Viscount Hanworth
Main Page: Viscount Hanworth (Labour - Excepted Hereditary)
Viscount Hanworth
To ask Her Majesty’s Government what is their assessment of the role of nuclear power in helping the United Kingdom to meet its climate change and energy security goals.
Viscount Hanworth
This is a timely debate, which comes some time in advance of the introduction to the House of Lords of the Government’s Energy Bill. We are eager to discover how, in truth, the Government foresee the future provision of electrical power in the UK. We should like to know what steps they intend to take to secure our future supplies of energy if the optimistic scenario that they have depicted in recent documents fails to materialise and if the commercial providers are not forthcoming. I should like to put this question to the Minister.
There is already a plethora of printed information from which one might seek some enlightenment. In March, a flurry of documents emanated from the Department for Business, Innovation and Skills and from the Department of Energy and Climate Change. Some of these documents contain new information, but much of their material is already familiar from previous publications. These documents seem to indicate a strengthened commitment to a nuclear future. Nevertheless, they do nothing to dispel the doubts about this future.
One of the most significant of the recent publications is the so-called Beddington report, A Review of the Civil Nuclear R&D Landscape in the UK. This report, which has been conducted by the Government’s Chief Scientific Adviser, represents an independent appraisal. The Beddington report amounts to an inventory of our existing research facilities. It has revealed some serious lacunae.
Another enlightening document is a report of the Energy and Climate Change Committee of the House of Commons, Building New Nuclear: The Challenges Ahead. Here, one will find a full expression of the doubts and anxieties concerning the nuclear programme and the energy policy of the UK in general. This document, which comes in two volumes, contains the brief and cogent report of the committee, together with a mass of oral and written evidence from numerous parties. It is to this report that one should go to discover the realities of our situation, which are in contrast to the optimistic aspirations of the Government.
The doubts that affect the Government’s programme arise mainly from the fact that it persists in seeking a wholly market-based solution to the energy problem. Their stance implies that they will have a limited control over the outcome, unless there are contingency plans for the eventuality that the markets will fail to deliver what is required. As the Commons report asserted, there is no evidence of any such contingency plans and it is likely that the markets will fail to deliver.
It is also clear that, in the absence of a successful nuclear renaissance, the UK will fail to meet its commitments, proclaimed in the Climate Change Act 2008, to stanch its emissions of carbon dioxide. According to existing plans, which have been influenced by our climate change commitments, the UK will lose in the coming decade about a quarter of its coal-fired power stations. We will lose all of the old oil-burning plant. We will be losing most of the existing nuclear plant, which consists of the eight advanced gas-cooled reactors and the one pressurised-water reactor, Sizewell B. This is the only current reactor that will still be operating after 2023. That is the reality of the energy gap, which the Government are hoping that the private sector can be induced to fill.
What we will be left with, in the absence of new nuclear plant, is an electricity-generating sector dependent almost entirely on gas and wind power. This assumes that the UK would continue to fulfil its climate change commitments. In such circumstances, the UK will be faced with the choice between breaking those commitments or suffering an even more severe dearth of energy supply.
One might look to the obiter dicta of some of the Ministers to discover what the Government really intend. We know that the Chancellor of the Exchequer, George Osborne, has been vocally supportive of the UK’s shale gas industry, arguing that this prospective energy source could be a cheap and secure way of meeting the country’s energy needs, as ageing power stations are decommissioned. However, most experts have doubts regarding the extent of the shale gas in the UK and its accessibility and they point to the environmental damage that would arise from its extraction. If the UK were to depend on gas, it would need to be imported from abroad. The global supplies of gas are limited and are liable to be pre-empted by other nations that have forsworn the use of nuclear energy. The supplies of gas from abroad will be both insecure and expensive.
Another possibility for filling the energy gap, in the absence of nuclear power, would be by burning coal, which nowadays the UK imports in large quantities. Some people have been able to imagine that this would be an acceptable recourse, if it could be accompanied by the as yet unrealised technology of carbon capture and storage. This technology appears to be a fantasy and the prospect of continuing to rely so heavily on coal fills all but the most ardent climate change sceptics with horror.
Finally, there is the suggestion that, in the absence of nuclear power, we could rely on wind power and wave power, on biomass energy and even on energy abstinence. The supply of biomass is limited and its burning is highly polluting. The energies of the wind and the waves are intermittent and they have to be accompanied by other sources of power to meet the base-load requirement. These renewable sources can play only a marginal role. Moreover, when the full costs of renewable energy, including those of the base-load provisions, are taken into account, they are seen to be exorbitant.
Now I must explain why the Government’s intention to achieve a nuclear renaissance by means of free market enterprise seems so improbable. For a start, one can point to the fact that no commercial supplier has yet given a firm commitment to build nuclear plant in the UK. A significant number of prospective suppliers have already withdrawn. One should also note that there are no other examples of nuclear power stations that have been constructed without the major involvement of a national Government. A new nuclear power plant has a life expectancy of 60 years. Ten years can pass from the initiation of a nuclear project, when the first expenses arise, to its completion, when the revenues begin to flow. Seventy years hence is way beyond the horizon of any commercial enterprise.
The logic of commercial project appraisal depends on a rate of discount that is applied to future earnings and diminishes their present value as they recede into the future. The commercial rate of discount obliterates the value of future earnings to the extent that no enterprise would undertake investment in such a long-term project as a nuclear power station unless it was heavily subsidised. Nuclear power is virtually incompatible with private enterprise. At present, the only realistic hope for a new nuclear plant in the UK is one that would be constructed by what is essentially a state-owned enterprise, namely EDF, or Électricité de France. The heavy subsidy that EDF can expect to receive is largely on account of the high cost of the alternative sources of power with which nuclear energy would be competing. Even so, it is unclear that this would offer a sufficient inducement for it to bear the risks of such a project.
What should the Government do in the face of the eventuality that commercial enterprises will not be prepared to undertake the building of the much needed nuclear power stations? The answer is that the Government should commission and finance the projects directly, as has been the case invariably in the past. By financing the projects directly, the exorbitant costs of the risk premia that are demanded by the financial markets would be avoided and the benefits would accrue to the public.
The Government should not allow themselves to be hamstrung by an atavistic free market ideology. Nor should they be obsessed by the totem of their nominal borrowing requirement. If the Government can afford such massive financial quantitative easing as we have witnessed recently, surely they can afford to finance our energy future. I earnestly hope that the Government have a contingency plan and that it is one that is dictated by common sense.