Baroness Worthington
Main Page: Baroness Worthington (Crossbench - Life peer)Energy Bill
Baroness Worthington Excerpts
Baroness Worthington
“( ) This section shall cease to have effect two years following enactment.”
Baroness Worthington
I think that we are all quite relieved to have reached our last day in Committee on the Energy Bill. I would like to thank everyone who has contributed to our debates, and I thank the Minister for her responses and for all her correspondence, which has been very useful.
Amendment 55ALA is designed to provide an opportunity to discuss an element of the Bill which has not had much attention so far, and that is the financial investment enabling investment contracts. Our amendment would provide a sunset clause to this aspect of the Bill such that it would no longer be part of the mix of policy two years following the legislation being given Royal Assent. We have tabled this as a probing amendment because we wanted to give the Minister an opportunity to provide some background information and clarity on the thinking behind the investment contracts element. When the draft Bill emerged, it was clear that quite a high degree of emphasis was being placed on a provision to enable the Secretary of State to enter into contracts for difference with investors ahead of all the detail of the Bill being worked through. The most significant difference is that this would be a contract between the Secretary of State and a party who wished to develop low-carbon electricity, not an enabling counterbody. The rationale was that such a counterbody would not be in existence, so it would be a direct contract with the Secretary of State.
It is fair to say that there has been considerable interest in these FID-enabling contracts. We were grateful to receive information from the department about the number of applications that have been submitted to date in relation to this element of the Bill, which now total 57. I note that that is just the number of applications that have come from renewable energy. The table we have been given does not indicate the level of interest that has been expressed by CCS or nuclear. Obviously the FID-enabling process is there for all technologies and yet the supporting literature and table show that while we have a lot of information about the renewables aspect, very little is supplied in relation to the other two major categories of low-carbon electricity. Can the Minister provide a bit of background information in relation to those nuclear and CCS projects which may have expressed an interest? Have there been any? If so, how many, and at what level of gigawatts? That information would be very useful and it is pertinent to the discussions around investment contracts.
It was my understanding that the FID-enabling contracts were necessary in order to prevent a hiatus in investment, but that is the least of the problems with regard to the renewables. Renewables have an existing support mechanism and we have already discussed in Committee the transitional arrangements that are in place for that. We have some concerns, but in general there is a transfer and crossover period for renewables that is clear. However, CCS and nuclear will be embarking on a completely new policy of support; I would have thought that those are the projects which need early sight of and access to the contracts, yet we are not being given much detail at all. That strikes me as odd. Perhaps the Minister can give the Committee an update on where we are in relation to being able to arrive at strike prices for those two technologies. It is important that the strike prices are subject to parliamentary scrutiny. We have been given an awful lot of information about renewables, but not about the other two technologies.
It will be increasingly important to treat these three diverse groups of technologies as similarly as we can, given that that is how we will be able to argue that our measures are subject to competition and to comparisons that will enable the least cost and the most sensible decisions. I am sure that that will be of great interest to state aid discussions. One of the main rationales for EMR intervention in the first place was that we were seeking to treat low-carbon electricity providers equally, yet still we seem to be proceeding in a fairly unequal way, with renewables being treated separately from CCS and nuclear. There is a great dearth of information on CCS and nuclear.
The state aid question is important, of course, for this section of the Bill. The rationale is that these investment contracts can be signed. I note with interest that the latest investment contract allocation update from the department says that they will not be signed until March 2014. Previous timetables implied that that would happen in autumn this year and that they would be subject still to state aid clearance. I struggle to see how this whole jigsaw will fit together. How will the investment contracts be able to be assessed for state aid if the remainder of the Bill is not yet worked through? Is it realistic to think that by March 2014 the Secretary of State will enter into contracts before the Bill has been approved or signed off in its detail?
As I have said, this is a probing amendment. It is specifically designed to try to elucidate more information in relation to these contracts. I note that it seems to have gone very quiet on the negotiating front with EDF. I saw today that in a 17-page press release, EDF found no space to mention Hinkley Point in the update on its results. I do not want to be overly pessimistic; however, if this is a really serious negotiation that is of material interest to its investors and people interested in its company, it seems odd that there was no mention of Hinkley Point. Perhaps I may end by asking that we have as much of an update as the Minister is allowed to give on that process of negotiation and when we might have more transparency around its terms. I beg to move.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, I thank the noble Baroness, Lady Worthington, for these amendments, which seek to time limit the provisions on investment contracts. Amendment 55ALA would time limit the provisions in Schedule 2 to the Bill, which relate to investment contracts, to two years following enactment.
The investment contract provisions in the Bill are already time-limited. The Secretary of State can only enter into investment contracts on or before 31 December 2015. However, the remaining provisions set out in Schedule 2 cannot be time-limited, as they provide the Secretary of State with the necessary powers to administer and make payments under investment contracts in the unlikely event that the enduring EMR regime is substantially delayed or does not come into force at all. In the main, the powers mirror those in Chapter 2 of the Bill on contracts for difference.
If payments had to be made under an investment contract, it is likely that they would need to be made for considerably longer than two years, potentially for the duration of the contract. The effect of time-limiting the investment contract provisions through this amendment would be that developers would not have the confidence to take final investment decisions on much needed low-carbon generation projects that might otherwise be delayed or cancelled, as there would no longer be a means to make payments under the contracts. The amendment would therefore negate the purpose of these powers and risk creating the investment hiatus that they are intended to address.
Amendment 55ALC seeks to amend the powers relating to varied investment contracts. A varied investment contract will, in the opinion of the Secretary of State, materially increase the likely cost to consumers of electricity. To ensure transparency, the Bill requires that varied investment contracts are laid before Parliament together with a statement explaining why the variation is appropriate, having regard to the likely cost to consumers.
This amendment would require that varied investment contracts could be laid before Parliament only up to 31 December 2015. There would, therefore, be no possibility to make amendments pursuant to this provision after this date. While it is not the Government’s policy intention to reopen investment contracts for further negotiation once they are agreed, this clause provides for useful flexibility should it be necessary—for example to comply, as the noble Baroness rightly points out, with state aid rules.
Before I ask the noble Baroness to withdraw her amendment, I would like to respond to her question on the number of CCS and nuclear final investment decision applications. Apart from the renewable developers, we are in discussions on the potential investment contract for Hinkley Point C which, if agreed, will build a 3.2 gigawatt nuclear power plant. As the noble Baroness is aware, these hugely sensitive negotiations are ongoing and it would be imprudent of me to go further than that. I can say that, while it may have gone quiet out there, we are currently in very close discussions. A number of CCS developers have approached the department for FID arrangements.
The noble Baroness asked about the timetable changing from autumn 2013 to March 2014. That is because we are using the final strike prices and final contract terms instead of draft pricing and draft terms.
Baroness Worthington
It is helpful to know that there are a number of CCS projects, but a precise number would be even more so if that could be forthcoming in a letter. If the timing is moving in order to have final strike prices, when will we be able to have any commentary on the strike prices for nuclear and CCS? We have nothing. This has to be bounded within a range: there is not an infinite amount of money that can be spent and there has to be a lower limit. Why can we not at least have a range to understand and consider in relation to those two technologies?
Baroness Verma
I accept that the noble Baroness is keen to get the range. I am not in a position to offer that comfort to her at this point but I will take away her question and hope to illuminate the Committee with a fuller, written response. The negotiations on the agreed strike price are very sensitive and I therefore need to go back to the department to see what I can offer to further inform the Committee. Given my reassurances on writing to the noble Baroness on outstanding questions, I hope that she will withdraw her amendment.
Baroness Worthington
My Lords, I am grateful for that response and welcome the Minister’s offer to write with further details. I accept that negotiation is sensitive but at what point does the interest of negotiating with one company override the very real interest of the wider public, the entire sector and all the consumers who will be paying for the outcome of that negotiation? It is odd that, in everything else, the department has provided very welcome levels of detail and yet there is such a degree of silence in this area that it makes people unnecessarily suspicious. There should be no one negotiation that is so sensitive and so overridingly important that we are unable to have a discussion about it. That is skewing things unnecessarily. Let us try and get these technologies on an even keel, get through state aid and move forward. One negotiation should not require this degree of special treatment.
I look forward very much to the Minister’s letter and, on that basis, I am happy to withdraw the amendment.
Baroness Worthington
Baroness Worthington
We tabled Amendment 55ALF in order to consider in detail the provisions in Chapter 5 about conflicts of interest and contingency arrangements in relation to the creation of the counterparty and the role that National Grid will be given in the delivery of many of the features of the electricity market reform proposals.
The amendment would slightly change the current wording of the clause that allows for the Secretary of State to determine the kind of appropriate measures needed to ensure that there is no conflict of interest between National Grid’s commercial enterprises and the role that it has been given under the EMR. I am sure that our amendment is not perfectly worded—it is a probing amendment intended to clarify that this should not be a question of discretion. The current wording makes it clear that the Secretary of State has a certain degree of discretion in deciding whether it would be “necessary or desirable”. That seems slightly too broad. We have tried to encapsulate in our amendment the idea that sufficiency is the important aspect, not desirability, and that there should be absolutely no question but that action will be taken to eliminate conflicts of interest between National Grid’s commercial enterprises and activities and its EMR role.
Along with, I am sure, many other noble Lords, we received a briefing from National Grid on this issue. We obviously recognise and take note of the many measures that National Grid has already put in place to manage conflicts of interest in other parts of its business and its very strong undertaking to continue to operate in a way that has no conflicts of interest. We do not mean to question National Grid’s desires or motives and are sure that it does indeed seek to work in such a way that it has no conflicts of interest—our concern is with the legal basis for the interventions that the Secretary of State will undertake to ensure that.
It is worth considering that the Utilities Act 2000 and the Electricity Act 1989 built in certain provisions that prohibit National Grid from undertaking certain activities. For example, it is not allowed to disclose to a third party any information about individuals or businesses that it receives by virtue of their transmission licence activities. That seems to be the kind of quite tightly drawn provision that might need to be updated in the context of the EMR. Clearly, National Grid will receive information from third parties in relation to the functions that it will carry out under the EMR. It is the body that will be tasked by the Government with signing the investment contracts and the CFDs, which will give it access to information that it would not otherwise receive. I just question whether the provision created under the Utilities Act needs updating to ensure that it applies to not just the transition licence but the new role in the EMR.
It is an example of why we need to get this right and make sure that we have thought of every angle. We should not create a framework in which the Secretary of State can determine whether something is necessary or desirable. It is the word “desirable” that gives us slight cause for concern. We think the actual criteria should be that it is “sufficient” and would like to see explicit mention that there should be no conflict of interest between the system operators’ roles and the new roles they are being given under the EMR. I beg to move.
Baroness Verma
My Lords, I am grateful to the noble Baroness, Lady Worthington, for the amendment. I understand the concerns she has raised regarding the potential for conflicts of interest to arise between National Grid’s existing businesses and its new EMR role.
The Government want to use the best people for the job of delivering electricity market reform. The national system operator within National Grid is well placed to succeed in the task of delivering contracts for difference and the capacity market. The expertise it will bring to the role is the reason we gave that role to the system operator in the first place. For example, there are strong links between the capacity market and the existing range of balancing services that the system operator currently provides.
In addition, the system operator has the relevant technical expertise and the commercial and financial skills to ensure that the capacity market can be delivered in an efficient way—for example, through the modelling of future supply margins and the delivery of auctions. The system operator is also uniquely placed to understand the implications for the electricity system of different technology mixes brought on by contracts for difference, ensuring that we have the highest quality analysis on which to base our decisions on how we support low-carbon technologies.
The matter of conflicts of interest that arise between National Grid’s existing businesses and this new role was identified at an early stage. That is why we have worked closely with the regulator, Ofgem, over the past 18 months to assess thoroughly the potential conflicts that might arise and to consider how best to manage them. The process has involved extensive engagement with stakeholders, including a call for evidence and a public consultation.
In April we published the findings of that joint work with Ofgem, together with our analysis, which included an impact assessment. The work with Ofgem and independent analysts showed that the risk of conflicts being acted on is small, which is why we will be putting proportionate measures in place, using the powers proposed in this clause. That approach retains the valuable synergies with the system operator’s wider role, and gives confidence to those who need it: industry, investors and, I would hope, this House.
Neither the Government nor Ofgem assumes that this is the end of the process. While I am confident that the proposals we have made are up to the task, we will keep close watch over the situation so that industry can be certain that any conflicts, real or potential, can be managed appropriately. The exercise of these powers potentially has significant implications for National Grid’s business and it is not a decision that the Government would take lightly.
We must always keep in mind the factors that make the system operator the best organisation for the job, otherwise we risk losing the benefits of having the system operator perform the EMR delivery role. That is why the measures must and will be targeted and proportionate. We do not want to put in place a disproportionate response to the problem, which would lead to us sacrificing the synergies and all the benefits to consumers that flow from them.
The noble Baroness asked whether the provisions in the Utilities Act 2000 and the Electricity Act 1989 need to be updated in the light of EMR. We are proposing specific powers in this Bill that would enable us to put in place specific measures to protect sensitive information relating to EMR. We have worked with Ofgem to decide how to use those powers and set out the detail publicly. Therefore we do not consider that the changes that the noble Baroness proposes are in fact necessary. I hope that the detailed analysis that we have carried out with Ofgem and our public commitments on how we will tackle these conflicts of interest will mean that the noble Baroness feels content to withdraw the amendment.
Baroness Verma
My Lords, rather than delay the Committee, it would be more prudent to write with a more detailed response. That might satisfy the noble Lord, Lord O’Neill.
Baroness Worthington
I thank the Minister for her response. The amendment was not seeking to add a disproportionate hurdle or to create a lengthy procedure or encumbrance that would prevent us benefiting from the expertise of National Grid. On the contrary, we were trying to give National Grid cover and protection by ensuring that we remove the discretion that is currently in the Bill. It comes down to another example of creating enabling powers that can be broadly interpreted. Obviously, we all trust that future Governments and Ministers will have the best interests of everyone at heart, but it is incumbent on us to make sure we write legislation in such a way that it enshrines that principle.
The purpose of the amendment was simply to question the reason for the degree of discretion and desirability factored into the clause. I would be grateful if the noble Baroness would reflect on that a bit more over the summer. The potential conflicts of interest are wide-ranging. I was grateful that the Minister mentioned the capacity mechanism, a measure which strikes at the heart of what National Grid does. The Committee already knows this, but we currently have two parallel solutions for capacity: the capacity mechanism as proposed in the Bill, which will not come into force until 2018-19, and in the interim period we have National Grid consulting on interim measures, apparently under its own licence initiatives and powers, to address what it considers to be a short-term concern about capacity markets. That already seems to be evidence that this is a highly complex and many-faceted Bill that creates unique circumstances within which the National Grid has to operate.
I am willing to withdraw the amendment, but I would like the Minister to consider the degree of discretion that the Secretary of State has. I beg leave to withdraw the amendment.
Baroness Worthington
My Lords, I support the amendment tabled in the names of the noble Lords, Lord Stephen and Lord Teverson. It is an excellent amendment, and had I been administratively competent enough, I am sure we would have tried to add our name to it because it raises an important aspect of this energy trilemma that we are trying to solve. As the noble Lord, Lord Stephen, eloquently pointed out, it is sadly missing from the Bill. This amendment or a similar amendment would be an excellent addition to it and would help to make it clear that this will be a very important part of the energy system. The reason it belongs in this Bill is because it is a significant move towards supporting the greater use of variable sources of electricity. As has been pointed out by previous speakers, one clear way of addressing the issues and challenges that variability creates is through the use of storage.
It is often—I think wrongly—stated that electricity cannot be stored. That is incorrect. It can be and is stored in many ways. We have heard of some of them today. Dinorwig is an amazing example. It was a government-funded public work, and it has been operated very successfully by a number of private companies. It is a jewel in the crown of our grid and provides fantastic, very fast and very efficient back-up at times of need.
However, there are many other sources. Hydro pump storage is not just in North Wales. There is an awful lot of it in Scotland, where it is a very reliable and well integrated source of renewable energy that has become at one with the environment in which it is located. These are technologies that were built in the 1950s and are still serving us today. They are amazing examples of what renewable energy can achieve. With the renewed interest in storage, a plethora of new approaches is emerging. I read with interest that GE, the wind turbine manufacturer, has launched a turbine that it is calling the “Brilliant” turbine. It is 2.5 megawatts and has a chemical storage facility built in to smooth the curves when wind power is operating or not operating. Obviously, that is a statement from the manufacturers that they can see a commercial advantage to being able to provide storage to help deal with the variability of the energy supply.
The Leighton Buzzard project was mentioned by the noble Lord, Lord Stephen. This is a fascinating and great example of where Britain can really excel. It is fairly straightforward engineering excellence at its best. The challenge is to take electricity at times of high supply using a filtration system to separate out nitrogen and then to cool the nitrogen as a liquid. That is the storage mechanism. Once it is heated and released, it can power a turbine. The great thing about the Leighton Buzzard project is that it is located next to a source of low-grade waste heat, which would otherwise be wasted, and that is helping to improve the efficiency of the system. These are exactly the sort of projects you can rely on the engineers and innovators of Britain to deliver. I really hope that we will see much more of such projects and more support for them.
The chemical project has also been mentioned—but I might have got this the wrong way round. The liquid air project is in Slough, and the chemical project—the 6 megawatt chemical battery, also mentioned by the noble Lord, Lord Stephen—is the one in Leighton Buzzard, so I apologise for the confusion. Nevertheless, those are two examples.
There is also a wide amount of pre-existing distributed storage available on the grid in the form of Economy 7 and storage heating. This is another aspect of storage that has been slightly forgotten. When we had our initial push for nuclear power and found that we had an overabundance of power in the night, when there was not much use for it, a parallel process was introduced to encourage householders to fit storage heaters in order to absorb that excess electricity at times when it was cheap and use it to heat their homes. I do not see why that should be forgotten. I think it has an essential part and could now, with the advances we have made in smart metering and the information that will be available to consumers, provide another form of storage.
Lord Teverson
I will just point out that the noble Baroness is absolutely right about that. It is true that heating water by electricity can still be done. Storage heating has perhaps become less popular—most water heating is by gas—but there is still a substantial element of electrical water heating.
Baroness Worthington
I absolutely agree. If immersion heaters were now plugged into the grid and could be switched on at times of high supply, they would be a great source of storage on the network.
I do not want to take too much time, but I also mention one of my favourite discoveries of this year: the flywheels at Culham. A little-known fact of our grid is that the fusion research unit at Culham demands a huge burst of power in order to work, and it was deemed to be too great a demand to place on the grid. So, in the 1970s, flywheels were installed, which are still operating today, based on the flywheels that operate in Dinorwig. This is another example of fantastic engineering that solves a problem. I am dwelling on all these examples because I think they really show that, as our energy system transforms itself and as we embark on this road with, I hope, a very clear and unswerving purpose, we will solve many of the problems and obstacles that have been cited today as insuperable. Innovation in engineering is something we excel at and I expect that noble Lords will come forward with many more examples.
I turn to the amendment and the requirements to introduce a strategy and set a target. I am at times a little sceptical about the setting of targets, but I am very supportive of the idea of a strategy. Representatives from the industry have told me that they are very confused about how to interact with the Department of Energy and Climate Change. There is not a single point person in the department who really has an overview of this issue, and they have asked if we could raise that issue and ask that it be prioritised and given a home within the department. They tend to feel that they are being passed from side to side, with no-one taking overall responsibility for it. I think that is in part because the definition of “storage” is not quite clear, and this hits at a core issue. Dinorwig is classed as a generator and holds a generating licence, but if you have an Economy 7 storage facility in your home, you are not a generator. Lots of technologies may emerge that are somewhere in between because they are both absorbers and generators of power. They could offer very particular services to the system. Is there a need for a separate licence category for such operators? The Government need to think about this and perhaps come to a conclusion. In the course of writing a strategy, I am sure that this is one of the things that needs to be addressed.
This becomes particularly important in relation to the distribution network operators. We tabled amendments in earlier Committee sittings to tease out the fact that the DNOs are currently preparing the business strategies which they will implement over the next eight years. It is my strongly held belief that the capacity mechanism within this Bill, if it is done correctly, could have a dramatic effect on the introduction of electricity storage, and therefore should have a material impact on the DNO strategies. We have said before that it seems crazy to be signing off on DNO strategies before the detail of this Bill and the capacity mechanism within it is fully worked through.
The Electricity Storage Network, which is the relevant trade association, has pointed out that support for electricity storage is currently available. It is not quite clear from the briefing whether the grant is worth £30 million or £50 million, but it is clear that the Government are making available some tens of millions of pounds for grid-scale demonstrations of storage. That is very welcome indeed. However, the association makes a point which makes sense to me: if you spend that kind of money on the demonstration but you do not have a policy to secure the route to market, that is effectively wasted money. What the sector is really looking for is a clear signal that it will be able to participate in the capacity mechanism and that there will be a way in which it can compete against the other potential sources of capacity that will be brought forward. The problem is that we are dealing with what is essentially quite a new set of technologies which is facing all the challenges that you would associate with that. Potentially, these technologies could be commercially viable, but they are not yet. How can they compete in a capacity market that essentially seeks to be technology neutral and provide one price for all? This is a contradiction in the proposals being made by the Government that really needs to be thought through.
The Bill makes it clear that on the supply side, when it comes to supporting low-carbon electricity supplies, the Government have accepted that we need a tailored strategy for the different technologies. We have differentiated strike prices as well as different treatment for nuclear and renewables—and within the renewables category, there is an enormous difference in approach. The reason for that is that the Government recognise that in bringing forward the low-carbon economy, it is not just a question of the least cost initially because these technologies are at different stages of development. The Government have expressed a desire to bring forward a range of technologies and not simply to compare them all against levelised cost. It is more subtle than that. Those interests may include the ability to establish a supply chain, which might have a material bearing on how we support certain technologies. The Government have gone so far as to create a levy control framework which is split up into the different technologies and potentially into different sizes of technologies, and even into different locations. I say that because on the supply side it is clear that the Government accept that one size fits all will not work and that different policies need to be brought forward in order to help all the various technologies at their different stages of development.
The demand management and reduction side is thrown out of the window and we are told that all technologies must be able to compete on a level playing field. What I would argue is that that simply will not work for those technologies which are less far along the development curve. Those include electricity storage, which has huge potential and will be very important, but at the moment would find it extremely hard to compete against the existing coal-fired generators, with gas that has just been mothballed or, indeed, potentially with new CCGT, although I hope it would be able to compete with it. I would simply state that on the supply side, the Bill recognises the need for differentiated approaches, but when it comes to the demand side we take a completely different approach. I would like to hear from the Minister what the justification is for those very different approaches. I am sure that she will respond by saying “the least cost”, but if it is a question of the least cost, the argument should apply to both sides. There must be something different on demand to which we are applying a different logic, and I would like to hear what it is.
Lord Stephen
I thank my noble friend the Minister. I absolutely agree that there is a lot of very good work going on within the department and some of the other government or public sector organisations providing support in this area that she has referred to. I do not see that as in any way contradictory to the benefits of bringing in this sort of amendment. In being prepared to withdraw it today, I would ask the Government to consider the benefits of introducing an amendment of this kind at a later stage in the consideration of the Bill. This is such a centrally important issue that it merits introduction to the Bill, for the reasons that I have mentioned. I will not go over all those reasons again, but we need to say that it is important and include it in the Bill, in the same way as we think that decarbonisation is important—and a number of us want to include a target in the Bill for decarbonisation.
I was interested in the comment from the noble Baroness, Lady Worthington, that she is not particularly keen on targets, because I thought that the issue of targets was pretty central to the arguments coming from the Opposition Bench in relation to its criticism of the Bill. When I first came into government in Scotland in 1999—and the noble Lord, Lord O’Neill, referred to that—one issue that we had to deal with in coalition negotiations was the enormous number of targets that the Labour Party wanted to introduce into every aspect of government. At that time, there was a general view in Scotland and in my party that we could do with slimming down considerably the number of targets that the new Labour Party—bright-eyed and bushy-tailed in 1997—came surging forward with in its early days of government.
Baroness Worthington
I thank the noble Lord for giving way. I want to clarify that, as I said in my speech at Second Reading and as I have consistently said in Committee, I agree with the setting of outcomes in terms of what the Government want to achieve. However, I am nervous of the micromanagement of individual technologies through ever smaller targets. An editorial in the Financial Times this week asked why we could not have a process where the Government set the objectives and the market chose the least costly and most sensible solution. I have consistently said that is what we should be doing. This Bill is not taking that approach and I fear that another very specific technology target might be the straw that breaks the camel’s back.
Lord Teverson
I point out to the noble Baroness that my right honourable friend the Secretary of State for Energy and Climate Change is saying that we do not need a post-2020 renewables target for precisely that reason.
Baroness Worthington
I am sorry to raise this again as we are sparking up another debate here. There might well be concerns about a specific post-2020 renewables target but it is strange that the Secretary of State should not be more strongly advocating a decarbonisation target as this is necessary. We can carry on with this offline.
Baroness Worthington
“Voltage optimisation
Within 12 months of enactment, the Secretary of State shall publish a strategy to support the development and usage of commercial and domestic voltage optimisation.”
Baroness Worthington
My Lords, this amendment is dissimilar in many respects from the amendment we have just debated. I am not calling for a target, just to be consistent with voltage optimisation. It is a good opportunity for us to have a discussion about the role that voltage optimisation can play in helping to reduce our demand for electricity.
I first heard about voltage optimisation when I was working for Scottish and Southern Energy which was considering internally how it might go about meeting a theoretical demand to reduce the demand of its customers. I was advocating voltage optimisation as a policy that it should embrace and the company was mulling over how it might meet it if it were to happen. The things the company thought about off the top of its head to reduce consumers’ demand were the greater use of thermometers and controls in heating, which was very obvious, and voltage optimisation on the electricity side. I had never heard of it, but the engineers understood the system far better than I could. They knew about voltage optimisation and its potential for knocking down demand in a very certain way.
One of the problems with demand reduction is that it can have a rebound effect. Some energy efficiency measures increase efficiency but do not produce a net reduction in demand. The fridge is a classic example. You get a bigger fridge that may be A++-rated, but its overall demand is greater. Voltage optimisation gave very clear and concrete outcomes.
When I arrived in this House, I came across a group of companies that are building and installing voltage optimisation equipment. They have formed a trade association, which I am very pleased about.
I have tabled this amendment to reiterate some of the benefits of voltage optimisation and to highlight that at the moment it is slightly falling between the cracks and does not receive any support, despite the fact that it can and does reduce electricity bills, has a very short payback period for companies and households that fit it and has the added advantage of stabilising the voltage used in equipment and extending the lifetime of that equipment. If you consider that the voltage coming into a home can fluctuate quite widely, a voltage optimisation unit will hold the voltage at an optimised level so that everything in the house is using that controlled voltage, which can extend the lifetime of white goods and other equipment that works far better on a stable voltage. I should have explained voltage optimisation at the start, but I assume a very high level of understanding among eminent noble Lords here.
The UK can lay claim to being a world leader in this industry. Two of the companies that I have spoken to spun out of universities and have established a UK manufacturing base for this equipment. I am told that the industry is currently contributing around £60 million per annum to the UK economy. It only started in 2000, so it is obviously a sector that is quite young, but growing.
The reason for this amendment is the concern that this technology is currently excluded from existing support mechanisms. It does not qualify for support under the ECO or the Green Deal. It seems that the reason is that it has not been accepted as part of the SAP rating of energy efficiency assessment for homes. The industry says that it has been trying to resolve this for a number of months—in fact, for years—and is feeling very frustrated that the department has not done more to expedite the issue. It seems that there is a slightly negative perception of this technology at the BRE. The industry is doing all it can to address the BRE’s concerns, but is seeking a little more political support from the department to expedite this process and recognise the great benefits that VO can bring.
I shall leave it there because we have already had a lengthy debate on a particular type of technology and this is a similar plea for greater awareness and priority to be given to this solution. There cannot be many things that will so clearly bring down demand, which also have the benefit of reducing customers’ bills, very short payback periods and increasing the lifetime of appliances. It seems to me strange that this is not being supported more by government. I know that the Government use this technology—I think that it has been installed in both No. 10 and DECC’s buildings and in many other public buildings. If it is as good as they say it is—and I am persuaded that it is—we should support it; it is as simple as that.
Obviously, this is a probing amendment, but I look forward to hearing reassurance from the Minister that voltage optimisation is an industry which the Government wish to support, and that she will address the fact that currently it falls outside all the support mechanisms. I beg to move.
Baroness Verma
My Lords, I am grateful to the noble Baroness, Lady Worthington, for the amendment. Over the past few months, a number of questions on voltage optimisation have been raised in this House and the other place. This is the result of having an industry that is passionate about its product and its estimates of potential savings. The Government, however, have to look at this objectively and consider the evidence of performance. I am not sure whether my noble friend Lord Deben was here during our previous debate but it demonstrated that the Government look at smaller projects. Perhaps my noble friend would look at Hansard to see how we are already supporting some smaller projects.
Voltage optimisation is a piece of electrical technology that could potentially reduce the energy consumption of household appliances and industrial machinery by lowering the supply voltage. Manufacturers of voltage optimisation devices have asked for recognition of this potential to save energy through its adoption in government-sponsored schemes, including the Green Deal, which the noble Baroness, Lady Worthington, mentioned. The Green Deal is an example of how a government strategy has been introduced that encourages householders and businesses to invest in technology, as long as it has a measurable and verifiable energy saving and can be recommended for a given building. These criteria are important to ensure that we realise real energy savings and ensure good value for money to consumers.
There is an established process for admitting new technology into the Green Deal, which entails the industry submitting its evidence to the Government’s contractor for entry to the standard assessment procedure, which is the tool for determining the energy efficiency of domestic buildings. In the case of voltage optimisation, this evidence has been reviewed by BRE, and its report has confirmed that there was a saving from the installation of voltage optimisation in some of the properties tested. In all these instances, however, part of this saving was found to result from a reduction in the level of service provided to householders—for example, by making lights dimmer. This cannot be counted as a real energy efficiency saving.
The report also highlighted further reductions in the estimated savings from voltage optimisation arising from the impact that EU directives are having on the energy efficiency of household appliances. The effect is that appliances are becoming more tolerant to, and efficient at, working within a range of supply voltages. A realistic projection of the likely take-up of modern appliances reveals that the potential saving from voltage optimisation will reduce each year, such that by 2020 the saving is likely to reduce to zero in a typical home and then become negative in later years. This is due to the voltage optimisation unit’s own power consumption.
In the commercial sector, it is more difficult to make generalisations about the efficacy of voltage optimisation due to the wide range of electrical plant that could be in use. However, this sector, too, is subject to improvements in the energy efficiency of electrical plant due to EU directives, which will reduce the savings from voltage optimisation. It is against this backdrop of evidence that the Government cannot commit to supporting voltage optimisation. There already exists a strategy within the Green Deal that allows industry to get its technology recognised and adopted, subject to it meeting key criteria. If the evidence for voltage optimisation were to change, then we could reconsider whether the market forces found within the Green Deal were sufficient to encourage its uptake.
I should also like to touch on the scale of savings that the noble Baroness believes will be made with voltage optimisation. We found that the indicative costs and savings were as follows: voltage optimisation units could cost around £300 plus the cost of installation but may save, on average, only £2 per annum. It has been suggested that by 2020 the units will use more energy than they save and will therefore have to be removed at further cost. This is evidence provided by the industry to the BRE, and the organisation Which? agrees with DECC about this. Given that, I hope that the noble Baroness is reassured that we are taking every possible opportunity to look at new entrants, and that on that basis she will withdraw her amendment.
Baroness Worthington
My Lords, I am grateful to the noble Baroness for those comments. What they serve to do is illustrate quite how closed the department is to this technology. If it was true that there was a saving of only £2 on an investment of £300, no one in their right mind would develop, manufacture and install it, and yet we have an industry that is doing so. Not only that, it is a British industry which is manufacturing in the UK.
I am grateful to the noble Lord, Lord Deben, for his intervention to say that small things which add up may not generate headlines, but actually they can generate headlines when it is a British-based industry creating British jobs and which can go on to export its technology around the world, leading to a positive balance of trade. Each individual bit of technology may not make the headlines, but the investment in UK skills, infrastructure and jobs should do so. Obviously the technical issues that have been quoted will, I am sure, be contested by the industry. All I am asking is that the department should not start out with a negative predisposition, it should look at the evidence in the round and listen to the industry.
Baroness Verma
My Lords, as I have said, if the initial criteria can be met, of course we will reconsider everything. The point is that the industry has to be able to provide benefits in the same way as those who are already involved in the Green Deal.
Baroness Worthington
I take the point, but what the industry is feeding back to me is that it is finding the process to be incredibly slow and time-consuming. People are pushing against an attitude of resistance which starts out by considering what they say to be false. However, that does not add up because some quite hard-nosed commercial operators such as Tesco have installed this equipment and are finding that it saves them money. If that is the case, some support should be offered. It is probably true that the quantum of savings and investment is better in larger-scale uses, but it cannot be true that this is an industry based on a fallacy. I refuse to believe that people would put their hard-earned money, hours and initiative into something which is of no benefit. I recognise that there is a procedure that needs to be gone through, but I hope that it can be opened up to scrutiny and perhaps a conclusion can be reached rather more swiftly than is the case at the moment.
The question of loss of service will be barely noticeable. People have said that voltage optimisation does not work because the lights are so dim that you cannot read a book. However, it is not on that scale at all. It is probably true that most households would not notice it. We probably enjoy a surfeit of lighting because we have all installed lots of halogen lighting in recent years. The loss of service is a contestable issue.
Energy efficiency and demand reduction comes with all sorts of potential loopholes and problems. I go back to what I said about fridges. The Government have been perfectly happy to hand out eco-credits, or whatever they were before they were called that, for the installation of appliances, but there is no requirement that those appliances should contribute to a net reduction in demand. They simply have to be efficient. As I have said, a larger and more efficient fridge, which is what the current trend is moving towards, uses more energy than a smaller, less efficient fridge. There is an inconsistency here. I know for a fact that when the light bulbs credits were available, we were handing out support to people who were simply putting those light bulbs into the cupboard under the sink. It is slightly unfair on the part of the Government to apply incredibly tight and overly restrictive criteria to a technology which I do believe is of benefit while not recognising that great leniencies have been shown towards other technologies in the past. I am not saying that we should go back to that but there is an inconsistency here.
I hope that this process will resolve itself and am sure that the industry will be keen to engage with the department to answer the concerns that have been reiterated here today. I am pleased to withdraw the amendment at this time.
Viscount Hanworth
Throughout the Committee’s debates, one vital element has been barely mentioned—the future of Britain’s nuclear energy. Without the prospect of major investment in nuclear energy, the nation’s energy policy makes no sense and the Energy Bill is virtually meaningless. The lack of debate about Britain’s nuclear programme has been a reflection of its uncertainty. The Government are still in protracted negotiations with the French state-owned monopoly EDF—Électricité de France—which in reality represents, at present, the only means of achieving new investment in nuclear plant. For reasons of political ideology, allied to fiscal anxieties, the Government are loath to finance the investment. They are relying on EDF to raise the necessary funds from the financial markets, which are currently in a parlous state. The company, in turn, sees an opportunity to recoup some of its recent losses in projects elsewhere at the expense of the British taxpayer. It can look to the examples of foreign national rail companies, which are recouping their losses by adopting rail franchises in Britain. It hopes that it can follow suit.
With such a prospect in view, one might expect greater eagerness on the part of the company to strike a deal. In a previous debate on the subject of Britain’s nuclear programme, one of my colleagues voiced the opinion that our Government were in a strong negotiating position and that they should therefore stand their ground. That is a misjudgment. EDF has other prospects in view, in China in particular, and the scale of those Chinese projects will far exceed anything that is on offer in Britain. Moreover, the company’s expenditure in Britain to date in connection with the prospective Hinkley C nuclear power station is no guarantee of their commitment.
According to an economist’s nostrum, bygones should be bygones, while according to an alternative version of the dictum, one should not throw good money after bad. The Government are therefore advised to have a properly conceived and well publicised plan—a plan B, as it is usually described—to meet the eventuality of a breakdown in the negotiations. There is a strong suspicion that the Government have a plan B, albeit a covert one, given that an influential faction within the Government appears to believe that Britain’s impending energy deficit can be overcome by a dash for gas that would rely on supplies of gas that could be magicked out of the ground beneath our feet.
We have been feeling the effects of the Government’s schizophrenic attitude throughout the debate in Committee on the Energy Bill. The schizophrenia is not unique to Britain but has been severely affecting Germany’s energy policy, which accounts for the fact that the German energy companies that originally intended to bid for nuclear contracts here have withdrawn, The nuclear schizophrenia has also made some inroads into the policies of the French Government.
In this country, we are already seeing strong opposition to the prospect of fracturing the ground in order to extract gas. The short-tem expedient of relying on natural gas to power our generating stations would be in utter contradiction to the avowed intention of decarbonising our energy supplies.
A further reason for the Government’s reliance on foreign utilities to realise their nuclear ambitions is the attenuated state of our nuclear industry. A recent report by the Science and Technology Committee of the House of Lords bore witness to this state of affairs. It recommended that drastic action should be taken to revive the industry and foster its research and development. The consequence of the report was flurry of activity that gave rise to a cluster of government reports centred on the so-called Beddington report that reviewed the civil nuclear research and development landscape in the UK.
Some of us have recently witnessed a resurgence in the optimism of the proponents of Britain’s nuclear industry. There is a strengthening feeling that the time is right for a nuclear renaissance. There are outstanding technical opportunities to be grasped for a generation of nuclear reactors that will succeed the reactors currently being built around the world.
Current reactors are conventional uranium reactors, mainly of the pressurised water variety, which follow the designs of the majority of the original civil reactors, albeit that nowadays they have greatly enhanced safety. There is, however, strengthening conviction that the succeeding reactors should take a new route that proceeds from a design that was realised in prototype form almost at the inception of the civil nuclear age. This is the thorium-based molten salt reactor. It has the signal advantage of using abundant fertile thorium fuel in place of fissile uranium fuel. In contrast to a uranium reactor, a thorium reactor will generate very little of the problematic wastes that afflict conventional reactors. It is also endowed with passive safety, which is to say that a malfunction leading to overheating the reactor would lead to its automatic shutdown. The reason why such a design was not adopted at the beginning of the nuclear age is that the reactor has one signal disadvantage which today is one of its major advantages —it fails to produce weapons-grade plutonium.
Now is not the occasion to describe the technology in detail. However, some Members of this House are very well apprised of the details. They constitute the All-Party Parliamentary Group on Thorium Energy, which is closely allied to the Weinberg Foundation. The foundation has a mission to expound the virtues of thorium technologies as well as to support nuclear technology and nuclear power in general. Those who are interested or curious should visit the websites of the APPG and of the Weinberg Foundation, which contain a wealth of information and are readily accessible.
There are other reactor designs we should also be considering, including fast breeder reactors. Notwithstanding some negative anti-nuclear propaganda that was aimed at them, fast breeders are eminently practical devices. The PRISM fast breeder reactor of the GE Hitachi company has been proposed to our Nuclear Decommissioning Authority as a way of profitably burning our stock of 120 tonnes of plutonium that resides at Sellafield. The authority has been given the task of recommending the best way to dispose of the stockpile, which was once regarded as a menace. Now it is being seen as a valuable nuclear resource which could power efficient and cost-effective ways of meeting our electricity demand.
Originally, it was proposed to bury the plutonium waste. Then it was thought that it could usefully be converted into a mixed oxide fuel for burning in conventional reactors. The emphasis appears to have shifted in favour of either the PRISM fast breeder as a means of burning the plutonium or the alternative Canadian CANDU reactor, which might be described as a slow breeder. It is because of this shift of emphasis, which implies a widening of the discretion of the NDA, that I believe that its original terms of reference, which were set out in the Energy Act 2004, need to be modified.
In 1954, the American physicist, Lewis Strauss, predicted that atomic energy would eventually make electricity “too cheap to meter”. That is the correct attribution of the quotation. He may have had in mind fast breeder reactors, which effectively create their own fuel, or he may have been thinking of power generation by hydrogen fusion. Either way, his vision, or something close to it, is still in prospect. We might therefore ask why, after the rapid progress at the start, the goal is still so distant. There are several answers to this question. One of them points to the nuclear phobia associated with nuclear weaponry, which has been exacerbated by nuclear accidents. However, the nuclear accident at Fukushima, which has created a major impediment, has little bearing on the question of the safety of a new generation of reactors.
There is also, in this country at least, the effects of a failure of the technological courage that once characterised the nation which we urgently need to recover. The effect of the demise of the scientific Civil Service has been experienced throughout the course of our deliberations in this Committee. The bright young people of DECC do not have the resources or the skills to deal competently with the complex matters that we have been considering. They have had to rely extensively on outside consultants. I hope that this will change in the near future. That is no criticism of them; it is a criticism of the circumstances in which they find themselves. I hope, too, that the injunction in my amendment that the Secretary of State should report to Parliament on an annual basis to give an account of his activities in relation to nuclear technology will provide some stimulus and will compel his to grapple with these issues.
I conclude by mentioning an article in the Engineer of 5 October 1956, the eve of the opening of the Calder Hall power station, Britain’s first nuclear power station. The article recounts that it took three and a half years from conception of the project to its realisation. This is the time that will have been spent in negotiations with EDF regarding the proposed Hinkley Point C reactor. The contrast with the snail’s pace at which we proceed nowadays is astonishing. The glory days of the Atomic Energy Research Establishment at Harwell and of the establishment at Sellafield—or Windscale, or whatever you care to call the place—are long since gone, but there is still an opportunity to recover some of the spirit of those times. I beg to move.
Baroness Worthington
My Lords, I will briefly speak to this amendment. I declare an interest as a patron—unremunerated—of the Weinberg Foundation. I also helped to establish the all-party parliamentary group to which my noble friend Lord Hanworth referred. I will not wax lyrical about the benefits of thorium and closed-cycle breeder reactors because I think we are all getting a little tired now as we are very near the end, but I understand the sentiment behind this amendment. I am particularly interested in the latter part of it, which requires the Government to report on,
“any necessary changes to the legal remit of the NDA”.
The reason why I am interested in that is that we have an opportunity here, in considering what we do with our plutonium stocks, to mark a new era in nuclear fission. That shift from seeing the plutonium as a liability that is just costing us money—which it is at the moment, to be honest—to seeing it as an asset that can be exploited to generate low-carbon electricity is, I think, just upon us. Soon it will be there, but we are not quite there yet.
My fear is that there is, quite understandably, a high degree of conservatism—with a small C—in the industry. There is a tendency to stick with what you know and not to do anything risky or to look beyond your immediate priority. The NDA does an amazing job of managing the process of decommissioning our existing nuclear sites, and I just hope that, when it considers what to do next with the plutonium stocks, it will consider in the round and will not be encumbered by a preponderance of doing only what it knows best and sticking to what it has seen previously. If it does that, I fear that once again we will be building a very expensive MOX fabrication plant, for which there will be probably no known customers by the time it is built. Certainly, the PWRs that are being built by AREVA and EDF will not wish to take it. It is much better for them to use newly fabricated fuel while it is available. That will be the “do nothing”, “stick to the plan”, “keep going as we are” strategy.
I am delighted that, in addition to those, new ways of approaching this problem have now been put forward by different industry representatives. My noble friend Lord Hanworth mentioned the PRISM reactor, GE Hitachi’s breeder reactor and the CANDU reactor from Canada. There has been quite a lot in the media about the PRISM reactor, but much less about the CANDU reactor, which is potentially an excellent solution. CANDU reactors are very flexible, are a tried and tested technology developed over many years by the Canadians, and have a very big investment arm behind them. It is a very viable project. There you get the advantage of building not just a fuel disposition solution but a reactor to provide clean energy. Given the precarious—or perhaps protracted—negotiations with EDF over Hinkley, it is very clear that we need to have a plan B. If we just switch our frame of reference to consider the plutonium stocks as an asset and then exploit them to maximise the production of electricity and minimise the production of waste, it will point us to a novel solution that would open up great benefits to the UK. I hope that the department, in the advice that it gives to the NDA, will consider this in the round and consider whether we need, perhaps, to rethink the remit of the NDA.
Lord O'Neill of Clackmannan
It is no longer for political reasons. Proliferation arguments have been set aside for a long time. The Koreans would not be knocking their socks off to try and do this if there was a technology they thought was good enough lying there untouched.
We have to be realistic. There is no question that I am an enthusiast for nuclear power but I also live on planet Earth. This planet is governed by rules of economics which the noble Viscount probably knows more about than I do. These technologies are, to a large extent, not proven in a commercial context for the generation of electricity. There are arguments about whether or not you should be using plutonium and how it can be dealt with. These are understandable but they are yesterday’s arguments. Today’s concern is producing reactors which can do the job at a reasonable price, efficiently and safely. At the moment, these criteria have not been met. If they had, the Japanese and Koreans would have the full-blown fast breeder on the table.
We know that there have been these things. There is a case for thorium but, as I understand it, the reactor in India produces 40 megawatts of power at the moment and it has quite a way to go. Some years ago I was fortunate to host a conference when a group of Indian technologists came over and described their work. It was fascinating but it was still small scale: I could compare it to carbon capture and storage. An enthusiast will tell me that somewhere in the world there is carbon capture and storage on a big scale but nobody has yet been able to find a way of developing it in an economically efficient manner.
Within 10 to 15 years we will probably have this kind of thing. Is Britain in a position to either contribute to this process or properly benefit from it? This is where the Science and Technology Committee report was highly critical of Government for not taking this seriously enough, over a number of years; this was not a coalition-specific charge. The previous Government, when they woke up to the requirement to embrace nuclear, understandably did a number of commendable things in terms of training and widening the opportunities for nuclear to be part of university engineering qualifications. Something like 13 university courses across the UK offer that, which is an achievement which is down to both Governments’ active encouragement. However, we still have a long way to go. We have a national laboratory at Sellafield which is not getting the funding it merits. This was the view of the Science and Technology Committee. Professor MacKay, the scientific adviser to DECC, who was before the committee last week but we have yet to get Michael Fallon, the Minister responsible, who will come before us after the recess.
Without getting too specific or hung up on particular technologies within the nuclear framework, it is essential that if we are going to take advantage of the new technologies as they come through we have got to have trained, capable people to do that. At the moment, I am not certain that the Government are giving it the highest priority and that is what this debate should be about. We could go through the specifics of Select Committee reports but that is not productive. If we are going to have this technology it is not a once-and-for-all thing. It is not like combined cycle gas plants which just need a little tweaking here and there. There are possibilities for bigger changes but, in order to invest in the right and most appropriate one, we must have a skilled labour force and institutions and research establishments capable of dealing with that. As someone hinted, we need to have an open-mindedness in the industry which, at times, it does not have—because they are very much companies wedded to particular technologies, as EDF is. It is just unfortunate in some respects that the company that is first to the starting line is the one that in the European context uses the least reliable technology in terms of construction, and probably the most expensive to run. If we get a strike price, as we will eventually, it will have to be set in such a way that it does not provide the more efficient and perhaps cheaper technologies with a chequebook to make fabulous amounts of money out of. I realise that that is the predicament that the Government have, but we must not just keep saying, “We don’t have a UK capability—we’re dependent on foreign countries”. The technical changes that will come through in the medium term will be such that it would be a tragedy if we repeated the failure of the 1980s, the 1990s and the noughties in terms of getting the proper people and technical capabilities.
We do make reactors in the United Kingdom; we make them for our nuclear submarines, and they are made by Rolls Royce. If a proper programme was developed, one would imagine that Rolls Royce would be interested in getting into the new generation of nuclear technologies. There are companies within the United Kingdom that have the capability to take advantage of this, but they need encouragement from government more than anybody else.
Baroness Worthington
On the question of what the UK can contribute, the noble Lord is absolutely right that Rolls Royce is already involved here in reactor design and manufacture. That company is sponsoring a student in the Dalton Research Institute in Manchester, looking at a small modular reactor based on a thorium fuel cycle; it is looking at different reactor designs, including molten salts. So it is here. One example of how a small amount of money can have a big effect is the $10 million grant given by the Department of Energy in America to a number of universities, plus the Oak Ridge National Laboratory, to look at molten salt-cooled pebble-bed reactors. That funding programme enabled them to leverage into the Chinese nuclear reactor research programme, such that the Chinese changed direction and are now collaborating in work on a molten salt-cooled pebble-bed reactor using thorium. I use that as an illustration that you do not have to build everything yourself and spend hundreds of millions; you can have a highly leveraged impact if you are smart about your R&D choices and build on your existing strengths.
One great thing about the all-party parliamentary group has been exposure to an increasing number of scientists in the UK who are working on thorium and molten salts—and in combination. It is true that Sellafield and the National Nuclear Laboratory, by being commercial, have to go out and seek funding from the existing incumbents in the market. Therefore, they do not have the luxury of being able to horizon scan or think slightly more outside the box, because they are continually looking for funding. If more funding were provided by government and we had a genuine R&D for nuclear fusion strategy, the NNL would be an absolute asset in this search for the most sustainable forms of nuclear power. They are the ones working with Thor Energy, fabricating solid fuel thorium rods today that are being tested in the Halden reactor. So there is plenty to be very proud of and to build on in the UK.
Baroness Verma
My Lords, Amendment 55F from the noble Viscount, Lord Hanworth, provides me with an opportunity to outline what the Government are already doing to better co-ordinate and develop research and development in nuclear technology.
The Government welcomed the Science and Technology Committee’s excellent 2011 report on Nuclear Research and Development Capabilities in the UK, and in responding to it we committed to undertake a programme of work designed in the simplest terms to assess where the UK was in terms of nuclear R&D, where we and the industry believe the sector could be by 2050, and how to get there. The work under this programme completed around the beginning of this year and went on to form the basis for the development of the nuclear industrial strategy. The strategy was published alongside the outputs from our R&D work in March.
This package of work highlights how essential research and development will remain in ensuring that nuclear power can play its role in the current and future energy mix while allowing us to continue to deal safely and securely with the legacy of our nuclear past. The strategy was clear that the co-ordination and development of nuclear R&D needs to be taken forward in collaboration between industry, academia and public bodies. In doing so, we aim to maximise the use of public and private resources and provide a level of harmonisation between industry’s commercial aspirations and maintaining energy options for the UK’s future growth. As such, we believe that it is unnecessary and even counterproductive to put a legislative requirement on the Government part of this larger collaboration when we have already committed to moving forward together. We recognise that while R&D on advanced fission technologies and alternative fuel cycles is important, it is just part of the wider whole that includes essential work on decommissioning and long-term waste management.
On the management of the UK’s plutonium stockpile, all the options being considered involve the spending of public money, and a key driver will be ensuring best value for taxpayers. Following a public consultation on long-term plutonium management, the Government have concluded that for nuclear security reasons the preferred policy for managing the vast majority of UK civil separated plutonium is reuse, and that plutonium should be converted to mixed oxide fuel for use in civil nuclear reactors. The Government’s expectation is that at current uranium prices the value of the fuel generated will be significantly less than the cost of its manufacture; in other words, for the foreseeable future, the manufacture of MOX is primarily a route for consuming plutonium stocks rather than a commercial operation in its own right. However, the Government remain open to any alternative proposals that offer better value to the taxpayer, and the Nuclear Decommissioning Authority continues to work on an assessment of both the CANDU and PRISM technologies, the use of either of which would involve the use of advanced reactors and new fuel forms.
I turn now to the reporting requirement to Parliament that is set out in the amendment. The nuclear industrial strategy sets out our intention to create a co-ordination structure across the UK nuclear R&D landscape, including the formation of the Nuclear Innovation and Research Advisory Board with its own expert secretariat. We envisage that this body will be in place by the end of the year. Part of its remit will be to provide publicly available progress reports about the strategy and the pathways in the road map, and comment on any divergence from these. This will provide an independent report that will be available to Ministers, the public and Parliament, which will be wider ranging and more detailed than what is proposed in the amendment.
I shall touch on a couple of points raised by the noble Baroness, Lady Worthington, on the remit of the Nuclear Decommissioning Authority. We believe that it plays an essential role in ensuring that the historic civil nuclear legacy sites are decommissioned safely, securely, cost-effectively and in ways that protect the environment. As we set out in the Government response to the committee’s report, we would have serious concerns about changing the authority’s remit or reallocating essential resources from it because we do not want to dilute its ability to focus on this critical mission. It is also worth noting that over the past five years, the NDA estate has itself contributed more than £544 million to R&D activities, with an annual spend of between 3% and 5% of its overall budget.
The noble Lord, Lord O’Neill, and the noble Viscount, Lord Hanworth, both asked why we are not using fast breeder reactors in the UK, and I think that the noble Viscount said that we had already done so. Dounreay used fast breeder reactors, but we found them to be commercially not viable. It was generating less than 50% at the time and was also a prototype, so there was some reasoning behind that decision.
I hope that I am able to reassure the noble Viscount, Lord Hanworth, that the Government are taking the issue of nuclear research and development very seriously and are working in partnership with experts from a variety of sectors. On that basis, I hope that the noble Viscount will withdraw his amendment.
Baroness Worthington
Before the Minister sits down, I have a question about one key phrase that was used. The noble Baroness talked about value for taxpayers. However, I was trying to communicate that the Bill will introduce considerable extra costs for consumers. What I am trying to get at is that taxpayers and consumers are one and the same—we are all taxpayers and all consumers of electricity. If you focus purely on the disposition of plutonium as something completely separate that the public purse has to fund, and argue that we just spend money on what costs the least, you are missing the bigger picture. As a citizen, I am both a consumer and a taxpayer, and will be paying for nuclear projects as a consumer. I would like to see a coherent strategy that says, “Here is a solution that gives two outcomes. We get rid of plutonium and we have low-cost electricity, which saves consumers money”. I just want to test that.
Baroness Verma
Absolutely—as I alluded to earlier, we are looking at proposals from both CANDU and PRISM. We have not put them to one side but are looking at them seriously. In the bigger context, it has to be about value for money as well as doing all the things that the noble Baroness and I would want to see.