Electricity: Decarbonisation

Viscount Hanworth Excerpts

Wednesday 21st December 2022 Lords Chamber

[Lord Callanan (Con)]

We will be setting out further plans on the matter in due course. I remind the noble Baroness that, during 2021, almost 55% of electricity generated in the UK came from low-carbon sources. We have an ambitious target of rolling out 50 gigawatts of offshore wind by 2030, and we have an excellent record in this area.

[Viscount Hanworth (Lab)]

Have the Government thought further about small modular nuclear reactors, which could come online much sooner than the EPR nuclear reactor proposed for Sizewell? Moreover, SMRs could have significant export potential if they were to materialise in good time.

[Lord Callanan (Con)]

The noble Viscount is absolutely right—SMR technology is something that we are supporting. We have given hundreds of millions of pounds-worth of support to Rolls-Royce, which is looking actively at how it can roll that out. It has great potential for the future, both in this country and in its export capacity.

Battery Strategy (Science and Technology Committee Report)

Viscount Hanworth Excerpts

Wednesday 23rd November 2022 Grand Committee

[Viscount Hanworth (Lab)]

In one sense, there is very little that needs to be said about the conclusions of the report of the Science and Technology Committee regarding the future of the industries in the UK that are pursuing the technologies of batteries and fuel cells. The report declares in its title that the strategy to support these industries has gone flat. The effort to support the emerging technologies has barely got off the ground, and the forewarning contained in the report has since been realised.

During the writing of the report, it was learned that Johnson Matthey has abandoned its project to supply materials to the emerging UK industry aimed at providing the lithium-ion batteries to power the next generation of UK manufactured vehicles. The firm was well established by middle of the 19th century as a dealer in bullion and rare metals. More recently, it has wished to be in the forefront as a provider of the special metals, including lithium, nickel and cobalt, that are essential to the industry. The chief executive of Johnson Matthey stated that the decision to exit the battery materials business was due to

“insufficient returns, increased commoditisation of battery materials”

and

“the need for very high capital investments to remain competitive.”

In fact, the company was short of the funds that needed to be invested in what is liable to become a highly profitable enterprise.

The sale of the assets of Johnson Matthey was mainly to EVM, which is a large European consortium. The sale included the battery technology centre in Oxford and the battery technology centre and pilot plant in Billingham. The assets relinquished also included a research centre in Moosburg, Germany, and a partly constructed site in Konin, Poland. The company’s lithium-ion phosphate battery facility in Canada was acquired by Nano One, which is a large North American consortium and technology innovator in battery materials.

Recently, we have learned that BMW, which owns the production facilities of the UK Mini, has decided to relocate the production of the electric Mini to China. We have also heard that one of the much-vaunted UK gigafactories intended to produce the car batteries—Britishvolt—has gone into receivership. The combination of these announcements is devastating. As regards the decision of BMW to relocate to China, we can assume that the firm has made its decision in view of a clear-sighted negative appraisal of the prospect of there being an adequate supply of automotive lithium-ion batteries sufficiently close at hand to justify its continued presence in the UK as a manufacturer of electric vehicles.

It has become evident that car manufacturers require their supply chain for batteries to be close at hand. One obvious reason for this is the cost of moving such heavy items from a remote manufacturer to the assembly lines of the cars. A more cogent reason is the likelihood that a heightened demand for batteries in future will be met with a dearth of supply. In such circumstances, a car manufacturer needs to be in a position to pre-empt the necessary supply. To do so, it must be located close to the source.

What would have convinced the departing car manufacturer that it should remain in the UK? Surely it is none other than confidence that support for the developing manufacturing infrastructure will be forth- coming from the Government. This is where the attitude of the UK Government has been most discouraging. The Conservative Government are wedded to the idea that free enterprise flourishes best when there is minimal intervention from the Government. Under Margaret Thatcher in the 1980s, the Government divested the state of its nationalised industries. These had been a legacy of the Second World War and the immediate post-war years, when the Labour Government had begun to take control of the commanding heights of the economy.

An assurance that private industry could be relied on to invest sufficiently in the basic infrastructure of the economy seems to have been provided by the experience of the privatisation of the electricity supply industry. Cheap combined-cycle gas turbine plants, powered by plentiful North Sea gas, began rapidly to replace the ageing coal-fired power stations of the erstwhile nationalised industry. The illusion was created that it is sufficient for the Government to undertake to supplement marginally the capital funds that private industry can raise from the financial markets. This is how the Government have proposed to support the building of factories to manufacture automotive batteries.

The support that the Government have offered Britishvolt is paltry. In January, they pledged a mere £100 million in support as a means of attracting investors. This is a small sum in comparison with the £1.7 billion that is reported to have been raised from private investors. The future of the enterprise was thrown into doubt over fears that it could run out of money, when the Government rejected a request for £30 million in advance funding. The matter is still unresolved, and the episode will serve as a future deterrent to investors in projects that require the support of the Government.

The Department for Business, Energy and Industrial Strategy continues to say that the Government are

“determined to ensure the UK remains one of the best locations in the world for automotive manufacturing as we transition to electric vehicles, while ensuring taxpayer money is used responsibly and provides best-value”.

This kind of boosterism is seen to be pure fantasy when one looks at the commitments of other countries to the future of battery technology. China has 20 battery gigafactories that are either operating or under construction, which have been sponsored by the state. Britain currently has only one sizeable factory that manufactures automotive batteries, which is a plant in Sunderland that is tied to the Nissan car factory. Nissan had planned to leave the UK in consequence of Brexit but, presumably, the tie to its battery producer was too strong to allow this to happen. Pathologies such as those affecting the automotive industry are pervading the British economy, and the fault lies largely with the incumbent Government.

Modern battery technology is closely allied to fuel cell technology. Fuel cells are proposed as a means of propulsion for the freight vehicles that are to replace the large diesel-powered juggernauts that pound our roads. They are also proposed for powering trains and ships. Fuel cells have received even less support from the Government than batteries.

Fuel cells are powered by hydrogen fuel, which is created, nowadays, mainly via the steam reformation of methane. This is an energy-intensive process that releases carbon dioxide. It needs to be replaced by a process of high-temperature electrolysis that splits the hydrogen molecules from the oxygen atoms with which they are combined in water.

The appropriate means of supplying the electricity and the heat for the process of high-temperature electrolysis is a small nuclear plant, dedicated to the task. However, Britain’s project to build small modular reactors, which has been undertaken by Rolls-Royce, has been subject to endless hesitation and delay as a consequence of the failure of the Government to provide adequate funding for the period of development, and the project remains in peril.

Our economic prospects are already dire, at least for the short and the medium term. Unless we can effect an industrial recovery, which would need to be sponsored by the Government, our long-term prospect is of an impoverished country that will be largely dependent on imported foreign technology. The majority of our capital assets, whether industrial or otherwise, will have fallen into the hands of foreign owners, through a process mediated by the financial sector, which will be the only remaining profitable enterprise.

Energy Bill [HL]

Viscount Hanworth Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

[Lord Howell of Guildford (Con)]

My Lords, I am very pleased that the mover and seconder of this amendment have mentioned direct air capture, because sometimes there is confusion between carbon capture and storage and the actual absorption of carbon out of the atmosphere on an enormous scale. Frankly, this is where the big impact will be made in future.

I know that we have made efforts with carbon capture and storage on and off over the years. There is a theoretical idea that finding a way to cheaply cap every chimney of the 9,000 coal-fired stations across Asia and Africa and pipe away the carbon might solve some problems and make a small impact on the overall rising greenhouse gases. However, the most sizeable absorption of carbon that is already in the atmosphere is through direct air capture and climate recovery.

Schemes are already being developed with the input and encouragement of Imperial College and other sources—and in other countries—for developing direct air capture on an absolutely enormous scale. Of course, we cannot do this alone; this is part of an international rescue, if you like, in a way that really begins to give some hope that emissions can be offset so that we can start getting some leverage and control on the overall carbon in the atmosphere. Without this, we will undoubtedly miss all the Paris targets and everyone throughout the world will face very dramatic and increased climate violence, very cold winters and very hot summers.

So I hope that the Minister will indicate that this area is in the Government’s mind and that the development of huge carbon sinks can commence—for instance, in deserts across the world that have already been designated as uninhabited areas. Carbon can be sunk into gigantic lakes the size of Wales or Dubai, or four times the size of London. These vast new developments would offset the overacidity of the ocean. These things can be done. Carbon can be captured and used. CO₂ is a fantastic promoter and fertiliser of food on a colossal scale, and if we are moving into an era of world food shortage, covered areas fed by carbon from huge carbon sinks will really begin to make some impact on the scene.

The other development for carbon sinks is that we could just plant a lot of trees, but that is not very good. Trees are moderate absorbers of carbon although, of course, if they go up in flames they put all the carbon back into the atmosphere straightaway. The real development comes from mangrove groves, which are 16 times more absorbent of CO₂ than other trees. They can be promoted along with saltwater and freshwater lakes in areas where there is a lot of sun and where electricity is therefore virtually costless. Of course, this is at or near the equator. These are the schemes that will save us all and which our Government should be leading in developing by thinking about and backing the necessary legislation. Please, can we have a little more thought on this excellent amendment and the ideas behind it?

[Viscount Hanworth (Lab)]

I wish to express my support for Amendments 39 and 49. I have been looking for a place to make my interjection, which ought to have been encapsulated in an amendment, but perhaps I should propose an amendment at Report. However, now is as good a time as any to air my suggestions.

Aviation contributes significantly to emissions of carbon dioxide. These emissions do not approach the level attributable to road transport but, nevertheless, they must be eliminated. It may be possible to replace short-haul aircraft with aircraft that depend on battery power, but long-haul aviation cannot be electrified. It will continue to depend on liquid fuels. It has been suggested that the fuel could be liquefied hydrogen, but this seems be impractical. Conventional hydrocarbon fuels have an energy density that greatly exceeds that of hydrogen, which is difficult to store in a liquid state and demands considerable storage space. Jet engines that burn hydrogen have not yet been developed.

It seems that hydrocarbon fuels must continue to be used in long-haul aviation. Eventually, this will be acceptable only if the carbon element of these fuels can be sequestered from the atmosphere and the hydrogen element of the fuels becomes green hydrogen. When such fuels are burned, their carbon element will be returned to the atmosphere. Moreover, the use of green hydrogen, as opposed to the so-called blue hydrogen derived from the steam reformation of methane, will mean that no emissions of carbon dioxide will come from this source. To manufacture aviation fuels derived from the direct air capture of carbon and from hydrogen generated by electrolysis will require a huge input of energy. Sufficient energy would be available only if we were able to depend on nuclear reactors to provide it. Such synthetic fuels will be costly to produce; unless they are subsidised, they will be unable to compete with petroleum-based fuels or fuels derived from biological feedstocks. However, biofuels have a high opportunity cost, since the production of their feedstock is liable to pre-empt the use of valuable agricultural land. They are therefore best avoided.

We need to support the development of carbon-neutral synthetic aviation fuels. I propose therefore that, in the first instance, they should be allowed to incorporate green hydrogen as well as carbon not derived from direct air capture but captured from fossil-fuel emissions. In time, both these allowances would be abolished.

[Baroness Jones of Moulsecoomb (GP)]

I have always been very sceptical about carbon capture and storage and direct capture of carbon dioxide from the air, because they are basically unproven technologies. I could say that I am even quite sneery about them, because people constantly use them as justification for not adopting the tried-and-tested solutions of energy reduction, energy efficiency and renewable energy. We are often distracted by shiny technofixes, which give an excuse not to make the tested and sustained reductions in carbon emissions that have to take place. As far as I am concerned, the best carbon capture and storage is coal—we should just leave it in the ground.

That said, I am quite swayed by the argument of the noble Baroness, Lady Liddell, about future-proofing. That is very valid and I am very pragmatic in saying that we need to pursue all solutions to the climate emergency. If carbon capture works and can compete on cost with other carbon reduction measures without creating additional harm or risks, it should absolutely be eligible to compete for revenue support contracts. Of course, it could also help my clean air Bill, which tries to emphasise not polluting the air in the first place. Failing that, if we want clean air—which is incredibly important for all of us and a human right, according to the UN—we have to take every opportunity we can to clean it up.

Energy Bill [HL]

Viscount Hanworth Excerpts

2nd reading
Tuesday 19th July 2022 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, I am tempted to address some of the issues that the noble Lord, Lord Moylan, has raised, but I have other things to say. However, I welcome his support—if I understand him correctly—for a baseload of electricity generated by nuclear power. With regard to the recommendation that we should rely heavily on a revived supply of gas, I tend to agree with his critics.

As others have already observed, the Energy Bill is a massive document, spread across 330 pages of dense legalese. The Bill contains 243 clauses and 19 schedules which will deliver 26 separate measures of a very diverse nature. It is not possible at Second Reading to devote close attention to the details. Instead, it may be appropriate to discuss the wider context in which the Bill has arisen.

The harbingers of the Bill have been a flurry of White Papers emanating mainly from the Department for Business, Energy and Industrial Strategy. The most recent of these has been the British Energy Security Strategy, published in April 2022, which describes how Britain might generate:

“Secure, clean and affordable … energy for the long term.”


There should be no doubt about the enormity of the task facing this country in adapting to the realities of climate change and energy insecurity. Moreover, we are tardy in our preparation to meet these exigencies.

It is appropriate to compare our state of unpreparedness to that of the nation on the eve of the Second World War. In the previous decade, our politics had been dominated by a spirit of conservative laissez-faire, and during the crucial years from 1935 to 1937, the office of Prime Minister was occupied by Stanley Baldwin, who seemed to make a virtue of indolence. He was succeeded by Neville Chamberlain, who believed that the best way to ward off an increasing threat of warfare was by emollience and appeasement. We are facing threats to our prosperity, if not to our survival, with a similar lack of preparedness and concern.

What was remarkable about Britain’s response to the demands of waging war was its abandonment of the laissez-faire ideology in favour of a co-ordinated, strategic direction, accompanied by a broad national consensus on the purpose and necessity of the endeavour. Despite the absence of any precedent for this, the wartime Government sponsored two generations of innovative military technology, the second being the basis of the post-war aviation, civil nuclear and native computer industries. We should hope that a similar strength of purpose and national cohesion would arise to confront the current threats. However, we are a long way from achieving this and are obstructed by some powerful legacies.

The first of these is a legacy that comes from a prolonged era of material aspiration and amelioration. Over much of the post-war period, the citizens of the UK have experienced continuous material betterment, and they have aspired to see this process continue or even accelerate. Occasionally, their aspirations have been frustrated, and then rising anger has threatened social and economic dislocations. We are due to witness something of this sort in the near future in consequence of the cost of living crisis and the escalating price of energy. The anger that is arising will be exacerbated by the realisation that the increasing inequalities of our society have ensured that the distress will be felt to very different degrees among the rich and the poor.

The second inconvenient legacy is the economic doctrines of Margaret Thatcher that still dominate the minds of the incumbent Administration. These doctrines are averse to centralised strategic direction of the economy. Such nostrums discourage the Government from taking the initiatives that would most effectively address the emerging problems of energy insecurity. They have been largely responsible for our woeful lack of investment in our energy infrastructure. The ideology that led to the privatisation of our public utilities, including power and transport, has proposed that the private sector is best equipped to run and invest in such enterprises.

An adjunct of privatisation has been the creation of the economic regulators. According to a government document, their role is to monitor compliance with contractual obligations to the Government and users and to establish technical, safety and quality standards. This description of their role does not include ensuring that infrastructure services are delivered efficiently or that adequate investments are forthcoming. It is interesting to note that, in certain connections, the Energy Bill is proposing unprecedented interventions by agencies created by the Government. The proposed independent system operator and planner will have powers to raise levies to fund the hydrogen business model and to raise similar levies to support carbon capture and storage. These are minor departures from the true faith of conservative neoclassical economics.

The continued willingness to allow the private sector to determine the investments in energy infrastructure without significant central guidance has been largely a consequence of an experience that arose out of the privatisation of the electricity industry. This occurred at the time when the supply of North Sea gas was reaching a peak. The private electricity utilities were able to invest rapidly and cheaply in combined-cycle gas turbine generating plant, which displaced many of the ageing coal-fired power stations. This was a pre-existing technology that was easy to implement. The utilities have been able, subsequently, to invest in wind turbine generation, the technology of which has also been relatively undemanding, notwithstanding the progress that it has been making. The success of these episodes seemed to confirm the effectiveness of a policy of laissez-faire.

More recently, there has been a persuasive demonstration of the unwillingness of private industry to invest in infrastructure projects that cannot achieve immediate financial returns. This has been demonstrated by the successive failures of projects to build the much-needed nuclear power stations. For the purpose of constructing nuclear power stations, the Government are now hoping to mobilise the capital invested in pension funds. They intend to rely on a so-called regulated asset base that allows construction projects to impose levies on consumers of electricity during the course of construction. It is doubtful whether this will be a sufficient inducement to build nuclear power stations.

The first generation of civil nuclear power stations embodied a new technology, the development of which was fully supported by the Government, as were the costs of constructing the stations. The current Government have shown themselves unwilling to adopt such a role. They have been unwilling to offer more than a grudging modicum of support to assist the development of small modular nuclear reactors. Apart from the minor support that is hinted at in the Bill, the same is true of the development of the technology and infrastructure for hydrogen fuel, synthetic aviation fuel and carbon capture and storage.

There is no mention in the Bill of the technology that is required to be developed if we are to replace the use of fossil fuels in steel production, in manufacturing cement, glass and bricks, in surface transport and aviation, and in many other applications. It is assumed that this technology will arise automatically.

To meet the objectives of securing the nation’s energy and of staunching its emissions of carbon dioxide, the Government must engage fully in a technological and an economic revolution; otherwise, their plans are bound to fail. The Energy Bill is a bizarre document. It contains detailed provisions to meet contingencies within scenarios which will not transpire unless the Government act very differently—and unless they do, we will be destined for economic misery and social discord.

Small Modular Nuclear Reactors

Viscount Hanworth Excerpts

Tuesday 28th June 2022 Lords Chamber

Asked by

[Viscount Hanworth]

To ask Her Majesty’s Government when, and under what circumstances, they will place orders for small modular nuclear reactors.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the energy and security strategy sets out our intention to take one nuclear project to final investment decision in this Parliament and two projects to final investment decision in the next, including SMRs. As with any government decision, this will be subject to value for money, relevant approvals and technological readiness and maturity.

[Viscount Hanworth (Lab)]

I am not reassured by the Answer the Minister has given. To await the completion of a generic design assessment of a proven technology is to impose an unnecessary delay. There is an international market awaiting small modular reactors. Unless the Government provide full and immediate support for the SMR of Rolls-Royce, foreign producers will capture the market and we may have to depend on them for the reactors we will need to install in the UK. Does the Minister regard that prospect, and the prospect of losing overseas markets, with equanimity?

[Lord Callanan (Con)]

We are providing immediate support to Rolls-Royce to develop the SMR; we provided it with £210 million to do exactly that. However, it is important that we go through all the relevant design approvals to make sure that SMRs are safe and easy to deploy. That is an important step to go through and which is legislated for in this country, and we should make sure that we follow it.

Catapults (Science and Technology Committee Report)

Viscount Hanworth Excerpts

Thursday 19th May 2022 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, the opening speaker in this debate, the noble Lord, Lord Mair, has filled the foreground with much important detail. I shall confine myself to the background.

Catapults were first established in 2011 with the purpose of fostering industrial research and development and bridging the gap between universities and industry. They were intended to address the fact that Britain had been failing to translate its scientific research into profitable industrial applications. This failure has a long history, which reaches as far back as the end of the 19th century. Then, it was becoming clearly apparent that countries on the European continent were outstripping Britain in industrial innovation. Eyes were turned to Germany in particular, which was experiencing revolutions in the chemical and electrical industries, as well as in heavy industries and steel production. There were social and cultural aspects that accompanied this progress, and it began to be asked what Britain was lacking.

Britain certainly lacked anything to compare to the Kaiser Wilhelm Society that was founded in 1911 as an umbrella organisation to support industrial research and development throughout Germany. Britain at the time was distracted by its imperial and colonial enterprise, which had a far-reaching effect on the national psyche. The esteem in which mid-Victorian engineers and scientists had been held began to be overshadowed by the status accorded to empire builders, who were soldiers, statesmen and colonial administrators. Talented individuals were diverted from trade and industry to serve the colonial enterprise. Nevertheless, there was a non-conformist ethic that sustained technological enterprise and prevailed in the industries of the Midlands and the north well into the 20th century.

The early post-war years saw a reform of the secondary education system in the UK under the Butler Education Act of 1944. The original intention had been to create a tripartite system of grammar schools, secondary technical schools and secondary modern schools. The technical schools were omitted and a gap was created in secondary education which has endured to this day.

A gap opened up in tertiary education when the colleges of advanced technology were freed from local authority control in 1962. Their role had been to pursue industrial research and development. This role went into abeyance when they became universities and began to teach degree courses in imitation of the older universities. The polytechnics and colleges of technology had been serving the interests of business and commerce by teaching commercial and industrial skills. The Further and Higher Education Act 1992 removed them from the control of local authorities and they too were allowed to bid to become universities. There has since been an implosion in the remnants of the further education sector, which has been severely starved of funds. The sector has been unable to invest in order to adapt to the changing demands of industry and the number of students who receive a technical education has fallen drastically.

In the meanwhile, the university sector has grown markedly. The cap on student numbers has been lifted and universities have been allowed to compete among themselves for students. The intellectual demands of a university degree course have been alleviated to cater to a wider ability range, and the research performance of universities shows signs of suffering. Their role in technical education has declined.

There have been increasing demands on universities to fill the gap where industrial research and development have been lacking. A further element has been added to the burden of the audits under which academics are labouring. They are required to demonstrate their research performance under the research excellence framework. Their teaching is monitored under the teaching excellence framework and the National Student Survey. Now, their performance in fostering industrial research and development is being encouraged and monitored under the knowledge exchange framework. They are being asked to fill the gap. These regimes make contradictory demands and ask too much of academics.

It was a consciousness of the gap that exists between academic research and industrial development that led to the establishment of the catapults. They are an increasing number of ad hoc organisations with designated purposes in various areas of industrial technology. The question that has to be asked is whether this is an appropriate and an effective means of satisfying the needs for industrial research and development. The answer that occurs to me is that, given the distorted nature of our educational system, and given the incoherent way in which Britain has organised its applied research, the catapults may be a regrettable necessity.

We can look at other countries to witness better systems. Comparisons, as we have heard, are often made with Germany, where applied industrial research, which is accorded a high status, takes place in the Fraunhofer institutes. These are research establishments spread throughout Germany that focus on different fields of applied science. With some 29,000 employees and with an annual research budget of €2.8 billion, they form the biggest organisation for applied research and development in Europe.

The size of this organisation is roughly equal to that of the Max Planck Society, which supports fundamental research in the natural sciences, the life sciences and social sciences. That organisation was given its present name in 1948. Previously, it had been the Kaiser Wilhelm Society. Its research is comparable to that of the UK universities. The superior research performance of British universities compared to their German counterparts may be an illusion, since the research that takes place in the Max Planck institutes and the Fraunhofer institutes is not directly attributed to specific universities. This is despite the fact that many of the researchers have been seconded from universities.

The report of the Science and Technology Committee makes a comparison between the catapults and the Fraunhofer institutes. However, the two networks differ in size by an order of magnitude. A comparison of the funding of industrial research and development in Germany and Britain is difficult to achieve, because of the dispersed and incoherent nature of the activities in Britain. But there can be little doubt that the funding by central government is much greater in Germany than in Britain.

It is only through greatly increased funding and by a fundamental reorganisation that industrial and applied research in Britain could hope to rival that of our European neighbours. I see no reason, for example, why the various public sector research establishments of Britain, which have served us well in the past, should not fall under the same umbrella as the catapults, to allow for a much greater coherence. At present, the catapults appear to be an ad hoc and a small-scale response to an enduring systemic failure in the United Kingdom.

European Research Council

Viscount Hanworth Excerpts

Wednesday 27th April 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes a very good point. We think on balance that it is worth associating with the Horizon programme, which is why we agreed to participate, paying our full amount into it of course for that participation. However, if the EU refuses to stand by the agreements that it signed, we will put alternative arrangements in place, and all the sums that would have been allocated to researchers under the Horizon programme will instead be funded directly by the UK.

[Viscount Hanworth (Lab)]

My Lords, we should soon be admitted to the Horizon Europe programme for funding research and innovation if the Government were to undertake not to invoke Article 16. However, what progress can the Government report in their endeavour to seek collaborative research arrangements with other countries, in particular with the Swiss, who have also not been readmitted to Horizon?

[Lord Callanan (Con)]

The noble Viscount makes a very good point and, of course, alludes to the previous answer that I gave to my noble friend Lord Hannan. There are many good universities around the world, not just necessarily in the EU. We have a number of different, collaborative research programmes with other parts of the world. Ironically, under the Horizon programme, it is of course possible for third countries to associate in collaborative research programmes, provided they pay their fair share of the bills. The EU is not just treating us unfairly in terms of the agreement it signed, but is actually treating us differently from other countries in the world.

Nuclear Energy (Financing) Bill

Viscount Hanworth Excerpts

Report stage
Thursday 24th March 2022 Lords Chamber

[Lord Oates (LD)]

My Lords, I shall speak to all the amendments in this group. They deal with value for money for the taxpayer and for bill payers, the impact on consumer bills of the regulated asset base charge, and the final amendment relates to excluding those on universal credit and other legacy benefits from such impacts.

Amendment 1 requires that the Secretary of State is of the opinion that designating a nuclear company will result in value for money, as evidenced by the publication of the value-for-money assessment. In this sense, it is about both value for money and transparency, which we will also touch on in later groups. We want to know not just that such a designation will result in value for money but on what basis that decision has been arrived at. We know from the history of the nuclear industry that promises about costs have rarely been kept and that finances have been opaque, to say the least. If there was one advantage of energy sector privatisation, it was that the costs which had previously been fairly buried in the accounts of the Central Electricity Generating Board became much clearer. That is a significant part of the reason why nuclear power ceased to be attractive, because it was clear that it did not offer value for money either for the taxpayer or for the consumer.

As my noble friend Lord Foster said when he spoke to this amendment in Committee, the Government have said already that they are going to conduct a value-for-money assessment. All we are asking is that that assessment is published as part of the process of the Minister being clear that it is his position that the designation would represent value for money. In Committee, the Minister notably failed to give any such commitment that the value-for-money assessment would be published, so I ask him to tell the House directly in his response whether the Government will publish that assessment. If he does, he will satisfy many of our concerns on this matter. If he does not, he will simply confirm our belief that the result of the Bill will be that the public are going to be landed with eye-wateringly expensive power generation which does not offer value for money and for which they will be forced to pay on their bills in advance.

Amendments 3 and 10 deal with the impact on consumer bills. Amendment 3 requires the Secretary of State to be of the opinion that designating a nuclear power company will not have a significant and material impact on consumer bills and to lay a report before Parliament setting out the reasons and evidence for that opinion. Again, this is about both the protection of the consumer and transparency over decision-making.

Amendment 10 seeks to exclude recipients of universal credit and legacy benefits from the regulated asset base charge, and I am grateful for the support of the noble Lord, Lord McNicol of West Kilbride, and the noble Baroness, Lady Bennett of Manor Castle, on this amendment. It would guarantee in law that the most financially vulnerable in our country do not see an additional increase in their energy bills to finance the exorbitant costs of nuclear power generation. The most indefensible part of the Bill is that the cost of nuclear generation and the way the RAB charges work would have a disproportionate impact on those who are already struggling to pay their bills. With the energy price cap already set to increase by 54% and with further increases very possible, indeed likely, in the autumn, this is no time to place further burdens on those least able to meet them, as the Bill does. On the Liberal Democrat Benches, we believe that we have an absolute duty to protect those least able to meet these costs at such a difficult time.

As finance expert Martin Lewis has said, the financial strain on families is already the worst he has known. He describes the increase in energy bills as a

“fiscal punch in the face”,

and adds:

“I am out of tools to help people now … It’s not something money management can fix … we need political intervention.”


But what we have in this Bill is political intervention to make the situation worse. Reports from the Joseph Rowntree Foundation have added that the case for support

“to help people on the lowest incomes could not be clearer”—

so why are we doing the opposite? As we all know, the number of people in fuel poverty is increasing at alarming rates; it is estimated that it will have tripled in the space of two years.

Citizens Advice finds that 55% of universal credit claimants are already going without basic essentials. The Government are proposing to increase benefits by just 3.1% at a time when inflation is forecast to peak at 8% to 9%. Many, including the CBI, believe that peak may be sustained over a significant period. This Bill would exacerbate the problem even further. Amendment 10 would at the very least make sure that the most financially vulnerable people in our country are not forced to bear further costs on their energy bills as a result of this unfair policy.

[Viscount Hanworth (Lab)]

My Lords, I wish to speak to Amendment 1. The noble Lord, Lord Howell, disposed of the previous version of this amendment most effectively in an eloquent speech in Committee, yet the Liberal Democrats persist in asking for an unequivocal value-for-money assessment of any project to build a new nuclear power station. It is not clear on what basis such an assessment should be made.

They may be inspired by the expectation that an assessment conducted according to commercial accountancy would cast doubt on the economic benefits of building new nuclear power stations. It has been pointed out to them that such a valuation would entail the commercial cost of capital funds, which are available from the financial sector only at an exorbitant rate of interest. It is precisely for the purpose of overcoming this impediment that the financial device of a regulated asset base, which is what this Bill advocates, has been devised.

Commercial accountancy—if that is what the Liberal Democrats have in mind—would be a most inappropriate means of assessing the value of investment in social and economic infrastructure that would provide us with a carbon-free source of electricity for the long term. Not only will this electricity be making a vital contribution to our climate change agenda but it will serve to sustain our industries in the absence of fossil fuels. Surely the Liberal Democrats should support such objectives.

The Liberal Democrats have been enjoined to tell us how they envisage that we might satisfy these objectives in the absence of the secure and reliable supply of electricity that would be provided by nuclear power stations. They have failed to do so. They have failed to tell us how the problems of the insecurity and intermittence of the supply of electricity could be addressed if it were dependent on the wind, the sun and imports from abroad. We must assume, in the absence of any declaration from them, that this is what they envisage. The truth is that they have failed to address the logistics of the energy supply in a meaningful way.

The value of renewable sources of power must be assessed not only on the costs of what they are able to produce but on the costs of what they fail to produce. At times when this power is not available, other sources must be found. In the absence of a baseload of electricity, they are liable to become exorbitantly expensive when there is a dearth in power. Wind and solar power will not satisfy the demand for a greatly increased supply of electricity, which must arise if our industries and our transport are to relinquish fossil fuels. The renewable sources of power would serve to satisfy the demands only of a wholly deindustrialised and socially immiserated version of the United Kingdom.

Nuclear Energy (Financing) Bill

Viscount Hanworth Excerpts

Committee stage
Tuesday 8th March 2022 Grand Committee

All this shows that we will not know what the GDF will cost until it has been constructed and is operating. We cannot know the real cost of nuclear generation and decommissioning in the absence of that information. It follows that the Secretary of State will lack the information to determine whether a nuclear project represents value for money, which he is required to determine under Clause 2. For those reasons alone, it is our belief that we should not move forward with new generation until a GDF is operational. However, there is also a more profound reason: we have no business creating more deadly waste until we have proven that we are capable of cleaning up the nuclear mess that we have already made. I would beg to move, but I believe that my amendment has already been moved and I thank my noble friend Lord Foster for that.

[Viscount Hanworth (Lab)]

The proponents of this amendment are trenchantly opposed to nuclear power. They are proposing as a condition for allowing a company to construct a new nuclear plant that a facility for the disposal of high-level nuclear waste should be available. Presumably they imagine they are proposing a condition that cannot be met. The proposers should be aware, albeit that they may have missed the point, that work is already under way to establish a geological facility for such waste. Three locations have been proposed, and there have been favourable responses from the people in the areas concerned. This was announced in a symposium that was held in November in Methodist Central Hall, a stone’s throw away from Parliament by Nuclear Waste Services, which is a branch of the Nuclear Decommissioning Agency. In fact, the Liberal Democrats have strongly opposed the establishment of a geological disposal facility. They have recently organised a petition of local residents to oppose a tentative proposal that such a facility might be created on the south coast under Romney Marshes.

Just a month ago, the Liberal Democrats ago voiced the old trope that nuclear waste is highly radioactive and highly hazardous and that the hazards will endure for millennia. They cannot have it both ways. Nuclear radiation is subject to a geometric or exponential process of decay. The more intense the radiation, the shorter lived it will be. On the other hand, a substance that has a half-life of thousands of years is only weakly radioactive. The methods that have been devised for the storage of nuclear waste can accommodate all these circumstances in a manner that can render the waste harmless. We have had various figures quoted for the cost of this enterprise, but the proponents of the amendment are proposing these figures as if they are a cost to be borne immediately. In fact, that cost will be distributed over a long period. If you take that into account, a very different conclusion arises.

This is an ill-conceived amendment and should be dismissed without further ado. We should not allow the legislative process to be entrammelled by such groundless objections and impediments.

[Lord Foulkes of Cumnock (Lab Co-op)]

I am not sure why my noble friend is so surprised that the Liberal Democrats have moved this amendment. They are always looking in two directions, and this is absolutely typical of them. My noble friend has been in the House of Lords long enough, and he ought to have got used to it by now.

[Viscount Hanworth (Lab)]

Yes, indeed. In 2010, the Liberal Democrats in the coalition Government proposed that 10 new nuclear plants should be built. Of course, they have totally changed their opinion.

[Lord Teverson (LD)]

Perhaps the noble Viscount will explain how the Labour Party in government has made some of the biggest U-turns on nuclear power ever seen in this country.

[Viscount Hanworth (Lab)]

No, I am not in the business of explaining that. There has never been consensus in the party but, right now, I think there is consensus as never before. The party is facing up to realities. I hope I shall have the opportunity to describe what those realities may be if we were to follow the prescriptions of the Liberal Democrats. I think that we would be looking at a scenario of misery and—

[Lord Teverson (LD)]

We all agree with the principle that the polluter pays. I believe that we also have a principle in life that we should not pollute if we have no way of solving that pollution during the time for which we are planning. The issues here are complex, but I do not think they are necessarily quite so straight- forward as the noble Viscount describes.

--- Later in debate ---

[Lord Howell of Guildford (Con)]

What I am saying is that, if the Secretary of State decides to publish his value for money assessment, that assessment will of course include the long-term national security concerns of this nation and a variety of other advantages of moving into a proper low-carbon electric age. That kind of value is not one that the noble Lord is going to agree with, so the disagreement will continue. Value is a totally subjective aspect; that is so with many national projects, but particularly with this one.

If I may say to the noble Lord, Lord Stunell, the rather endearing Lib Dem concept that no public subsidy could possibly be involved—that is, nuclear is all right but there must be no public subsidy—is an absurdity. Of course there is going to be public concern about the national security of this nation; public concern is something that will have to be paid for, either through subsidy by the taxpayer or by ordaining the Government to raise the money in some other way. The latter was the proposition for Hinkley C, which was allowed to have a strike price that was at that time almost twice the going rate for electricity kilowatts per hour from coal, oil or anything else, including renewables. Things have changed since then; now that electricity and gas have soared, perhaps the strike price is quite reasonable compared with other fossil fuels. That raises the question of contracts for difference; perhaps it was not quite such a bad prospect as some of us thought.

Anyway, that is beside the point. The main point is that value is utterly subjective and must contain all kinds of assessments by the Secretary of State, his colleagues and the Government about national security and its contribution to our long-term aim of a decarbonised world, as well as a vast range of other considerations—all of which have to be balanced out in taking these difficult political decisions. We can argue until kingdom come but the reality is that judgments have to be made, and they are much bigger than value in the narrow sense.

[Viscount Hanworth (Lab)]

I quite agree with what the noble Lord, Lord Howell, has just said; indeed, I feel somewhat pre-empted. However, before I address the amendment, I shall talk about cost overruns.

The cost overruns have been substantial in Flamanville and Olkiluoto but they are mainly attributable to the fact that there was a long hiatus in the process of constructing nuclear power stations, so the skills that constructed the majority of the French and our own power stations had evaporated. It is worth looking back at the history of our original nuclear programme to recognise both how rapid and effective it was and that it was not accompanied by the kinds of problems we have witnessed on these large power stations.

Be that as it may, Amendment 4 from the Liberal Democrats is predicated on their opposition to nuclear power and the proposal that nuclear power projects should be assessed in terms, as we have heard, of their value for money. I presume that they wish the assessment to be based on commercial accountancy, and that they hope and expect that on that basis the projects will be judged to be too expensive to pursue. The proposers of the amendment should know that when a nuclear project is financed by commercial funds, the likelihood is that more than 50% of the cost of the project will be attributable to interest costs.

In other words, the costs of projects pursued in this manner will comprise a substantial transfer payment by the beneficiaries of the project, who are the consumers of electricity, in favour of the financial sector. Are the Liberal Democrats happy to see major investments in social and economic infrastructure evaluated according to the criteria of commercial accountancy? If so, they are aligning themselves with a political ideology that I would have expected them to reject.

[Lord Teverson (LD)]

That is not what the amendment says.

[Viscount Hanworth (Lab)]

Be that as it may, when we talk of value for money, we usually have in mind the amount of money we would be paying for an item that is subject to immediate use or consumption. The concept loses its meaning, as we have heard, when considering something where consumption is to be deferred and is liable to take place over an extended period. In such cases, we must attempt to envisage the circumstances likely to prevail in the future. This is surely the case for a nuclear power station, the construction of which may take a decade and which is intended to provide a carbon-free supply of electricity for many years. It is envisaged that such power stations will be able to supply the plentiful electricity needed to power a carbon-free economy and to assist in averting climate change.

The appropriate means of determining the value of a nuclear project is to consider the associated opportunity cost. Opportunity cost is a technical term in economics that denotes the opportunities that are forgone by pursuing—or not pursuing—a particular project. It requires a degree of imagination to assess the opportunity cost of a nuclear project, which far exceeds the imagination required in pursuing an exercise in commercial accountancy. I invite the Liberal Democrats to assess the opportunity cost of forgoing nuclear power. In particular, I encourage them to envisage the consequences in terms of economic and social misery that will arise if we fail to create an ample and carbon-free supply of electricity. Their policies are inviting such a failure.

[Lord Teverson (LD)]

There is a concept in economics—which I am sure the noble Viscount is aware of—of opportunity cost.

--- Later in debate ---

[Viscount Hanworth (Lab)]

That is exactly what I have been talking about.

[Lord Teverson (LD)]

Exactly. My point about it is that, first, it is the Government’s Bill says there will be this assessment. We are trying to find out is what it actually is, in the interests of transparency—which I am sure the noble Viscount would not disagree with. In terms of costs, there are opportunity costs of other forms and ways of meeting climate change targets. That is the point. You can reject opportunity cost, which means other ways of doing this. I do not think the noble Viscount’s enthusiasm for nuclear—which I understand—should disregard some of the other ways of achieving these objectives.

[Viscount Hanworth (Lab)]

Let me answer that. Looking at the alternatives proposed by the Liberal Democrats, I could go into a long discourse to outline what will happen to our industries if we forgo an ample supply of electricity to power them and maintain our economy. This is what the Liberal Democrats are inviting. They simply have not faced up to the realities of their proposals. The noble Lord says the Bill already asks for an assessment; I think that is a trivial point, because I am trying to tell him that such an assessment is probably not the appropriate way of proceeding—as we have heard very eloquently from the noble Lord, Lord Howell. I am not defending the proposal that a value for money assessment should be made. I am suggesting that such an assessment should be put aside because it is irrelevant and inappropriate.

[Baroness Bennett of Manor Castle (GP)]

I am sorry to intervene on the noble Viscount’s private discussion with the Liberal Democrats, but he referred to opportunity costs and may not be aware of the study from the University of Sussex Business School and the International School of Management—ISM—of 123 countries over 25 years, which was published in Nature Energy. It showed that nuclear and renewable energy programmes do not operate very well together and that nuclear crowds out renewable. That is the opportunity cost when going for nuclear; you lose the renewables.

[Viscount Hanworth (Lab)]

My discourse on renewables would have been on the extraordinary cost of having to accommodate intermittence. I am afraid there are other things to discuss. I have already discussed this in another forum, so I think we can leave that point.

[Baroness Worthington (CB)]

My Lords, I will speak briefly on Amendment 4, as much of what I was going to say has already been covered. I have some sympathy with this amendment, as transparency is nearly always good and it would benefit the industry to have a thorough description of the value of investing in nuclear on this and other scales, so that we have it as an option as we combat climate change and seek to deliver affordable power to the nation.

As the noble Lord, Lord Howell, pointed out, value is subjective. Therefore, it would be hard to use it as an objective way of saying that this should not go ahead. What value does Switzerland currently place on its electricity grid, which is almost 100% hydro and nuclear? That means that, despite its location in the centre of Europe, Switzerland is feeling incredibly safe in these troubled times. What value does it place on that? It is of huge value to Switzerland.

Similarly, the social cost of carbon rapidly needs to be revised as we realise that the impacts of climate change are happening far faster and at far greater cost than we ever thought. How do we factor that into value? Transparency is important and I would welcome a much more open discussion about the value that these large-scale nuclear power projects deliver for us. You can look at the levelised cost of electricity, but I suggest it is not the most important factor. You can pay a lot less for a tricycle than for a tractor, but they do not perform the same job. You must compare like with like.

With renewable technologies you have rapid deployment but very diffuse sources of energy, large land take and intermittency, which then requires a substantial extra cost on the grid for levelling when the sun is not shining or when we have periods of no wind, which does happen in Europe—it happened recently, actually, and contributed to the high gas prices we have seen. Let us have that discussion. I feel confident that the project we are talking about here, Sizewell C, will provide a great value for the money we are about to spend, not least because 50% of its additional cost comes from its financing, as has already been stated. That is a huge overhead, because these are capital-intensive long projects. This Bill will help reduce that and increase the value for money.

We now have two reactors under construction today. We can look at the costs of those to see how they transfer to subsequent projects that are funded under this more efficient mechanism. I have been informed about and questioned EDF about its cost overruns. The costs of the two reactors being built today are in line with what you would expect if you were building a huge construction project through the period of Brexit and Covid. Nearly all the inflated costs are true of all big infrastructure projects and are not unique to the nuclear project currently under way. So I would welcome having this conversation. I think transparency would be a friend of the industry and I therefore have some sympathy with this amendment.

--- Later in debate ---

[Baroness Worthington (CB)]

When we embarked on our nuclear build, we also took government money to build our hydroelectric pumped storage units, which were designed specifically to compensate and were built alongside the nuclear units. We are losing nuclear units, but we still have our hydroelectric pumped storage. The noble Lord can speak to National Grid. As we are not going to be seeing the same parity of nuclear output even after we have built the next round because we are losing the AGRs, we have more than enough capacity on the grid to cope with those fluctuations.

[Viscount Hanworth (Lab)]

I regard this amendment as a complete blind. Indeed, the figures that have been quoted do not tally with the ones to which I am privy. Large nuclear power plants are the only proven technology available today to provide a continuous and reliable source of low-carbon electricity. They have never been afflicted by major unplanned outages, albeit that as nuclear power plants—

[The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)]

My Lords, there is a Division in the Chamber. The Committee will adjourn and return as soon as agreed after Members present have voted.

--- Later in debate ---

[Viscount Hanworth (Lab)]

As I was saying, large nuclear power stations are the only proven technology available today which provide a continuous and reliable source of low-carbon electricity—

[Lord Teverson (LD)]

Geothermal.

[Viscount Hanworth (Lab)]

Can I please proceed uninterrupted, then we can have a real set-to later?

Nuclear power plants have never been afflicted by significant unplanned outages, albeit that, as they have aged, their maintenance needs have increased. These have been fully accommodated by planned outages. Nevertheless, the closure of the Magnox reactors has led to an increase in load factors, which are now considerably above their historical average. The average has risen from an historical 60% to its current level in the high 70s. The recent unplanned outage at Hunterston B, which can be blamed on the age of the plant, limited its nuclear power generation for much of 2018. It was accompanied by an average load factor throughout the industry of 72.4%.

This amendment flies in the face of reality. We must turn the matter around by asking the Liberal Democrats and the Greens, who are averse to nuclear power, how they propose to accommodate the intermittence and unreliability of the renewable sources of power they are so keen to advocate. Perhaps I should not raise the temperature by declaring this, although I fear I must, but this amendment is a blind and is a transparent piece of nonsense.

[Lord Teverson (LD)]

I will not respond to that hugely, except to say that the really important amendment, which I think we will all treat seriously, is the one on the cost of energy and the fact that this will add to energy prices. The proposition that we should exempt fuel-poverty households from this is serious; we should discuss it, because it is very current and important.

I gently suggest to the noble Viscount, Lord Hanworth, with whom I have enjoyed serving on the committee for many years, and the noble Baroness, Lady Worthington, that they have somehow fallen into the wrong idea that it is renewables versus nuclear. That is how the argument has gone.

[Viscount Hanworth (Lab)]

If I could interject, we are objecting to the complete exclusion of nuclear, which is the agenda of the Liberal Democrats. It is madness.

[Lord Teverson (LD)]

The answer to intermittency comes back to opportunity cost. As I said at Second Reading, the most effective way of reducing it is energy efficiency. That should be the prime objective. Does the noble Viscount disagree about energy efficiency?

[Viscount Hanworth (Lab)]

No, I do not, but that is not the point. Continue.

Nuclear Energy (Financing) Bill

Viscount Hanworth Excerpts

2nd reading
Monday 21st February 2022 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, the recent history of the nuclear industry is evidence of the failure of the Government’s energy policy. The coalition Government of Clegg and Cameron recognised the need to renew Britain’s fleet of nuclear reactors. In 2010, it was agreed that the construction of eight new nuclear power stations should be called for. Several contactors expressed willingness to undertake the projects but one after another they withdrew. The list includes Scottish and Southern Electricity, the German companies RWE npower and E.ON, and the Japanese companies Hitachi and Toshiba.

This has left the French company EDF as the sole nuclear contractor, and at one stage it was doubtful whether it would be prepared to proceed with its project, given the difficulty in raising the necessary funds and the paucity of its own resources. The principal difficulty has arisen from the Government’s insistence that infrastructure investment in the nuclear industry should be financed by private capital.

One is reminded that the construction of our existing nuclear plants was invariably financed by central government. Money borrowed from private lenders is subject to burdensome surcharges comprised within exorbitant rates of interest. These charges consist of a risk premium, a scarcity premium and a discount rate. The discount rate reflects the time preferences of the lenders, whereby future receipts are valued at far less than current receipts. It is a consequence of this short-term perspective that half the cost of constructing a new nuclear power station, which can take as long as 10 years, will be attributable to interest charges. These will eventually constitute a massive transfer payment from the consumers of electricity to the financial sector.

As a provider of finance, the Government should be expected to take a long-term perspective. It should be one that envisages the consequences of global warming and the need to provide a stable baseload of carbon-free electricity, which only nuclear power can provide. The free market ideology of the Government has resulted in a system of contracts for difference, under which the guaranteed payments are entailed in a so-called strike price. Any returns to the investment that are below the strike price will be supplemented and any returns above it will be taxed.

This system has been an invention of neoclassical economists. It has accorded perfectly with their theoretical vision of how the economy ought to work, but it is at variance with reality. Among the economic fictions that support this system is a belief in the efficiency of intertemporal financial intermediation, whereby lenders can be prevailed upon to accept future repayments with little in the way of monetary inducements. In reality, it has proved impossible for prospective contractors to acquire the investment funds without incurring a heavy burden of payments to the financial sector.

The Government’s latest attempt to square the circle is represented by the Nuclear Energy (Financing) Bill. The Bill proposes to provide a stream of revenues to the contractor during the period of construction. The revenue will be derived from a charge levied on existing consumers of electricity. The supposition is that, with a guaranteed revenue stream and the alleviation of some of the risk, the contractors will be able to acquire capital funds from the private sector with greater certainty and at a reduced cost.

This begs the question of where the funds will come from and whether they will be adequate to cover the costs. The Government have also reserved the right to judge whether a proposed nuclear project will represent value for money and there is a risk that they will declare or decide that it does not. The common understanding is that the capital will come from the pension funds. I believe that this is the Government’s assumption. We have yet to hear any assessment of the likelihood that the funds will be forthcoming. Perhaps the Minister could address this point. To my knowledge, the Government have revealed no plans to meet the eventuality that the funds to sustain the regulated asset base will not be forthcoming from the private sector. Perhaps, in that case, the Government should derive funds by issuing designated nuclear bonds, as has been suggested.

In January, the Government announced £100 million of funding to support the continued development of the Sizewell C project, in the hope that this would attract further financing from private investors. This is a trivial sum. It might seem odd to describe £100 million as a trivial sum, but it is small in comparison with the £4.3 billion that is reported to have been lost through Covid-related fraud. The cost of the Hinkley Point C power station, which should open in 2026, is estimated to be between £22 billion and £23 billion. The cost of Sizewell C has been estimated at £20 billion. One should be mindful of the fact that, under existing arrangements, at least 50% of these sums will be paid to the financial sector in interest charges. Stripped of interest charges, the true cost of constructing a massive power station at Hinkley Point or Sizewell can be compared with the cost of the 2012 Olympic Games, which is supposed to have been £14.8 billion. These costs seem small when set beside the accumulated profits of banks and the tax paid by the banking sector.

These figures have been bandied about because I wish to pose a rhetorical question: can we afford to secure our future energy supply and fulfil our carbon reduction ambitions? The Government’s economic philosophy might suggest to them, absurdly, that both of these questions should be answered in the negative and that it will be too expensive to achieve these goals.

--- Later in debate ---

[Lord Oates (LD)]

I am grateful to the noble Baroness. I am sure that the noble Lord, Lord West, is very familiar with Portsmouth and that he will take the opportunity to visit such projects.

As we know, electrical use is highly cyclical, both in terms of daily peaks and troughs and annual swings. Therefore, we have to show much greater urgency about how we use smart pricing to reposition demand rather than simply piling on more production to meet peak load. We also have to invest in energy storage and integrate it into grid planning through batteries, green hydrogen production, pumped hydro, compressed gas storage and other solutions.

Finally, nuclear power generation produces high-level nuclear waste which is deadly for longer than any human civilisation has ever survived. It is notable how few noble Lords who contributed as nuclear proponents to this debate addressed that fundamental issue.

The Minister was keen to tell us, as other noble Lords were, how the UK was the first country in the world to begin a civil nuclear programme, yet decades after that and after promising that a solution to this problem is just around the corner, the Government and industry have still failed to supply one. It is our contention that, quite apart from the other powerful arguments against nuclear, it is morally unjustifiable to build new nuclear stations until we first have a geological disposal facility in operation for the long term to deal with the existing high-level waste we have produced. That is key.

In our view, the case for new nuclear generation projects falls down at every hurdle. They cannot contribute to our 2035 electricity decarbonisation target, they cannot effectively complement renewables, and they cannot even clean up the mess they have already created. So laden are these projects with risk, so staggeringly unable are they to keep to time or budget, and so eye-wateringly expensive is the electricity they generate that the only way to finance them is by passing the risks and costs to consumers and taxpayers who are given no choice over whether to accept them.

It is hard to improve such a fundamentally flawed project, but in Committee we will do our best to bring forward amendments to deal with the specific flaws in the Bill that I identified earlier. We look forward to working with noble Lords across all parties in the House to at least make the best of a bad job.

[Viscount Hanworth (Lab)]

Before the noble Lord sits down, may I ask him to clarify how he proposes that we should accommodate the variability of wind and solar power, which I believe are the sources of power that he prefers or proposes?

[Lord Oates (LD)]

If the noble Viscount had listened to my speech, I set out a range of areas in which we need to completely rethink our energy system, including significant investment in energy storage that we can bring online, demand repositioning and demand reduction. Those are the solutions, but I am happy to discuss them further with the noble Viscount outside the Chamber.