EU: Energy Governance (EUC Report)
Viscount Hanworth Excerpts(8 years, 6 months ago)
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Viscount Hanworth (Lab)
My Lords, several reports of the European Union sub-committees of the House of Lords have been scheduled for debate prior to the crucial date of 23 June, when the referendum will be held to determine whether Britain has a future as a member of the European Union. It might seem that such reports would become irrelevant if our membership of the Union were to cease. Indeed, the very existence of the European Union Committee would be in doubt. However, it is a misapprehension to imagine that, in that event, the committee’s reports would become irrelevant. In any circumstances, we shall be tied to Europe, and the needs and problems to which the reports draw attention will be only exacerbated if we leave the European Union.
The need to which the report on energy governance draws attention is for an orderly and integrated system of energy supply throughout the European Union that transcends national boundaries. The three aims are to achieve carbon reduction in line with agreed commitments, to ensure security of supplies, and to achieve efficiency and affordability. The European Union imports 53% of its energy supplies. For their imports of gas, the member states depend heavily on a single supplier, which is Russia.
There are mounting anxieties over the security of supplies. There is a growing dependency on renewable resources for generating electricity, and these can be intermittent and unreliable. These problems can be addressed and partly overcome by enhancing the interconnectedness of the network of supply. The intermittency of the electricity generated by wind and solar power can be mitigated if the network of interconnections is wide enough to comprise regions of greatly differing climatic and meteorological conditions.
Britain faces the same problems as many of the other nations of the Union. After spending most of the previous 25 years as a net exporter of energy, the UK became a net importer in 2004. The gap between imports and exports has increased since then, and it looks set to continue to increase in future. Our imports of energy now amount to 40% of our consumption. The narrowing margin in our capacity to meet the demand for electricity is compelling us to seek external supplies via enhanced connections with neighbouring countries.
The need for concerted action across the European Union to deal with the problems of energy supply is increasing at a time when its ability to act in concert is in doubt. Thus, whereas the European Commission is keen to declare common objectives, it is hesitating to define the means by which they can be achieved.
The tendency is well illustrated by the programme for carbon reduction. In 2007, the leaders of the European Union agreed climate and energy targets for the year 2020. These included a 20% cut in greenhouse gas emissions relative to 1990 levels. The Commission mandated a 20% provision of energy from renewable sources and a 20% improvement in energy efficiency. Targets were declared for individual member states. In 2014, the European Commission adopted targets for 2030 that included a 40% reduction in greenhouse emissions relative to 1990 levels, a 27% target for renewable energy and an energy efficiency target of 27%. However, no targets were declared for individual member states, for fear of their being resisted.
Such apparent weakness of purpose has led, in some quarters, to the disparagement of the European Union. However, in an alternative perception, it highlights the need for concerted action. The need to act in concert is evident in view of the threat to supplies of gas. Russia, which is the principal supplier of gas to the European Union, is inclined to use its position as a means of achieving its political aims. The Russian intentions have become clear recently in connection to the Nord Stream 2 project, which proposes to link Germany directly to Russia via a gas pipeline under the Baltic Sea. This would bypass Ukraine, thereby denying it the tariffs for transporting the gas, as well as threatening its own gas supplies.
It is rumoured that the five western companies co-investing in Nord Stream 2 have been told by Gazprom, the Russian state energy company, that, as a condition for participating in the project, they must cease to receive gas supplies via Ukraine. The project has been heavily criticised by central and eastern European nations that are dependent on Russian supplies that come via Ukraine and that are fearful of Russian aggression. The European Commission had reacted by proposing that mutually supportive groups of member nations should be established with the aim of pooling and protecting their supplies of gas.
It is notable that the former Soviet Baltic states of Lithuania, Latvia and Estonia are pressing for the creation of a single gas market with no internal borders. They have grave anxieties concerning Russian intentions. However, Latvia, the gas supplies of which remain in the hands of Gazprom, has rejected the opportunity to import gas from Lithuania, and Estonia is pursuing its own projects, including co-operation with Finland. This makes regional co-operation difficult, and it is incumbent upon the European Union to try to amend this situation.
The project for unifying the European energy market is beset by political, technical and economic difficulties. The economic difficulties concern the design of an integrated market and the raising of the necessary funds for establishing or enhancing the interconnections, and for enhancing other aspects of supply.
The Union has adopted many of the nostrums of the neoclassical economists who inspired the Conservative Governments of Margaret Thatcher, and which also prevail among the Conservatives at present. The document declaring the framework strategy of the European Commission for a resilient energy union makes it clear that the Commission expects the necessary investment funds to be provided by private enterprise. It declares that a centralised, supply-side approach is an outdated business model, and it evinces the belief that private firms in competition can be relied upon to cope with the complexities of an integrated market.
To some degree, interconnectedness can be seen as a public good; the public in question being the people within the realms of the interconnected nations that form the European Union. Since public benefits would not be included in their cost-benefit analysis, there is a risk that private investors will underinvest relative to the size of the investment that would maximise the public good. In view of the differing interests of groups in different member states, there is a need for an overarching policy negotiated at European Union level.
The belief of the economics pundits, who tend to be neoclassical economists and free marketeers, is that the appropriate outcomes can be engineered by establishing incentives for private investors. I have a different opinion. To expect to achieve the optimal outcome in a hands-off manner strikes me as foolishly optimistic. Not only must one identify the appropriate outcome but, in order to fashion the incentives, one must make an accurate assessment of the likely responses of private investors. There is a strong possibility that the incentives will be misjudged.
We had a recent experience of this in connection with the energy market reforms of the present UK Government, which are intended to be mediated by so-called contracts for difference. A similar “cap and floor” regime has been proposed by Ofgem for mediating the returns to private investment projects, aimed at enhancing the UK’s connections to the electricity supplies of Norway, Denmark, France, Belgium and Ireland. The regime sets a maximum and a minimum amount of revenue to be derived by the interconnector, and it proposes to add to or subtract from their actual revenues according to their shortfall or their excess.
In the UK, the policy of placing investments in power generation entirely in the hands of willing commercial providers has been a disaster. The willing providers of the next generation of nuclear power stations have not been readily forthcoming. We will have to rely on French and Chinese nationalised corporations to undertake the task of building our nuclear power stations, at an exorbitant cost. At present, their commitment to this task is in doubt. I wish to argue in favour of initiatives for which the finance has been provided by central government, and in which the Government, supported by expert opinion, have the oversight of the associated technologies.
The incentive to rely on the private funding of infrastructure projects has been to remove the costs from the Government’s budget and to prevent them impacting on the levels of the Government’s deficit. A fallacy of this approach is to imagine that the discount rate by which the present value of future costs and benefits is calculated, and on which the rewards of the private investors are based, can or ought to be the rate that applies to commercial investment projects. That rate, according to the Government’s methodology of levelised costs, is at an exorbitant 10%, which is appropriate only to high commercial risks. Investment in national infrastructure is not associated with commercial risks, and the risks that there are should be borne by the Government.
This is recognised in the advice that is embedded in the so-called Treasury Green Book for the appraisal and evaluation of investment projects by central government. There, we find that the discount rate for social investment is deemed to be 3.5% per annum. This is a high figure when compared with the current prime lending rate of 1.5%, which is the average rate of interest charged on loans by major commercial banks to private individuals and companies. The consequence of funding energy infrastructure projects in the manner of the UK Government is that the deferred benefits of the projects will accrue largely to private enterprise, when they ought to accrue to the public good.
The European Commission has adopted similar nostrums to those of the present UK Government. However, whereas the Commission is in a position to promulgate an agreed agenda, it is not and never has been in a position to dictate how it might be fulfilled. The documents of the Commission openly concede this point. It behoves us at present to recognise this truth and to gainsay those critics who suggest that our membership of the European Union in some way diminishes our national sovereignty. We are free to make our own decisions on how to reach common objectives. Our membership of the Union can only empower us.
Nuclear Reactors
Viscount Hanworth Excerpts(8 years, 6 months ago)
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Viscount Hanworth
To ask Her Majesty’s Government what progress has been made in the assessment of the alternative design proposals for small modular nuclear reactors, and when those alternatives are likely to undergo their generic design assessments.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, in March the Government launched phase 1 of a competition to identify the best-value small modular reactor design for the United Kingdom. DECC has received 38 expressions of interest, which it is now assessing for eligibility. No assessment has yet been made of the designs.
Viscount Hanworth (Lab)
I thank the Minister for that enlightening Answer. I should like to draw attention to a passage in the December 2014 feasibility study of the National Nuclear Laboratory on small modular reactors. The report declares that there is,
“a narrow window of opportunity in which the UK can join the respective programmes … there are other interested parties and also a cut-off point by which time there will no longer be an opportunity for the UK to contribute to design in a way that will provide substantial Intellectual Property Rights”.
Therefore, do the Government intend to involve Britain’s nuclear industry in an SMR programme in a manner that would assist its revival? Can the Minister assure us that the Government will not regard this project simply as a commercial affair? That is how he described the Government’s involvement in the project to build a reactor at Hinkley Point.
Lord Bourne of Aberystwyth
As I indicated, there has been strong interest, with 38 expressions of interest. It is indeed the Government’s intention to take this forward, which we are doing.
Energy Security: Hinkley Point
Viscount Hanworth Excerpts(8 years, 9 months ago)
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Lord Bourne of Aberystwyth
My Lords, the noble Baroness is wrong: there is no flip-flopping over energy policy. It is absolutely clear and it was set out in my right honourable friend the Secretary of State’s speech that we regard security as the number one proposal. We are ending subsidies. We are moving away from subsidies to a market-based approach, which is the right thing to do. It is important that we balance the interests of the public purse with the interests of decarbonisation and security, and that is what we are doing.
Viscount Hanworth (Lab)
My Lords, would the Government be prepared to consider taking a significant share in the equity of EDF? Then the Company might become part of a nationalised industry owned jointly with the French. At present, we are in the process of underwriting all the risks of the Hinkley C project, so surely we should also expect to partake in any profits that might derive from that project.
Lord Bourne of Aberystwyth
My Lords, this is a commercial deal, as the noble Viscount should be aware. It is a matter for EDF if the costs increase: they are EDF costs. We have a strike price, as I have indicated, which is firm and unchanging and will guarantee us energy up to and beyond the 2030s—for 60 years from when this comes on stream.
Feed-in Tariffs (Amendment) (No. 3) Order 2015
Viscount Hanworth Excerpts(8 years, 10 months ago)
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Viscount Hanworth (Lab)
My Lords, the energy policy of this Government is in utter disarray. One can take no pleasure in their discomfort; the adverse effects will be felt by all of us in the immediate future and in the longer-term.
The Government ought to have taken a strategic approach to the supply of energy. The explanation of their failure to do so lies partly in their ideological tenets and partly in the mistaken lessons that they have drawn from a previous experience. The experience of denationalising the electricity industry has led them to believe that investment decisions could be left to the market. At the time of this denationalisation there were ample supplies of North Sea gas and the private companies were able to invest cheaply in gas-powered turbines for generating electricity. When these were placed alongside the existing conventional coal-fired power stations, there was an ample supply of generating capacity. With the decommissioning of the coal-fired power stations, this is no longer the case.
The Conservatives have come to believe that this experience provides a model for an energy policy. They have convinced themselves that a centrally directed strategic policy for energy provision is a thing of the past. They persist in believing that the private sector can be relied on to deliver a mixed portfolio of generating technologies. They imagine that in this way they can avoid the risk to government of choosing and pursuing an inappropriate technology.
The feed-in tariffs, which we are discussing today, became an important part of the laissez-faire approach when it was recognised that certain infant technologies might need some assistance. Households and small enterprises have been given incentives to pursue small-scale generation. The incentives consist of a pro rata payment for each kilowatt of electricity they generate, together with a so-called export tariff, which is supposedly tied to the amount of electricity that is fed into the grid. In the absence of a meter to determine how much electricity has been exported, it is assumed that 50% of the electricity generated by photovoltaic cells will be exported and that 75% of the electricity generated by wind turbines will be exported. The intention was gradually to reduce the financial support given to the infant industries via a process described as “degression”—a neologism unrecognised by most dictionaries.
Instead of a steady reduction in the support for small-scale generation, the Government have reacted to the success of the scheme and its consequent expense by proposing a step change in the support, which virtually abolishes it. Their reliance on a laissez-faire market-oriented policy has exposed the Government to the unintended consequence of a vigorous expansion of photovoltaic generation. There is now a significant industry devoted to the installation of the equipment and a major import bill to be paid to the suppliers of solar panels, who are predominantly the Chinese.
Why have the cuts been so drastic? The reason is that the expenditure in support of the feed-in tariff threatens to pre-empt too large a proportion of the expenditure allowed under the so-called levy control framework, which limits the expenditure on subsidies that are levied from consumer bills. The Government wish to devote these funds to other purposes, which are their support of nuclear power and fracking. However, by some quirk of European Union legislation that could easily be disregarded, the funds devoted to supporting infant enterprises under the levy control framework are accounted as government taxation and government expenditure. This is a matter of statistical classification, which would be regarded as unimportant were it not for the Government’s obsession with the nominal size of the budget and the budget deficit.
The effects of the withdrawal of support have been acknowledged in the Government’s own impact assessment. An infant industry will be threatened with extinction and many people will be thrown out of work.
The advent of photovoltaic electricity generation is important because of the manner in which it can stimulate further technological advances, as well as the way in which it promises to change consumer behaviour. The technology in question is that of smart metering, which will allow the price of electricity to be varied according to the level of demand, and which will inform the consumer accordingly. Consumers will become increasingly aware of the cost of grid-supplied electricity and of the desirability of avoiding its use during periods of peak demand. With smart metering, it should become self-evident to consumers that they should deploy energy -intensive electrical appliances only in off-peak periods.
The disarray of the Government’s energy policy, of which I spoke at the outset, is the result of their reliance on willing providers to undertake the required investment in electricity generating capacity. But there has been a dearth of willing providers. In consequence of their failure to invest, the large energy suppliers should bear the cost of maintaining the present feed-in tariffs.
The prospective investors in nuclear power are the nationalised and semi-nationalised energy corporations of two foreign countries; namely France and China. There are now doubts regarding the commitment of EDF, the French national electricity supplier, to build the nuclear power station at Hinkley Point. If the French withdraw from this project, it seems likely that the Chinese will do likewise. What then will remain of the Government’s energy policy? They will have to rely on increasingly expensive supplies of gas. Their ambition to derive ample supplies of gas by fracturing the ground under our feet appears to me an implausible one. The alternative supplies of gas, which are from the Middle East, the north Atlantic and Arctic Russia, are beset by geopolitical hazards. Moreover, if we are to rely on imported gas to satisfy our energy needs, it will not be possible to fulfil the commitment to staunch our emissions of greenhouse gases.
I strongly support these Motions, which oppose the cuts in the feed-in tariffs, and I call on the Government to think again.
Lord Cavendish of Furness (Con)
My Lords, I rise to oppose both these Motions, but especially that in the name of the noble Baroness, Lady Featherstone. I should perhaps declare an interest, in that I have been a beneficiary of feed-in tariffs, albeit not with solar.
Feed-in tariffs cost about £1 billion a year—last year it was £851 million—and most of that goes on solar. That is a considerable sum of money, and every penny of it is added to the bills of electricity consumers. I find it significant and surprising that speakers so far have spoken up for the producers rather than the consumers. Adding that money to consumers’ bills hits the poor harder and rewards the rich, because electricity makes up a bigger part of the expenditure of the poor. So it is a regressive transfer of money from the poor to the rich.
What are we getting in return for this expenditure? We get rooftop solar running at 10% load factor, which is less than 1% of final electricity consumption. That is a trivial trickle. Most of it is generated on a summer’s day, rather than on a winter’s night when it is most needed.
The Minister’s own department’s renewable energy planning database shows that the UK has already given planning permission for sufficient renewable energy capacity to overshoot the 110 terawatt-hours required to meet the 2020 target contribution for electricity. The overshoot, if it is built, would be about 35%, but there is no budget for that excess. The department reckons a budget overshoot of £1.5 billion is possible. However, some people calculate that it could easily be £2 billion and that the department is being conservative.
My final point is political. I have checked my party’s manifesto, and it seems to me that the Government’s actions are entirely consistent with it. I am therefore extremely sorry that the noble Baroness should choose quite soon in her career in your Lordships’ House to introduce a fatal Motion. A lot of people are increasingly being left with the feeling that these fatal Motions are not just discrediting your Lordships’ House—they are actually intended to discredit your Lordships’ House.
Nuclear Technology
Viscount Hanworth Excerpts(9 years, 2 months ago)
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Viscount Hanworth (Lab)
My Lords, the demand for electricity is highly variable. It varies throughout the diurnal cycle of 24 hours and over the weeks, the months and the seasons of the year. The need to satisfy a demand on a large scale first arose in this country in the 1920s and 1930s. The nation responded rapidly by gathering the electricity generators into a centrally controlled system that was supported by an integrated network of electricity generation known as the national grid. The result was an ample generating capacity that was exploited effectively by the ability of the grid to supply power to the places where it was most needed, by transmitting it at high voltages with minimised losses.
Our national system served us well in this manner until the 1990s and became the envy of the industrialised world. In the 1990s, our electricity supply industry was privatised with the intention of creating a competitive market. The perverse outcome was that, very soon, the industry fell into the hands of a few large producers and into foreign ownership. In this era, the problems created by the variable demand were met by a new technology of gas-powered generation that was sustained by an ample supply of North Sea gas. It seemed to the proponents of privatisation that a centralised control of the nation’s electricity supplies was no longer needed and that the market system was appropriate to the purpose.
These fortunate circumstances are at an end. We no longer have an ample and cheap supply of gas that can be relied upon to fuel a flexible electricity supply. If we are to meet our targets for decarbonisation, we cannot continue to satisfy the base load demand with the output of coal-fired power stations. Nowadays, our demand for electricity is being met increasingly by the intermittent supply of wind power and by other renewable resources, including solar power. The problems of intermittency might be overcome if we could expect the sun to shine when the wind ceases to blow. However, the inverse correlation between these two sources is a weak and an insufficient one. Moreover, this Government seem to be intent on destroying our solar-powered resources by the removal of the subsidy incorporated in the feed-in tariff.
We might be able to mitigate these problems of an intermittent supply if we could depend on supplies from beyond our national boundaries. For these to be available, there would need to be a super grid that could transmit the power from remote locations at very high voltages. Under the conditions of a free market and given the difficulties of international co-operation, such a facility is unlikely to materialise within the foreseeable future. In such circumstances, it is difficult to see how we can easily satisfy our demand for electricity. Nevertheless, we can speculate about the ways in which the Government are intending to address the problem.
To supply the base load, they appear to be relying on the new nuclear facilities which they are hoping the French and Chinese will create for us. To meet the peak demand, they may be hoping to rely on supplies of gas that might be purchased on the international market or magicked out of the ground on which we stand by the process of fracking. At present, neither of these recourses seems to be viable. The gas from fracking is not yet available and it is doubtful whether it ever will be available in a significant quantity.
The plans for the French nationalised electricity company to build a massive nuclear power station at Hinckley Point is mired in problems, both of a political and of a technical nature. The project is exorbitantly expensive and it is likely to be affected by considerable delays. We are told that we may have to wait until 2033 to see the commissioning of the power station at Hinckley Point.
The proposals to place our nuclear future in the hands of the Chinese fills many people with grave anxiety. What other recourses are available to us to meet the demand for electricity and for power more generally? It is plausible that we should be able to meet the needs by deploying our own technical resources and by reinvigorating our nuclear industry. With sufficient government support, and possibly in collaboration with the industry of a partner nation, we should be able, within a reasonable period of time, to realise a programme for developing a small modular reactor that can be manufactured in a central location and installed on the sites of existing and defunct nuclear plants. It has also been suggested that, if these reactors were more widely dispersed and located close to centres of population, they could provide district heating via pipelines of up to 30 kilometres in length. This would greatly reduce our reliance on gas for heating, thereby contributing significantly to the process of decarbonisation.
The ability to design and construct small modular reactors within the UK has existed for many decades within Rolls-Royce and its supply chain. Rolls-Royce has produced nearly 100 reactor cores for UK submarines with an outstanding record of safety and performance. These have been conventional pressurised light-water reactors of a tried and tested design. We need to embark upon the development of such a reactor immediately while there is an opportunity to do so in advance of our competitors.
If time were available, I would also talk of the need to embark upon the development of a further generation of reactors capable of disposing of the nuclear waste of the previous and of the current generations of reactors. These would be fast breeders and thorium molten salt reactors. The next speaker might touch on these matters.
Energy Bill [HL]
Viscount Hanworth Excerpts(9 years, 5 months ago)
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Viscount Hanworth (Lab)
My Lords, the Energy Bill that we have before us today contains two unrelated sets of measures. One set concerns projects for establishing onshore facilities for generating electricity by wind power. The second concerns the establishment of a new agency for regulating the extraction of oil and gas from the North Sea. I will deal with these matters separately and in that order.
The legislation affecting wind power proposes an early end to the subsidies that have been received under the renewables obligation. The subsidies will end on 1 April 2016, which is one year sooner than had been agreed by the partners in the coalition Government. The legislation will also appoint local authorities as the primary decision-makers in respect of planning applications for new onshore wind farms. The measures in the Bill were pledged in the Conservative Party election manifesto. Their purpose was to appease a vocal faction within the Conservative Party that regards wind turbines as a blot on the landscape and to seek an advantage for candidates who were vying for election in marginal rural seats. It is notable that 37 out of 198 marginal constituencies were in rural areas.
Of the available sources of renewable energy, the cheapest by far is onshore wind. It has dismayed environmentalists to see the Government pursuing a policy that is in utter contradiction to their declared intention to provide renewable energy at the lowest possible cost. There are currently some 5,000 onshore wind turbines, which satisfy close to 6% of the electricity needs of the UK. It is reckoned that about 250 planned onshore wind farms are likely to be cancelled as a result of the early end to subsidies, which would mean that 2,500 planned turbines will not be built. This will have a devastating effect on the wind power industry, which is said to be in a fragile state. Moreover, given that around 70% of wind turbines are to be found in Scotland, the adverse economic effect of the cancellations will be concentrated in that region, which has infuriated Scottish MPs. The question arises of why the changes to the planning regime will affect onshore wind but not shale gas. Why should local authorities be given a power of veto over wind farms but not over fracking installations? There is no honest answer to that question.
The second part of the Bill concerns the extraction of oil and gas from the North Sea. The aim is to maximise the recovery of the remaining resources by establishing a regulatory regime that is more effective than the present regime, which faces challenging circumstances. The Bill deals with some complex matters, and to reach sound opinions on the quality of the proposed legislation, one needs to acquire detailed knowledge of the regime that grants licences to the companies operating in the North Sea. To evaluate the proposals, one needs to know, in detail, how the industry is organised and how the operators within it are liable to interact. One also needs a fair understanding of the technology for the recovery of oil and gas, of the state of repair of the installations in the North Sea and of the geophysical details of the continental shelf that surrounds the UK. It is fortunate that the parliamentary Recess is available to us for researching these matters.
We are also fortunate in having the excellent Brown report at our disposal, which has made recommendations that have been adopted by the Government. The report records some startling realities, such as the vast contribution of offshore oil and gas to the UK economy over the past five decades. As we have been reminded, production from the UK continental shelf met 67% of the UK’s demand for oil and 53% of its demand for gas in 2012. It also contributed £6.5 billion in corporate taxes in the year 2012-13. Some 42 billion barrels of oil equivalent have already been extracted from the area, and it is estimated that somewhere between 12 million and 24 million barrels remain to be produced.
Those who are concerned to limit the effects on the global climate of the burning of fossil fuels might be happy to see a rapid decline in the output of the North Sea. However, a further decline in its productivity will have serious implications for Britain’s balance of payments and economic welfare. In fact, the recent fall in output has been dramatic: production fell by 38% between 2010 and 2013. Levels of investment have fallen and the rate of discovery of further reserves has halved in that period.
The Brown report attributes a large proportion of the decline in output to a fall in productive efficiency, although it gives no indication of how that efficiency is measured or calibrated. The truth is that the many operators who are scattered throughout the North Sea are tripping over themselves. In the early years, a few major operators exploited large and plentiful fields under a relaxed regime of light-touch regulation. Over time, the number of fields has increased to more than 300. New discoveries are much smaller than hitherto and many of the fields are marginal and highly interdependent. There is also increased competition for a depleted stock of ageing infrastructure. There may be better prospects for the operators elsewhere in the world, and unless a more orderly structure is imposed and they can be offered more attractive fiscal incentives, they are liable to go elsewhere.
The Brown report recommended that a revived regulatory body should be established at arm’s length from DECC, which has previously performed the regulatory functions. The number of staff within the department who have been deployed recently in this capacity is half what it was previously, and the cuts that have been imposed on the department will undermine their role. It is now proposed that the new Oil and Gas Authority should be funded wholly by the industry, which should save something from the Government’s budget. However, one has to ask whether such an arrangement will run the risk of regulatory capture. This is a process, familiar in the United States, by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. We can look forward to a discussion of these matters in the Committee stage of the Bill, for which I understand four days have been scheduled. At first this seemed an excessive allocation, but I am beginning to think that the detailed scrutiny of the Bill will fully occupy the available time.
Sellafield
Viscount Hanworth Excerpts(9 years, 5 months ago)
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Viscount Hanworth
To ask Her Majesty’s Government what is the annual forecast cost for (1) storing, and (2) protecting, the stocks of plutonium at Sellafield in (a) 2015, (b) 2025, and (c) beyond 2025, if there is no decision to deal with the material otherwise.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, the Nuclear Decommissioning Authority, the body responsible for the decommissioning of the United Kingdom’s civil nuclear legacy, has a budget of approximately £3 billion per annum. The costs of storing and protecting the plutonium at Sellafield are a small proportion of this total figure. We do not give out the precise figure on the grounds of commercial sensitivity and national security.
Viscount Hanworth (Lab)
I thank the Minister for that very informative Answer. What progress, if any, has been made in assessing the prospect of burning the stocks of plutonium in a CANDU reactor or a Hitachi PRISM reactor? This would not only dispose safely and profitably of the stock of plutonium but give a much-needed boost to Britain’s nuclear industry. I am aware that a report was sent to the Department of Energy and Climate Change by the nuclear decommissioning agency in January, after a considerable delay. Can the Minister assure us that a similar or greater delay will not affect the department’s assessment of the report?
Lord Bourne of Aberystwyth
My Lords, the noble Viscount is right on the need for a decision on this. We are expecting at the year end to have the options put in front of us by the Nuclear Decommissioning Authority and then move to a decision. He will be aware that even when a decision is made, there will be a massive stock of plutonium at Sellafield for many decades ahead.
Energy: Onshore Wind
Viscount Hanworth Excerpts(9 years, 6 months ago)
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Viscount Hanworth (Lab)
My Lords, this strikes me as a most deceptive announcement. The deceit lies in the fact that rather than being aimed at reducing the cost to consumers—as it proposes to be—the announcement is in truth aimed at appeasing, as we have heard, a Back-Bench Conservative lobby averse to what it regards as unsightly wind farms. The cost of offshore wind-generated electricity is reckoned to be £120 per megawatt hour, whereas the cost of onshore electricity is reckoned to be £80 per megawatt hour. Clearly, the interests of economic efficiency would be best served by preserving the subsidy for onshore power and reducing that for offshore power. The interests of the environment would be best served by preserving the subsidies for both. Could the Minister tell us how our electricity demand can possibly be met in the absence of onshore power being fostered in the way that we all assumed it would be?
Lord Bourne of Aberystwyth
My Lords, first of all, the noble Viscount makes the same point about this being a response to Back-Bench opinion. This is actually in response to the country’s opinion, as reflected in the Conservative manifesto, which was voted upon at the general election.
The noble Viscount is right about the current cost of offshore wind being more expensive than onshore, although I notice that that difference in cost has sometimes been exaggerated. The cost of offshore wind is falling. Certainly, it is important we realise that, for some of these new technologies, the costs will fall further. Therefore, I am bound to say that this is the reason we have made this decision. It is important that we balance the interests of the bill payer and the interests of new technologies against the fact that onshore wind has been highly successful and will continue to be so. These contracts are on a 20-year basis, so it is not as though wind farms and the contribution that they make will suddenly disappear.
Climate Change
Viscount Hanworth Excerpts(9 years, 6 months ago)
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Lord Bourne of Aberystwyth
The noble Lord is right in that we do need ambition in this regard. We are encouraging more ambitious targets through Europe. Of course we are working with Europe on a reduction of at least 40% by 2030 based on a 1990 baseline—that remains the case. But, yes, we do need to take account of the fact that there is a massive challenge to keep inside the 2 degrees increase in temperatures over the period that we are looking at.
Viscount Hanworth (Lab)
What steps are the Government taking to sustain and enhance our competence in nuclear engineering, as indeed they have been encouraged to do in several recent reports?
Lord Bourne of Aberystwyth
The noble Viscount will be aware that we are very much on target for bringing on Hinkley Point C by 2023. After that, there are other nuclear generators that should be brought on, such as Sizewell. The noble Viscount is right that it remains very much an important part of the mix. We are working with EDF, taking account of what is happening in France and Finland, for example, to make sure that we deliver something that is entirely safe and contributes to a vital part of our energy supply.