Nuclear Energy (Financing) Bill

Debate between Viscount Hanworth and Lord Teverson

Committee stage
Tuesday 8th March 2022 Grand Committee

[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.

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[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.

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[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.

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[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.