their clear desire to ensure that a nuclear power station will commence or continue the generation of electricity—on the face of it, that seems a very reasonable objective—and for recognising that the special administration provisions add a valuable layer of protection in this area. Ultimately, that is why they are in the Bill. However, I do not consider it necessary to place a statutory requirement on the Government to take ownership of a plant in the unlikely event that a special administration fails in its objectives, because the provisions for the energy transfer scheme, applied by clause 33, already serve this purpose. The amendment may even inadvertently lengthen the period of an RLNC administration order, as one assumes that the Government-owned company would, for example, need to apply for a new nuclear site licence.

In the unlikely circumstance where rescue cannot be achieved and it is unnecessary for the administration order to remain in place, the Secretary of State—or the authority, Ofgem, with the consent of the Secretary of State—may apply to bring the administration order to an end. Once the administration has ended, the Secretary of State may prepare a nuclear transfer scheme, which would bring the plant under the control of a public body, or, for example, the Nuclear Decommissioning Authority. In such a scenario, it is envisaged that the plant would then be decommissioned and cleaned up. However, the Government would still retain the option to move the power plant into public ownership and, if deemed in the best interests of consumers and taxpayers, commence or continue the operation of the plant.

Let me say in response to comments made by the hon. Member for Kilmarnock and Loudoun that there may be circumstances in which discontinuing the project and having it safely decommissioned is in the best interests of both consumers and taxpayers. That will ultimately be down to a value-for-money process that asks: what is the best deal here for consumers and taxpayers? The Office for Nuclear Regulation may have shut down the plant for safety reasons; there may have been an environmental or security incident, or maybe something else happened that meant that trying to make that plant commence or continue to generate electricity was not in the interests of consumers or taxpayers. It is important, then, that the Secretary of State retains discretion to act in whatever way will achieve the best outcome for consumers and taxpayers during the insolvency of a relevant licensee nuclear company.

I stress to the Committee that the likelihood of those scenarios is, of course, very remote, as indeed is the likelihood of a nuclear administrator ever being appointed. I thank the Opposition for their forward thinking and consideration of what would happen in such a scenario, but I hope that I have assured the Committee that it would not be sensible to tie the hands of the Government in such a way that they had to commit further taxpayer money to a project without being able to balance that against the merits of doing so. The amendment would create an automatic process, but the Bill provides sufficient flexibility to allow the Government to pursue the option that the amendment provides for if they consider such a decision to be in the best interests of consumers and taxpayers. I therefore ask the hon. Member for Southampton, Test, to withdraw the amendment.

[Dr Whitehead]

I thank the Minister for his consideration of the processes by which a power plant might need to be rescued and/or decommissioned and/or discontinued. I think he will recognise, however, that the circumstances in which he says ministerial discretion would need to be exercised are an unlikely part of an unlikely scenario of an unlikely future.

The Minister gave the example of an accident, or something else, closing the plant down, so that it would have to be decommissioned and could no longer produce power. That would need to be done anyway, even if the company was placed in Government hands, so I do not think that those circumstances affect the path I have set out relating to Government interest in a plant that could not be bought out of administration because it was a going concern, or because it had been sold to another company—unless the Minister has it in mind that the sale of a nuclear company to another company would be done on a peppercorn basis, in which case the nuclear plant would lose all the value that the bill payer had invested in it.

In any event—this is what concerns me about the intervention by the hon. Member for Kilmarnock and Loudoun—the whole purpose of the RAB model is to produce a working nuclear plant that was invested in up front by members of the public and bill payers. That plant would then produce power as a reward for that up-front investment. If we easily closed a plant down because it was insolvent, we would be overthrowing the whole purpose of the RAB scheme, which is for the public to get something back, and we would be back to the instance that we talked about early on in Committee.

[Alan Brown]

The hon. Gentleman is right about the purpose of the RAB model, but would the unlikely event of insolvency not just confirm the failure of the RAB scheme? We should not keep throwing good money after bad in the event of such a failure.

[Dr Whitehead]

The hon. Member is right that in the event of an utter catastrophe, where the nuclear core does not work, the concrete casings are seriously deficient and the whole thing has to be closed down, we are in a scenario—this was sort of suggested by the Minister—where it would not be viable to continue the project. However, where it is in principle possible, electric power production in the plant should continue, because billions of pounds of customer payments will have been invested in the plant.

--- Later in debate ---

[Alan Brown]

I beg to move, That the clause be read a Second time.

Again, I am trying to rise to the challenge from the Minister to put forward amendments and new clauses to improve the Bill. New clause 1 is about trying to ensure much greater transparency on costs by asking the Secretary of State to lay a report before Parliament. That in itself should not be onerous and it is something that I expect the Minister would easily be able to commit to. All the other new clauses are similar and about trying to establish that transparency, so that parliamentarians and consumers understand the cost of a nuclear project once it is signed off or at different phases following that.

New clause 1 is very modest. Subsection (2)(a) is about the provision of confirmation of the capital cost. Parliamentarians and, more importantly, consumers need to know just how many billions of pounds are committed to each new nuclear project. We hear that Hinkley Point C is now costing around £22 billion, an increase of 25% on the original estimated cost of £18 billion, but we never get these figures confirmed by Government, because it is said that cost increase is a contractor risk. So, we do not ever formally get to understand the true costs of Hinkley Point C.

At the moment, while we assume that Sizewell C will be in at least the same order of magnitude of cost, we are always told that Sizewell C will be cheaper than Hinkley Point C because of lessons learned in the design and construction of the project. Even then, that still means that Sizewell C will be in the order of £20 billion. That is a lot of money being committed for consumers, and consumers have the right to know just how much money is being committed.

We do not even know how that £20 billion estimate is going to pan out because construction costs are soaring post covid and post Brexit. Even if savings are made on Hinkley Point C, they could easily be counterbalanced by natural cost increases in the construction industry.

Subsection (2)(b) calls for all up-front costs to be clarified. If we look at the development of Sizewell C, that would mean confirmation of how much of the £1.7 billion allocated in the budget has been used and what it was used for. We also need to know what other costs are committed to during the anticipated construction period. Under the RAB proposals, consumers will start to pay money as soon as construction begins, but they are actually not committed to the full construction cost because that gets spread out over the rest of the RAB contract period; but I think it is only right to know what costs have been committed to as soon as construction commences.

Looking at the bigger picture—possibly I should have made the new clause more wide-ranging—we need to know what decommissioning costs are committed to within the overall cost envelope. We should also have the full details of RAB payments in terms of anticipated changes going forward, over the six-year period post construction.

I say to the Minister that I do not want to hear commercial confidentiality used as a smokescreen for not providing information. Giving details of the kind that I have highlighted would in no way endanger an operating company’s patent in design, or people being able to work out the costs of individual elements, because we are looking for the big picture costs.

--- Later in debate ---

[Greg Hands]

As the hon. Gentleman just explained, new clause 1, tabled by himself and the hon. Member for Aberdeen North, seeks to place additional reporting requirements on the Secretary of State. In particular, it will oblige the Secretary of State to lay a report before Parliament outlining expected overall capital and up-front costs of the project, before the licence modification powers are exercised. I want to thank the hon. Member for engaging with the substance of the Bill. He is right that I challenged him on the first day because he had not tabled any amendments; now he duly has, and it is our job to debate and scrutinise those amendments.

While we agree that it is important for the Secretary of State’s decision making with respect to a RAB to be transparent, a requirement to publish details of a negotiated deal prior to the licence modifications could jeopardise our ability to complete a successful capital raise—that is the point here. That could in turn impact our capacity to secure value for money for consumers; at the end of the day, that is what this Bill is all about. I want to reassure the hon. Member—

[Alan Brown]

Can the Minister explain more fully why giving detail on what the anticipated capital costs of the project are will somehow endanger the sign-off of that deal?

[Greg Hands]

At the point of the licence modification, we then go into the raising of the capital. Raising the capital may be more difficult, or be jeopardised, if that information has been published. It must be in the best interests overall for the Secretary of State to make the judgment as to how they can best effect best value for money for consumers, and ultimately for the sake of the taxpayers.

[Alan Brown]

I am still not clear how putting in the public domain what the capital cost is would make it difficult for somebody to secure private investment. First, they will have already looked at securing investment; and secondly, once the costs are known it would surely be easier for them to secure additional private investment.

[Greg Hands]

The hon. Gentleman may be mixing up what is in the public domain and what is part of the negotiation. You will know, Mr Gray, that it is important for the Secretary of State to be able to, in the negotiation, get the best deal—that is what we are looking for here. That is the whole purpose of the legislation; the purpose of the RAB model is to save consumers money overall. It responds to the National Audit Office report that mentioned Hinkley Point C, and said that there ought to be the ability to save money overall by sharing costs between consumers and taxpayers. That is what the RAB model is seeking to do. What we are debating overall with this legislation is how to best effect a saving for the consumer, which we estimate to be in the region of £30 billion overall. That is a very effective saving for consumers.

I would like to reassure the hon. Member that the allowed revenue for the project will be calculated by the authority throughout the construction period, thus helping to ensure that the company is spending money efficiently and economically. In response to that part of the new clause looking for detail on capital costs, these will be a key input to a project’s value for money assessment as it goes through relevant approvals. As set out in our consultation on RAB, when assessing the value for money of new nuclear projects, the Government would be focused in particular on whether the project was expected to contribute to the target of net zero emissions by 2050 and deliver security of supply at a lower total electricity system cost for consumers than alternatives without the project, so additional considerations do come into play.

In response to the part of the new clause that asks about the up-front costs of a project, we have suggested elsewhere that any initial costs to the project financed under a RAB model would be very small. For example, a project beginning construction in 2023 would cost only a few pounds per dual-fuel household in this Parliament.

The new clause is not necessary, given the steps that we have taken elsewhere in the Bill to ensure that the modification procedure and the designation process that precedes it are as transparent as possible. We believe that sufficient transparency is already embedded in the Bill. The Secretary of State will be obliged to publish the designation statement setting out how they will assess nuclear companies against the designation criteria, including value for money, for a RAB project. The Secretary of State will also need to consult with a list of key independent bodies, including Ofgem as the RAB regulator, the UK’s nuclear and environmental regulators and the devolved Administrations, on their draft reasons for project designation, which will include the Secretary of State’s assessment of the project’s value for money. They will then be obliged to publish these reasons at the point that a project is designated.

The Secretary of State is also required to consult named persons prior to making any licence modifications, which will allow expert voices to input on whether the licence modifications are effective in facilitating investment. Following the consultation, the Secretary of State must then publish the details of any modifications made as soon as reasonably practicable after they are made. This approach—of consultation followed by publication—is well precedented in other licence modification powers.

I turn to a couple of points raised by the hon. Member for Kilmarnock and Loudoun. He asked some questions about potential the savings of Sizewell relative to Hinkley. First, of course we are expecting there to be savings—learnings from the Hinkley process to be transferred to the Sizewell process. Secondly, going back to what I said earlier, we would expect that the RAB model would also lead to savings overall for the consumer over the life of the plant.

The hon. Member then asked about the strike price reduction. Under the RAB model, it is not appropriate to talk about a strike price, because it is a fundamentally different financing construct, without a strike price, which is applicable under a contract for difference regime. It would not be appropriate to use a strike price in this case. It is fundamentally different.

[Alan Brown]

My point was that part of the original strike rate deal agreement for Hinkley Point C was that if Sizewell C followed on, there would be a consequential reduction in the strike price for Hinkley. I know this is about a RAB model; but I am asking, will that consequential price decrease in the strike rate nevertheless be made—or, because of the RAB model, does Hinkley remain at £92.50?

[Greg Hands]

The hon. Member raises a very good question. The negotiation is ongoing at the moment with Sizewell. I reiterate the point made by the Secretary of State that the learning process from Hinkley is ultimately transferable to Sizewell. There are also aspects of the supply chain that were established for Hinkley that are transferable to Sizewell. If I understand correctly, there have been savings during the construction of Hinkley, with learnings from the earlier part of the construction going into the later part. We expect those savings to go forward to Sizewell. However, I stress again that comparing a RAB model strike price with the strike price of a contract for difference is not appropriate. There is no strike price with a RAB model.

By following this model and allowing the Secretary of State to lead on negotiations, as is standard for a project of this type, we will be able to achieve the best deal for consumers and taxpayers. I hope that demonstrates to hon. Members the Government’s commitment to transparency in the licence modification and the processes that support it. I hope they will withdraw the amendment.

[Alan Brown]

I have listened to the Minister and I am still not convinced in any way that what he outlined will provide the transparency that I am looking for. Again, the argument is, in terms of construction costs, “Well, it is only a few pounds per dual-fuel household per month for the duration of this Parliament.” That is one of the points I keep returning to. “We are talking about just a few pounds per month per consumer” is a way of trying to minimise the actual costs that are being committed, and I do not think it is sufficient. That is why I want to see much more transparency on the actual costs that are committed.

It is also interesting that the Minister made an assessment about security of supply and the whole-system cost, and looking at the value for money of a nuclear power project on that basis. I would like to understand a bit better how the Government actually undertake that. I refer him to the Imperial College report that demonstrated that using pumped storage hydro would save £690 million a year compared with nuclear energy. So, clearly, it is all about how we look at the metrics and which other technologies we consider when looking at the whole system and looking ahead to 2050.

I will not press the new clause to a vote at the moment. We will look at bringing back something on Report to try to encapsulate what we are looking for in terms of that transparency. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Report on agreed strike rate

“(1) When granting an electricity generation licence to a nuclear company in relation to a nuclear

energy generation project, the Secretary of State must lay a report before Parliament.

(2) The report under subsection (1) must set out—

(a) whether the Government has offered the nuclear company a guaranteed strike price for the sale of electricity onto the National Grid;

(b) the strike price included in any such arrangement;

(c) the duration in years of any such arrangement.”—(Alan Brown.)

In respect of new nuclear projects, this new clause would require the Secretary of State to publish details of any agreement reached offering a guaranteed strike price for the sale of electricity onto the National Grid.

Brought up, and read the First time.

[Alan Brown]

I beg to move, That the clause be read a Second time.

I will be very brief because most of my new clauses are quite self-explanatory. This new clause seeks full clarity on any commitments that we undertake in a new nuclear project. It has previously been suggested that once a new power plant is operational, the actual cost of the electricity will be deducted from the RAB payments and, arguably, somehow the RAB payments could then be nullified by that arrangement. I do not see how that is credible.

If we are entering a 60-year contract to pay back a lot of the capital cost of the project, it does not make sense that the electricity would work to counterbalance that. I am concerned that a strike rate or some sort of minimum floor price will be agreed with a company, else it might not want to commit to the £20 billion or £20 billion-plus capital expenditure. That is what the new clause is all about. If there are any agreements on the price for the sale of electricity that is baked into contracts or negotiations—although it might not be called a strike rate—we need to understand that. Again, we need to have that full transparency on the costs that will be committed to consumers’ bills.

[Greg Hands]

I thank the hon. Member for Kilmarnock and Loudoun for probing, but I will briefly point out two reasons why we cannot include his new clause in the Bill. First, the new clause makes reference to “granting an electricity licence”; to be clear, the Bill does not give powers to the Secretary of State to grant any licences but, instead, to amend existing generation licences. Purely on language terms—important terms—we cannot accept the new clause. Secondly, the new clause proposes that the Secretary of State must report on any strike price agreed in relation to a project and provide further detail on that price. As I have already said, “strike price” is not an appropriate term because there is no strike price in a RAB model. For those reasons, I ask that the hon. Gentleman withdraw his new clause.

--- Later in debate ---

[Alan Brown]

I will not press the new clause to a vote at the moment. I will have a think about what the Minister recommends on language, which presumably means the language he would accept; I will also revisit what we are calling a strike rate. Maybe we can agree something on Report. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Report on decommissioning costs

“(1) When granting an electricity generation licence to a nuclear company in relation to a nuclear generation project, the Secretary of State must lay a report before Parliament.

(2) The report under subsection (1) must set out—

(a) how decommissioning costs will be met, including any role played by—

(i) revenue collection contracts;

(ii) strike rates; and

(iii) consumer risk.

(b) how this would change if the nuclear company were to become insolvent.”—(Alan Brown.)

In respect of new nuclear projects, this new clause would require the Secretary of State to publish details of how decommissioning costs will be met, including in the event of the nuclear company becoming insolvent.

Brought up, and read the First time.

[Alan Brown]

I beg to move, That the clause be read a Second time.

Again, I will be very brief, because I think it is clear what I am looking for. I am sure that the Minister will give the same answer about granting and modifying a licence, and that it is not the time to provide that information. However, I do think it is very important that, at some point, we understand it. We keep being told that decommissioning costs are baked in, up front, in the price of a contract. For me, it is vital that we get more information on what is actually baked in, and how that can provide any certainty on future decommissioning, because I still have grave concerns that a company could choose to walk away, and the taxpayer or consumer is left to pick up the decommissioning costs at a later date.

[Greg Hands]

I thank the hon. Gentleman for tabling the new clause. He is right that, in my view, it cannot be accepted into the Bill because it refers to granting rather than amending a licence; however, I welcome his attention to the costs of decommissioning, which is an important issue across all these projects. It is important to note that the Energy Act 2008 legislated to ensure that the operators of new nuclear power stations have secure financing arrangements in place to meet the full costs of decommissioning. Nothing in the Bill would alter in a negative way the provisions of the 2008 Act.

Under the 2008 Act, operators are required to submit a funded decommissioning programme to the Secretary of State for approval. I stress to the Committee that it is a legal requirement to have an approved FDP in place before any nuclear-related construction can begin on site. When making a decision on an FDP to approve, reject or approve with conditions, the Secretary of State must have regard to the FDP guidance, which sets out the guiding factors that the Secretary of State must be satisfied are met. The guidance stipulates key documentation and so on, and consultation with the ONR, the Environment Agency and Ofgem.

All of that is laid out in the 2008 Act, so I hope to have demonstrated that the robust FDP legislation, combined with the RAB model and our insolvency measures, will ensure that the costs of decommissioning are met. For all those good reasons, in addition to the reason that the new clause talks about granting rather than modifying the licence, I ask that the hon. Gentleman withdraw the new clause.

[Alan Brown]

I will not press the new clause to a vote. Equally, I am not convinced that there is enough transparency on the decommissioning costs. It is certainly something that I would like to revisit. I understand what the Minister says about the process, but of course we have not had a chance to test how robust it is. It has been applied to Hinkley, but decommissioning is some way off. We know how much liability the taxpayer has at the moment in terms of the existing decommissioning, which it is estimated will cost £132 billion over the next 100 years. We have an astonishing nuclear waste legacy that the taxpayer is having to pick up. That is why I am really keen to explore the robustness of the process, and more importantly what costs there are, but I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 4

Report on proposed payments to a nuclear administrator or relevant licensee nuclear company

“(1) Prior to making payments for the purpose described in section 41(2)(c), the Secretary of State must prepare and publish a report on the proposed payment and must lay a copy of the report before Parliament.

(2) Before the payment is made, the report under subsection (1) must be approved by the House of Commons.”—(Alan Brown.)

This new clause would require any payments under clause 42(2)(c) to be approved by the House of Commons before being made.

Brought up, and read the First time.

[Alan Brown]

I beg to move, That the clause be read a Second time.

I will be brief. The new clause could have been an amendment to clause 41. I am concerned that the financial provisions under clause 41 are open-ended. The Secretary of State can make decisions, and subsection (1) begins:

“There is to be paid out of money provided by Parliament”.

It is effectively saying that Parliament will pay for whatever decisions the Secretary of State makes. As I say, that is open-ended; it is a blank cheque, if something is enacted under clause 3. That is why I simply ask that, before making any payments, information be provided to Parliament, and the anticipated level of expenditure be approved by Parliament itself.

[Greg Hands]

New clause 4 would add another new report for the Secretary of State to lay before Parliament, as the hon. Gentleman said, to detail the funding that the Secretary of State would propose to make to a nuclear administrator or relevant nuclear licensee company, and further requires that the report be approved by the House of Commons. As I have already made clear, I think the clear and transparent process that we have already laid out in the Bill achieves the objective overall, but in this particular case such an amendment could have negative implications for the operability of the SAR, or the special administration regime. This may place additional risk on consumers being unable to realise the benefits of the plant that they have contributed to building and significant sink costs. Of course, these are powers that we hope the Secretary of State will never have to use, and money that will never need to be spent.

As well as the need for pace, there is also a need for all relevant parties to be comfortable that the SAR is deliverable. In order to take on the administration appointment, the administrator would need to be assured that funding in the form of loans, guarantees or indemnities would be available from day one of the SAR. That is a crucial part of how a SAR regime operates. The administrator must know that funding is available from day one. The proposed amendment could introduce a degree of uncertainty over the funding pending a report from the Secretary of State to be deposited in Parliament, such that the administrators might be reluctant to take on the appointment.

I remind the House that the objective of the RLNC administrator is to commence or continue the generation of electricity, and we expect that in doing so the administrator must be able to act swiftly. It is imperative that an administrator has quick access to the funding required to ensure that such outages do not occur—we are talking, after all, about a nuclear power plant—and security of supply is maintained. More importantly, such swift action must also be conducted safely, and any lapse in funding could result in safety-critical operational expenditure not being spent. I therefore consider that such a reporting obligation on the Secretary of State would hinder the effectiveness of the special administration regime, so I ask the hon. Gentleman to withdraw the motion.

[Alan Brown]

I really do not buy the argument that getting approval for expenditure somehow jeopardises getting that expenditure and getting the plan operating. It makes no sense whatever. I think the Minister just wants to retain the open chequebook policy that allows the Secretary of State to do whatever he wants, but he argued it was necessary for security of supply.

It feels as though the end is in sight. I am not going to press this to a vote, given that we will simply lose it, so I am happy to withdraw, but, again, I would like to reconsider it because, to repeat myself, I want greater clarity and transparency on the costs that could be committed in future. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Report on transfers falling within section 32(3)

“(1) Prior to a transfer falling within section 32(3), the Secretary of State must lay a report before Parliament.

(2) The report under subsection (1) must set out—

(a) the liabilities associated with the nuclear company;

(b) any estimated costs of getting the plant operational again if it has been temporarily shut down;

(c) the estimated lifespan of the nuclear power station; and

(d) decommissioning costs and confirmation of any funding provided by the nuclear company for this purpose.”—(Alan Brown.)

This new clause would require the Secretary of State to publish a report on the matters listed prior to any transfers falling within clause 32(3).

Brought up, and read the First time.

[Alan Brown]

I beg to move, That the clause be read a Second time.

Lastly and briefly, new clause 5 ties in with the debate that we had earlier on amendment 18 to clause 32. These are the key considerations that the Government would need to consider before committing to maintaining the operation of a nuclear power plant. In the case of a company becoming insolvent, it cannot be taken over as a going concern and cannot be transferred. In terms of the going concern aspect, what liabilities are associated with the nuclear costs? Obviously, there are the actual costs of getting the plant operational again if it has had to shut down. The estimated lifespan of a nuclear power station and the decommissioning costs and confirmation of any funding that is provided by the nuclear company for that purpose again gets into the value for money argument and making a sensible decision. Do the Government take over the operation of the plant, for example, or do they start the decommissioning process and shut it down to get best value for the taxpayer?

[Greg Hands]

I thank the hon. Member for Kilmarnock and Loudoun for describing his proposed new clause 5. It is important to understand that the new clause, like the previous ones, would oblige the Secretary of State to lay before Parliament a report, in this case detailing the liabilities associated with a nuclear company, the estimated costs of restoring operation in the event of a shutdown, the estimated lifespan of the nuclear power station and the decommissioning costs of the project.

Obviously, I welcome the hon. Gentleman’s desire to increase transparency and the robustness of the Bill. However, I would like to bring to the Committee’s attention that it is of course the court that has the final say, as it is the court that appoints the time at which the energy transfer scheme is to take effect, following approval by the Secretary of State. It is a matter for the court. Therefore, the proposed reporting obligation on the Secretary of State must be considered unnecessary, as sufficient transparency is already offered through the court process. The courts will make an informed decision and will have ultimate responsibility for the decision on when an energy transfer shall take effect.

The proposed reporting requirement might oblige the Secretary of State to publish sensitive material, including of a commercially sensitive nature, which could have implications for the effectiveness of the RLNC administration order, the ability to achieve the objective and also to bring the administration to an end. It might well act against the public interest. The new clause risks the failure of the RLNC administration order’s objective and considerable sunk costs to consumers. I therefore ask the hon. Gentleman to withdraw the motion.

--- Later in debate ---

[Alan Brown]

In each response, the Minister says that he welcomes my desire for greater transparency, but he then rejects all my requests for greater transparency, so it does not quite feel like that. Presumably it means that we will be able to agree something on Report to get the transparency that we desire. Again, I am not convinced that doing this report would jeopardise the process, but I am happy to withdraw the new clause at the moment and to try to find ways to get the answers and transparency that I am looking for. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill to the House.

[Greg Hands]

On a point of order, Mr Gray. I would like to thank you and Ms Fovargue for your excellent chairing of the Committee, getting us through this important process efficiently and effectively. This has been a very interesting debate on a very interesting Bill on a very interesting topic, which attracted broad interest across the House. I have to confess that this has none the less been a relatively uneventful Committee, but for connoisseurs of the topic, it will provide many future years of reading as to how nuclear financing was scrutinised by the House of Commons so effectively and in significant detail.

I thank the excellent witnesses whom we heard from last week and all members of the Committee for their constructive debate. That has allowed the Bill to go through significant scrutiny, and facilitated important discussions. I also thank the Whips—the Whips must always be thanked—on both sides for their efforts and their effective management of the time. I offer my thanks to the Clerks, the Hansard reporters, the Doorkeepers and, indeed, all the parliamentary staff, and to my excellent team of Department for Business, Energy and Industrial Strategy officials, for the smooth proceedings and ensuring that we have all been well looked after and have finished with the Bill well scrutinised, but in good time. I look forward to the next stages of proceedings on the Bill and the continued insight from colleagues across the House.

[Dr Whitehead]

Further to that point of order, Mr Gray. I would like to associate myself with the Minister’s remarks about the passage of the Bill and with the thanks that are due to the many people who took part in its processes, from witnesses to hon. Members here today. A number of them were, I know, somewhat tested on occasion by the detail into which some amendments went. But overall, we have had good scrutiny of the Bill, facilitated by the courteous way in which the proceedings were conducted. I thank the Minister for those courtesies in how our debates proceeded, and I thank you, Mr Gray, for your excellent chairing of our proceedings.

[Alan Brown]

Further to that point of order, Mr Gray. In a similar vein, I thank yourself and Ms Fovargue for chairing the Committee. I especially thank the Clerks for all they have done, and for the assistance they have provided with drafting amendments and new clauses. I must admit, although the Minister has said that some were not relevant, I trust the Clerks’ judgment more than I trust the Minister. I do not mean that to be facetious.

Tidal Energy Generation: Ringfenced Funding

Alan Brown Excerpts

Thursday 25th November 2021 Commons Chamber

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Thank you, Madam Deputy Speaker, for the opportunity to bring this critical issue before the House this evening. I have been passionate about the tidal marine industry’s potential for some time. I am glad that now, only a few weeks after the conference of the parties in Glasgow, it is finally getting the focus and attention that it deserves.

Ahead of this debate, as we all know, the Prime Minister announced at Prime Minister’s questions yesterday that there will finally be some ringfenced funding for tidal energy: £20 million in the forthcoming contracts for difference auction. I wish I had known that securing a debate in this House is all it takes to get some movement out of the Government and the Cabinet. I must really start securing adjournment debates much more often.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It was my PMQ.

[Ian Blackford]

Of course—I congratulate my hon. Friend on his Prime Minister’s question yesterday.

While my party colleagues and I were glad to see some movement yesterday, we have also been very clear that it amounts to only a partial U-turn. The Government have a way to go yet. Every little may help, but if we are serious about the scale of the opportunity, we need to go further.

In securing this debate, our ask was for a £71 million ringfenced fund. The ask remains for £71 million, which we genuinely believe is the level of investment that will allow the industry to fulfil its potential to provide green baseload energy that is so critical to our situation, and will support a sector that has massive potential not just at home but as an export industry. The level of investment that we put in now will ultimately determine whether the industry will reach its potential on these shores or we miss the chance and let it slip through our grasp.

Let me put the issue in context. The Royal Society report published this month refers to tidal marine contributing 11.5 GW of electricity. That is 15% of UK generation capacity.

[Alan Brown]

May I go back to the pots of money? As my right hon. Friend says, £20 million is clearly welcome compared with where we were, but would a bigger pot of money not unlock greater investment and create a better jobs return? A £70 million pot could unlock £140 million of private investment and create 400 jobs, whereas £20 million would unlock only £20 million and create 100 jobs. A bigger pot would get a better return for consumers.

[Ian Blackford]

My hon. Friend is right. We are, essentially, at ground zero today. This is about how we kick-start the industry. The modest Government support for which we are asking would unlock that private investment, and when we think about the 11.5 GW that I talked about—that 15% of UK electricity—

--- Later in debate ---

[Ian Blackford]

I must say to the hon. Gentleman that my support for this is not just for the short term; I was at the port of Nigg when the MeyGen project was launched many years ago, so the subject has been dear to my heart for a long time. I do, however, agree with him about the scale of the opportunity. Of course the £20 million of investment that was announced yesterday is important, because it will allow us to develop the industry, but the question at the heart of today’s debate is about the scale of our ambition.

I respectfully ask the Minister, as I would ask the Chancellor of the Exchequer, for a recognition of the scale of this opportunity. Phase 2 of the MeyGen project has already been permitted to go up to 80 MW, and in the Pentland Firth it could ultimately reach as much as 400 MW, but the ability to expand from the current 6 MW installed in MeyGen phase 1 is restrained by the investment that has been put in place in this round. We would certainly not be looking at deploying the 80 MW; it would be a much reduced figure. I would simply say to the Minister and to all Members: let us have that ambition. Let us have that desire to see this green energy source get to 15% of UK electricity production. To do that, however, we have to show more ambition than is being shown today. I do not wish to be seen as ungrateful for what has happened; all I am asking the Government to do is to recognise the scale—

[Alan Brown]

Will my right hon. Friend give way one more time?

[Ian Blackford]

Let me make a little bit of progress. At this rate, I am going to use up all the time myself, but I want to be respectful to the Minister.

My message to the Minister is to reassess what has been done and to do all that he can to ensure that we develop this green potential. The funding of £71 million that we have asked for would have resulted in 100 MW of capacity deployed in the very near term from what we know from planned projects. Let me ask him this specific question. With a funding pot of £20 million, what specific assessment of capacity deployment have the Government made? I genuinely ask him not to duck this question, as it is critical to revealing what assumptions the Government have made in relation to their lower level of investment. I am sure that they will not have made this announcement without making such an assessment, and I look forward to the Minister addressing that question when he responds.

It is important to set out just how obvious an opportunity investment in the tidal marine sector is, and why it is important for us. First and foremost, we should remind ourselves of how deeply fortunate we are that this world-leading technology is already located in the United Kingdom and particularly in Scotland. We have a chance to grow this sector exponentially, but we have to take it. It is estimated that the tidal stream industry could generate a net cumulative benefit to the UK of £1.4 billion and support at least 4,000 jobs by 2030. Additionally, although wave energy is a less mature technology than tidal stream, it could add a further net positive contribution to the UK economy of £4 billion and support 8,100 jobs by 2040.

This industry is not alone as an emerging opportunity; there is also emerging evidence of just how big this opportunity can be for our present and future energy needs. A recent report for the Royal Society, led by Daniel Coles at the University of Plymouth in collaboration with the Universities of Aberdeen, St Andrews and Highlands and Islands, has found that the UK can get 15% of its electricity production from tidal stream power. That would be a massive contribution to the work that needs to be done to get to net zero by 2045 in Scotland and by 2050 in the rest of the UK. Achieving this would require around 11.5 GW of tidal stream turbine capacity to be installed.

Just to put that in context, we currently stand at 18 MW. This takes us to the nub of the issue regarding the support required from the Government to create the investment in the industry that my hon. Friend the Member for Kilmarnock and Loudoun mentioned. To meet those ambitions means installing a least a further 124 MW by 2031. That would put tidal stream on a trajectory to install the estimated 11.5 GW needed to generate 34 terawatt-hours a year by 2050.

The recent research for the Royal Society also indicates that if we build up this targeted support for the tidal industry, it will drive down the levelised cost of energy to below £150 per megawatt-hour. This would make tidal stream cost-competitive with other technologies such as combined cycle gas turbines, biomass and anaerobic digestion. So, from the current position where there is no route to the domestic market, it is now clear that if this sector gets the investment it needs, it will quickly become a key component in meeting our energy needs.

[Alan Brown]

Does my right hon. Friend agree that another thing the Government could do that would not cost them or consumers any money would be to set an interim date and target for hitting 1 GW of tidal stream? That would send a signal to investors about how seriously the Government are taking this.

[Ian Blackford]

Absolutely, because it is about that ambition. I hope the Government share our ambition to see this sector generate the level of electricity we believe it can generate. It is about creating the circumstances, by kickstarting the sector with modest Government investment, so that investors come in. We have developed an opportunity for green energy, but let us also think about the opportunities for manufacturing and for a global success story, given the technology that has been developed on these islands.

A proper level of investment will allow existing developments such as the MeyGen project to take off. This project, the world’s largest tidal array, is already exporting significant amounts of electricity, and it has significant capacity to grow. This presents a transformational opportunity for the tidal sector and would once again demonstrate Scotland’s commitment to a green recovery. It could also create thousands of new full-time roles in the Scottish supply chain, helping to achieve its full potential.

We also need to think about the opportunity for our industrial base in Scotland, because the ability to tie in green energy to the powering of data centres, for example, would be an enormous opportunity throughout Scotland, particularly in my area of the highlands and islands. From this ability to generate green energy, we can develop a wider industrial strategy to create the job opportunities and the wealth that we all want to see.

--- Later in debate ---

[Greg Hands]

The right hon. Gentleman is mixing up funding with the process of an auction. It is a contract for difference auction. The idea of £20 million being available is that it allows us to have a competitive process between all of the different parties that may be interested, and then to make sure that at least £20 million goes towards these projects. It is not the same as granting funding, which is what I think he is looking for, of £71 million. It is a competitive auction process. The purpose of the CFD scheme is to support and push for—

[Alan Brown]

Will the Minister give way?

[Greg Hands]

I will try to fit in a response to the right hon. Gentleman.

The purpose of the scheme is to support and push for only the most promising and competitive projects in the offing. My Department’s analysis shows that £20 million is optimal for that purpose and that a larger ring-fenced budget would serve neither the interests of the electricity bill payer, nor the interests of the sector itself, which must be pushed to innovate and find ways of bringing down its costs. So, yes, the Government have, this week, delivered for the burgeoning tidal stream industry and it is for the developers now to really push on and make good on their promises and their potential to demonstrate the value for money and the scalability that we need to see from our renewable energy technologies as we transition to an efficient and net zero-ready power sector.

We all remember the remarkable fall in the cost of offshore wind energy, to which the right hon. Gentleman referred in his speech, once it was able to take full advantage of the contracts for difference scheme. We have, this week, given the tidal stream sector the chance to push on and try to do the same. It will all be to our benefit and to the benefit of our planet and environment if the sector succeeds in this endeavour.

Question put and agreed to.

Energy-intensive Industries

Alan Brown Excerpts

Wednesday 24th November 2021 Westminster Hall

[Jack Brereton (Stoke-on-Trent South) (Con)]

I beg to move,

That this House has considered energy intensive industries.

It is a pleasure to serve with you in the Chair, Ms Nokes. I am grateful to have secured this timely debate. As we continue to emerge from the economic hit of the covid crisis and as financial activity builds and grows, energy prices are noticeably higher and our constituents are feeling the pinch. We have seen domestic suppliers go bust, and jobs and product affordability have been threatened by the cost of energy to businesses. The short-term issue of price volatility is exacerbated by longer-term issues of energy production and energy efficiency.

Today, I will set out the issues facing industries that rely on the intensive use of energy, not least the ceramics industry, for which the Potteries are internationally famous. It is worth remembering that to be the world capital of ceramics, Stoke-on-Trent needed to be not just a city of pots and clay, but a city of pits. The energy requirements to fire ceramics at extreme temperatures are intense, and it was local coal—as well as clay—that fired kilns historically.

Times change and coal firing is now, thankfully, a thing of the past. The last such firing was literally a museum piece, organised by the fantastic Gladstone Pottery Museum in my constituency at the Sutherland works of Hudson & Middleton in 1978. It is a good thing that coal firing is a long-lost practice. We should not over-romanticise the scenes of smoke billowing from hundreds of bottle kilns, which came at the human cost of debilitating industrial illnesses such as miner’s lung and potter’s rot, but neither should we look to close the industry down or leave it to wither on the vine, as the last Labour Government did, when massive household names, including Spode, Tams and Royal Doulton, were lost during their time in office.

The ceramics industry was born out of the innovation of Josiah Wedgwood and, while some processes from that time survive, the industry has continuously been one of innovation, with producers often competing to deliver even greater efficiencies. Just as the ceramics industry has had to adapt and adjust from the use of coal to the use of gas and electricity, it is currently adapting and innovating to the ongoing shift from gas. We should support it and other energy-intensive industries in doing so.

As a whole, the energy-intensive industries of steel, chemicals, paper, glass, cement and lime, industrial gases and ceramics contribute £38 billion annually to UK GDP, according to figures from the Energy Intensive Users Group. The group notes that the industries provide 200,000 jobs directly and support 800,000 indirectly. Those are not jobs that we should lose to international competitors with lower environmental standards than our own, lower ambitions for carbon reduction or higher interventionism.

There is an urgency to ensuring that energy-intensive industries survive in the UK, due to the real and present danger of the volatility in world energy markets. It would be a tragedy if short-term price pressures were allowed to undermine British industry just at a time when order books are recovering strongly from covid and firms are looking to take on more skilled staff. Just as there is a need to keep industrial jobs in Britain, we need to make sure that the existing orders for goods stay on the books of British firms.

Competitor countries are providing support and are ready to seize the market share. Worryingly, that includes competitors with less exposure to world energy markets and scant regard for enforcing environmental protections. In ceramics, it is worth being clear what that risk is.

The renaissance of the ceramics industry since 2010 is a great British success story, with the sector’s gross value added doubling in real terms from 2009 to 2019, according to the House of Commons Library. Ceramics is particularly important in the midlands economy. Some 60% of direct employment in the sector is within the midlands engine, and most is concentrated in the Staffordshire Potteries, focused on Stoke-on-Trent. The sector’s products encompass everything from crockery to electrical components, bricks to agricultural filters, sanitaryware to armoured plating, tiles to prosthetic joints, and pipes to works of fine art.

I have previously visited Ross Ceramics in Newstead in my constituency, which has expertise in the manufacture of complex geometry ceramic cores, which are used in the casting process of jet engine components for aerospace and other industrial uses. It is world-leading engineering. Far from being an industry of the past, modern manufacturing in advanced ceramic technologies is securing the future of skilled employment on good wages in and around north Staffordshire, but firms that usually face one third of their total production costs from energy are suddenly finding that two thirds of costs are from energy.

The industry has long militated against price shocks by buying energy in advance, but many were stung by the pandemic, finding that they had excess energy at a time of restricted demand for ceramic production, and taking a loss on selling back that energy. Things have now boomeranged completely. Firms that had held off from buying energy early for this winter—for fear of further lockdowns hitting demand—now face severe financial difficulties. Firms with full order books operating at 100% capacity have none the less had to contemplate shutting down early in December, out of fear that it will be cheaper to pay employees not to work than to incur the costs of the necessary amount of gas and electricity to fire products at 1,000°C or more.

I note that Portugal, a direct competitor for tile manufacturers, has recently introduced a 30% reduction in the network access tariff for the ceramics sector. That is just one example. Many countries around the world have taken such steps to support energy-intensive industries that have high costs. The industry’s electricity prices in the UK are some of the highest in Europe and are becoming uncompetitive. Additionally, although many of our manufacturers use electricity to generate heat, others who could switch to decarbonise are deterred from doing so by the high cost of commercial electricity on top of the capital investment that would be needed.

I am encouraged that the Government’s industrial decarbonisation strategy of April this year recognises the dangers and undesirability of simply offshoring production, or ceding it to competitors, as a route to getting the UK’s overall emissions down. Of course, the Government have devised the energy-intensive industries exemption scheme, which is great for businesses that qualify for it. Unfortunately, many of the industries in Staffordshire are excluded at the first hurdle from what the Department for Business, Energy and Industrial Strategy has dubbed the “sector-level test”. Specifically, that means businesses within NACE codes 23.41, 23.42 and 23.43, which cover household ceramics and ornaments, sanitaryware and insulators. Those codes need to join other NACE codes in the ceramics sector that, thankfully, are within the eligibility criteria—namely 23.20, which covers refractory products; 23.31, which is ceramic tiles and flags; 23.32, which is bricks and so on in baked clay; 23.44, which is other technical ceramic products; and 23.49, which is other ceramic products.

If we see the industrial decarbonisation strategy as a herald of the Government’s intention for a serious investigation of the longer-term measures needed to support industry as it transitions to lower-carbon energy, we need to look at how the parallel doubling of public research and development investment can benefit energy intensive industries. That will be necessary to improve efficiency, to encourage a move towards more electric firing and to develop hydrogen as the solution for the larger high-powered kilns where electricity is not an option.

There is a pressing need for an investment strategy for R&D in the energy transition for the midlands engine ceramics cluster, which is just as important as those in London and the Oxford-Cambridge arc who have for far too long received disproportionately high public R&D funding. Public R&D funding is particularly needed in a sector such as ceramics, given the high number of small and medium-sized enterprises—as much as 97% of the sector, according to the British Ceramic Confederation. Even firms that do pass the sector-level test for the energy-intensive industry scheme have difficulty passing the business-level test, due to the smaller-sized enterprises typical of the sector—even firms with worldwide brand recognition.

When certain qualification thresholds for energy-related assistance are set at tens of millions of pounds per work site, the ceramics industry loses out. A sum of £1 million per site would be more realistic. The use of NACE codes could, as has already been demonstrated, target lower thresholds at the ceramics industry for its particular characteristics and configuration.

I know that the Government recognise their responsibility to step up to the plate. Only this Monday, the Government announced £9.4 million to back a trailblazing hydrogen-storage project near Glasgow, helping to create high-skilled jobs. Last week, the Royal Navy issued a market exploration notice to seek hybridisation of the fleet, seeking private sector expertise for a public sector commission to reduce emissions by 20% to 40% by 2030.

The week before that, the RAF announced that it had secured a Guinness world record, no less, for the world’s first successful flight using only synthetic fuel, in partnership with Zero Petroleum Ltd. There was also confirmation this month of the highly significant £200 million Government investment in the Rolls-Royce small modular reactor—an exciting development that could create 40,000 jobs and secure many more in the supply chain, including at Goodwin International in Stoke-on-Trent, which leads the way in British precision engineering.

Sources of intense energy with low to zero carbon emissions are one clear way forward for heavy industries. Another is carbon capture and heat capture. The Minister will know that Stoke-on-Trent leads the way with a district heat network to use deep geothermal energy to heat our city and save thousands of tonnes of carbon dioxide annually, benefiting residents, education providers and businesses alike.

We can go further; I know that our local industries want to go further, but they need support to do so. Keele University, in our neighbouring borough of Newcastle-under-Lyme, has not only worked with EQUANS, part of the ENGIE Group, to generate and store energy from wind and solar on campus; it has also worked with Cadent Gas to demonstrate that hydrogen can be blended at up to 20% into the natural gas network, with no adverse effects for users. The consequent reduction in carbon emissions is obvious, but with hydrogen being six times as combustible as natural gas, public reassurance on safety will be paramount.

Fortunately, Keele and Cadent found in their year-long trial that it is safe to use a 20% hydrogen mix, saving 27 tonnes of CO₂ emissions in the process. Rolling that out to the domestic market nationally could remove from the atmosphere the equivalent emissions of taking 2.5 million cars off the road, all without changes to current gas heating and cooking appliances. For any new fuel source tested in private homes and campus buildings, as happened with the Keele-Cadent trial, there is a need to research the effects on ceramic and other industrial production, not least because glazes can respond very sensitively.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The hon. Member is making a good speech. Does he agree that it is high time the Government changed the regulations on hydrogen blending to allow that to happen in the gas network? At the moment, the gas management safety regulations do not allow any blending above 2%, which is contrary to the Government’s own hydrogen strategy.

[Jack Brereton]

I thank the hon. Gentleman for that point. I know that the Government are looking at that. Further trials at scale are being looked at—in Newcastle, I believe—to be undertaken by Cadent. I am sure that that will lead to further changes and to developments of hydrogen mix within the industry.

As I was saying, it is important to do that testing for energy-intensive industries, not least because glazes can respond sensitively to firing conditions, such as temperature and humidity. For that reason, I am glad to say that certain offshore production lines have looked to return to Stoke-on-Trent from locations with different climatic conditions that simply do not create the pristine quality of ceramic goods one gets from Stoke-on-Trent. I have been pleased to discuss with Cadent the importance of fully scientifically trialling and testing the impact of hydrogen mix, and I know that Cadent has been looking into this further with Lucideon, which leads the industry in ceramics research and material science.

I have argued for several years that we need an international research institute—a ceramic park—based in Stoke-on-Trent to institutionalise the myriad projects and advances, not least the work of Lucideon, to develop hydrogen kilns, which I am pleased to say recently secured UK Research and Innovation funding. What we need now is a dedicated research facility as a base for those projects for the industry, with Lucideon as the anchor. Glass Futures in St Helens is one example of what might be achievable by learning from another energy-intensive industry.

I am sure that the British Ceramic Confederation will have engaged with the Minister about its ambition for a similar world-leading centre of excellence for the world capital of ceramics. Indeed, as the BCC will point out, the sector has been working on recycling waste heat for decades, such as by pre-heating spray dryers with exhaust gases or heating spaces via heat exchangers on tunnel kilns. This is not a sector that wants to waste anything, and where it is economically viable, energy and carbon efficiency has been invested in for decades.

I should note that one such improvement comes from switching from intermittent to continuous kilns. One of the dangers of today’s very high energy prices is that kilns may need to be shut down completely and then restarted, which is far more complicated and dangerous than it sounds, with wide-ranging consequences. However, innovation must continue. That means supporting the development of new technologies, providing incentives for large-scale investment in proven technologies, and creating a regulatory framework that supports decarbonisation alongside the international competitiveness of UK industry. Some of the new technologies are almost there, but there are issues to overcome. For example, we have to overcome tar build-up or moisture content, depending on the fuel innovation; resist corrosion for acidic kiln exhaust gases; and avoid emissions of nitrogen oxides.

The need to produce and distribute hydrogen on a large scale must be fully researched, not least because hydrogen is also being touted as a fuel of the future for everything from JCBs to trains, including the freight trains that will bring the fine white china clay into the Potteries and will hopefully take more products out in the future. The Government want demand for hydrogen to be high, so they must ensure that the market conditions are right for a ready fuel supply. Interestingly, I note that as part of the Government’s industrial fuel-switching competition, BEIS funded a £3.2-million project led by the Mineral Products Association and Hanson UK to trial a mix of 100% net zero fuels, including hydrogen, meat and bone meal and glycerine, for commercial-scale cement in Lancashire for the very first time this September. Let us see more of those sorts of trials covering more of our energy-intensive industries.

In conclusion, I am happy that we have a Government who have enabled manufacturing to resurge in the UK, particularly the British ceramics sector. Modern and advanced manufacturing is a key provider of high-skilled, well-paid employment across Stoke-on-Trent—not just in ceramics, but emblematically so, as it is the world capital of that industry. We are on the cusp of very big advances in low-emission energy, and we need to seize the opportunities without taking our eye off the ball of the short-term dangers of price volatility in traditional fuel markets. Energy-intensive industries are spread right across the country, and are crucial to realising the higher-skill, higher-wage economy that will level up opportunities. I look forward to the Minister’s response detailing how the Government will meet the challenges ahead.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on bringing forward the debate. At the outset, he rightly highlighted the energy supplier crisis. I am sure he agrees that the Government need to do more about this crisis. He highlighted coal and the bygone days of coal, and certainly that should be a reminder to Government in terms of the lack of support that was given when the coalmines were shut down. It still has a legacy, and it is a legacy that lives on in my constituency. It is something that cannot be repeated, and that is why we need a just transition commission for the UK Government, like the Scottish Government have. We need that support as we move from a reliance on fossil fuel towards renewable energy.

The hon. Member for Stoke-on-Trent South is a vocal advocate for the ceramics industry, and he should be commended for that. I hope the ceramics industry has a strong future because we need to retain all the manufacturing that we can. Support like that is welcome, and hopefully the Government will listen. The key thing is that there needs to be support for decarbonisation. Other Members spoke about tariff reductions and reducing energy costs. Energy is too high at the moment, but the Government really need to be helping industry decarbonise, and proper investment and support from Government is required. That should put some of these industries ahead compared to those elsewhere. That is where, for me, the investment needs to come from Government to help them decarbonise.

We heard from the hon. Member for Newport East (Jessica Morden), who is clearly a big advocate for the steel industry. I was pleased to visit the works in her constituency, and I repeat: investment is needed to help the steel industry decarbonise. That is the future. We talk about clean green steel, and that is where Government investment is needed.

The hon. Member for Bridgend (Dr Wallis), who is not in his place, also spoke about the steel industry and highlighted the fact that there is not enough money in the UK Government’s hydrogen strategy by comparison with members of the EU. I agree with him that more needs to come from the UK Government in terms of the hydrogen strategy.

We heard from the hon. Member for Aberavon (Stephen Kinnock), who has also always been a strong supporter of the steel industry and a strong advocate in this House. His key message to the UK Government seemed to be that it is not a sunset industry, and I agree. In fact, that message was so strong that he said it twice—in an intervention and in his speech—and I agree: the UK Government need to support the steel industry.

The hon. Member for Scunthorpe (Holly Mumby-Croft) is another advocate for the steel industry—I am kind of repeating myself here, but investment in clean green steel and decarbonisation is important. I commend her for being the only one who got something out of the Prime Minister’s speech on Monday other than Peppa Pig, so congratulations on that.

We heard from the hon. Member for Strangford (Jim Shannon), who always turns up at these debates and always makes a useful contribution. Again, he highlighted the importance of manufacturing and Government support for decarbonisation.

What I took out of the speech by the hon. Member for Bolton West (Chris Green) was that nuclear energy is indeed more expensive. He is an advocate of nuclear energy, but it is more expensive. We are talking about taking away tariffs for renewable energy, but nobody is talking about taking away tariffs for nuclear energy or addressing the eye-watering costs.

[Chris Green]

Energy costs are clearly important, but reliability and stability of supply is also a key feature, which nuclear power would provide. Does the hon. Gentleman think that that is an important feature that we should have?

[Alan Brown]

That inflexible reliability that comes from nuclear energy means that, while we talk about the wind not blowing, the amount of base-load it pumps on to the grid means having to curtail other, renewable energy sources, because nuclear is so inflexible. So no, I do not agree. That is the problem: nuclear is the wrong energy to mix with renewables, and it really is not the future.

I was talking about tariffs and the cost of nuclear energy. There is £1.7 billion in the Red Book just to develop Sizewell C, before we get to the final investment decision. Think what that £1.7 billion could do for the steel industry, the ceramics industry or decarbonisation—and that is only to get to the final investment decision, before the Government then rush to spend £20 billion on the capital investment for Sizewell C. Then that will be added to our electricity bills under the RAB—regulated asset base—model, for the 10 to 15 years of construction of the nuclear power station, and then a 60-year contract thereafter. So do not let us talk about taking away levies for renewable energy; let us look at what nuclear energy will cost us. I urge the Government to spend that money more wisely, rather than on nuclear energy.

Finally, the hon. Member for Stoke-on-Trent North (Jonathan Gullis), who is obviously another advocate for the ceramics industry, made an interesting point about the lack of ceramics from Stoke-on-Trent in this place. I suggest to him that he make an investment: buy a lot of mugs and pottery and donate it to this place. That will help the industry and promote it here.

I am coming to the end of my remarks, and I do not want to be too flippant, because this is a very important debate. We need to see support for ceramics and manufacturing, and we need to look at how we decarbonise. Carbon capture has been mentioned. I urge the Minister to reconsider the disgraceful decision to make the Scottish carbon capture cluster a reserved cluster. That should have been given the go-ahead and it should have been one of the track 1 clusters. It incorporates carbon capture, hydrogen production, which has been mentioned as part of the future of decarbonisation, and direct carbon capture from air. It is a really important, innovative cluster and it should have been given the go-ahead. Why was it not selected? I want the Minister to answer that. Equally, I would like to hear what proper investment will be made available to help and support the manufacturing sector to decarbonise.

--- Later in debate ---

[Lee Rowley]

I am grateful for the hon. Gentleman’s intervention. He anticipates some of my speech. To pick that up now, there is an incredible amount of work going on across the four nations of the United Kingdom. I am looking forward to coming to Northern Ireland as soon as I am able. We are currently trying to organise a visit, and I am keen to talk to him further about the example that he highlights.

[Alan Brown]

The Minister mentioned the chemical industry. Does he understand that INEOS at Grangemouth is part of the Scottish carbon capture cluster, and at the moment INEOS is one of the biggest emitters of carbon dioxide in Scotland? The Scottish CCS would obviously alleviate that problem. Will the Minister look into that, promote the Scottish carbon capture cluster and take it away from being reserved, as it is classed at the moment?

[Lee Rowley]

I am grateful for the hon. Gentleman’s intervention. I do acknowledge the challenge of the Grangemouth plant and the excellent work that goes on there. I have spoken to INEOS on several occasions since taking up my post. He and his colleagues have contributed to the carbon capture and storage debate actively and noisily over the past few weeks. He knows that an initial two sites have been announced and the intention is to have four by 2030. The Minister of State, Department for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) has articulated that we want to continue to work with the Scottish cluster to see what is possible there.

I want to touch on a number of points that individual Members made. My hon. Friend the Member for Stoke-on-Trent South rightly highlighted—along with many Members—the challenge of energy prices. We acknowledge and accept there are challenges with energy prices. My hon. Friend the Member for Scunthorpe highlighted price spikes noted in just the past few days. From conversations I have had, this debate and wider discussion within industry, we know that there are challenges. I thank colleagues, unions, industries and trade bodies for articulating that in recent months.

There is significant price volatility, which it is important to acknowledge. Prices have spiked and started to float down over recent weeks. I hope all Members would accept that in the past two years alone we have had very low prices and very high prices. We are at a particular place in the market at the moment.

Bulb Energy: Administration

Alan Brown Excerpts

Wednesday 24th November 2021 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

In 2018, there were more than 70 companies in the energy retail sector, but now there are fewer than 30—a reduction of 60%. Bulb is the 23rd company to go bust since August, a statistic that, somehow, the Secretary of State seemed to be happy about when he was at the Dispatch Box earlier. When are this Government going to get a grip on what is now a cost of living crisis and an energy supply crisis? As energy bills soar, the Treasury gets extra VAT, extra income on fuel duty, and, on top of the £350 billion-worth of oil and gas revenues from Scotland that it gets to squander, an extra £1.1 billion more that it predicted this year alone, because gas prices have increased, so when will it reinvest some of that money to support consumers and the sector?

Bulb was the seventh largest company, with 1.7 million customers. What is the plan for coming out of special administration, because the Secretary of State has still not told us that? When EDF, Scottish Power, Octopus Energy, Utilita and Good Energy all say that they cannot afford new customers, what will happen with these customers? Can the energy companies actually refuse to take new customers, and what discussions is the Secretary of State having on that?

The Secretary of State says that the energy cap is here to stay, but what will be the effect on consumers in fuel poverty when the cap invariably goes up by £400 to £600 in April? It is a disgrace. The Government have allocated £1.7 billion of taxpayers’ money to develop Sizewell C to final investment stage. Why not invest that money in energy efficiency and renewable energy and do stuff that actually brings down energy bills, rather than committing consumers to a 10 to 15-year contract for nuclear and six years on top of that? When will they get a grip on energy policy as a whole?

[Kwasi Kwarteng]

This is where the hon. Gentleman and I disagree. We are firmly committed to nuclear power; he is against it. We can do two things: we can commit to renewables, as we are doing with our 10-point plan, and commit to 40 GW of offshore wind. I hope that he recognises that we are committed to tidal for the first time in many decades—that is something that he should appreciate. He should also remember that we have the warm home discount and lots of mitigations protecting the most vulnerable customers across the winter and in the next few months.

Nuclear Energy (Financing) Bill (Fifth sitting)

Alan Brown Excerpts

Committee stage
Tuesday 23rd November 2021 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Fovargue. Like the Minister, I would like to spend a moment announcing, as it were, this part of the Bill, which I hope we can get through in an orderly and suitably speedy fashion. It is however important to share an understanding of what we think this part is about. As the Minister said, it concerns the setting-up of revenue collection contracts; the setting-up of a counterparty to hold the revenue collected from suppliers to underpin action by the nuclear company in terms of construction; and, importantly, as he said—he seemed a little concerned when I mentioned this in our previous sitting—revenue collection and distribution during both the construction and production phases of a nuclear project.

My understanding is that during the production phase, the nature of the revenue collection changes. During the construction phase, within the overall allowable costs architecture, the nuclear company is likely to absorb whatever comes its way from the counterparty for the purposes of underpinning the construction costs of the nuclear plant. Obviously, there are debates to be held on that and further regulations to be put in place concerning how the revenue stream for a nuclear company is carried out and the requirements of the construction at various phases.

We have debated to some extent the instance whereby the allowable costs ceiling is breached because of rising costs, particularly during production; whether the regulator would have the opportunity to revisit the allowable costs ceiling; and what effect that would have on the run through the regulated asset base process to customer bills as a result of those recalculations. However, there are issues with what revenue stream goes into the nuclear company, and at what stage during construction, but that is within the overall costs ceiling, or should be, in the first instance.

During the production phase of a nuclear plant, the relationship between collection, distribution and re-disbursement becomes a little more complicated. I would be obliged if the Minister could shed a little light on some of the things that happen during the production process, which are still slightly unclear. That is important because, in the production process, the receipt of funding under the RAB process becomes a comparative issue. The company is making money and producing electricity, and one would expect that, as a result of the RAB model, the money that is being made by the company would sit within the parameters of what has been agreed for the regulated rate of return under the RAB model. If the company is making more money from its production of electricity than is allowed within the overall model’s parameters, that money starts coming back to the counterparty or, at least indirectly, through to customers.

Conversely, if the company is making less money from its production than is allowed within the RAB model for production purposes, money continues to come in under the allowable costs ceiling. The best explanation is given on page 21 of the consultation document on a RAB model for nuclear, which suggests:

“Suppliers could pass the cost of the payment obligation onto their consumers, as they do with other regulated costs and could likewise reimburse their consumers (as happens under a CfD) in periods where suppliers receive payments from the project company (e.g. when the Allowed Revenue is lower than the project company’s revenue from power sales). The design process would need to consider how these charges could be made in more detail, in consultation with suppliers and consumer representatives.”

That is essentially the model during the production phase: it is potentially a two-way process.

That issue reflects, at least to some extent, the amendments that we wish to discuss this afternoon —an understanding of how the money goes into the counterparty, what the counterparty does with the money, what the counterparty does when the money is held, and what the counterparty does if that money may not be needed, or money has been paid back into it by the nuclear company during the production phase. Consideration of how that happens, where that money goes and what sort of requirements one should place on that process are at the heart of some of our amendments.

I thought it important to check whether we have a shared understanding with the Minister of how the process works. Assuming that we do, we can discuss the amendments on the basis of that shared understanding of what this part of the Bill sets out to do. That is essentially a contribution to the clause stand part debate, but I hope that it clarifies how we will proceed with part 2 as a whole, and that it will be helpful to the Committee.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship again, Ms Fovargue. It was interesting that the hon. Member for Southampton, Test spoke about a shared understanding. I wish I had one; I do not think that the Bill is good enough to have any shared understanding of what it is about. Part 1 is clearly all about the definition of designating a nuclear company, and then a blank cheque in terms of defining costs. It seems to me that part 2 is all about how the blank cheque moneys are recouped in revenue collection.

I have one point to put to the Minister. Explanatory note 119 states:

“The terms of a revenue collection contract will be bilaterally negotiated between the Secretary of State and an eligible nuclear company to be designated under Part 1.”

Would he enlighten me on what expertise the Secretary of State has in negotiating a revenue collection contract for a new nuclear power station, how that will be undertaken in a transparent manner, and what options are available for scrutiny of that?

[Greg Hands]

I thank both hon. Gentlemen for their contributions. I will try to be as helpful as I can. Rather than setting any hares running, it is essentially a very similar process to how contracts for difference work under the Energy Act 2013. There is nothing essentially different here, other than the fact that it is about nuclear power generation and has the RAB model. What we are talking about in this part of the Bill is essentially the same process that is being used for contracts for difference under the 2013 Act. I am always slightly reluctant when an Opposition Member asks whether we have a shared understanding. It strikes me as often being slightly dangerous to give a blank cheque on that. My understanding of the process, and I think the Opposition would agree, is that it is essentially the same process that we have been using for contracts for difference through the collection company.

--- Later in debate ---

[Alan Brown]

The other point that I was making was about transparency. What options are available for the likes of me, an opposition MP, to scrutinise and challenge what is being signed off as a good deal?

[Greg Hands]

The regulations will be subject to the affirmative procedure, which, as the hon. Gentleman knows, will mean a debate in a Committee Room like this, and the potential to take the legislation to the Floor of the House and have a Division of the House of Commons. In that sense, the scrutiny available to Members of Parliament—if that is what he is referring to—is considerable. That is why the regulations will be subject to the affirmative procedure. I think it is reasonable for Parliament to see the regulations when they are made, although we do not envisage that further technical changes to those regulations will be subject to the affirmative procedure. As laid out in later clauses, those changes will be subject to negative procedure. I hope that the Committee will agree to clause stand part.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Designation of a revenue collection counterparty

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Dr Whitehead]

I beg to move amendment 15, in clause 19, page 16, line 11, at end insert—

“(4A) Revenue regulations may make provision to prevent electricity suppliers from recovering the costs of paying a revenue collection counterparty from customers who qualify for the Warm Home Discount Scheme.”

This amendment would mean that electricity bill payers who qualify for the Warm Homes Discount scheme would not be liable for levies on their bills that pay into the RAB revenue collection fund.

Amendment 15 relates to the latter end of clause 19. Hon. Members will see that the clause suggests that revenue regulations may make provision for electricity suppliers to pay a revenue collection counterparty for a number of purposes, including

“to hold sums in reserve; to cover losses in the case of insolvency or default of an electricity supplier.”

According to our shared understanding of how the RAB would work, the regulations would require electricity suppliers to pay into a revenue collection counterparty for those purposes. Thereby, as the RAB consultation makes clear, if that company has been required to pay into the revenue collection counterparty, the company could make restitution for the money it had paid into the revenue collection counterparty by adjusting its bills to reflect that fact.

We are in exactly the same territory as contracts for difference, where there is a levy on customers and the supply company recovers the money that it has paid into the levy fund by passing that levy on to customers in their bills. We have a problem with placing additional levies on already sky-high bills, but that is how this arrangement will work. We question how that process will work. As hon. Members will also know, we currently have within our electricity supply arrangements a warm home discount scheme, which provides for a number of bill payers to get £140 off their bills each year if they qualify. There are some issues about the size of the company relating to that obligation but, in principle, pretty much all customers on a low income or a guaranteed credit element of pension credit will, or should, receive that warm home discount.

The energy company has to supply that discount to its customers. It may socialise the costs through its overall bills as a sort of secondary levy, but it gives a proportion of electricity customers a permanent reduction in their bills due to their particular circumstances, such as—as the discount suggests—particular fuel poverty-type issues in heating their homes and meeting their fuel bills.

The effect of a levy—in this instance, quite a substantial levy—to customers under these circumstances, particularly during the construction phase of a regulated asset base operation, would be to put, say, an extra £10 on the bill of someone who is already receiving a warm home discount, so that their fuel bills go up. A number of people would be placed in fuel poverty as a result of that difference, and therefore, ironically, it is quite possible that more people would be eligible for the warm home discount as a result.

When and if this levy comes on stream, we do not think that the process should include the supply company passing on that increase to those people who are already paying their bills but have a warm home discount. Those companies should not be able to recover the cost of payment into the revenue collection counterparty by passing it to those people receiving warm home discount. This would mean a socialisation of that cost to other bill payers, but the warm home discount would nevertheless remain at the right proportion of the bill, not diminish in value because that person was required to pay that levy to the energy company so that it could recoup its costs related to the revenue collection counterparty.

This is quite a simple amendment to try to return that warm home discount to the position that it would have been in before that levy was introduced. I would suggest that it is in line with what the Government intended for that warm home discount in the first place. Although other customers may pay a little more on their bills, it would maintain the relative billing position for the poorest and most vulnerable customers, including those in receipt of a guaranteed credit element of pension credit, helping those who have considerable difficulties in paying bills and are perhaps in fuel poverty as a result. We would like this power to ensure that energy companies do not incorporate those customers into the arrangements for collection and distribution of money coming into the revenue collection counterparty.

[Alan Brown]

I will just say a couple of things. I was listening to the arguments and if the amendment goes to a vote, I will be happy to support it and do anything I can to try to support the most vulnerable and not create any more fuel poverty. Listening to the arguments, they seem to confirm that the concept as a whole is a costly burden on consumers. As the shadow Minister said, it creates a levy that will put more people into fuel poverty. The levy will not just last for a few years; it starts with a construction period of 10 to 15 years in all likelihood and then a 60-year contract. Rather than tinkering at the edges, protecting some people and pushing other people into fuel poverty, the heart of the matter is that this is a costly white elephant exercise. That said, I would still support the amendment for what it aims to do.

[Greg Hands]

As has been stated, amendment 15 looks to make provision to exclude from the RAB charge those consumers who are eligible for the warm home discount scheme. I understand the good motive and the effect of what the hon. Member for Southampton, Test is proposing. For background, the warm home discount is a Government initiative to take £140 from the energy bills of consumers who receive the guarantee credit element of pension credit, or who are on a low income and receive certain means-tested benefits. We have already proposed increasing the value of the rebate to £150 per annum in any case.

As we have discussed, if a new project is funded through the RAB model, suppliers will be obliged to pay towards it. It is expected that the suppliers will pass these costs on to consumers. While I do not intend to go back over the arguments in favour of the RAB model, we believe the arrangement will facilitate private investment while also reducing the costs of delivering new nuclear projects. I understand the Opposition’s desire to protect consumers on the lowest incomes, which is what the Government are already doing. The Opposition are proposing to increase that element of protection. Of course, these consumers can spend a disproportionate amount of their income on energy costs. As we all know, energy bills are regressive.

However, a large-scale project funded under the scheme will add, at most, a few pounds a year to typical household energy bills during the early stages of construction and less than £1 per month on average during the full construction phase of the project. The Government have taken a number of actions to protect low-income households from energy costs, as laid out in our updated fuel poverty strategy. That includes not only the warm home discount but cold weather payments and the household support fund.

[Alan Brown]

Isn’t the problem with some of the schemes aimed at protecting the most vulnerable that they are paid for by other consumers? By default, the schemes are always creating another cohort to move into fuel poverty, because actual schemes to help people are paid for by other consumers.

--- Later in debate ---

[Dr Whitehead]

The hon. Member is absolutely right. I am sure that we could do some back-of-a-fag-packet calculations about what we are going to need from the warm home discount, given the rises that are likely to occur under the fuel price cap in the coming spring and over the next six months, but it will certainly be rather more than £10.

[Alan Brown]

Does the hon. Gentleman agree that another odd aspect of the Minister’s argument is that raising the warm home discount to £150—an extra £10—is really significant and helps people, but an extra £10 on their bill is okay and something we do not need to worry about? The two cannot both be right.

[Dr Whitehead]

The hon. Member makes a very interesting point, which I was rather slower than him to get to. He is quite right: if this is going to be £1 a month during the construction phase, therefore adding only £10 to £12 to the bill per year, it is contradictory to say that one is insignificant while the other is very significant.

There is also the fact that £12 a year, or £10 a year or whatever, will affect different people’s bills in different ways, because the bill for a large family, or someone with a large house, will be higher in total, and the £12 nuclear levy will be a smaller proportion of it than for someone who is eligible for the warm home discount—perhaps a single pensioner living in a small house, with a lower bill but nevertheless without the wherewithal to pay it. That £12 would be a higher imposition on their bill than it would on other people’s bills.

I think we all agree that the warm home discount is an important actor in combating fuel poverty and ensuring that the most vulnerable people in our society as far as energy costs are concerned do not have it even worse than they do at the moment and are given some assistance with their bills. We all ought to be very mindful of that when we put levies on people’s bills. What the Minister says about who we do and do not put into fuel poverty when we change levies on fuel bills is true, but that is an argument for better indexation, not for continuing with the warm home discount in the way that we are.

I am sorry to say that we will have to divide the Committee, because we think that this is an important principle that ought to be upheld. We do not want to the effects of the levies, which of course may be much more than £12, depending on how the allowable costs ceiling goes, to directly affect the warm home discount, which we think is a very important part of the energy landscape and the battle to combat fuel poverty. We would like it to be on the record that we did not simply allow this to be brushed under the carpet, and therefore wish to vote on the amendment.

Question put, That the amendment be made.

Division 3

Ayes: 6

---

Labour: 4
Scottish National Party: 2

Noes: 7

---

Conservative: 7

[Alan Brown]

I beg to move amendment 20, in clause 19, page 16, line 25, at end insert—

“(6B) Prior to making provisions by virtual of subsection (4), the Secretary of State must consider—

(a) the number of customers the supplier has;

(b) the level of bad debt from customers;

(c) the liabilities of the electricity supplier including any renewables obligations due and what levels of collateral will risk the supplier’s operations as a going concern;

(d) the impact on consumer bills of upfront payments to the revenue collection company; and

(e) the value and extent of forward hedging the supplier has in the market.”

This amendment would require the Secretary of State to consider the matters listed before requiring electricity suppliers to provide financial collateral to a revenue collection counterparty.

The other day, the Minister challenged us in the SNP to table amendments, so in that spirit of co-operation—given that I am fundamentally against the Bill but have still tabled amendments to improve it—I look forward to him accepting them.

Clause 19 further confirms the Government’s desperation to provide unlimited guarantees and support mechanisms to get nuclear projects—as we know, that means Sizewell C —off the ground. For me, the clause is further proof of how ill-thought through the Bill is, and how loosely many clauses have been drafted. This clause will be blindly accepted by Government MPs without further thought or debate apart from some challenge from this side of the Committee.

Yesterday, energy supplier Bulb Energy, which has 1.7 million customers, effectively went into administration. Given that 23 energy suppliers have gone bust since August of this year, it beggars belief that the UK Government have introduced clause 19, which may require energy suppliers to pay money up front. Cash flow insolvency is a major issue in the energy supply market at the moment, but the Bill could place further demands on suppliers.

The clause will allow the revenue collection counterparty to set the form and terms of the financial collateral that it demands from electricity suppliers. There is no guidance or controls; there is simply the concept of a nuclear project being so important that revenues must be guaranteed for the nuclear company. Subsection (2) is the start of what I have no doubt will be an accountant’s field day. Subsection (2)(a) is a typical catch-all, as it states that revenue may be collected under

“such…descriptions of its costs as the Secretary of State considers appropriate”.

As an aside, will the Minister tell us whether it is really the Secretary of State who will make those assessments, as the clause states, or will it actually be the regulator?

Subsection (2)(b) and subsection (4) refer to holding sums in reserve and to suppliers providing financial collateral. The kicker with the financial collateral is that subsections (6)(a) and (b) state that the revenue collection counterparty may

“determine the form and terms of any financial collateral”

and may “calculate” the payments that are due. There seems to be no independent scrutiny and no way to challenge those demands. Then, for good measure, subsections (8) and (9) provide for the revenue collection counterparty to make demands on interest, debt collection and further add-ons. That certainly seems very balanced towards the assessments that the revenue collection counterparty makes.

Paragraphs (c) and (d) of subsection (8) mention “references to arbitration” and “appeals”, but what will those processes and procedures look like? Yet again, there is too little detail. Without suitable protections and considerations, the clause and its consequences could damage well-run energy suppliers and those that are struggling to get by, and that is if they get through the ongoing crisis.

Why should energy suppliers pay up front to cover RAB payments? It might suit the Government to have clauses to protect funding for new nuclear, but that could lead to massive cash flow issues for the electricity supply companies that I mentioned earlier. As they would be paying in advance of receiving income from customers, they would need to manage that credit issue by servicing debt costs. Those costs would then be passed on to consumers, further raising the cost of our bills.

I have already stated my opposition to the Bill and to a new nuclear power station, but from my perspective as a consumer, the Government want me to tie into the construction costs payments for 10 to 15 years in a 60-year RAB contract, which will go beyond my lifetime. Then, just to be on the safe side, my electricity company, to which I pay money, will possibly have to provide money up front, which will cost me, as a consumer, more money. That is a ridiculous concept; it just does not make sense.

Although I am against the principle and poor drafting of the Bill, it is important that we debate clause 19, which is why I have tabled the amendment. I hope that paragraph (a) of the amendment is self-explanatory: any collateral or money that is asked for would need to be pro rata based on the energy supplier’s ability to pay, which would be based on its customer base. In paragraph (b), I highlight that bad debt needs to be considered, because some companies have much higher numbers of vulnerable customers, which means that they are likely to carry more bad debt. That dynamic could change further with the collapse of so many energy supply companies.

--- Later in debate ---

[Dr Whitehead]

I am very sympathetic to the amendment, although I do not think that it will do exactly what the hon. Member for Kilmarnock and Loudoun would like. It would be helpful to have some clarification from the Minister as to exactly how the payments will be organised by the revenue counterparty body.

Although those payments are up front, in that the electricity supply companies would be required to make a payment on behalf of the customer into the counterparty before the power station had been built, that does not mean that the payment would all be up front. It means that the payment would be staggered over a period, which might be the whole of the production period of the nuclear power plant, according to what was required at particular times of the construction, so that the counterparty had sufficient funds to meet those calls from its revenues at any one time, but did not have a large surplus against calls. The counterparty would therefore have to modulate and regulate its calls on the energy supply companies as the process of construction continued.

Presumably, then, a company’s health would not be set against an overall up-front payment in that instance. All companies would be required to pay into that levy arrangement regularly, so there would not be a greater demand on one company than another or a large amount of money demanded in one go. That is my understanding of how the system would work, but I appreciate what the hon. Member for Kilmarnock and Loudoun said about the 23 companies that have gone bust recently. As the energy market stabilises, I think there will not be many companies to take a levy from in the first place. Those companies that are able to pay a levy will by and large be those that were in sufficiently robust health in the first instance to weather the storm of high gas prices and high energy costs—there are a number of other reasons why companies may or may not be reasonably robust but that is a debate for another day.

Overall, I do not think that the amendment does exactly what it is intended to do.

[Alan Brown]

I think I understand the point that the hon. Gentleman is making, but subsection (4) says:

“Revenue regulations may make provision to require electricity suppliers to provide financial collateral to a revenue collection counterparty (whether in cash, securities or any other form).”

I still read that as meaning that cash could be asked for to be paid up front.

[Dr Whitehead]

Indeed, and that is why we need better clarification from the Minister. Is there a distinction between cash up front in general—that is, one pays before getting any result from a nuclear plant that is being built—or cash up front in the sense of taking all the stuff in the agreed revenue allowance? Would that be taken either mostly up front, all in one go, or at level that an energy company would find unaffordable during particular elements of the process? There is still some uncertainty about exactly how that process would work.

I have a lot of sympathy with the argument of the hon. Member for Kilmarnock and Loudon. If the revenue counterparty decided that it was going to take a very large amount of levy early in the process to have lots of money in the bank and to be able to cover any eventualities connected with the construction process, that would be a pretty unreasonable imposition on energy companies, particularly in the present circumstances. However, I think there are least implied elements of regulation in the Bill that would prevent that from easily happening, and I would be interested to hear whether the Minister thinks that is the case. If he does, where in the Bill is that, and which arrangements would be preferrable in terms of the revenue collection counterparty operating on a more equitable basis as the construction period progressed?

[Greg Hands]

I thank the hon. Members for Kilmarnock and Loudoun and for Aberdeen North for tabling their amendment. Of course the Government welcome all Opposition parties tabling amendments; that does not necessarily mean that we will agree with the aforementioned amendments, but it is a useful process to test and probe the Bill, and I think our publics would like to see a process whereby all Opposition parties tabled amendments to test the Government’s proposition. I fully buy into that process, but I do not happen to agree with this amendment.

The amendment addresses how the interests of suppliers and their customers should be considered when making provision in regulations for the supplier to pay the revenue collection counterparty. It would also require the Secretary of State to have regard to the other liabilities of electricity suppliers—the hon. Member for Kilmarnock and Loudoun talked with topicality about that—as well as to the impact that collateral requirements will have on a supplier’s operation. I thank the hon. Gentleman and the hon. Lady for ensuring that the Government consider the impact on suppliers and consumers when establishing the RAB revenue stream.

I reassure Members that the Government intend to act in a way that effectively manages the payment obligations on suppliers and, through them, consumers. We do not believe, however, that the amendment is the best way of ensuring that. First, the provision of collateral by electricity suppliers is a form of security that has been administered very successfully in the contract for difference regime. As I said on clause 15, the regime seeks to replicate that tried-and-tested regime, which has functioned effectively to bring investment into new energy projects for the last eight years.

We have been clear that in designing the RAB revenue stream we are seeking to replicate many of the provisions of contracts for difference to help to provide a familiar and workable framework for suppliers, but it is not just about supporting investment. We will protect suppliers from paying unreasonable amounts of collateral and ensure that overpayment of collateral is returned to suppliers.

[Alan Brown]

What is there in the Bill that protects suppliers from having to pay too much collateral?

[Greg Hands]

The protection in the Bill is through the regulation of the process and the oversight, for example by the authority, in this case Ofgem, which will ensure that any amounts paid to the generation company are reasonable. The hon. Gentleman is right to ask who will set the parameters, the Secretary of State or the regulator. The Secretary of State sets the initial licence conditions; however, it is the authority, in this case Ofgem or its equivalent, that will ensure that any amounts are reasonable and in the interests of existing and future consumers. That is very much in the Bill.

[Greg Hands]

That is a reasonable request. I am saying that this is a tried-and-tested process that has been there throughout the contract for difference regime. Paying in collateral, and the way that collateral operates, is something that has been around for decades, but if it is helpful I am happy to write to the hon. Lady and copy in members of the Committee to explain in more detail how it works in the CfD regime and the Energy Act 2013. I should also make it clear that the Bill provides a framework for the RAB revenue stream and requires that the detail of suppliers’ payment obligations is set out in the secondary regulations that will need approval from both Houses. Ahead of that, and as required by the Bill, we will publish and consult on the draft regulations. We will include British energy suppliers within the consultation, so they will have the opportunity to feed in any views from an energy supplier perspective.

In the context of protecting our most vulnerable energy consumers, which was the subject of the previous amendment, I refer Members to my comments in that debate setting out the numerous actions that the Government are taking to help low-income households, including the warm home discount, cold weather payments and the household support fund. I hope that I have assured the hon. Member for Kilmarnock and Loudoun that the design of the RAB revenue stream will ensure that the interests of consumers are protected and that mechanisms are in place to protect suppliers from disproportionate requirements that would affect their ability to operate. As such, I believe that the amendment is unnecessary, and I hope that he will withdraw it.

[Alan Brown]

It was no surprise that the Minister did not accept the amendment. It will be no surprise to him that he has not completely satisfied me either with his explanation. We keep hearing the argument that we are trying to replicate the CfD model, which is interesting considering that we are introducing the RAB model. It was said that CfD would not work for nuclear, but now we are trying to replicate certain things. He said that there will be consultation and secondary legislation, but there are no guarantees on what the Government will do or how they will respond to any consultation. Secondary legislation can easily get steamrollered through this place anyway. Given that, I would prefer to press my amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Greg Hands]

As the hon. Members for Southampton, Test and for Greenwich and Woolwich laid out, amendment 17 addresses the situation in which funds held by the counterparty may be paid into the Consolidated Fund, which of course is the Government’s general bank account at the Bank of England. Currently, the legislation allows the revenue regulations to provide for sums to be paid into the Consolidated Fund. The intention of the amendment is to narrow the scope of that so that the regulations can provide for sums to be paid into the Consolidated Fund only where there is no alternative.

I thank the hon. Members for the amendment, which they explained well. It certainly echoes my sentiment that consumer funds should not generally go into Government accounts. I reassure Members that we envisage the power to have limited but important uses. For example, it could be used to ensure that the counter- party repays a loan given by the Government—by the taxpayer—to respond to an emergency. That is not a hypothetical situation. We saw the importance of it quite recently in the course of covid, when the Government did indeed have to provide a loan to the counterparty for the contract for difference regime: to the Low Carbon Contracts Company.

The taxpayer should be able to be repaid that loan, but the amendment provides that sums cannot be paid into the Consolidated Fund where there is an alternative. I could see a number of people making an argument that different things that could be done with that money would provide alternatives to what is being envisaged: in this case, repaying the taxpayer. If passed, the amendment would unnecessarily narrow the scope of the power in a way that would limit its use. I hope that my explanation has shown Members the importance of the power, which is in my view unlikely to be used. However, I have given a real example from the last couple of years of where exactly such a situation arose.

[Alan Brown]

The Minister has given the example of an emergency loan, but surely the regulation is all about

“apportioning sums…received by a revenue collection counterparty from electricity suppliers under provision made by virtue of section 19”.

Clause 19 is about collecting money from electricity suppliers; ergo, the example of a loan does not equate to what this is about.

[Greg Hands]

I disagree with the hon. Gentleman. My understanding is that the loan would not be repayable if an alternative were there. The ambiguity of an alternative would unnecessarily narrow the scope of the power, though I appreciate where he is coming from.

[Alan Brown]

I ask the Minister to read clause 21(1)(a), which contains the reference I quoted to clause 19, which I do not think covers the emergency loan situation.

[Greg Hands]

We will just have to agree to disagree. I think the amendment unnecessarily narrows the scope of the power in a way that we would not wish to see in terms of protection of the taxpayer. I therefore ask the hon. Member for Southampton, Test to withdraw it.

Nuclear Energy (Financing) Bill (Third sitting)

Alan Brown Excerpts

Committee stage
Thursday 18th November 2021 Public Bill Committees

[Matthew Pennycook]

It is a pleasure to serve with you in the Chair, Ms Fovargue. The amendments you have grouped stand in my name and that of my hon. Friend the Member for Southampton, Test.

Taken together, the purpose of amendments 1 and 2 is to ensure that in enabling nuclear companies to benefit from the RAB model and for the Government thereby to bring a large-scale nuclear project to a final investment decision by the end of this Parliament, as they are committed to do, the Bill nevertheless makes it clear what kind of companies it would be inappropriate for the Secretary of State to designate for that purpose. In moving the amendment, my assumption—Government Members may correct me if I am mistaken—is that the Committee as a whole would accept that it would be inadvisable to allow some nuclear companies to own and/or operate a nuclear reactor on British soil. That is because civil nuclear power is, without question, critical national infrastructure, the compromise of which would have real implications for national security, given that any company owning and/or controlling such infrastructure would have direct access to the national grid.

Conservative Members, or indeed the Minister when he responds, may argue that the amendments are unnecessary, because no Secretary of State would choose to designate a nuclear company to benefit from the RAB model that posed any threat to national security. Yet it is precisely because previous Secretaries of State have been content to allow companies that the Opposition would argue should never have been given the opportunity to own and operate UK nuclear plants that we believe we need such additional safeguards in the Bill.

Put simply, we want to ensure that the legislation is amended so that this Government, or any future Government who might wish to use the RAB model for new nuclear, cannot make the kind of error that was without doubt made in recent years. Namely, a company owned and directly controlled by a foreign state—a state that the integrated review is clear poses a systemic challenge to our security, prosperity and values—was given the opportunity to own and access critical national infrastructure.

I will touch on the way in which the Government might, if they were minded to accept our amendments or table modified versions of their own on Report, differentiate companies owned and directly controlled by a foreign power and those in which a state merely has a majority financial stake. Before that, I will examine the error that I have mentioned and the lessons we might draw from it to improve the Bill.

On Second Reading, we made it clear that our strong view is that although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C, as the last potential nuclear project that could conceivably begin to generate by the end of the decade.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I note that the hon. Gentleman was choosing his words carefully. We all know that it is about the China General Nuclear Power Corporation; many people have concerns about its involvement in the nuclear sector, which I echo. He talked about when a state is a majority shareholder, which includes EDF in France, but surely the amendment says

“not wholly or in part”.

As France is a majority shareholder in EDF, would that not eliminate EDF from participating in the RAB exercise for Sizewell C?

[Matthew Pennycook]

The hon. Gentleman pre-empts what I will come on to say. We are keenly aware of the need to differentiate different types of companies, which is why, thankfully, the Chair has allowed me to group this amendment with amendment 1, which clearly defines what we mean by “owned by a foreign power”. It is not just owned by in terms of a majority stake, but directly controlled by in the way that I would argue EDF is not.

To return to the involvement of the China General Nuclear Power Corporation in UK nuclear more widely, we believe that the case of Sizewell C illustrates precisely why amendments 1 and 2 are required. Driven by an almost embarrassing enthusiasm for Chinese investment, which was shared and arguably surpassed by the coalition Government that preceded it, the Cameron Government eagerly embraced Chinese involvement in UK civil nuclear energy. As a result, Hinkley Point C, while largely financed by EDF, is underpinned by effectively foreign Government part-financing in the form of a 33.5% interest on the part of China General Nuclear Power Corporation.

When the final investment decision for Hinkley Point C was approved, associated heads of terms were agreed for CGN to take a 20% stake in Sizewell C and to secure majority ownership, complete control of planning and financing, and unfettered operation of the nuclear plant at Bradwell-on-Sea in Essex that would incorporate, subject to generic design approval, a Chinese-designed Generation III Hualong One reactor. Bradwell B was always the ultimate prize for CGN and why it was willing to take a significant stake in the Hinkley plant and a minority stake in the development work to progress Sizewell C toward a final investment decision.

As far as we can ascertain, although the present Conservative Administration have never said as much—I invite the Minister to remedy that if he wishes—there is now a general acceptance that acquiescing in the construction of a piece of critical national infrastructure at Bradwell that would be designed, planned, owned and operated by a subsidiary company of a Chinese state-owned enterprise, and, as all SOEs are in China, controlled ultimately by the Chinese Communist party, was perhaps not the wisest decision that the Cameron Government made.

Furthermore—I do not believe a Minister has said this explicitly, so I urge the Minister to provide greater clarity to the Committee when he responds—I take it as read that the present Government now take the view that such an arrangement is no longer tenable, and that it is their intention to remove the influence of the People’s Republic of China from the Sizewell C project entirely, and, should any new nuclear view on that project prove necessary, the future UK nuclear programme more widely.

The press release accompanying the publication of the Bill stated:

“The RAB model will reduce the UK’s reliance on overseas developers for financing new nuclear projects”.

The Committee will appreciate that that statement is not a clear declaration of intent when it comes to rolling out foreign Government part-financing, ownership and control of civil nuclear power in this country. If it is the Government’s intention to end foreign Government part-financing and ownership of new nuclear projects, the Committee should be told what that means in practice for the October 2016 Sizewell C strategic investment agreement, as well as what the Government’s reneging on that deal would mean for CGN’s 33.5% stake in Hinkley Point C. More specifically, it is right that the Committee is also given a sense of how, assuming it has been determined, the Government intend to remove the CGN minority stake from the Sizewell C company, or, if it has not, the various options being considered.

That brings me to the £1.7 billion committed to nuclear in the recent Budget, the purpose of which, according to the Red Book, is

“to enable a final investment decision for a large-scale nuclear project in this Parliament”—

the very same intention that we are told is the purpose of the Bill. As I am sure Members will appreciate, that statement contained in the Red Book is wilfully obscure. Given that Sizewell C is, as I have said, the last potential nuclear project that could conceivably begin to generate by the end of this decade, and the fact that this Bill creates the funding model that will almost certainly enable a final investment decision on it to be made, the Minister needs to be more transparent with the Committee about the future of the CGN minority stake, because the answer could have real implications for the applicability of the funding model set out in this legislation, and, as a result, the bills that consumers in all our constituencies will pay in the years ahead.

We heard from Professor Stephen Thomas in our evidence session on Tuesday that the cost of buying out the CGN minority stake in Sizewell C is likely to be a tiny fraction of the £1.7 billion allocated to nuclear in the Budget, so what will the rest of that public funding be used for? Will it in whole or in part be used to finance Sizewell C beyond financial closure? If so, how do the Government intend to require the consortium to allow them to participate, and will the investment of direct public funding, if made, have any impact on the amount of RAB financing that will be required for Sizewell C to proceed?

Whatever the £1.7 billion committed to in the Budget is ultimately used for, the involvement of CGN in UK nuclear power over recent years illustrates the risks associated with foreign states, particularly ones of an authoritarian nature, financing and operating critical national infrastructure. We should not only learn the lessons of that, but ensure that clauses 1 and 2 are tightened so that the Bill cannot be used to facilitate such involvement in the future. That is the purpose of amendments 1 and 2. Taken together—this follows on from the point made in the intervention earlier—they would ensure that the Secretary of State cannot designate a given company to benefit from the RAB model provided for in the Bill if the company in question was owned and directly controlled by a foreign power. Their combined effect would not be to prevent the coming together of consortia that are not UK majority-owned. That would almost certainly render future projects unviable or more costly, but the amendments’ incorporation in the Bill would ensure that consortia drawing upon the RAB model could not include investors owned and controlled by a foreign state.

The use of the word “controlled”, as per amendment 1, is critical. This follows on from the point I made in response to the hon. Member for Kilmarnock and Loudoun. We are acutely aware that in attempting to amend the Bill to prevent a company such as CGN from benefiting from the RAB model, we would not wish to prevent all companies in which states have a majority interest—EDF is the most obvious example—from doing so. That is why amendment 1 specifically defines “owned by a foreign power” as one owned and controlled by a foreign state.

I hope the Minister responds to the amendments in the constructive spirit in which they have been tabled and that the Government will see the value of incorporating them into the legislation.

[Alan Brown]

It is a pleasure to serve under your chairwomanship, Ms Fovargue. In my intervention, I wondered if the amendments would technically preclude EDF under the RAB scheme. I hoped that the amendments were a stalking horse for Labour to come round to our way of thinking regarding a new nuclear power station, but unfortunately, that does not seem to be the case.

That said, I support the amendments. It is crazy that decisions have not been made before now about excluding China General Nuclear from critical infrastructure. The UK Government probably acted on the back of the United States’s actions to remove Huawei from critical telecoms infrastructure, so it makes no sense that a Chinese state-operated nuclear company is allowed to participate and invest in and possibly, if it gets its way, construct a new power station at Bradwell. That makes no sense. I would like to hear what the Minister has say about that. In principle, I support the amendments, although, ideally, I would rather we were not doing new nuclear.

[Dr Whitehead]

Continuing briefly from my initial remarks, I want to make it clear that the amendments—and all our other amendments—are based on the idea that the Bill should be strengthened, not subverted in any way. I can assure the Committee that the hon. Member for Kilmarnock and Loudoun’s hope that these two amendments are a stalking horse to remove EDF from the project is certainly not the intention. The intention is precisely to ensure that the nuclear programme in this country is sound, robust and integral to our security in all senses of the word.

We do not think the amendments will do anything other than put us in a much better position to ensure that the financing of nuclear is done on a clearer footing and on the basis that we know who is putting money into the project, in this instance Sizewell C. I concur with my hon. Friend the Member for Greenwich and Woolwich that effectively the Bill is pretty much about how Sizewell C gets going, comes to financial closure and gets into its construction period so that it produces electricity in good time for the grid.

It is important that the Committee thinks carefully right at the beginning of its proceedings about how we want to framework that nuclear financing; how we want to framework the arrangements which, after all, will be the umbrella under which we have all our other discussions in Committee. The framework that we have at the moment, particularly for Sizewell C, as my hon. Friend has set out, is a sequence of memorandums and a number of things further to memorandums, which appear to lock our nuclear development into an arrangement with the Chinese General Nuclear Power Corporation, which is very much an instrument of the Chinese state. Although companies have been set up—set up for the purpose of engaging in Hinkley—with one nominated director, given who those nominated directors are and how they go back to China it is very clear that those companies are centrally state-controlled, and are state-controlled vehicles for investment—just as we have stated in our amendment—for the promotion of that particular foreign power’s interests, in this instance in nuclear power.

Given those interests in nuclear power, it is important that we do not lose sight of the overall scheme of things in considering investment or otherwise in Sizewell C. It is important to understand that the deals, as it were, that were made between 2013 and 2016 were very much about that sequence of events leading from investment in a power station with a minority stake, with a reactor that would be built in France, within a framework of a company controlling that, that is a private company but has substantial state connections, but nevertheless is a very different model from what we are faced with regarding the CGN investment.

So there has been a sequence of events that starts with Hinkley C, with a minority stake, a French reactor and a French company with its own investment in the majority of the plant, and then a contract for difference at the end of it for production, moving to the second event in the sequence, which was envisaged at that time to be Sizewell C, with an undefined arrangement at the time for investment elsewhere in the plant, but a clear stake in that plant, beyond financial closure, of the Chinese General Nuclear Power Corporation, coming to 20%. And then would come the prize at the end of the sequence—certainly the prize for the Chinese Government—of the entry into European nuclear development for the first time of a Chinese reactor, the Hualong One. That would be the basis of a Bradwell nuclear plant. That reactor would separately go through a generic commissioning process; the initial moves towards that are being made. That reactor would then be at the core of the Bradwell plant, and Bradwell would be majority-owned, run, controlled and operated by the Chinese state nuclear corporation.

So, leading down the path of that sequence, Sizewell C being a stopping-post in that sequence and the end of it being Bradwell, is obviously the nuclear project that we are discussing at the moment. Therefore, the part-ownership of the nuclear company must be seen as integral to that overall process and that overall agreement; and if we do nothing and say nothing about that involvement, we are effectively condoning that whole sequence of agreements.

Those agreements were initially made in the form of a memorandum of understanding on civil nuclear collaboration in 2013, and effectively those stakes that I mentioned were set out then. George Osborne, the then Chancellor, stated that Chinese companies were taking a stake, including potential future majority stakes, in the development of the next generation of British nuclear power. So, it was pretty explicit, certainly from the UK Government side, what they thought that sequence was going to be about, and it was actually pretty similar to the idea that the Chinese had, as far as their involvement in nuclear was concerned.

That was followed, during Chinese President Xi Jinping’s state visit to the UK in 2015, by a “Statement of Cooperation in the Field of Civil Nuclear Energy”, which welcomed the minority investment and the proposal for a Chinese-led project at Bradwell B in Essex. What is less well known is that that was followed by a very lengthy document, “Secretary of State Investor Agreement”, which was primarily about investment by a number of parties, including CGN, in Hinkley but which also related to the whole sequence. It is arguable, therefore, that there is a substantial lock-on of Chinese involvement not just in 20% of Sizewell but in the whole sequence, as laid out in the various memorandums of understanding and the investment agreements undertaken between 2013 and 2016.

The question is: what are we going to do about it? The proposal is for a RAB scheme to cover the project’s investment costs. A decision will have to be made about how the RAB scheme will work and we will discuss the detail later, including how Ofgem will set out the allowable costs that form the backbone of a RAB agreement. Ofgem will have to assess the overall allowable ceiling for the project costs, particularly in its construction phase but also during its production phase. That will form the basis on which the money to meet those costs will be taken in from the general bill-paying public. The ceiling for those allowable costs will be determined to a considerable extent by how much investment is likely to be required and, therefore, how much of it will have to be underpinned by the RAB arrangement at the Sizewell plant. If a substantial part of the plant is to be financed by the China General Nuclear Power Corporation, then logically the allowable costs would relate to the rest of the required investment, rather than all of it. Crucially, the decisions and discussions that this Committee is going to enter into will be determined by what that 20% consists of.

The Red Book offers a tantalising clue as to what that might be. As my hon. Friend the Member for Greenwich and Woolwich said, a total of three lines focus on the £1.7 billion of new direct Government funding being made available, essentially for the Sizewell C project. He said that the Red Book is possibly wilfully obscure; it is certainly obscure, and for a number of reasons. All the Budget and spending review document has to say about the £1.7 billion Government funding is that it is being provided

“to take a final investment decision this Parliament, subject to value for money and approvals.”

--- Later in debate ---

[The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)]

Thank you, Ms Fovargue. It is a pleasure to serve under your chairmanship. I look forward to working with Committee members as we scrutinise this important and timely Bill. To begin, I want to briefly remind Members of the purpose and background of the Bill.

As all Members will agree, it is vital that the UK continues to lead the world in tackling climate change. That is why we have committed to a 78% reduction in emissions compared with 1990, as well as fully decarbonising our power sector by the year 2035, which will mean ensuring that the UK is entirely powered by low-carbon electricity, subject to security of supply. To deliver that, we will need new nuclear power plants, which are the only proven technology deployed at scale to provide continuous, reliable, low-carbon electricity.

[Alan Brown]

The Bill is mainly about Sizewell C. Can the Minister tell me where any European pressurised reactor is operating at scale connected to the grid at this moment in time? He is talking about proven technology.

[Greg Hands]

I am speaking in a general sense about nuclear being a proven technology, deployed at scale. That has been the case since 1957 or ’56, with the very first nuclear power plant in the world here in the United Kingdom at Calder Hall just by Windscale.

However, it is clear that we need a new funding model to support the financing of large-scale and advanced nuclear technologies. The Bill will deliver that, in the form of the regulated asset base model. I am sure the Committee will discuss the detail throughout our sittings, so I do not intend to go into the minutiae now, but I want to outline the Government’s position that this is the best way of delivering new nuclear projects while delivering value for consumers.

I am glad that the Opposition recognised that point through their support for the Bill on Second Reading. That support has been reiterated today by Her Majesty’s official Opposition, if not by the Scottish National party. I am grateful for their useful contributions on Second Reading and look forward to further discussions in Committee. Similarly, I recognise the interesting points raised by the SNP in that debate. I recognise that the SNP has a principled—if, in my view, irrational—objection to new nuclear projects. Nevertheless, I am pleased to subject the Bill to the SNP’s careful scrutiny as well.

I hope that as we move through Committee and the rest of proceedings on the Bill, we can work in collegiate and co-operative ways, considering the individual clauses of the Bill to ensure that it can meet its objectives. I think that was the position laid out by Her Majesty’s loyal Opposition at the start of the debate.

I turn to amendment 1, tabled by the hon. Members for Southampton, Test and for Greenwich and Woolwich. It is linked to amendment 2 to clause 2, and I am happy to debate both together. The amendments seek to insert as a criteria for designation that the company is not wholly or partially owned by a foreign country. I want to touch briefly on the implications that the proposed definition could have for the wider policy of financing nuclear projects in this country.

If the definition as drafted could rule in all companies that were seen to be controlled by state sponsors, it could thereby rule them out of eligibility for a RAB. The RAB allows us to bring new sources of financing into nuclear projects and reduce our reliance on overseas developers, but it is not credible to introduce a blanket exclusion on developer participation in RAB companies, many of whom are to some degree state-sponsored, including some of our closest international partners. One has already been named during proceedings on the Bill and in Committee this morning.

I am sure that the intention of the hon. Members does not lie in that direction, as that could make it much harder to bring new, appropriate projects to fruition. We should never forget that the Bill’s purpose is to make it more possible to finance nuclear projects in the future, not less so. However, I welcome the focus on national security in one of the UK’s key infrastructure networks, a point made by Her Majesty’s Opposition. We will no doubt focus on that matter fully in our consideration of all the amendments.

I will take the points raised in turn. The hon. Members for Southampton, Test and for Greenwich and Woolwich both asked what the £1.7 billion in the Budget and spending review is made up of. We had an extensive debate on the Budget—I think it was four days in all—and there was a chance to examine this, but I will now reiterate the purpose of the money.

The funding is to bring a project to final investment decision this Parliament, subject to value for money and all relevant approvals. This could include development stage funding to support the maturation of a project and to de-risk it. It could also include some Government investment at the point of a transaction. This will help to mobilise other private sector capital into a project, and that is very important. We are in active negotiations with Sizewell C on its nuclear project—the most advanced currently in the UK. The funding could be used to support development and investment in the project, subject to value for money and relevant approvals. It is an active negotiation.

[Alan Brown]

The Minister will have noticed in the evidence session on Tuesday when I put the question to the Sizewell C company about the derivation of the £1.7 billion and what discussions the company had had with the Government about that, the lady did not seem to know, or to believe there had been discussions with the Govt. How does this £1.7 billion get defined if the Sizewell C company does not know its derivation?

[Greg Hands]

To be fair, I also listened carefully to Sizewell C’s evidence, and the company will be as aware as we are that this is an active negotiation. I was not in any way surprised that Sizewell C’s representative did not wish to be drawn on the question of exactly where the £1.7 billion would be deployed. We have outlined in the Budget document the sorts of areas that would be in scope. None the less, this is an active financial negotiation.

--- Later in debate ---

[Greg Hands]

I do not think the hon. Gentleman is correct. It is not fair to conclude that the evidence from Sizewell C was incorrect, or that it was ill-informed in any other way. This is an active commercial negotiation. We have laid out the parameters of the £1.7 billion, and is in no way surprising that our negotiation partners may not wish to comment on what they think it is likely to be spent on. After all, it is taxpayers’ money, which will be deployed by this Government to move forward a nuclear project.

[Alan Brown]

The Minister made a key point: this is taxpayers’ money. Surely, we as taxpayers have a right to know, even roughly, what services will be procured from this £1.7 billion. I would still expect the Sizewell C company to have discussions with the Government and say, “We need to do x, y and z in order to de-risk this project and get it to the final investment decision stage”.

[Greg Hands]

I would say two things in response. First, Sizewell C may not feel it is appropriate to comment on the deployment of taxpayers’ money. Secondly, I know from long experience of Government that often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking. We have laid out in the Budget document, which was quoted by the hon. Member for Southampton, Test, what we think is going to be in scope—what the £1.7 billion might be spent on.

The hon. Member for Greenwich and Woolwich asked a more general question about China. He asked whether this was about sending a message to China, or words to that effect. The answer is no. The UK welcomes foreign investment in our infrastructure, but as we have always said, that should not come at the expense of our national security. It is already the case in UK law that all investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. The National Security and Investment Act 2021 also strengthens our powers to act should we need to.

--- Later in debate ---

[Greg Hands]

I think we have already had the debate, but I will say briefly that the clause defines the key terms referred to in part 1 of the Bill. Subsection (2) defines a “nuclear company” as one that holds an electricity generation licence granted by the authority for a nuclear energy generation project. The authority is the Gas and Electricity Markets Authority, the governing body of Ofgem.

The clause goes on to make a distinction between an ordinary licensed company and one that has been designated by the Secretary of State to benefit from a RAB through having its licence modified by the Secretary of State. Subsection (4) defines a “relevant licensee nuclear company”. To become one such, it is necessary for the company to have had its licence modified by the Secretary of State to insert RAB special conditions and to amend the licence terms. It is also necessary for the company to have entered into a revenue collection contract with a revenue collection counterparty, so that RAB funding may flow to the company’s project.

[Alan Brown]

I appreciate that the Minister has been generous with his time. Will he clarify whether Sizewell C has an electricity generation licence? I could not find that on Ofgem’s website.

[Greg Hands]

I will write to the hon. Gentleman on that specific issue, perhaps this afternoon. I need to check whether Sizewell C has such a licence. I will get back to him.

Those steps in the clause are necessary to make clear the different stages that a company goes through under the RAB model.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Designation of nuclear company

Amendment proposed: 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power.”—(Matthew Pennycook.)

This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.

--- Later in debate ---

What is missing from the criteria is the big question of whether the company would, in the Secretary of State’s opinion at the time of designation—I appreciate that circumstances can change and so on—be in a good position to be able to complete and deliver the project.

[Alan Brown]

I understand where the hon. Gentleman is going, but where is the fall-back?. The Secretary of State is desperate to get a nuclear deal signed off, so he just signs it off: “Yes, I am of the opinion that this project will be completed.” Ten years down the line, it all falls apart and the project cannot be completed, a bit like the Californian example. What protection would the amendment introduce? It seems that the Secretary of State can just sign this off based on his opinion. If there are repercussions down the line, they do not come back on that Secretary of State.

[Dr Whitehead]

The hon. Member makes an important point, at least part of which we will discuss when we come to the procedures under which a potentially failed project might be rescued or transferred to other undertakings so that it can be delivered and completed, or if already operating, can continue to operate.

[Dr Whitehead]

It is quite possible that the Secretary of State could deem the first two criteria on the basis of work that the company had done to approach designation. However, unless the Secretary of State has in mind the whole picture at the point of designation—in the previous group of amendments, we touched on some of the things concerning the whole picture—it would be possible for him to conclude that, yes, on the basis of the work done so far, the particular mechanisms looked like they might produce, say, value-for-money electricity at a rate per kilowatt-hour that was compatible with market levels of electricity at that point or in the future or with value for money as far as other electricity production is concerned, but he might still not have a handle on whether the undertaking that the nuclear company was about to engage in was sound in the overall, as far as completion was concerned.

The hon. Member for Kilmarnock and Loudoun touched on an important lesson in that respect, which ought to be put before the Committee. He mentioned a case in California—it was not quite in California; it was a little way a way, although it began with the same letter. I am talking about the experience of a nuclear power plant in South Carolina in the United States. When I say the experience of a nuclear power plant in South Carolina, I do not mean that—because there is no nuclear plant in South Carolina; there are a bunch of a concrete foundings, walls and various other things that look like a nuclear power station, but it does not operate, it has never produced a single kilowatt of electricity and it remains abandoned.

More significantly, that project not only was abandoned but was commissioned precisely on the sort of criteria that are contained in the Bill. All those things were gone through by the South Carolina legislature, which put in place something remarkably similar to a RAB. Indeed, the bill payers of South Carolina were required to stump up money for the project as it progressed, and I am sure hon. Members will be interested to know just how much money went from the bill payers of South Carolina to that project and how much they got out of it as a result of introducing a RAB model in South Carolina. The answer is nothing. Some £9 billion of customers’ money went into the project, and they will continue to pay for that lump of concrete for the next 20 years in their bills because of the way in which the thing was constructed, all on the basis of agreements that looked pretty similar to what is in the Bill.

What South Carolina did not do was ask serious questions about the resilience of the various partners and companies involved in the project in the light of changing circumstances in terms of the construction of the project and the health of the companies involved. Among other things, costs went through the roof, the timescale increased substantially and one of the companies that was in charge of the project effectively went bust—it called for chapter 11 protection and was therefore unable to continue with the project. All those things could have been foreseen by the South Carolina legislature, but were not. The project went ahead, with the customers footing the bill, as various reviews subsequent to the collapse of the nuclear programme said, on the basis of something that was extremely unlikely to ever come to fruition as a nuclear power plant, not only because of the dodgy nature of the financing of the project but because it had completely unrealistic timescales—those involved expected to produce electricity within six years from the start of production and so on, none of which was properly overseen.

[Alan Brown]

I appreciate the hon. Gentleman giving way once more; I am starting to feel like I am on a mission to annoy each contributor—apologies. He makes valid points, and I understand his concerns and what he is trying to do, but I still do not understand how the amendment would preclude such a scenario. Surely, as well as the amendment, the Secretary of State would need to look at a list of criteria, with their sign-off verifying what factors have been considered to reach the opinion that the project is viable. Otherwise, the Secretary of State could just say, “I think this project will be completed—let’s move on.”

[Dr Whitehead]

Yes, indeed. The hon. Gentleman is right, to the extent that the amendment does not actually guarantee the success of a project as a result of its placement in the designation clauses. Of course, it is not possible to do that, because changing circumstances can mean that projects cannot come to fruition. The difference the amendment would make is that the Secretary of State would be required to look at all those sorts of things in the overall scheme of things as far as the company and the prospects for success of a particular project are concerned, in such a way that he could form an opinion, which he would undoubtedly have to publish, that he was as satisfied as he could be, having done all that work, that the project had a very high prospect of being completed, and he would have to underwrite that.

One thing I did not say about the South Carolina project is that a lot of it is now the subject of legal action, and various state officials are being hauled up before the courts for their lack of diligence in actually looking at the overall circumstances of the project when they gave the go-ahead on a similar basis to that which we are discussing. If the Secretary of State had to sign off, on the basis of the amendment being in the Bill, that it was all okay and could go ahead, and it turned out that it was not okay and could not go ahead, under circumstances that could have been foreseen, he would then be liable. That is potentially quite an important concentration of the mind, ensuring that the work had been done, as much as it could be done—I accept that it would not be a perfect operation—to ensure that there was a reasonable or good prospect that the company involved could complete the project. That is all the amendment says. It would be an important addition to the designation process.

We need to be clear that, as much as we can do the work, we have done the work in getting the designation clearly marked on the basis that the company really can deliver a nuclear plant and produce electricity for customers. As I have said, we are engaged in a RAB process, which ultimately lands on the customers. We absolutely do not want to ever land the customers of the United Kingdom in the same position that the customers of South Carolina are in today, so far as a nuclear power plant is concerned.

Ordered, That the debate be now adjourned.—(Mark Fletcher.)

Nuclear Energy (Financing) Bill (Fourth sitting)

Alan Brown Excerpts

Committee stage
Thursday 18th November 2021 Public Bill Committees

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I will come to this in my own comments, but is it not the case that the Secretary of State gets to sign off whether he thinks a project is value for money and sufficiently advanced, and then a statement is published giving the reasons for that? However, the Secretary of State gets to write the rules for the sign-off. Is it not the case that no clear structure or checklist will be gone through so that the Secretary of State can sign off such projects?

[Greg Hands]

I disagree with the hon. Gentleman. I think that the process and the checklist is set out pretty well. If he would like, I can run through how the process works when we get to the later clauses and look at the specifics of the process. It might appropriate to take him through that.

When considering value for money, the Secretary of State is expected to have regard to the cost to consumers, future security of supply and our decarbonisation targets. The Secretary of State can designate multiple nuclear companies at any given time, so more than one project can be designated for a RAB at the same time, but the designation criteria, project status and likely value for money will be applied individually to each project.

[Alan Brown]

Following on from my intervention, I have real concerns about the clause—we will come later to clause 3—and the lack of transparency in what constitutes value for money. In signing off projects, the Secretary of State has to give an opinion on whether they are suitably advanced to justify a designation, but what constitutes “suitably advanced”? What considerations must the Secretary of State be compelled to make to ensure that a project is suitably advanced to give the correct level of detail and analysis for cost definition in sign-off? We should bear in mind that sign-off for a 60-year contract ties up consumers.

I do not see those considerations in the Bill. The Minister said that he would take the Committee through them, but how does the Secretary of State consider how suitably advanced a project is? Does there have to be a working prototype? There is no working prototype of the evolutionary power reactor model generating electricity to the grid. The projects in France and Finland are years late, over cost and still not connected to the grid—and, as I said earlier, the Taishan 1 EPR is now offline due to safety concerns. How can the Secretary of State have any confidence that a project such as Sizewell C is suitably advanced when there is no working prototype?

What other permissions need to be taken into account to determine whether a project is suitably advanced? Does it need to have planning permission? Does it need to have gone through all its environmental appraisals and have all its environmental approvals in place? Are there other things to consider? How far is outline design to be developed? Is there a level of detail to consider to determine whether a project is suitably advanced? How much site investigation work needs to be undertaken before a Secretary of State can have confidence that a project is suitable advanced, bearing in mind the cost of a 60-year contract? Should consideration be given to a company’s track record on deliverability? That takes us full circle to how there is not an EPR up and running. In a way, that touches on what the shadow Minister said about having confidence that a project can be delivered when not one project has yet been delivered successfully.

The Government are in advanced negotiations on Sizewell C, which is the most well developed nuclear project at the moment. Does it come close to the definition of “sufficiently advanced” or does a lot more work need to be done? That takes us full circle back to the discussions earlier about the £1.7 billion allocated in the Red Book. The Minister has still not given us any clarity on what the £1.7 billion is for. Is it to allow the Sizewell C company to develop the project further to get it to a position that the Secretary of State thinks is sufficiently advanced? That would mean that, by default, the Secretary of State knows what “sufficiently advanced” means, so we should be able to understand what the £1.7 billion is going to pay for. Hopefully, all that can be explained.

EDF has claimed it is using Hinkley as a prototype that it will replicate at Sizewell C. It will accrue savings and just move the design almost lock, stock and barrel from Hinkley into the footprint at Sizewell C. I would have thought that, by default, that means the project is sufficiently advanced such that we do not need the £1.7 billion to advance it any further. A bit of clarity on that would be useful.

We need a lot more clarity on subsection (3)(b). What is the process for the Secretary of State assessing and giving the opinion that

“the project is likely to result in value for money”?

What are the intended governance and transparency protocols? We have spoken about the designation in a statement, but there is no clarity on what the Secretary of State will consider and what will be provided in the statement.

In recent months we have had the dodgy covid contracts. How do we ensure good faith rather than backroom negotiations and that there is public trust in what goes on in the signing-off of contracts? When I asked the Treasury a written question about the £1.7 billion and the discussions the Chancellor has had, the answer I was given was:

“Details of any meetings with companies regarding funding are commercially sensitive.”

If the Treasury will not even tell me who it is meeting and when, how can we have any comfort about what goes on behind closed doors in respect of the negotiations and the assessment of value for money? I hope to come back to value for money later in Committee, because I have tabled a relevant new clause.

It seems to me that as it stands, subsection (3)(b) means nothing, other than that the Secretary of State can rubber-stamp something that he believes to be value for money. Let us bear in mind that this is the Government who told us that Hinkley was value for money, even though everybody argued that the strike rate was too high. With this Bill, they are telling us that Hinkley was actually a rubbish deal, so we need the RAB model in the Bill to save taxpayers’ money.

The Government explained on Second Reading that a contract for difference had to be used for Hinkley because it was the first of a kind, so all the risk was on the developer, but that raises further questions. If a CfD was needed for Hinkley because it was the first of a kind in the UK, how on earth can the Government make a final decision to proceed with Sizewell C under a RAB model before Hinkley is even operational?

Hinkley is 25% over budget and at least a year late, with a possible further 15-month delay on top of that. How can the Government have any confidence in signing off on something like Sizewell C, for which the impact assessment talks about a 2023 construction start date? How can that project be anywhere close to “sufficiently advanced”? How can the Secretary of State do a proper value-for-money assessment given all the outstanding issues with Hinkley?

As I said, we need a lot more clarity on that £1.7 billion. Is that going to be the way forward in future? Is it the intention that, for a project to get to a stage where it is sufficiently advanced and the Secretary of State can make a value-for-money assessment, something like £1.7 billion will be allocated to each developer that is in the mix for a new nuclear project? That is crucial for value for money overall.

Paragraph 50 of the explanatory notes gives four criteria that might be used to consider value for money, but three of them are just the traditional Government tropes to justify nuclear in the first place: security of supply, low-carbon electricity and net zero targets. The Minister alluded to that in his opening speech. Those same arguments have been put forward to justify new nuclear for the past 15 years. We still do not have a new nuclear plant operational, so when the Secretary of State looks at the reasons for value for money, it will be very easy because those are the arguments that they will use.

In particular, the security of supply argument was used to justify Hinkley, but Hinkley was supposed to be required by December 2017 to stop the lights going out. It will not be operational for at least 10 years after that original date, and the lights have not gone out, so security of supply is almost a nonsense argument for value for money. That confirms to me that the criteria are too loose and will be too easy. There will be a lack of transparency, but the Secretary of State will sign it off and say, “Yes, I think the project is value for money.” Again, we have this Bill because they are desperate to get Sizewell signed off at any cost.

In conclusion, for me the clause is too loose and too vague. It is set up to encourage backroom negotiations without transparency. At the very least, it would be nice if the Government conceded to an independent assessment of the risks and value for money for consumers. That was suggested in the witness session on Tuesday by Citizens Advice. I look forward to the Minister’s response, but he will have to go a long way to satisfy me that there is a robust procedure in place to assess value for money and how suitably advanced the project is for designation.

[Greg Hands]

I thank the hon. Gentleman for that varying and detailed speech on clause 2. I will try to deal with each of his points. First, he raised a series of additional factors that could be considered by the Secretary of State. He might have tabled an amendment, for example, on what those additional factors might be. I do not think I have seen any amendments tabled by the Scottish National party, but he might have perhaps tabled one in the same way that the official Opposition did as a test. My initial response is that the additional factors he raised would be covered by the two criteria on whether it is value for money and sufficiently advanced, so his additional criteria would be encompassed by the two processes that are already there. Perhaps he can table an amendment to deal with where he would specifically like something added.

The hon. Gentleman asked about the £1.7 billion. We have been clear, while remaining consistent with the fact that this is a commercial negotiation, that the funding is to bring a project to a final investment decision in this Parliament, subject to value for money and all relevant approvals. That could include development stage funding to support the maturation of the project to de-risk it. It could also include some Government investment at the point of a transaction, helping to mobilise other private sector capital. It is already laid out in detail in the Budget document. It was debated at Budget, and I reiterate it today. That there is a limit to how much additional information I can put out on something when ultimately the background is that it is a commercial negotiation.

--- Later in debate ---

[Alan Brown]

Earlier, the Minister talked about UK pension funds as well in terms of levering in capital. Is some of the £1.7 billion going to be matched funding with pension funds, for example, or is it to provide some guarantees so that the pension fund can invest at a guaranteed rate of return, where the guaranteed rate of return comes from the taxpayer?

[Greg Hands]

I am not going to add anything on the £1.7 billion, which is a separate process and a separate factor to the Bill. I have nothing further to add. I have given sufficient detail of where the £1.7 billion might be spent. Where it will be spent is properly a matter for which the background is the commercial negotiation.

The hon. Gentleman mentioned delays at Hinkley Point C. He is in danger of arguing with himself at times. At one point he argued that we had not brought a nuclear project to a final investment decision, or we had brought only one in the last decade. Then he said that we should wait to make a decision on Sizewell C until we had Hinkley Point up and running. It sounds to me as if he wants to have it both ways—

[Alan Brown]

I want it no ways.

[Greg Hands]

He is saying we are either moving too quickly or too slowly. Ms Fovargue, it reflects back to the starting position. If the hon. Gentleman does not mind me saying it, I think he is opposed to nuclear power per se. I suspect he is less interested in whether it is going too quickly or too slowly, to be frank, and it would be helpful if he gave us a straight view as to whether we are being too quick or too slow.

--- Later in debate ---

The Secretary of State must publish a designation notice as required by subsections (5) and (6). That notice should include a description of any conditions and the reasons for undertaking the designation. While recognising the role of the Secretary of State in negotiating with prospective projects on behalf of consumers and taxpayers, the effect of the clause is to allow transparency over decision making regarding project designation. I therefore urge that the clause stand part of the Bill.

[Alan Brown]

The Minister spoke about transparency, but as I touched on earlier, it seems to me that clauses 2 and 3 still do not provide transparency. Clause 3(1) gives the Secretary of State the power, in effect, to make things up as they go along. Under paragraph (a), the Secretary of State sets out the procedure that they will follow, so they are setting the rules, and then paragraph (b) allows the Secretary of State to confirm whether the designation criteria that they have already set in clause 2 have been achieved. The criteria in clause 2 are simply these: does the Secretary of State think that the project is advanced enough to be designated and is it value for money?

Effectively, by my logic, the Secretary of State states that the project is advanced enough and is value for money. Then, under clause 3(1), the Secretary of State affirms what rules will be applied to confirm what has already been confirmed—that the project is value for money and suitably advanced. It is a kind of circular argument. If the Secretary of State is determined to sign off on a new nuclear project, which they are, and they are setting the rules that they are going to apply and then they will publish the rationale as to why it has been signed off, that, to me, does not provide proper transparency. It is not things that can be challenged; it is actually just the Secretary of State giving their reasons for why they have signed off.

As I touched on earlier, paragraph 50 of the explanatory notes still does not give enough information, either. It actually gives too much wriggle room for a Secretary of State to be able to sign off, so that is also not robust enough. The Minister challenged me to table amendments, and I can table a new clause at a later date, or we can challenge further, but it is really hard to table amendments to clauses that are so fundamentally flawed. It is hard to actually improve them.

Turning to value for money, the cost to consumers is one of the items that has been suggested, but the Government are also good at saying that a new nuclear power station will add only £x a year to a consumer’s electricity bill and therefore it will have minimal impact on bills. That is a very neat way of trying to argue that a new nuclear station involves minimal cost to consumers, but of course we are talking about a 60-year contract.

In the same vein, the letter from the Minister to all MPs on 26 October stated that a nuclear project starting construction in 2023 will add only a few pounds to bills during the lifetime of the Parliament and only £1 per month during full construction. I will leave to one side the fact that 2023 is a fanciful construction date, but let me break down what the cost of £1 per month per consumer means. According to the Office for National Statistics, there are now 27 million households in Great Britain. According to the Bill’s impact assessment, the construction period for unit 1 is estimated to be between 13 and 17 years, plus another year for unit 2, so let us call it a 15-year construction period. That £1 a month per household is circa £5 billion up front. It can be argued that £1 a month is a low cost for consumers, but something like £5 billion is actually being committed. That is why we need more robust ways to evaluate what is the actual cost to consumers and what is value for money.

Let us work backwards from some of the figures in the impact assessment. It is suggested that, under RAB, the capital cost and associated financing for a new nuclear power station could be £63 billion. If we work backwards over a 60-year period, that is still only a few pounds a month, but it is actually £63 billion that we are talking about. That is a huge sum, which could be invested much better elsewhere in other forms of renewable energy. I hope that demonstrates how much wriggle room the Minister and Secretary of State have given themselves with the Bill. In fact, looking at the cost and impact assessment that the Government have quoted, it almost undermines their argument about the justification for new nuclear.

I turn now to subsection (2). Truthfully, it adds little more in the way of transparency. The Secretary of State must provide

“draft reasons for the designation”

and consult stakeholders, but the subsection does not detail how the statutory consultation will be undertaken, the timescales applied to it or, more importantly, what happens to the consultation feedback from the stakeholders whom the Secretary of State consults. Paragraph 54 of the explanatory notes states that a final reasons determination must be published as part of the designation notice, and subsection (5) covers that too. With the way the Bill is currently framed, however, this has the potential to simply be a tick-box consultation exercise. The Secretary of State can consult and stakeholders respond, then the consultation is dismissed out of hand and the final reasons are printed.

Subsection (3)(f) states that the Secretary of State may consult the Scottish Ministers and the Scottish Environment Protection Agency for Scottish projects, so what protection is there for the Scottish Government if they say no? We are implacably opposed to new nuclear, as is current SNP policy and the policy of the Government who have been elected by voters in Scotland since 2007. At the moment, the Scottish Government rely on the national planning policy framework to block new nuclear, but will the Minister confirm that, despite market failure, if somehow a proposal came for a new nuclear project in Scotland, the Bill, along with the United Kingdom Internal Market Act 2020, will not be a way for the UK Government to ram it through? How valid would the consultation with the Scottish Government be? It is not clear in the Bill.

Again, clauses 2 and 3 do not do enough to provide transparency and hold the Government to account. As I say, I would like to amend the clauses and be helpful to the Government, but given that I am opposed to the Bill and that I do not think the clauses are robust enough, it is very difficult to do so.

[Kirsty Blackman]

It is a pleasure to be able to take part in this Committee. Thank you very much for your excellent work in chairing today’s sitting, Ms Fovargue.

I have just been on the Subsidy Control Bill Committee, and the Subsidy Control Bill has an incredible lack of information. We spend a huge amount of time asking for more transparency in that Bill, but this Bill is significantly worse than the Subsidy Control Bill in the lack of information that has been provided. To be honest, I cannot believe that the Bill is actually considered appropriate for primary legislation, because there is a totally stunning lack of info and an absolute lack of transparency.

The Secretary of State has to publish the reasons for the designation. What does that mean? What does the Secretary of State actually have to say in their reasons for the designation? Do they just write, “I think it’s a good idea. Let’s go for it.”? There is not enough information. As my hon. Friend the Member for Kilmarnock and Loudoun asked earlier, does the Secretary of State have to take into account whether there is planning permission in place? Does the Secretary of State have to take into account the licences that have been put in place? It is totally unclear how this is likely to work.

I have a specific question for the Minister in addition to my general dismay at the clause. Subsection (3) talks about the people who have to be consulted. It says that if part of a site is in Scotland, the Scottish Ministers and SEPA have to be consulted. It also says something similar in relation to Wales and England. We know that if something is to be built in a border area, it will likely have cross-border environmental effects, so two environmental agencies could be involved should a project be fairly close to a border.

I would like the Minister to give me some comfort by saying that he would consider consulting more than one environmental agency, because if a project were to be on the border between England and Wales but slightly more on the English side, it might still have environmental impacts in Wales. It would be relevant, therefore, for the Minister to ensure that the consultations are slightly broader than simply where the footprint of the site is, because we know that any large thing that is built—whether it is something as potentially likely to cause massive environmental problems as nuclear or something much less of a potential environmental risk—has wider environmental issues than simply its footprint. It would be useful if the Minister could confirm that he would give consideration to that happening in the event that it is really pretty close to a border.

--- Later in debate ---

[Greg Hands]

My hon. Friend makes a very strong point—one made by quite a few people who were in Glasgow just two weeks ago. Ironically, in Scotland, making that argument strongly were not just the UK Government, but countries from all over the world. They were making the argument for nuclear power being part of our low-carbon future.

The powers of the Scottish Government are unchanged. The Bill makes provisions for the Secretary of State to consult named persons and organisations prior to the specification of any project under a nuclear RAB, and to consult those persons or organisations before he or she amends a projects licence to insert RAB conditions. Ministers in devolved Administrations will be captured—in scope, I should say; not physically—by this consultation.

[Alan Brown]

The Minister has already said that energy generation is a reserved power. Is he confirming that if the devolved Administrations say no in a consultation, that could be overruled by Westminster, with the imposition of a nuclear power plant?

[Greg Hands]

The hon. Gentleman is inviting me to go down a hypothetical road. The devolved Administrations have powers in other areas, and if the devolved Administration was strongly minded about having a nuclear power plant in that particular part of the UK, it is difficult to envisage circumstances in which the UK Government would proceed to do that. I hope that gives him enough reassurance.

I will deal with the point made by the hon. Member for Aberdeen North. On the question of a project near a border, it is reasonable then that the UK Government would consider the appropriateness of consulting with the devolved Administration. I return to my earlier point about specifying those who must be consulted and those who the Secretary of State would think it reasonable to consult. That would be within the scope of who the Secretary of State would think it reasonable to consult.

--- Later in debate ---

[Greg Hands]

As the hon. Gentleman says, this amendment addresses the process for modifying a designated nuclear company’s licence, particularly which documents should be published before the power is exercised. We recognise that designating a nuclear company and subsequently modifying its licence is a significant decision. That is why the legislation lays out a clear process, which provides transparency and builds confidence in the decisions that the Secretary of State will make when exercising these powers. The process in the Bill is strongly based on existing licence modification powers; it is well precedented.

The amendment obliges the Secretary of State to publish a document setting out how the licence modification would facilitate investment in nuclear projects before modifications are made. I do not believe that is necessary. The Government have already set out a clear process and strong transparency provisions in the legislation. Currently, the Secretary of State is required to consult named persons prior to making any licence modifications, and must then publish the details of any modifications as soon as reasonably practicable after they are made, with material excluded only when necessary—for example, for purposes of commercial confidentiality or national security.

[Alan Brown]

Could the Minister give an example of an existing licence that the Government have granted that could likely need to be modified to facilitate the investment that the Government are looking for? Could he explain what that process looks like?

[Greg Hands]

The process is as described. It is based on a very good precedent on these sorts of licence modifications. This would not be the first Bill to come along to look at how to modify a licence, and we have based that entirely on existing precedents. There is nothing unusual in this process or this structure.

The approach of consultation followed by publication is well precedented, as I said, in other licence modification powers. We think that the amendment proposes an unnecessary additional process. Moreover, the consultation provisions will allow expert voices to input on whether the licence modifications are effective in facilitating investment, which, of course, is exactly the purpose of the clause. I therefore hope that the hon. Gentleman will withdraw the amendment.

--- Later in debate ---

[Dr Whitehead]

I beg to move amendment 9, in clause 6, page 5, line 13, at end insert—

“(ba) the interests of existing and future consumers of electricity in relation to their prospects of recouping their contribution at the conclusion of the construction phase of the project;”.

This amendment requires the Secretary of State to have regard to the interests of electricity consumers in recovering the value of their contribution to the construction of a nuclear power plant.

We have now reached the point where we have the first consideration of the consumer in the Bill, in clause 6(4)(b), dealing with the licence modification arrangements. Hon. Members will note in subsection (4) the things that the Secretary of State must have regard to when exercising the power under subsection (1), subject to what we have just discussed about subsection (2) in terms of the design, construction, commissioning and operation of nuclear energy generation projects.

Subsection (4)(b) says that the Secretary of State must have regard to

“the interests of existing and future consumers of electricity, including their interests in relation to the cost and security of supply of electricity”.

I understand that to mean that the Secretary of State, in modifying licences, particularly in respect of a RAB agreement, must look at the interests of consumers with respect to the cost of electricity and the extent to which it may be produced at a better price as production develops in the years following the adoption of a RAB, and the extent to which security of supply to customers can be maintained.

What is lacking in that list of things that the Secretary of State must have regard to—along with many other things—as far as the consumer is concerned is a recognition that the consumer has an active interest as well as a passive interest in this process. If we are setting out to produce a RAB arrangement that effectively requires a levy on customers at all stages of the process—during development, construction and production—then the consumer surely has rather more of an interest in that process than just the passive interest in price and security that is suggested in subsection (4)(b).

For example, the consumer has a considerable interest in making sure that the cost to them is reasonable at all stages of the process, and that it does not simply set out to milk the consumer for the purpose of sorting out the project regardless of its vicissitudes. The consumer has a particular interest not only in the way that the RAB contract talks about the price of electricity, but in how it addresses the extent to which the consumer’s investment may be recouped as the RAB process comes to its conclusion and goes down its path.

Of course, in that context, the RAB arrangements that we are discussing have, during their latter stages, a two-way process. If the production of electricity goes above the ceiling of the allowable costs limit, then it is expected that the company producing the electricity, because the model is regulated, will restore money to the consumer in one way or another. If its production is under that allowable costs ceiling, however, it will take money from the consumer to allow that process to continue smoothly. Indeed, in the RAB consultation, we had a rather optimistic, smooth little curve down as the process comes to its end. I do not think that will quite be the reality as the RAB process goes on, but it is important.

[Alan Brown]

I share the hon. Gentleman’s concerns about protecting consumers from costs and so on. That is actually why we are against large-scale new nuclear. Can he explain a wee bit more about recouping costs? Recouping costs sounds like getting money back in terms of the asset, which does not make sense. The amendment also mentions recouping contributions

“at the conclusion of the construction phase of the project”.

That is effectively rent on a 60-year contract for the RAB, so I am not sure why it would be at the conclusion of the construction stage.

[Dr Whitehead]

It is at the conclusion of the construction stage because the construction stage gives way to a production stage. That is the point at which electricity is produced, when the customer—I am assuming we can describe the consumer and customer as an entity—or those acting on behalf of the customer can start to think about the extent to which some of that money may come back as a result of the way that production is carried out within the ceiling set for overall RAB programme costs.

There could be circumstances under which, as the RAB process comes to an end, the customer recoups—in lower bills, dividends and so on—a lot of the money that was put in. There will always be excessive production over the allowed costs level, so money will come back to the customer. We will see later in the Bill the methods by which that money might be restored to the customer. Yes, there is a real interest, post the construction phase, in recouping those costs.

A second issue for the consumer is the eventual outcome of the ownership of the plant at the end of the RAB period, as it goes into production. As it is a regulated asset base, by the end of the RAB period, the company that has undertaken the construction and run the production of the plant will have received all the money it should have received through the regulated asset base arrangement, and will have worked successfully as a result of the support that the RAB process provides.

Depending on how many years are set out for the RAB process to take place, if it reaches its end within the working life of the nuclear plant, the question then arises of who owns the nuclear plant at the end of that period. Does the consumer own it at the end of that period? If they do, that is a little bit like a mobile phone contract, whereby the consumer would expect the charges to reduce substantially after paying off the cost of the phone in their contract. Clearly, it is in the interests of customers to have an active involvement not just in spending their money wisely, but in recouping or changing it into a different form as the RAB process sets its course. Indeed, under those circumstances, the Secretary of State might need to consider the length of the RAB contract, and how far it goes into the operating life of the nuclear power station, to carry out the terms of the contract and to consider what arrangements might be made for life at the end of that contract.

I suggest that those are all things that the Secretary of State ought to have regard to over and above the passive involvement of consumers that is set out in subsection (4). That is why we tabled the amendment, which states that the Bill should take account of

“the interests of existing and future consumers of electricity in relation to their prospects of recouping their contribution at the conclusion of the construction phase of the project”.

That is an active consideration in the management of customers’ contracts, not just a passive one where the customer stands by and waits for the money to be deducted from their account to pay for these projects forever. The Secretary of State should have an active view on that in terms of how to get the best value for the customer from the project overall, over and above the best value for the project itself.

--- Later in debate ---

[Greg Hands]

I will try to speed up a little. As we know, the clause allows the Secretary of State to make the necessary licence modifications to apply a RAB model to a designated nuclear company. Subsection (2) clarifies that the effect of a licence modification is that the company would benefit from being able to receive an allowed revenue to construct, build, commission and operate a new nuclear power plant. Subsection (3) requires that the power be exercised only in relation to a nuclear company that is designated in accordance with the provisions of the Bill.

Licence modifications will not take effect unless the nuclear company whose licence has been modified subsequently enters into a revenue collection contract with a revenue collection counterparty, as set out in subsection (9). The modifications will be subject to negotiation between the Government and the nuclear company. It is therefore not possible to describe the exact modifications that would be required; however, subsection (5) highlights possible examples, such as the revenue that a company is allowed to receive, how that revenue is to be calculated, and the kinds of activities that may be undertaken by the company.

When making any modifications to a licence, subsection (4) requires the Secretary of State to take into account both our commitment to decarbonising the power sector and the interests of existing and future consumers with respect to the cost and supply of electricity. Alongside that, and to ensure that any RAB project is financeable, the Secretary of State, when making modifications under the clause, must have regard to the costs incurred in delivering the project and the need for the company to finance that activity. Together, those obligations will ensure that the modification powers are used so that the project contributes to a transition to a low-carbon, low-cost energy system.

As set out in subsection (3), the power to make modifications to a licence will last while the designation for a nuclear company is in effect. That is important to allow the Secretary of State to make modifications to the licence to take into account developments in negotiations and engagements with the financial market. When making any modifications in that period, the Secretary of State will need to continue to take account of the consultation that he undertook with all bodies named in clause 8. In addition to the modification of the designated nuclear company’s licence, subsections (7) and (8) allow him in very limited circumstances to modify the standard conditions of generation licences if necessary. The Secretary of State can make those modifications only if he considers it appropriate for consequential, supplementary or incidental purposes.

[Alan Brown]

I will be brief, because I know that time is getting on, and far be it from me to speak to a clause that both Front Benchers have agreed adds transparency to the Bill—albeit that, being facetious, I would say that doing so is a low benchmark. Subsection (2) clearly states that the licence can be modified only to facilitate

“investment in the design, construction, commissioning and operation of nuclear energy generation projects.”

Given that clause 1 states that a company can be designated only if it already has a generation licence, I would like the Minister to provide more clarity on what could be in a generation licence that prohibits the investment that he says that we are seeking to unlock by modifying it. That is the part that I am not quite clear on.

Clause 6(5) says that it is all about being able to change the revenue mechanism to allow a company to create more money. The Minister rightly said that subsection (4) lists some of the things that need to be considered as part of a licence modification. I ask him to consider that in the light of what I said earlier about clauses 2 and 3, and about there not being enough information in the Bill about what the Minister or Secretary of State should consider. We could also look at that in the round on Report, but we would like a wee bit more information about why the licence would need to be modified to release this so-called investment.

--- Later in debate ---

[Dr Whitehead]

We would be in a sorry place, but that is effectively what the clause appears to state. It is all about the fact that it could produce energy, not that it does produce energy. Those are two potentially different things. The hon. Gentleman is right about the industry standards that set it all up to make sure that energy can be produced. I merely think it might be a good idea if we found out if it did produce that energy.

[Alan Brown]

I do not want to go on for too long but, further to the previous intervention, is it not the case that it can easily be argued that the EPR reactors currently being built are capable of generating electricity, but not one of the two EPRs under construction in Europe have started generating electricity for the grid? They are actually 10 years late, which underlines the point made by the hon. Member for Southampton, Test.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Alan Brown]

Again, I will be brief. I have a few comments on clause 7 stand part. Subsection (2) and paragraph 83 of the explanatory notes confirm that a licence can be modified to allow the cost cap to be exceeded, but also, critically, so that additional revenue can be collected. The Minister spoke about transparency. How can that power be applied transparently? Clause 7 references clause 6(4), but that subsection does not provide enough scrutiny of governance.

I will give an example. What is to stop a nuclear company begging another £1 billion? With the costs of a nuclear project, £1 billion here or there does not make much difference in the overall scheme of things. If the Secretary of State thinks, “I am so worried about security of electricity supply”—that is an argument we keep hearing on nuclear—under clause 6(4)(b), they can then decide, “Yes, this power station is so critical for future energy security, I will just throw more good money after bad.” It is an easy step, and one that could be repeated several times—£1 billion here or there makes no difference.

This Government have already proven to be so pro-nuclear that they signed up to the most expensive power station in the world, Hinkley Point C, and so pro-nuclear that, after market failure, we are here debating this Bill, and, as was said earlier on, they have committed £1.7 billion just to develop Sizewell C to the final investment stage. We know they are so desperate to get Sizewell C over the line for the final investment stage, they are making that the newest, most expensive power station in the world, which we will be paying for for 60 years. So I do not understand how the clause gives protection and transparency for consumers, if costs go up. Invariably, costs will go up. It is unlikely that the risk is going to be carried by the developer. The risk under the RAB model is going to be carried by the consumers.

[Greg Hands]

Clause 7 provides the Secretary of State with the power to modify the allowed revenue of a relevant nuclear company where that is required to complete the construction of the nuclear RAB project.

I stress that this is a narrow power. Subsection (2) makes it clear that it can be exercised only where the expenditure to complete construction is likely to exceed a cap under the licence and to make modifications to the allowed revenue of the company. Subsection (4) means the power can only be used before the completion of construction, the point at which the plant is ready to enter commercial operations. That refers back to our previous debate. That is the right point at which this power ceases to be exercisable. The use of the power is at the discretion of the Secretary of State.

[Alan Brown]

Will the Minister explain how he sees the cap being set? Obviously, on a construction project, there is usually agreed risk sharing and that effectively sets a cap, but presumably, given the way the Minister is talking, there will be even more headroom here. How is that headroom going to be set and how transparent will that be, in terms of understanding what costs have increased to reach the cap?

[Greg Hands]

The financing cap will be set out at the beginning of the project by the Secretary of State. It will be available to be scrutinised. The purpose of the power in the clause relates to what happens in the event that we approach the financing cap.

The clause would have relevance in the very unlikely situation that, during construction, the project is likely to breach its financing cap under a RAB. The financing cap is the point at which investors are no longer required to put money into the project. What happens then? The cap is set at a remote overrun threshold. This means that before committing to a company having a RAB, the Secretary of State should be confident that the prospect of costs hitting that threshold is really very unlikely. Under the RAB licence, mechanics will be in place to incentivise investors to minimise costs and schedule overruns, such as overrun penalties. That will ensure that the breach of the financing cap is a remote risk.

When deciding whether to exercise the powers, subsection (3) means that the Secretary of State will need to have regard to the achievement of carbon targets and the interests of consumers, and whether the company is able to finance its activities. Those are the same considerations as when deciding whether to amend the company’s licence to insert the RAB conditions in clause 6. Given the strategic importance of a new nuclear plant, and the wider considerations, such as our need to secure resilient low-carbon energy, it is more appropriate that such a decision is made by the Secretary of State in this instance.

The Secretary of State is also the most appropriate person to balance the interests of consumers, taxpayers and investors. It is not about putting additional burdens on consumers. The RAB is designed to protect consumers by giving them a more cost-effective nuclear power plant, as shown by the steps that we have taken in the Bill. That includes robust due diligence before the final investment decision to be confident that the project will be effectively managed, incentives on the project in construction, penalties for investors in any overrun scenario, and the option for the Government to step in if the project hits extreme overruns.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Procedure etc relating to modifications under section 6 or 7

[Dr Whitehead]

I beg to move amendment 13, in clause 8, page 8, line 11, leave out from “power” to end of line.

This amendment strengthens the requirement on the Secretary of State to publish details of license modifications.

Ms Fovargue, as there are no amendments or objections to the clauses from this one to the end of part 1, I suggest that it might be possible to dispose of them collectively to get to the end of part 1 this afternoon. The Opposition would have no objection to that.

I will be brief. Amendment 13 simply says that if the Secretary of State is going to publish something, they should get on and publish it. As it stands, the clause states:

“The Secretary of State must publish details of any modifications made under a relevant power as soon as reasonably practicable after they are made.”

That is a weaselly dilution of the “must” at the start of the line—if the Secretary of State must publish details, they should just get on with it. Hon. Members will see that the following subsection states:

“If…the Secretary of State makes a modification…the Authority must…publish the modification.”

That does not have the little weasel phrase at the end, so why is that weasel phrase in subsection (5) and not subsection (6)?

[Alan Brown]

I do not want to be a pain, but does not deleting

“as soon as reasonably practicable after they are made”

make the timescale for the Secretary of State to publish open-ended? In a way, the amendment is not tightening the timescale but leaving it more open-ended.

[Dr Whitehead]

My concern in this clause is that the phrase

“as soon as reasonably practicable”

gives the opportunity for almost limitless delay to publication. If the Secretary of State must publish details of any modifications, he must, and if he does not, he can be called up under the terms of the Bill. If that weasel phrase is in it, however, the delay could last for a long time. I suggest that the amendment tightens it up by saying that it should be published and that is it.

[Alan Brown]

I realise that we are arguing over semantics, but perhaps it should be amended to be “must publish details of any modifications made under a relevant power once that modification has been made” to try to bring absolute clarity that it needs to be published right away.

[Dr Whitehead]

Yes, that might have been a good idea, but unfortunately it is not on the amendment paper this afternoon. My amendment is, so I hope the Minister will consider ensuring that subsections (5) and (6) are consistent, so that both modifications made under both are required to be published, full stop.

Oral Answers to Questions

Alan Brown Excerpts

Tuesday 16th November 2021 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

In the Budget, £1.7 billion was allocated just to develop Sizewell C to a final investment decision. The Government are putting through the Nuclear Energy (Financing) Bill to enter into a 60-year contract for that project, and yet, in terms of tidal stream, there was no Government support whatsoever. Without a ringfenced pot of money, tidal stream will not be able to compete in pot 2, so will the Government urgently reconsider the request for a £71 million pot of ringfenced money?

[Greg Hands]

Since 2003 successive Governments have provided innovation funding of £175 million to wave and tidal sectors, and there has been £80 million since 2010. We are strong supporters of tidal stream. The Prime Minister was explicit from the Dispatch Box yesterday, reiterating his support. What we now need to do is work with the sector to demonstrate cost reductions and the potential for this technology.

Nuclear Energy (Financing) Bill

Alan Brown Excerpts

2nd reading
Wednesday 3rd November 2021 Commons Chamber

[The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)]

I beg to move, That the Bill be now read a Second time.

I want to start by apologising the House for the fact that I will be unable to stay for all of the debate as I am taking the train to Glasgow to be there for energy day at COP and will therefore miss the wind-ups. I have informed Mr Speaker of this, and those on the Opposition Front Bench. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Mid Norfolk (George Freeman), the Minister for Science, Research, and Innovation, will be here for the debate and he will respond for the Government.

Two weeks ago, on 19 October, the Government published their net zero strategy. It is our vision for a decarbonised economy in 2050 and the policies and proposals that will keep us on course to reach net zero emissions through our five-year carbon budget. It is a strategy that puts the UK on a trajectory to meet carbon budget 6, a 78% reduction in emissions compared with 1990 levels by 2035, as the Prime Ministers reminded us earlier today. These kinds of ambitious goals are vital as we host COP26. Integral to achieving carbon budget 6 is our new ambition to fully decarbonise the power sector by 2035. This will mean that the UK is entirely powered by low-carbon electricity, subject to security of supply. Of course our electricity system must be resilient and affordable, as well as low-carbon. It will predominantly be composed of wind and solar but, as last year’s energy White Paper made clear, a low-cost, reliable system means that renewables will be complemented by technologies that provide power when the wind is not blowing or the sun is not shining. Large-scale nuclear power plants are the only proven technology available today that is deployed at scale to provide continuous, reliable and low-carbon electricity. Our electricity system needs nuclear power.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Will the Minister give way?

[Greg Hands]

Of course I will give way. Perhaps the hon. Gentleman could explain why the SNP is so resolutely opposed to continuing the strong nuclear tradition in Scotland.

[Alan Brown]

I will do so later, but the Minister knows nuclear waste is a key issue. On proven technology working alongside renewables, he will be well aware that pumped storage hydro can provide that. Why will the Government not give the go-ahead for Coire Glas in the highlands, which has been progressed by SSE?

[Greg Hands]

The hon. Gentleman is right, and we are looking at that technology, but I stress what I just said about deployment at scale. We need something that can be deployed at scale to provide the bulk of our electricity when the sun is not shining or the wind is not blowing. We are always open-minded on other new technologies, but the most important thing is what can be deployed at scale. The measures in this Bill are critical for ensuring we have the option to bring forward further nuclear capacity.

Twelve of the UK’s 13 current nuclear reactors, representing approximately 85% of our nuclear capacity, are scheduled to close by 2030. Although Hinkley Point C is under construction, additional nuclear is likely to be needed in a low-cost 2050 electricity system. That is why we have committed to bring at least one further large-scale nuclear project to final investment decision by the end of this Parliament, subject to value for money and all relevant approvals.

--- Later in debate ---

[Greg Hands]

The Bill does not change the planning process, but it does change the investment case and the ability to bring in private sector investment, particularly institutional funds, including British pension funds, that are currently put off or find it difficult. It also affects the ability to bring in private institutional investors from overseas—we have seen the difficulties at Wylfa and at Moorside. In that sense, my hon. Friend will find the Bill of great encouragement in respect of future nuclear builds in his constituency.

[Alan Brown]

Will the Minister give way?

[Jonathan Edwards]

Will the Minister give way?

--- Later in debate ---

[Greg Hands]

As I have outlined, the Bill is about nuclear. Creating a more diverse potential finance base is exactly what it is about. It is not biased in favour of one technology vis-à-vis another, but, as a Government, we have been absolutely clear about the important, growing role that nuclear will play. On Hinkley Point C, we think that that was the right model for the decision at that time. I think the hon. Gentleman’s problem is with nuclear as a whole rather than specific problems at a nuclear plant. The United Nations Economic Commission for Europe said:

“International climate objectives will not be met if nuclear power is excluded”.

I think his policy is to exclude nuclear power in its entirety.

Members will be reassured that a project starting construction in 2023 will add only a very small amount to the average dual-fuel household bill during this Parliament—on average less than £1 per month during the full construction phase of the project. I believe that these bill impacts are proportionate, given the benefits that nuclear offers our electricity system. Ultimately, nuclear power will deliver a lower-cost system for consumers compared with reliance on intermittent power sources alone. The RAB model will make new nuclear projects cheaper. Our analysis has shown that using this funding model for a nuclear project could produce a cost saving for consumers of more than £30 billion, compared with funding projects through a contract for difference.

[Alan Brown]

Will the Minister give way?

[Greg Hands]

No, I am going to make more progress.

That saving equates to more than £10 a year for an average domestic dual-fuel bill throughout the life of a nuclear power station, which can operate for 60 years.

The UK has a pioneering history in nuclear energy. We were the first country in the world to set up a civil nuclear programme, back in 1956. There are proud communities—I see many Members who represent them here today—who have been working in the industry for more than 60 years. Creating new nuclear projects will support this important sector and help to level up the UK. The civil nuclear sector is already a major provider of high-value, high-skilled jobs across the entire country. It employs approximately 60,000 people, with nearly 90% of those jobs based outside of London and the south-east. New nuclear projects will be important sources of economic opportunity for the whole country. Hinkley Point C has already created well over 10,000 job opportunities. Future nuclear projects bring with them significant opportunities for training the future nuclear workforce through apprenticeships and training schemes to increase skills.

This legislation will vary in application across the UK. The Government are undertaking close joint work with other stakeholders on the potential options for nuclear at the Wylfa site. The RAB model could play a key role in funding any future project there.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Not for the first time I think I am going to express a minority view in the Chamber, but I am sure everyone will listen carefully and, once I present my arguments, change their minds and agree with our point of view.

The real debate is whether we need new nuclear or not. I intend to spell out why we do not need new nuclear and, therefore, why we do not need the Bill. Before doing so, I want to highlight the UK Government market failures that have led to the Government scrambling to bring forward the Bill.

We know that Hinkley Point C is currently under construction, but it is under construction as the most expensive power station in the world. There are several reasons for that and how it came about. First, successive Governments seem to have developed a groupthink, following lobbying from the nuclear industry, that somehow nuclear is a prerequisite for our future. Then came the rationale that building a suite of new large-scale nuclear power stations would lead to competition and cheaper costs. However, that philosophy was flawed in that there were not enough competitors to start with and then a piecemeal approach was taken by nominally awarding sites to different preferred bidders. For Hinkley Point C, that meant EDF was the only game in town, so there was no competition when negotiating the contract. EDF had already been beset with problems with its EPR prototypes in Finland and France, so it had to be more cautious in its pricing. It is little wonder then that the UK Government ended up with such a bad deal. They have since tried to tell us that the eye-watering strike rate of £92.20 per megawatt hour for a 35-year contract, while the cost of offshore wind dropped to £40 per megawatt hour for just a 15-year concession, meant that the nuclear deal was a good deal.

In a letter last week, the Minister of State, Department for Business, Energy and Industrial Strategy, the right hon. Member for Chelsea and Fulham (Greg Hands), was effectively saying, “By the way, the Hinkley Point C deal was actually rubbish and poor value for taxpayers, so now we have an alternative funding model and we’re bringing that forward.” Interestingly, it was stated in the letter that the new funding model could potentially save the taxpayer £30 billion to £80 billion. How much money do the Government estimate has been wasted on Hinkley? How many billions of pounds are the Government willing to commit bill payers to if they say they can save up to £80 billion? Logic says that hundreds of billions of pounds would have to be spent to be able to argue that there could be a saving of £80 billion. I will happily give way to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Mid Norfolk (George Freeman), if he can tell me how much money that £80 billion saving is estimated on? The right hon. Member for Chelsea and Fulham would not give way, but I am happy to give way if the hon. Gentleman can tell me how much the Government estimate—[Interruption.] I take it that he will not give us a figure. The Minister will not come forward and give a figure. That does not add confidence. The Government are saying the saving could be between £30 billion and £80 billion. That is a huge range and that does not give confidence to the estimating proposals either.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)]

Just to correct the record, it does not at all mean I am not going to answer the hon. Gentleman’s question. It means that I will do it in the usual way, when I wind up at the end of the debate.

[Alan Brown]

I was so hopeful that I was getting an answer there on the hundreds of billions of pounds that are being committed.

Returning to Hinkley Point C, we hear how advanced the project is and how well it is going, but the reality in terms of cost is that it is £4.5 billion over the initial estimates, which is 25% over budget. On progress, the commissioning date for unit one has now been put back to June 2026, instead of the anticipated 2025, but they also admit there is a programme risk of up to 15 months on top of that. That means that it could be September 2027 before unit 1 of Hinkley is operational and unit 2 will then follow a further year behind. So it is realistic to say that Hinkley Point C will not be fully operational until 2027-28, which is 10 years after we were initially told that Hinkley Point C was required to stop the lights going out. Given that the lights have not gone out, that undermines the original case for Hinkley.

We have to bear in mind that the EPR system has still not been shown to be successful. Flamanville in France is expected to start generating to the grid in 2024, 12 years late. Finland’s project has been delayed yet again, until next year, and it is 13 years late. Both have been crippled with spiralling cost increases.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

Further to those costs, we know that the permanent safe disposal of radioactive waste from nuclear power plants has not yet been achieved by any country. A 2018 study from the department of geology at the University of Kansas recently suggested that nuclear waste disposal would be two and a half to four times more expensive than has been estimated. Those costs will be passed on to those who come after us. Is my hon. Friend satisfied that these possibilities have been fully taken into account in the financing model?

[Alan Brown]

It will be no surprise to hear that I have no confidence that the true costs of nuclear waste disposal are actually included. We hear that this is rolled up in the strike rate for Hinkley, but if something happens and EDF goes out of operation, who will pick up the additional costs? It will clearly be the bill payers or the taxpayer. We hear about the fact that nuclear is supposed to be clean energy, but how can it be classed as clean energy when we are burying radioactive waste and having to store it for up to 1,000 years? That, to me, does not mean clean energy.

Taishan in China was held up as an exemplar EPR project when it was commissioned, but it has been offline since June this year due to safety concerns and rod damage. It is clear that the design and construction of EPR nuclear stations has still not been bottomed out properly. As the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), said, a reliance on French state-owned EDF and the Chinese state company China General Nuclear kind of undermines the argument about having sovereign energy security. It makes no sense.

Despite the cost and programme issues at Hinkley, we are told that Sizewell C will somehow be different. There will be cost savings from learning on Hinkley. The design will be replicated, saving more money, but the reality is that the site at Sizewell C is bound to have different ground conditions, different environmental considerations and different logistics and site constraints, which affects methods of working, and that means that we cannot build an exact duplicate station the same way.

Even if savings are realised on Sizewell C compared with Hinkley, what does that mean cost-wise? If Sizewell C saves 25% compared with Hinkley, that is still a capital cost outlay of £18 billion. Surely there are better ways to spend £18 billion. We heard from the right hon. Member for Kingswood (Chris Skidmore) about the number of jobs being created. If I was given £18 billion to £20 billion, I am sure that I could create 30,000 jobs —by the way, that is £730,000-odd a job in capital costs alone. That is not a good return.

On costs, we are told that a new deal signed under the proposed new funding model in the Bill will cost consumers only £1 a month during construction, but if we look at a 10-year construction period for Sizewell C, we see that that means that bill payers in 28 million households will pay £3.4 billion before it is operational. That is a further £3.4 billion in expenditure when that money could be better invested elsewhere.

We still do not know with this Bill what the long-term pay-back options will be. Will there be a further agreement on the strike rate or a minimum floor price on the sale of energy? What length of contract will bill payers be tied into once a RAB model for an agreement is signed off?

What else could we do with that amount of money? We could upgrade all homes to energy performance certificate band C. We could have wave and tidal generation. The UK Government are willing to introduce the Bill and commit hundreds of millions of pounds to nuclear—the Budget has £1.7 billion just for developing nuclear to a negotiation stage—but they will not even ringfence £24 million for wave and tidal in pot 2 of the forthcoming contracts for difference auction. The disparity is clear.

It is time the Government took their blinkers off. It will be a real disgrace if they do not provide a pathway for wave and tidal projects to scale up. Scotland is currently leading the world on the issue; the O2 tidal generator is operational and grid-connected in Orkney. I hope that the Minister will reconsider the request to ringfence a small amount of money in pot 2 of the forthcoming contracts for difference auction.

[Mark Jenkinson]

I am a huge supporter of tidal energy, but is it not the case that nuclear, given its energy density, is the most environmentally friendly and low-carbon technology that we have, while tidal has the potential to significantly damage marine ecosystems? I am a big supporter of tidal energy, but we have to be really careful about where we deploy such things. We have a ready-built, proven technology here—the most environmentally friendly and low-carbon technology that there is.

[Alan Brown]

I completely agree with the hon. Gentleman about nuclear being clean—oh, wait, apart from the radioactive waste that we still do not know what to do with. We will ignore that point, but he has a valid point about the need for clear environmental considerations with respect to where we site any marine project. That should be part of a robust, up-front planning process, working with the likes of Marine Scotland. There are regulatory bodies that have oversight of these projects, so it is important that they be involved in the planning process. I agree with the hon. Gentleman that there is still a huge future for wave and tidal.

[Richard Graham (Gloucester) (Con)]

The hon. Gentleman highlights the value of marine energy in Scotland and elsewhere; he and I are absolutely on the same page on that. Does he agree that one thing it would be very helpful for the Minister to take away is the need to clarify the precise size of the pot that will be available specifically for marine energy in the next contracts for difference auction round, CFD AR4? There is a danger that unless there is a specific pot, the marine energy providers will be rather crowded out by other forms of renewable energy.

[Alan Brown]

I completely agree. I was happy to co-sign the cross-party letter from the all-party parliamentary group on marine energy, which I fully support. I hope that the Minister is listening, because this is a matter that we agree on across parties.

Looking at other technologies that we should be spending money on, I compliment the UK Government on seeing the opportunities that floating offshore wind can bring, but let us start deploying it much more quickly and investing more money, because that is where the real future is. Clearly, the further out to sea the turbines are, the greater the reliability of wind and subsequent generation.

There needs to be much greater investment in carbon capture and storage. The Government need to reverse their disgraceful decision not to have a Scottish cluster as part of their track 1 CCS projects. A Scottish cluster would also deliver hydrogen production, which is vital on the pathway to net zero.

We heard earlier, as we always do, the argument that nuclear is required for when the sun does not shine and the wind does not blow, but as I have tried to point out to the Minister, there is an existing technology that can address that issue: pumped storage hydro, a renewable energy source that utilises surplus grid energy to fill the reservoirs and can then dispatch electricity when required. Pumped storage hydro is the perfect foil for intermittent renewables, rather than big, inflexible nuclear power stations that invariably pump energy to the grid when it is not required. An Imperial College report suggests that there could be system savings of £700 million a year from using pumped storage hydro technology instead of nuclear.

SSE has all the necessary permissions in place, right now, to progress a new pumped storage hydro scheme at Coire Glas in the Highlands. It is progressing the design at its financial risk, and all that it needs is agreement with the Government and a minimum floor price for electricity—not a strike rate and not direct funding, just a minimum guarantee on the sale price of electricity. Then the development can reach the construction stage, and can be commissioned in the same timeframe as Hinkley. I ask the Government to reconsider, and to get round the table with SSE and other developers.

[Mark Jenkinson]

I thank the hon. Gentleman for allowing me to intervene again. I am a big supporter of pumped hydro, which is great for storage, but we cannot neglect the fact that we require a surplus of electricity to pump the water in the first place, up to the point of that storage. It is great to be in control of when we release the water and use the energy, but we have to think about how we get it up there in the first place.

[Alan Brown]

Absolutely. That is my point. This is about utilising spare energy and then filling the reservoirs. That is much more productive than, with nuclear, putting additional electricity into the grid and then making constraint payments to wind farm developers to turn the turbines off. Those turbines could be used to much greater effect for the likes of pumped storage hydro, or generating green hydrogen.

It is clear that there are alternatives to nuclear. The Government have rightly pointed out that the existing nuclear fleet is coming to an end, but they have wrongly concluded that that means we need new nuclear. Dungeness went offline earlier this year, seven years early, because of safety concerns. Hunterston B is about to go offline, and Hinkley Point B will close next summer. Hartlepool and Heysham will follow in 2024. That means that Hinkley Point C will not even replace the lost capacity, and by 2024, 5.3 GW of nuclear capacity will have been lost to the grid.

If the grid can operate successfully without that 5.3 GW of nuclear for three or four years until Hinkley’s 3.3 GW comes on line, that in itself confirms that new nuclear power is not required. In all likelihood, Torness and Heysham 2 will not last until 2030, so all but one of the existing stations will be offline before Hinkley comes online. By not replacing the existing nuclear fleet as it comes to the end of its life, the UK Government are themselves proving that we do not need a nuclear baseload, because the grid can operate without it, unless an energy security crisis arises when all the other stations go offline. The Minister can address that later if he wants.

Although here in the Chamber it is just me saying that we do not need new nuclear, plenty of experts agree. Back in 2015, the then chief executive officer of National Grid, Steve Holliday, said:

“The idea of large power stations for baseload is outdated”.

In the 2019 World Nuclear Industry Status Report, Mycle Schneider, who was the lead author of the report, said that nuclear power

“meets no technical or operational need that low-carbon competitors cannot meet better, cheaper and faster.”

A recent study by Good Energy and the Energy System Catapult demonstrated that carbon emissions from the power sector could be eliminated as early as 2030 without the need to develop new nuclear power. Sarah Darby, associate professor of the energy programme at Oxford University’s Environmental Change Institute, has said:

“Nuclear stations are particularly unsuited to meeting peak demand: they are so expensive to build that it makes no sense to use them only for short periods of time. Even if it were easy to adjust their output flexibly—which it isn’t—there doesn’t appear to be any business case for nuclear, whether large, small, ‘advanced’ or otherwise.”

It is clear that there is not a case for new nuclear—and, as my hon. Friend the Member for Edinburgh North and Leith (Deidre Brock) pointed out earlier, we have yet to address the nuclear waste issue. It will cost £132 billion to deal with the existing nuclear waste legacy. Why do we want to create another waste legacy for future generations to deal with?

So we do not need nuclear, and we do not need this Bill. Even if we consider what it aims to achieve, the fact remains that there is market failure, given that Hitachi has walked away from Wylfa and Oldbury and Toshiba has walked away from Moorside. So there is no competition to drive down cost, and EDF and China General Nuclear are still the only show in town. As the hon. Member for Southampton, Test (Dr Whitehead) asked, while the RAB model may might bring down costs, what protections are there in the event of project overruns?

Clause 2 puts all the powers of negotiation and contract award into the hands of the Secretary of State, and allows the Secretary of State to determine what is value for money. We all know how good the Government are at direct negotiations, so how can they guarantee value for money in a transparent manner?

As I touched on earlier, we have been told for five years that Hinkley is good value for money, but now the Government have come back to the House to say that actually that is not the case and they have a new plan for how to deliver nuclear. I therefore cannot possibly support this Bill, especially as the electorate of Scotland have consistently voted to elect a Government on a “no new nuclear” manifesto. Why should Scottish bill payers be forced to pay for nuclear energy that they do not want or require? This is another democratic deficit for Scotland, especially when so much of our renewable energy is not being supported at the moment and we are stuck with the highest grid charges in Europe. It really is time that Scotland had control of its own energy decisions, but in the meantime I will be proud and pleased to vote against this Bill.

--- Later in debate ---

[Chris Green]

My hon. Friend makes a really important point. The physical security is one aspect, but the cyber-security, including firewalls and other protections, is immensely important to the sector. This energy provision is a key strategic interest and we cannot allow anything to interfere with it, but I am sure that the Minister and the experts in the sector are well aware of those threats.

[Alan Brown]

On security, I presume that the hon. Gentleman shares my concerns about China General Nuclear being involved at Hinkley and still being in the mix for Sizewell C.

[Chris Green]

I am concerned about the strategic national interest, but I think that most people at home would need to have reassurance on this: the security risk of the technical aspects, to which people might be more sensitive, is different from the financial aspects, which is what the Chinese involvement is at the moment. Those are two very different things. However, I do acknowledge the hon. Gentleman’s concerns.

--- Later in debate ---

[Anthony Browne]

I absolutely agree. As I said, we have had nuclear for 70 years and we know that it works. The point I was about to come to, which my hon. Friend touched on earlier, is that the French have 70% of electricity produced by nuclear and they have a very well-established industry. It is not politically controversial at all. They have made it work and made it cost-effective. That is one of the reasons why France has far lower carbon dioxide emissions that we do in the UK. We should change to other technologies. We heard mention of tidal power earlier—yes, absolutely. However, there have been many projects to try to make tidal power work over the past few decades and none of them has yet quite succeeded, although we should still carry on trying.

As I have said many times in this House, the UK has had a really good track record in reducing carbon dioxide emissions, roughly halving them. Our per-capita emissions are now lower than those of many other countries, including green icons such as Denmark and Norway, but France has had lower emissions than us for decades because of nuclear power. I used to live in Belgium and got my electricity bills from France, and they used to have to say where the electricity came from: “nonante-neuf pour cent nucléaire”, which is—in Belgian French, not French French—“99% nuclear power”. That was always a delight for me. Driving around France, nuclear power stations are all over the place. It is not a political issue; people are very comfortable with it.

The environment movement has been very successful in demonising nuclear power beyond any scientific justification. That in part is why UK Governments have been so nervous, and it has meant as a country we have gone from being a world leader in nuclear power and one of the first to introduce it to being a straggler with a semi-clapped-out sector, as we have heard, with all these power plants going out and without much expertise, so that we end up depending on foreign companies and foreign Governments to be able to do anything. We have to build up our capacity again as a country. As we move away from nuclear fuels, we need a strong nuclear sector more than ever.

[Alan Brown]

The hon. Gentleman is talking about demonising nuclear, but is having a £132 billion waste legacy to clean up demonising nuclear, or pointing out a harsh reality?

[Anthony Browne]

I thank the hon. Gentleman for raising that point, which I was going to come to. Clearly nuclear has to be cost-effective throughout the whole lifecycle, and there is a burden of responsibility on the Government to ensure that is the case, although I must admit I do not recognise the £132 billion figure.

As we move away from fossil fuels, we need nuclear power more than we did in the ’50s, ’60s, ’70s when we were developing it. As we start using electricity to heat our homes and power our cars, we need more production capacity that is resilient and secure. The hon. Member for Richmond Park (Sarah Olney) made a point about energy efficiency, and I completely and utterly support that, but as we move away from fossil fuels across other areas of the economy and our lives, the demand for electricity will go up rather than down, whatever we do with efficiency. That is inevitable, so we need to ensure we have more production and more secure production.

The recent spike in gas prices has shown our national vulnerability if we do not have resilient energy suppliers, and we must guard against that happening to electricity suppliers. We cannot risk windless days and dark days leading to blackouts in future. Wind, solar and hydrogen power are wonderful. We have done great in rolling them out—wind power produces more energy than any other source and that is great—but they are not the sole solution. We need every tool in the toolbox. We need to ensure that we can provide the stable, resilient base-load that we will increasingly need as we move away from fossil fuels.

In the various debates I have had about nuclear power over the decades, anti-nuclear campaigners normally pipe up at this point with, “Nuclear power is not a good use of taxpayers’ money.” That is when I know they have largely run out of other arguments. Obviously nuclear has to be value-for-money. I am an economic, fiscal Conservative. We want to go for the best value forms of energy, not the expensive ones. It needs to be financially sustainable, and we need to look at the whole lifecycle costs of nuclear power. Clearly the Government have a duty to do that, and that is what the Bill is about. The Government have to ensure we have the right financial framework to ensure that the nuclear industry can survive and thrive and in the most cost-effective way possible. If companies are to invest multiple billions of pounds to build nuclear reactors, they need to do it in the lowest risk way, otherwise the cost of capital becomes prohibitive and the projects are not viable.

I used to work at Morgan Stanley, the US investment bank, and we had a big infrastructure fund investing in projects around the world—not nuclear, I have to say, but many other different sectors. When assessing new infrastructure investment, we have to factor in many of the risks. There is construction risk: can we build the thing? There is technology risk: if it is a new technology, will it work? There is political risk: what if there is a new Government who change their mind and say no? Then there is demand risk or volume risk: will there be enough demand for the product and will it be at the right price to generate the revenues to pay for the cost of capital being put up front to build it?

The trouble with the previous financing regime is that it did not deal with the first risks and expected companies to bear all those risks up front at cost to themselves. That meant that many companies found they had just too much risk to make the projects viable. It is not surprising that some companies ended up pulling out of nuclear power stations they had been planning to build.

The regulated asset base model that the Bill brings about is a far better model for financing the building of nuclear power stations, because it properly shares construction risk, political risk and technology risk between the public sector, consumers and companies. The RAB model is a completely standard model that has been widely used in other areas of infrastructure for decades and is well understood, as various Members have pointed out. The Government and companies have experience of the RAB model. We know it works well and we know how to make it work well in the interests of both parties. I am delighted that we are on the front foot again with nuclear power as a country. As we progress and improve our expertise as a nation, as we have heard we need to do, nuclear power will get more standardised, easier to build and better value for money. The Government must continue to have courage in their convictions with nuclear power. I fully commend the Bill to the House.

--- Later in debate ---

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

My apologies, Mr Deputy Speaker; I thought that another contributor was waiting to speak before me.

It is a pleasure to wind up the Second Reading debate for the Opposition. Notwithstanding the somewhat overly partisan opening from the Minister of State, who came along, as he often does, with a set of pre-scripted remarks that were in danger of being as old as some of the nuclear plants that are presently being decommissioned, it has been a considered and well-informed debate in the main. I thank each right hon. or hon. Member who has taken part.

I will pick up on three points that have featured prominently. First, as my hon. Friend the Member for Southampton, Test (Dr Whitehead) argued convincingly, although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C; I believe that the hon. Member for Bury North (James Daly) has just conceded that. Sizewell C is a project that EDF has no intention of financing from its own balance sheet and that we know has failed to entice the necessary private investors, as the right hon. Member for Kingswood (Chris Skidmore) mentioned in relation to Moorside and the fact that the current funding model is not fit for purpose.

It is vital that we bear that point in mind as the Bill progresses, because unfortunately for some, and much as the spin might suggest otherwise, it does not herald the dawn of a new nuclear fleet. It is simply a necessary means of resolving the issue of whether Sizewell, the last potential nuclear project that could conceivably begin to generate by the end of this decade, is constructed or not, and—this was referred to by the hon. Member for Morecambe and Lunesdale (David Morris) and, in an intervention, by the hon. Member for Gloucester (Richard Graham)—the issue of whether the cost reductions that will flow from the plant being a clone of Hinkley Point C, and its ability to draw on the skills and workforce associated with that site, are secured.

Several Members, including the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Richmond Park (Sarah Olney), argued that nuclear should not form any part of the UK’s future low-carbon energy mix. We on this side of the House respect their strongly held views on the subject, but we take the view, as does the Committee on Climate Change, that a limited amount of new nuclear is required to achieve the decarbonisation of the UK’s electricity system within the next 14 years, and to meet our longer-term net zero target. Since Sizewell C is the only power station that can now feasibly come online within that timeframe, we want to ensure that it does, in order to provide the necessary amount of firm power to support a predominantly renewable energy mix.

[Alan Brown]

As I pointed out earlier—and the hon. Gentleman is well aware of this—much of the existing nuclear fleet is going offline before Hinkley even comes online. Does that not indicate that the grid could operate safely and we could have energy security without relying on a new nuclear station?

[Matthew Pennycook]

I listened carefully, as I always do, to what the hon. Gentleman said in his speech. I think what he misses is the fact that the demand for electricity will double, so I do not think that his argument about the amount of baseload or firm power that is required necessarily follows.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)]

It is a pleasure to follow the hon. Member for Greenwich and Woolwich (Matthew Pennycook), and I want to thank him and all hon. Members who have spoken in this important debate. We have had more than 15 speeches and a number of important interventions. I also want to thank the right hon. Member for Doncaster North (Edward Miliband) for his constructive approach to this important piece of legislation.

In the seven minutes available to me to wrap up the debate, I want to try to deal with as many of the points that have been made as possible. First, I would like to remind the House of what the Bill really signifies and what it does. The net zero strategy, published earlier this month, sets out our vision for a decarbonised economy by 2050. This will see the power sector fully decarbonised by 2035, with nuclear power playing a key role alongside renewables. As the Prime Minister set out from the Dispatch Box earlier today, he and the Cabinet are putting every effort at COP into delivering that international leadership to that end.

This Bill creates a new funding model for future nuclear projects that will support our transition to a secure, resilient and affordable low-carbon electricity system. The measures in the Bill are critical to ensuring that we have the option to bring forward further nuclear capacity, delivering a system that is lower in cost for consumers than if we relied on intermittent power sources alone. While consumers will contribute to the cost of new nuclear projects during their construction, analysis shows that lowering the cost of financing new nuclear will save roughly £30 billion over the life of this refinancing, compared with relying on existing mechanisms.

It is good to hear that the Opposition will, sensibly, not vote against the Bill tonight. I would be surprised if any Member decided to vote against it—

[Alan Brown]

Will the Minister give way?

[George Freeman]

No, I will not give way. I am under time pressure and I need to deal with all the points that have been raised—[Interruption.] I have at least half an hour of questions to answer, not least from the hon. Member himself.

The Bill will make it easier to attract, and reduce the cost of, capital. However, a number of points have been raised by hon. Members. I pay tribute to my right hon. Friend the Member for Kingswood (Chris Skidmore), who raised the urgency of tackling the downscaling and ending of the existing nuclear fleet, the urgency of getting this new financing in place and the role of nuclear in levelling up in Somerset and elsewhere in the country. My hon. Friend the Member for Gloucester (Richard Graham) powerfully set out the importance of tidal. My hon. Friend the Member for Morecambe and Lunesdale (David Morris) set out the importance of the nuclear cluster in his constituency and the importance of the 24/7 supply of nuclear for reliability, resilience and baseload.

My hon. Friend the Member for Bolton West (Chris Green) highlighted the role of nuclear in developing apprenticeships and skills, and the role of this model in funding fusion. My right hon. Friend the Member for Beckenham (Bob Stewart) and my hon. Friend the Member for Workington (Mark Jenkinson) raised the question of security. My hon. Friend the Member for South Cambridgeshire (Anthony Browne) made a very powerful speech on the failures of the environmental movement, which has put such irrational fear in the way of the nuclear industry, setting us back two decades.

My right hon. Friend the Member for Vale of Glamorgan (Alun Cairns), the former Secretary of State for Wales, powerfully made the case that Wales stands to benefit substantially but we need to get the cost and the risk assessment right. He also highlighted the role of small modular reactors. My right hon. Friend the Member for Clwyd West (Mr Jones) highlighted the role of the Welsh cluster, and my hon. Friend the Member for Waveney (Peter Aldous) highlighted the role of Lowestoft in this industry in tackling coastal regeneration. I should also like to thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie), who has been a formidable campaigner for energy in her constituency and the whole of north Wales, and my hon. Friend the Member for Bury North (James Daly).

Given the extraordinary benefits of this extraordinary sector—60,000 people employed in the UK, with 90% of those jobs not in London and the south-east but across the country; each worker in the nuclear sector contributing an average of £96,000 gross value added to the economy, 73% higher than the rest; and a median salary of approximately £45,000—it is extraordinary why anyone would oppose it, particularly hon. Members from Scotland, which has huge potential. The local economic impacts are huge: look at Hinkley Point and its well over 10,000 job opportunities and more than 3,600 British companies in its supply chain. Overall, the project is on course to create 25,000 jobs.

It is even more extraordinary to hear Scottish nationalist party Members when it is not just Conservatives, not just the nuclear industry and not just Her Majesty’s Opposition who favour it. Sir David Attenborough himself said:

“I do not question the use of nuclear energy as a way of solving our energy problems in the short term”

until we can solve

“the problems of storage and transmission of power.”

The UN Economic Commission for Europe said:

“International climate objectives will not be met if nuclear power is excluded.”

If that is not good enough for SNP and Liberal Democrat Members, Zion Lights, former Extinction Rebellion activist and founder of Nuclear for Net Zero, said:

“renewables alone would require unfeasibly massive amounts of storage”—

which we do not have—

“to keep the lights on… we are in a climate emergency and need all the clean energy we can build right now”.

That includes nuclear.

The GMB, Unite and Prospect trade unions are all strongly in favour. I could not put it better than Charlotte Childs, the GMB national officer:

“Our environment, our economy and our communities need Ministers and MPs to back new nuclear.”

I hope all will tonight. Even a member of the Green party, Josh Stringfellow of the Kingston Green party, said:

“As Greens we trust the science on climate change. As Greens we should also trust the science on nuclear”.

Across the board, there is recognition that we will not hit net zero unless we accelerate our investment in new nuclear. This Bill provides the framework for reducing the cost of capital and increasing our options for private investment, which makes it all the more extraordinary that we have had the opposition we have. The hon. Member for Southampton, Test (Dr Whitehead), in a thoughtful speech, mentioned a decade of dither and delay. I assume he means from 1997 to 2007, when the then Labour Government completely turned their back on the nuclear industry.

Interestingly, the Scottish nationalists like to have their cake and eat it. The hon. Member for Kilmarnock and Loudoun (Alan Brown) is opposed to nuclear power but, of course, Scottish consumers will benefit from being on the grid. They will benefit from the baseload, resilience and security it gives us. I hear loud and clear his call, and the call of others including my hon. Friend the Member for Gloucester, for more investment in tidal. I reassure the House that we are looking at making sure contracts for difference provide strong support for that sector.

The hon. Member for Richmond Park (Sarah Olney), in a thoughtful speech, set out the importance of supporting net zero, which makes it all the more strange that the Liberal Democrats seemingly have an almost religious objection to nuclear energy. I was a Parliamentary Private Secretary in the Department of Energy and Climate Change when both the right hon. Member for Kingston and Surbiton (Ed Davey) and Chris Huhne were Secretary of State, and it was they who put in place the contracts for difference funding mechanism for nuclear, which did not work and which we are now having to sort out. It is easy to oppose with the benefit of hindsight, but the truth is that this is urgent and the Bill provides the basis for it.

The hon. Member for Richmond Park is right that household insulation is important, which is why we provided an additional £1.75 billion in the Budget to upgrade the homes of those on low incomes through the social housing decarbonisation fund and the home upgrade grant. The Government are consulting right now on raising the standards for home insulation in new houses that are built.

A number of Members mentioned wave and tidal, and I am delighted to confirm that not only is this Department funding great science and research in tidal, wave and other renewables but that at the global investment summit last week I visited wind and tidal technologies and we secured nearly £9 billion of private investment in the international renewables sector. We are actively considering whether we should ringfence tidal technologies in the next round of CfD, and it will be eligible under pot 2.

The hon. Member for Kilmarnock and Loudoun challenged the £30 billion cost saving. The full analysis and methodology is set out in the impact assessment accompanying this Bill, and I confirm the current contract ensures that consumers will not pay for any overruns at Hinkley Point C.

The hon. Member for Edinburgh North and Leith (Deidre Brock) mentioned radioactive waste, and the truth is that we have been producing and managing radioactive waste perfectly successfully, without accident or danger to health and safety, for decades. Some 94% of the waste is very low level, and the Government, like previous Governments, have a strong plan for a geological disposal facility.

A number of colleagues raised the issue of national security. I want to make it clear that the Bill is not concerned with making it difficult for any particular country or company to apply. The quality of the bids will be considered in due course by the Secretary of State, with full accountability to Parliament. The Bill does not determine any future nuclear project’s ownership structure; it simply creates a new financing model that broadens our options for new nuclear.

As a package, the legislation before Members will help to end our reliance on overseas developers for finance, which has led to the cancellation of nuclear projects in the UK. Instead, the Bill ensures that our new nuclear power plants can be financed by British pension funds and institutional investors. However, this is not about shutting out individual companies or countries, and the Government have already taken significant powers through the National Security and Investment Act 2021.

A number of colleagues have raised the issue of the scrutiny of risk assessment, and I want to reassure Members that the Secretary of State will be required to act transparently and with full disclosure to the House. I close by thanking Members from across the House for their contributions, highlighting that I hope very much that the Scottish nationalists will not divide the House tonight on something that Scottish voters will benefit from. I strongly believe that this new funding model acts in the interests of the whole of this country, and I commend this Bill to the House.

Question put, That the Bill be now read a Second time.