Nuclear Energy (Financing) Bill

Debate between Lord Callanan and Baroness Wilcox of Newport

Committee stage
Tuesday 8th March 2022 Grand Committee

[Baroness Wilcox of Newport (Lab)]

I have started so I will finish. Amendment 10 would require the Secretary of State to gain assurances about the delivery of a project before designating a nuclear company to undertake it. We hope that a designated nuclear company will not fail and that projects will be delivered without a hitch, but experience teaches us that complex infrastructure projects often encounter bumps in the road. There will always be scenarios that cannot be planned for but the aim of this amendment is to ensure that the Government can demonstrate the existence of contingency plans for the most obvious obstacles.

Amendment 16 is designed to probe plans for promoting the production and capture of hydrogen as part of nuclear power generation. Various methods are outlined in the UK hydrogen strategy but the next steps are limited to awaiting further innovation and developments in the 2020s. Have the Government assessed the potential benefits of utilising by-products from nuclear processes, and have they now modelled costs and other impacts?

Amendment 29 would require the Secretary of State to lay before Parliament a statement outlining the steps taken to prevent further charges being imposed on revenue collection contracts when cost caps are revised. We understand that the Government would not necessarily want to rule out imposing further charges on consumers if it is the only way a project can come to fruition, but I hope that the Minister can clearly state today that it is by no means the department’s preferred option.

Finally, Amendment 38 would bring legacy benefits within the scope of Amendment 37 in the name of the noble Lord, Lord Oates. Many legacy benefits remain active. If we were to insulate recipients of universal credit from additional costs, that same protection should be extended. Again, I am sure that the Government will not want to rule anything out, but I hope that the Minister can demonstrate how they will shield the least well-off from relevant levies on energy bills. They are a constant source of worry and concern given the cost-of-living issues we face at this time and will face in future.

[Lord Callanan (Con)]

I thank everybody who has spoken in yet another wide-ranging debate on energy policy—I definitely have all my lines ready now for the next time we have Oral Questions in the House. At the risk of agreeing with almost everybody, I just want to say that what we need in this country is a diverse mix of supply—yes, we need new nuclear; yes, we need more renewables; yes, we need interconnectors; yes, we need pump storage—which is the best way to keep bills low and supply reliable. It is absolutely not a question of renewables or nuclear; government policy is that we need both.

There is a long list of amendments in this group. They have been tabled respectively by the noble Baroness, Lady Bennett, and the noble Lords, Lord Foster, Lord Teverson, Lord Oates and Lord McNicol. We have taken them together because they are of similar intent and similar subject matter.

Let me start by replying to the noble Lord, Lord Foster, and his comments on the designation statement. He is of course right that the department is still developing the statement, given that we do not want to pre-empt any of the debates we are currently having in Parliament on this Bill; the noble Lord would be one of the first to criticise us if we decided all these things in advance. We want to listen to what parliamentarians say and gather all opinions before finalising the statement.

Before coming on to the individual amendments, let me remind the Committee of the commitment we made in the 2020 energy White Paper to bring at least one large-scale nuclear project to a final investment decision by the end of this Parliament, subject to value for money and all the relevant approvals. I thank my noble friend Lord Howell and the noble Baroness, Lady Worthington, for their thoughtful contributions setting out all the considerations that we need to take into account when making decisions about the value for money of new nuclear projects.

The Bill has been introduced with this objective in mind. It seeks to introduce a funding model that can lower the cost of finance for the large-scale nuclear that most of us agree we need; help to invigorate the UK nuclear industry; encourage, ideally, investment from British institutional investors and pension funds; and support our desire—shared by everyone, I think—for a decarbonised, resilient energy system.

Amendments 7 and 8 seek to clarify the types of company that may benefit from the nuclear RAB model. Amendment 7 would severely inhibit our ability to achieve the objectives I have just set out by restricting those able to benefit from the RAB model to not for profit, co-operatives, community-interested companies or companies wholly owned by a UK public authority. I understand the political intent of the amendments tabled by the noble Baroness, Lady Bennett, but I point her to the brilliant examples of energy companies that have been set up by a multiplicity of local authorities across the country in recent years. Without exception, every one of them has gone bankrupt, with considerable costs to local taxpayers. These things are not as easy to do in the public sector as the noble Baroness might imagine. If it was so easy and simple, all those companies would be prospering and returning funds to the taxpayer. In fact, a number of—mainly Labour—local authorities have lost millions of pounds for local taxpayers in attempting to do things better than the market. Public is not always good.

With regards to Amendment 8, I am pleased to confirm that Clause 14 already provides that “a company” means a company that is registered under the Companies Act 2006 in England and Wales or Scotland. The amendment is therefore unnecessary.

On Amendment 23, I can confirm to the noble Baroness, Lady Bennett, that, irrelevant of ownership, if a designated nuclear company ceases to meet the designation conditions set out in the Bill, the Secretary of State has the power to revoke its designation. Provision is already made for this in Clause 5(1); for that reason, the noble Baroness’s amendment is unnecessary.

Amendments 6, 10 and 29 seek to tackle scenarios whereby a nuclear station may not be built or suffer from cost overruns, or there are issues with its generation output. Those things can happen in the real world but all these scenarios are fairly unlikely to occur. The approvals process for nuclear projects, of which designation for the purposes of the RAB model will form a part, is designed precisely to ensure that the Secretary of State must be sufficiently confident that the proposed project would be able to complete construction. In due course, we will publish a statement to provide details of exactly how the Secretary of State expects to determine whether the designation criteria have been met.

Once construction is under way, we will want to make sure that the project company is incentivised to manage its costs and schedule. It will be overseen by Ofgem as the independent regulator. However, in the unlikely and remote circumstance that a project looks as though it may exceed the cap on construction costs set out in its modified licence, it is important that there is a mechanism in place to allow additional capital to be raised to ensure completion of the project. The aims of that, of course, are to ensure that consumers can continue to benefit from their investment and to minimise the risk of sunk costs.

With regard to Amendment 6 and the first part of Amendment 16, I assure the Committee that the RAB model will be designed to ensure that the appropriate incentives are placed on the company to maximise plant availability. Nuclear reactors have an extremely good record of availability and delivery but we want to make sure that that is maintained. On broader generation capacity security, I draw the Committee’s attention to the Great Britain security and quality of supply standard and the Great Britain capacity market. Both these essential tools ensure that security of supply is met in GB and that we have resilience in the day-to-day operation of the GB electricity system should generation outages occur.

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[Baroness Wilcox of Newport (Lab)]

I am grateful to the noble Lord, Lord Oates, for tabling these amendments, which bring us back to transparency. We are sympathetic to the argument that, generally, information should be made public unless there is a compelling reason for that not to be the case. However, we understand that these are arrangements with commercial partners and that this reality needs to be reflected in the final transparency provisions.

[Lord Callanan (Con)]

I realise that time is getting on, so I will be as brief as possible. I thank the noble Lords, Lord Oates and Lord Foster, for Amendments 33, 34, 35 and 36. As most of the material is similar, I will take them together, starting with Amendments 33 and 36.

By way of background, I will explain the purpose of Clause 13. Four amendments have been tabled to it, but I reassure noble Lords and my noble friend Lady Neville-Rolfe that this clause is in no way designed to act as a “free pass” for the Government. It is a narrowly drawn provision, allowing for the exclusion of specific, sensitive, commercial and national security information only. I want to be upfront and clear about that. From looking at their detail, I do not believe these amendments will achieve what I suspect is noble Lords’ goal to increase transparency. Actually, they could cause extra confusion.

Amendment 33 makes the publication of relevant material the “primary duty” of the Secretary of State, and so would effectively place transparency above the protection of national security. I submit that this is intuitively wrong; it would be dangerous to subordinate national security concerns to publication concerns.

Amendment 36 would require the Secretary of State to make statements to Parliament about the seriousness of the potential impact of the release of information on the commercial interests of companies and how this is balanced against the public interest in disclosure. This creates ambiguity around the protection of commercial interests, which could have a serious impact on the ability of a project to raise the necessary investment. It would either make it harder to bring forward new projects or, alternatively, raise the cost of financing those projects; either way would result in worse value for consumers. I submit that it also goes against a basic tenet of commercial negotiations and operations: that an investor’s commercial interests will be treated respectfully and confidentially.

Amendments 34 and 35 similarly seek to restrict what information can be excluded from publication or disclosure under Part 1 on the grounds of national security or prejudicing commercial interests. Similar to the previous amendments, the suggestions made in these amendments would add unnecessary and unhelpful ambiguity to an otherwise straightforward provision. Again, this would introduce additional uncertainty for both the Government and potential developers.

Looking first at the addition of “in exceptional circumstances”, there is no obvious legal understanding or definition of what such circumstances would be. This would create uncertainty as to when the provision could be used and what information could be redacted. The circumstances in which Clause 13 applies are already sufficiently set out in its subsection (2). Similarly, given that “seriously” has no clear definition in this context, I submit that the addition of this term would add to the uncertainty and ambiguity about whether legitimate commercial interests would be respected for potential investors. I think that it would make them less likely to go on to be involved in projects.

I understand the desire for increased transparency behind these amendments, but I hope that, given the legal uncertainty of the wording used, I have been able to reassure noble Lords that the Government have no intention of hiding any information that we do not strictly need to in order to respect commercial confidences, so I hope that noble Lords will feel able to withdraw or not press their amendments.

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[Lord Callanan (Con)]

This is not a direct example, but, of course, the special administration regime has recently been used in the case of one particular energy company. I do not need to go into the specific example, but I was aware of a lot of the discussions that went on before it. Some of those were extremely commercially confidential because, of course, discussing possible outcomes results in potentially prejudicial publicity and might perhaps bring about the objective that we did not want. The company eventually went into a special administration regime, and information was published as soon as practicable about that. It is important in those circumstances to retain the flexibility. The Secretary of State’s discretion to act expediently would obtain the best outcome for consumers and taxpayers during the special administration.

Amendments 40 and 43 seek to place an additional reporting requirement on the Secretary of State which we consider would also impede the ability of the special administration to achieve its objective. In the case of Amendment 40, I remind the Committee that a special administration is a court-administered procedure and, in the circumstances, a nuclear administrator would be an appointee of the court. It is therefore important that we retain the established process and do not seek to put in place reporting requirements which could oblige the Secretary of State potentially to publish commercially sensitive material, which would then jeopardise a transfer. I cannot, of course, seek to predict the court process, but it is possible that that some aspects of the information that Amendment 40 seeks to have published would also be publicly available, such as through companies publishing their financial statements.

In the circumstances, should any licence modifications be made by the Secretary of State during the administration, the legislation determines that such modifications will—correctly—need to be published, except for any matters which are commercially sensitive or would be contrary to the interests of national security.

There are already statutory arrangements in place with regard to the costs of decommissioning in the Energy Act 2008. This requires an operator to have in place an approved funded decommissioning programme— as already discussed—before construction on a new project can commence. I expect that, as was done for Hinkley Point C, the FDP for any future projects would be published along with relevant supporting documentation —again, apart from material of a sensitive nature.

Turning to Amendment 43, again, I am unable to accept this amendment, because it would risk the ultimate operability of the special administration regime and consequently risk consumers being unable to realise the benefit of the plant they have helped to build. As we have seen during the recent energy supplier crisis, it is imperative, as in the example that I just gave to the noble Lord, Lord Foster, that a fully operational special administration regime can be stood up in the quickest possible timeframe to protect consumers. This includes allowing for requisite funding from the Secretary of State to be provided efficiently. In addition, if insolvency occurred when perhaps the House was not sitting, I am sure that the noble Lord would accept that this would also cause unnecessary further delay.

The amendment would also cause a level of uncertainty that could deter potential administrators from undertaking the appointment under the special administration regime. The administrator would need to be assured that funding would be available from day one of the SAR to ensure its operability and ability to deliver its objectives, which of course are to continue or commence the generation of electricity. If there are delays in accessing the required funding, that could result in outages and problems with security of supply. In the case of a nuclear power station, there are also safety considerations. Any lapse in funding could result in some safety-critical expenditure not being met.

I thank noble Lords for all their amendments and in particular for their consideration of these matters with regard to the special administration regime. I hope that I have been able to provide appropriate reassurance that we hope never to use the regime, but it is there to serve the crucial purpose of protecting the interests of consumers. We need to make sure in that case that it is fully operable, efficient and able to meet its objective that energy generation will commence or continue in the unlikely event of an insolvency. I hope therefore that the amendments will not be pressed.

[Baroness Wilcox of Newport (Lab)]

I thank the Minister for his reply and recognise the points that he has made regarding SARs. Nevertheless, I still feel that greater safeguards need to be in place. However, at this point, I beg leave to withdraw the amendment.

Emissions Trading Scheme: Transport

Debate between Lord Callanan and Baroness Wilcox of Newport

Monday 11th October 2021 Lords Chamber

[Lord Callanan (Con)]

I do not agree with the noble Baroness. The transport decarbonisation plan was the first such plan in the world. It sets out how the transport sector will move on a path to net zero and includes consulting on a world-leading pledge to end the sale of all new polluting road vehicles by 2040 and net zero in aviation by 2050. It is a world-leading, ambitious plan. I am sorry that the noble Baroness does not support it.

[Baroness Wilcox of Newport (Lab)]

If the Government are minded to review their policy and include all forms of transport, will the Minister consider seeking the views of municipal bus companies such as Newport Transport, which is the clear leader in Wales, in their moves towards zero-emissions electric buses? It is the first operator in Wales to achieve a modern-day emissions-free squadron service. I know that Newport City Council and the transport company would be willing to share their experience of this excellent practice with the UK Government.

[Lord Callanan (Con)]

I am sure we would be very happy to take into account the views of Newport Transport. I congratulate it on its commitment to zero-carbon transport. Of course, many other local authorities and bus companies around the UK are also developing battery buses, hydrogen buses, et cetera, so great progress is being made.

Deep Seabed Mining

Debate between Lord Callanan and Baroness Wilcox of Newport

Monday 6th September 2021 Lords Chamber

[Lord Callanan (Con)]

Of course, safeguarding the marine environment is extremely important. We would engage in extensive public consultation ahead of making any decision to issue or sponsor any deep-sea mining exploitation licences. That of course would include engaging fully with the fishing industry.

[Baroness Wilcox of Newport (Lab)]

My Lords, BMW, Volvo, Google and Samsung are saying publicly that there should be a moratorium on the proposals to dig up metals from the deep sea and that other ways should be found to extract cobalt to make batteries to fuel the future switch to electric vehicles and increased mobile phone use. Can the Minister advise the House of the Government’s position on the views expressed by these major car and technology companies?

[Lord Callanan (Con)]

Well, of course they are entitled to their position; I would just advise the noble Baroness to read carefully exactly what they said in their declarations. The World Bank has estimated that something like 3 billion tonnes of metals and minerals will be needed to fully decarbonise the global energy system by 2050, so we must be careful, proceed with caution and do all the appropriate scientific analysis. But there is widespread support in this House for the net-zero challenge and we must provide the means to do it.