Hinkley Point C Reactor

Andrea Leadsom Excerpts

Tuesday 8th March 2016 Commons Chamber

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

In the same tone as the hon. Gentleman, I would like to draw attention on International Women’s Day to the fact that Dame Sue Ion was on “Desert Island Discs” as the first woman to be awarded the very prestigious president’s medal by the Royal Academy of Engineering and she is herself a nuclear expert. I am sure that all hon. Members will be delighted to hear that today of all days.

I thank the hon. Member for East Lothian (George Kerevan) for securing this debate, which gives me the opportunity to put forward the Government’s vision for Hinkley Point C. HPC is a matter of national importance for our energy system, and it is only right that it should be discussed in this House. However, let me point out that we do not put all our eggs in one basket. Far from being the only game in town, as the hon. Gentleman suggested, it is part of a balanced mix of energy sources that includes renewables and fossil fuels. It is absolutely vital that we stick to our plan for energy security and decarbonising at the lowest price to consumers.

Returning to HPC, there are numerous approvals processes for a project like it, many of which have already been completed. These include state aid; the approval of a funded decommissioning programme to cover the costs of managing waste from HPC, which is included in the contract for difference; planning approval; and grid connection. Some other processes will continue up to signature of the documents. Looking ahead, HPC will need to comply with the UK’s robust nuclear regulations—among the most stringent and safest in the world.

However, the key to this project is the funding package that has been negotiated with the developer. It is this, I think, that the hon. Gentleman had in mind when calling for this debate, and I intend to focus my remarks on it. The short answer to the question he raised is that the timing of Government’s final approval of the deal is dependent on EDF being in a position to make a final investment decision. As he is aware, this is ultimately a commercial matter for EDF. In the UK, it is for developers to fund, build and operate new nuclear power stations. I would like to take this opportunity to explain what this Government are doing to expedite the successful conclusion of this landmark deal.

[Callum McCaig (Aberdeen South) (SNP)]

rose—

[Andrea Leadsom]

I shall not give way for a while; I am slightly short of time and I have important points to make. I will give way later if there is time.

Let me first remind the House of the reasons why the Government have supported the development of Hinkley Point C, and how we have ensured that this is a good deal for Britain. New nuclear is needed, alongside renewables and fossil fuels, because nuclear is the only non-renewable low-carbon technology that is currently proven and can be deployed on a large scale to provide continuous supply. Most existing nuclear plants, which currently meet about 16% of our energy needs, are due to close by the late 2020s. Without new nuclear build, the share of nuclear generation could dip to 3% in 2030. Britain is a world leader in civil nuclear, through our skills base, our infrastructure and our regulatory regime. Hinkley Point C will keep Britain at the forefront of nuclear development.

Government policy has determined that the new plant should be financed and built by the private sector. The Government have worked closely with new-build vendors and industry to develop a number of initiatives to maximise both the capability and the economic benefits to the UK. That goes far wider than Hinkley Point C—industry has set out proposals to develop 18 GW of new nuclear power in the UK—but the first step in this long-term plan is Hinkley, which will be the first new nuclear power plant to be built in the UK for 20 years, and which will blaze a trail for further nuclear development.

Once it is up and running in 2025, Hinkley will provide 3.2 GW of secure, base-load and low carbon electricity for at least 60 years, meeting 7% of the UK's energy needs. That is enough to power 6 million homes, twice as many as there are in the whole of London. Hinkley will give an enormous boost to both the local and the national economy, providing 25,000 jobs during construction, as well as 1,000 apprenticeships. The plant will provide employment for 900 permanent staff once it is up and running, contributing £40 million a year to the local economy.

Having visited Bridgwater recently, I can tell the House that there is a real sense of excitement about the project. EDF has not been complacent; it is digging away. It has back runs, and the whole site has been levelled. There is big investment in the local community, and local people are very supportive of the project.

EDF believes that at least 60% of the £18 billion value of construction work on Hinkley will go to UK-based businesses. Through our negotiations, we have ensured that consumers will not pay anything for the electricity until the plant is generating, so the risks of construction will be transferred to the developer. At the same time, we have ensured that mechanisms are in place to enable any construction underspends or profits above a certain level to be shared with consumers. If the project comes in under budget, savings will be shared with consumers, but if there are overspends, the developer will bear all the additional costs.

As I have said, we need new nuclear, and Hinkley Point C will pave the way for a new generation of nuclear plants in the UK in a cost-competitive way, thanks to the unique deal that we have negotiated.

[Callum McCaig]

In the context of that “unique deal”, may I ask the Minister, as the final decision approaches, for a cast-iron guarantee from the Government that the strike price of £92.50 will not be increased?

[Andrea Leadsom]

As I have explained, the strike price has been agreed, and we expect a final investment decision in the very near future.

The deal has already been through a number of rigorous approvals processes, both within the Government and within the European Union. In October 2013, the Department of Energy and Climate Change and EDF agreed the strike price for the electricity to be produced by Hinkley Point C. In October 2014, the European Commission approved the Hinkley Point C state aid case, following a lengthy and rigorous investigation by the Commission. Notwithstanding the ongoing opposition of a small minority of member states, we are confident that the decision is legally robust and will stand up to challenges.

In October 2015, EDF and its partner of 30 years, China General Nuclear, signed a strategic investment agreement in London. That commercial agreement set out the terms of EDF's partnership in the UK with CGN, starting with Hinkley Point C. EDF and CGN agreed to take a 66.5% stake and a 33.5% stake in Hinkley respectively. At that point, the final form of the contracts was agreed in substance. My right hon. Friend the Secretary of State made it clear at the time that she would make her final decision on Hinkley once EDF had reached its final investment decision.

The Government’s position has remained unchanged while the final details of the contracts have been ironed out. In November, we set out that we expected to conclude the deal in the coming months, and the Secretary of State made it clear that she was minded to proceed with the contract for difference support package for the deal, subject to any change in circumstances. We remain confident that all parties are firmly behind Hinkley Point C and are working hard towards a final investment decision. We have received assurances from EDF and the French Government—EDF’s largest shareholder—on this point. Hinkley is a large investment for EDF and CGN, so it is only right and proper that they take the necessary time now to ensure that everything is in order so that they can proceed smoothly once they have taken a positive final investment decision.

[James Heappey]

Does the Minister share our impatience, however, at the delay in the decision? Will she perhaps use this opportunity to encourage EDF to make all haste in arriving at that final investment decision?

[Andrea Leadsom]

I hear my hon. Friend, and I can tell him that we are ready and keen to proceed as soon as EDF announces its final investment decision. However, this is a commercial matter, and it is for EDF to finance Hinkley Point C and to deliver that final investment decision. We are aware of the financial issues it is dealing with, and we remain in regular contact with the corporate leadership of EDF and with the French Government. We have been assured by both that they are taking the necessary steps to reach a final investment decision as soon as possible. We are confident that this is a matter of when, not if. Specifically, we have been reassured that the resignation of the EDF finance director will have no impact on the timing of EDF’s final investment decision.

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

I just want to correct something that was said earlier. The finance director has always been opposed to this. This is not new or strange. I have spent nine years dealing with this as the MP for the area, and I can tell the House that this has come as no surprise at all. I just wanted to clarify that point for the Minister of State.

[Andrea Leadsom]

I am grateful to my hon. Friend for that clarification.

Last Thursday, 3 March, my right hon. Friend the Prime Minister met President Hollande at the UK-French summit in Amiens, France. The French Government gave a public commitment that EDF is currently working to take a final investment decision in the near future, with the full support of the French Government. We expect that a final investment decision can be achieved within a few weeks. Once EDF announces that it has taken a final investment decision, all parties will be in a position to sign the contracts and detailed investment documents within a matter of weeks. EDF’s chief executive officer, Jean-Bernard Lévy, has also reassured us that EDF is still on track to pour the first concrete at the Hinkley site in 2019 and to start generating electricity in 2025.

[Philip Boswell]

The Minister spoke earlier about safety. At Sellafield, engineers estimate that it will cost about £50 billion over the next 100 years to clear up buildings B30 and B38. Will she tell us how much has been set aside for the decommissioning of the Hinkley Point C project, and where that money is going to come from?

[Andrea Leadsom]

The hon. Gentleman knows that that is a completely different matter. I see him nodding his head—he knows he is being mischievous. He also knows that the full cost of decommissioning Hinkley point C is included in the contract for difference—[Interruption.] It is included. It is a requirement of new nuclear to have a fully costed decommissioning programme included in that way.

The Government remain committed to conducting this deal in an open and transparent manner. We intend to honour the commitment made in this House by the previous Secretary of State to place the contracts—with only the most commercially sensitive data redacted—and the value for money assessment for Hinkley in the House of Commons Library once the documents have been entered into. This is a good deal for the British public, and it is one that the UK Government remain committed to. I thoroughly commend the project to all Members of this House.

Question put and agreed to.