Hinkley Point C

Lord Grantchester Excerpts

Thursday 15th September 2016 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for repeating the Statement in your Lordships’ House today. I also thank her for contacting me this morning to let me know that she would be making this Statement.

I say at the outset that Labour supports the development of new nuclear power as part of the UK’s energy mix, to ensure the country’s energy security, to deliver thousands of high-skilled jobs across the country and to deliver clean energy in compliance with our legal obligations on meeting climate change targets. Labour has always been critical of the strike price being set at £92.50 per megawatt hour; we have called for a price in the mid-£80 per megawatt hour range.

Critically, this investment must be delivered on time and on budget—two features that all Governments seem to be unable to improve on. Being on time is critical, as old energy plant is phased out, leaving a vulnerable period in the nation’s security of supply in the 2020s. The Government’s Statement today makes no mention of amendments on this following the review. This side of the House has argued that any future delays, which have already added five years to the project at a cost of £6 billion, should result in a penalty clause with a taper being applied to the price. While we may all be second-guessing whether the deal will be a good one in relation to future energy pricing, the country’s need for a new low-carbon energy supply coming on stream is well documented. Any cost overruns should be recognised and welcomed as a cost to EDF, and any underruns are to be shared.

Although the price at £92.50 per megawatt hour may well reduce to £89.50 if Sizewell C is built, nevertheless this is above the price agreed in France for Flamanville. It can be stated with a certain amount of confidence that the technical issues around the developments in light water reactors will find innovative solutions. We do not have a particular issue with this.

The Government were right to subject Hinkley Point to review, but the review should have taken place far earlier than at the 11th hour, when the room for renegotiation and manoeuvre is severely limited. This deal will set a precedent and benchmark for the future. Key review dates should also be set along the way to ensure that this project delivers to plan. The quality mark of having received approval from the globally recognised gold standard of the ONR will be much prized.

I am also wondering why the Government are rushing the Statement out today, the last day of this September sitting, with three weeks’ interval before Parliament returns in October.

I learned that, last night, as energy supplies through solar came to an end around sunset, a price hike occurred with an interconnector to the continent also being unavailable pushing pricing up well over £120 per megawatt. Will the Minister ask Ofgem to monitor and investigate price volatility through the winter months to guard against any possibility of manipulation for whatever reason?

On the Statement, I have a few questions that I would be grateful if the Minister could clarify. The review has concluded with a few alterations around the issue of control. The Government will now be able to prevent the sale of EDF’s controlling stake prior to completion. This is being done via an exchange of letters. Will the Minister clarify what is the legal form or basis under which this agreement by exchange of letters is enforceable? What would the implications of non-compliance be? Will the letters be made public? I would be most grateful to understand better the legal context to this agreement.

After completion the Statement refers to the new legal framework under which the Government will be able to intervene in any sale of EDF’s stake. Can the Minister give any further indication what form this intervention may take and how? Will this intervention be limited to ownership issues only?

The Statement continues with reforms to future foreign investment in British critical infrastructure and highlights three elements: namely, a golden share; reports to the Office for Nuclear Regulation regarding changes in ownership; and new processes within government to scrutinise foreign ownership for national security reasons. In the context of comments made by Mrs May on her appointment as the new Prime Minister, the position of foreign control in takeovers of important British companies was identified as a key issue for the new Government. Given her position within the wider business department that now includes energy and climate change, can the Minister clarify what the next steps and milestones will be and whether this scrutiny will be limited to investment in critical infrastructure only? What will be the parliamentary oversight of these new powers?

Regarding future investments, can the Minister clarify whether the contract includes assurances and guarantees that Bradwell and other plants are committed to the same investors? Does this also include commitments that key personnel and skills will be available to British companies throughout the British economy? Can the Minister give precise terms and details of any link between this and any future investments?

On the wider issues regarding the Statement, why have the Government refused in this review to demand a better deal for bill payers, who will be funding this for decades—at a cost of up to £30 billion according to the National Audit Office?

This investment will result in 25,000 high-skilled jobs with possibly 550 apprenticeships, which should be widely welcomed. It is vital that this contract fulfils in delivering high-skilled jobs and key positions within the organisation for British companies. Will the Minister give the House assurances regarding the timetable and transparency over the contract to ensure job security as well as the security of energy supplies that this country so desperately needs?

I am grateful to the Minister for the Statement and look forward to receiving this vital further information.

[Lord Teverson (LD)]

My Lords, I, too, thank the Minister, but I have a different take on the pricing side. Some time ago, we had the resignation of the finance director of EDF. I have looked at the share price since the announcement was made, and it is going down. Does the Minister expect EDF to be solvent by the time this project is due to be delivered? That is a real risk, given the other problems at Flamanville and—I am not brave enough to pronounce the town in Finland—the Finnish nuclear station. Will EDF survive this? What are the contingency plans?

This decision was originally made some three years ago, and we have had this soap opera ever since, but time and technology have moved on. Given the assessments on smart grids, energy storage and the Government’s brave and correct interconnector plan, is this nuclear power station—and fleet of nuclear power stations—necessary? I for one am not against nuclear technology as such, but is this the right technology to go forward? The previous Minister in the House of Commons, the Secretary of State for DECC, Amber Rudd, was very keen on small nuclear reactors. I would be interested to know whether the Minister is still pursuing that area.

I accept and welcome the various measures put in place to protect taxpayers and the public sector against the future costs of decommissioning, but I am concerned about the nuclear waste issue. I cannot see that there has been any movement by the Government in terms of their nuclear waste strategy or where we are going to put even old nuclear waste, let alone new nuclear waste. How can we be sure that the funding that will be put in place for decommissioning will reflect such an undefined nuclear waste strategy for the future?

Now that we have got through this period of constipation on energy decision-making, when can we expect a decision on the Swansea tidal lagoon?

I want to take up another major element in the Statement that is really interesting and that I have debated with the Minister on previous occasions. The Government are saying that they will take a golden share in future nuclear and other critical energy projects. The Minister will not be surprised if I ask her whether the Government have consulted with the Office for National Statistics about this strategy. She is quite right to be sensitive about the issue and wanting to make sure that, in having even slight government control over a company or a project, it does not become part of the public sector and go on to the public sector balance sheet. However, this seems quite incautious in comparison with previous government policy, and it is quite likely that at some point this project, which is worth £18 billion, will be put on to the public balance sheet. If that is the case, surely we should have put our own public money into it, at a more or less zero long-term interest rate, rather than bother with Chinese and French investment because it is going to be on the public sector balance sheet anyway.

I shall leave my questions at that. Again, I thank the Minister for repeating the Statement.

Carbon Budget Order 2016

Lord Grantchester Excerpts

Tuesday 19th July 2016 Lords Chamber

[Lord Howell of Guildford (Con)]

My Lords, as another former Secretary of State for Energy—there are plenty of them around—I want to come down from the rhetorical heights that we have just experienced and congratulate my noble friend on her new appointment. It will be very challenging because there are many changes ahead. Some of them are not yet foreseen because of the pace of technology, which will transform a great deal of what we are talking about today.

I declare interests as in the register. I also declare that I come to this whole issue as one far from convinced that we are doing anything like enough to protect the next generation. My criticism is made not with a grand vision that there is a serious climate change challenge for this whole planet but that our policies are not nearly effective enough and, in many areas, are counterproductive in meeting that challenge.

I, along with my noble friends, cannot resist using this as an opportunity for a short requiem for the Department of Energy and Climate Change. I never thought that it was a good idea. It was based on a flawed belief in certain branches of politics that policy and theory are more powerful than technology and market forces. Of course, they are not, as has been proved again and again.

I have a few questions. It is a quiet and empty House at this point in the evening but in fact we are presiding over issues concerning billions and billions of pounds. It is often the way that the really expensive matters get the least attention.

In the carbon budget now proposed for the five-year period from 2028 to 2032, we are planning, on the recommendation of my noble friend who has just spoken and the Committee on Climate Change, a total reduction of 1,725 million tonnes in carbon emissions, which is about 345 million tonnes a year. That is out of an estimated worldwide emission level—in as far as you can measure these things—in about 12 years from now of 40 billion to 45 billion metric tonnes. Therefore, if you can rely on these measures, the contribution that we are making to carbon emissions is rather less than 1/100th of that total, and of course that excludes consumption-based emissions and import-based emissions, as my noble friend Lord Lawson rightly pointed out.

The reality is that our hundredth is up against the 40 billion or 45 billion tonnes of emissions that will be going into the atmosphere at that time, with 70% to 75% of them coming from China, the US, Russia, India and Japan. They are the big ones and the rest of us are trying to do our bit. Therefore, the bigger question behind all this is: if we are serious about global CO₂ reductions and about climate change, rather than merely stating that we think we are doing our bit and that is it, and if we are really serious about meeting the challenge for the next generation, what are we doing about attempting to work with those nations to see that they turn the pace of their advance in technology towards reducing carbon emissions? The decision on whether climate change is grappled with and severely contained or whether it is undermined by a colossal increase in emissions will be made not in this country or even in Europe but in those countries.

All around us we can see danger zones: the vast growth in India of coal-fired power stations and vast growth in China, although that has been curbed a bit and the Chinese are using high-quality coal. The Indians are trying to use supercritical boilers to increase the amount of electricity they can get out of a tonne of coal. They are much criticised for doing so but that is the way they are going. My main question is: what is our underlying strategy for meeting the real climate change issues and the real curbing of CO₂, rather than just dealing with our own local affairs?

I now turn to the cost of it all. The Explanatory Memorandum for the Carbon Budget Order slightly disingenuously says that there is not a cost. The impact assessment says that it is nought. It goes on to say that the cost is not in the carbon budget but in how it is delivered—that is what influences prices and costs—and, in turn, that is determined by energy efficiency, energy prices and technology. The impact assessment, as opposed to the Explanatory Memorandum, rather ruefully admits that at the end of it all it could cost minus £5 billion if everything goes wonderfully but up to £9 billion if everything does not go so well. These of course are guesstimate figures of a high order.

Secondly, there is the crucial question that my noble friend Lord Ridley raised with the eloquence and precision he has in all his contributions. The impact statement reminds us that the Act requires the Government to publish policies and proposals soonest on how we achieve these carbon budgets. That prompts the question again and again, which never gets a very good answer: are we going much faster than the others? The Act requires account to be taken of the circumstances at European and international level. That is aside from whether or not we are in the European Union. A great many energy issues and co-operation with the continent can of course continue regardless of whether we are signed up to the EU treaties, and they probably will. We get a lot of our electricity daily and we will get more—up to 18 gigawatts through the interconnectors from continental Europe and from Norway. We are linked technologically with Europe whether we leave the EU or not.

Can my noble friend tell us exactly how detailed was the account taken in formulating these budgets—perhaps he can get advice from the Committee on Climate Change, chaired by my noble friend—and how it then explains our devastating domestic energy prices in Britain? They are now, as my noble friend Lord Ridley reminded us in an excellent Times article, 21% higher than the median or average, and our industrial prices are 43% higher than the average. How can we explain that?

Were we able to explain at the time of the closure of Redcar steelworks why our energy costs for steel were 40% above German costs? What is the explanation? Were these matters taken into account? We really are entitled to know how much account was taken of these extraordinary disparities, which give us a higher industrial energy price than any of our neighbours and competitors, let alone of course the great new competitors of Asia, Africa and Latin America. Why are our domestic prices higher than those in continental Europe, with the resulting suffering and difficulty that occurs—whatever my noble friend who spoke earlier says—when people have to go to food banks and face the agonising choice between heating and eating? These are real problems and we need assurances that they are properly addressed before we just tick the boxes and see a huge new impasse develop in areas where we ought to be helping people and not hindering them.

[Lord Grantchester (Lab)]

My Lords, I thank the Minister for her introduction of the orders. I congratulate her on her new skillset and wish her well on bringing energy into her brief.

That prompts me to reflect on the changes in the Machinery of Government paper merging the Department of Energy and Climate Change with BIS. The recent sudden lurches in government policy, especially with regard to renewables, have greatly affected investor confidence resulting in the House of Commons report. Ernst & Young has also issued a report highlighting how the UK has slipped to 13th in its investment attractiveness index. Here is yet another change and one where climate change has been dropped from the title.

Energy policy development as evidenced by the Climate Change Act 2008, which we are partially discussing today, is critical to countering climate change and the environmental consequences that follow. Some commentators have reflected that DECC has a closer affinity with Defra as a department, especially concerning the activity of the Adaptation Sub-Committee, air quality, flood defences and agricultural policy. Why is it that under paragraph 6 of the Machinery of Government paper, where it is mentioned that the merged department will have joint responsibility with other departments, no mention is made of the Department for Environment, Food and Rural Affairs? Mention is made of the Department for International Development, the Foreign and Commonwealth Office, the Department for Work and Pensions, the new Department for Exiting the European Union and the Department for International Trade, but no mention of responsibilities for Defra. Is this an omission or does it have deliberate consequences? Asking that is not to diminish the opportunities to interpret energy policy in relation to business and industrial strategy, as this statement does.

Secondly, let me praise the Government for bringing forward this SI in agreement with the recommendations of the Committee on Climate Change. The Climate Change Act 2008 was intended not only to put climate change at the centre of government policy but to depoliticise it in the UK and to be strong yet flexible. In this regard, I am happy to agree to the Climate Change Act 2008 (Credit Limit) Order 2016 in that it provides flexibility in allowing a credit limit to be utilised for purchasing unused abatement credits from other overseas countries. In agreeing to the order, can the Minister restate emphatically tonight that the Government have no intention of implementing this since the Committee on Climate Change has advised that it is unnecessary and so that the Government will concentrate on decarbonisation through domestic policies and opportunities?

Thirdly, let me praise the Government for agreeing with the fifth carbon budget recommendations by the end of June, albeit the 30th, just seven days into the tumultuous referendum result to leave the EU. This praise must be tempered with the criticism that the Carbon Budget Order 2016 should have been taken and approved before 30 June under the statutory provisions of the Climate Change Act. Let me not underplay this breach. Once again it highlights the somewhat relaxed attitude towards climate change evidenced by the abolition of DECC, as we have discussed already. Surely it cannot be right to backdate tonight’s approval to 30 June and see that as sufficient. Can the Minister clarify the implications of this breach? It cannot be buried with the legalities pertaining to the old departments. Can she also clarify that statutory obligations are important in her department, that decarbonisation will be championed in the Cabinet, and that energy policy will be a clear priority for the new Administration?

Fourthly, let me praise the Government again that in agreeing the fifth carbon budget which covers the period 2028 to 2032, they are in step with the timelines agreed for the EU in Paris this year. Once again this praise allows me to put a challenge to the Government and seek assurances on further issues by asking questions. The Brexit vote adds yet another cause for anxiety to investor confidence, which is already shattered. In the Paris climate change agreement, certain elements need to be ratified at the EU level and others need member state approval. Can the Minister outline the dates of the legal process for ratification in light of the vote and the departmental reconfiguration? I would underline for her the importance of our continuing to lead internationally on climate change. The former Secretary of State promised to ratify the Paris agreement early. The new Secretary of State has acknowledged that leaving the EU makes it harder to meet our climate targets.

I have many other challenges to put to the Government in the context of the Carbon Budget Order 2016, but perhaps I may finish on the issue of the importance of the policy statements that are a statutory requirement following consent to this order. I am sure that the Minister will want to commit to abiding by that tonight, as well as making a commitment to publicising future energy policy, The Carbon Plan: Delivering our Low Carbon Future, before the end of the year. Attention has been drawn in the debate to the fact that there is a gap in the projected emissions reductions and a lack of policy to close it. The Government must improve on the lack of accountability for the delivery of that plan and for managing carbon budgets. Their own National Emissions Target Board, which is responsible for managing carbon budget delivery between departments, has failed to meet on time or have adequate resources to hold the Government to account. Without public and parliamentary notification, this board has now been replaced by the inter-ministerial group on climate change, the substantial details of which the Government have refused to release, despite questions from Members of Parliament. If the Minister cannot clarify this tonight, can she perhaps write to me with details of dates and summaries of these meetings?