Energy: Civil Nuclear Power

Baroness Bloomfield of Hinton Waldrist Excerpts

Thursday 9th December 2021 Lords Chamber

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I am most grateful to my noble friend for securing this incredibly important and timely debate, and for his thoughtful and thought-provoking speech drawing on his wealth of experience in this sector, gained over so many years. I am also grateful to all noble Lords for adding to the excellence of this debate. We are fortunate indeed to have so much experience in this House; polymaths indeed. I say to the two noble Lords who were wrongfooted by the timings of today’s business that I will be happy to respond to their speeches if they will forward them to me in due course.

My noble friend Lord Howell and other noble Lords raised the important question of the role of nuclear power in this country’s energy system, at a most important time for energy policy—a time when people and businesses up and down the country are worrying about the cost of their energy and the health of the companies that they rely on to provide it. The debate is also timely for another reason that gives a crucial context for our deliberations. We recently published our Net Zero Strategy, a milestone document that sets out the UK’s path to net-zero greenhouse gas emissions by 2050. The UK was the first major economy to make net zero a target, enshrining it in legislation in 2019. There is no doubt that climate change is one of the greatest global challenges that we face, and that action and leadership are urgently needed in the UK and across the world. In committing to net zero, and now in publishing our plan of action to help us get there, the UK is showing global leadership in a battle that we simply must win.

Everybody acknowledges that net zero is an enormous challenge. To ensure that we are on track to meet that target, we have set the UK’s sixth carbon budget in line with recommendations from the Committee on Climate Change. We must reduce our emissions of harmful greenhouse gases by 78% against 1990 levels by 2035. This will require all areas of our economy to play their part.

The power sector’s effort share in this mission amounts to an 80% reduction in emissions by 2035, the mid-point of the carbon budget 6 period. This will require a range of low-carbon technologies to be deployed in large capacities, and quickly, not least because we estimate that our electricity system will need to double in size by 2050 to meet the increased demand as sectors such as heat and transport use electricity to achieve their own decarbonisation.

The Government have been clear that a significant proportion of the UK’s future electricity needs should come from renewables such as wind and solar, and flexible technologies, including energy storage and demand-side response. However, we have also been clear that the UK needs stable, firm, low-carbon power for when the wind does not blow and the sun does not shine.

It is in this context that we consider the value of nuclear power. We are already a nuclear nation. We built the world’s first commercial power station, at Calder Hall in Cumbria, in 1957. Since the mid-1990s, around 20% of the UK’s electricity supply has come from nuclear. After 1995, when we built Sizewell B in Suffolk, there was a hiatus on new nuclear build, but we broke that hiatus in 2016 when we gave the go-ahead to Hinkley Point C in Somerset. In 2020, nuclear provided around 16% of the country’s electricity supply and 27% of our overall low-carbon supply. Hinkley Point C will provide 3.2 gigawatts, meeting around 7% of GB’s current electricity requirements. However, over the next decade, as many noble Lords have pointed out, many of our existing plants will be coming to the end of their life. Therefore, we need more nuclear power, including large-scale gigawatt and advanced nuclear technologies, and the Net Zero Strategy, which highlights nuclear’s role in reaching net zero.

We have announced a £120 million future nuclear enabling fund, the details of which are being worked up following the spending review, and I look forward to updating noble Lords on how that money can help to support further nuclear research in the UK. Alongside more information on the fund, we will publish a road map for new nuclear in 2022. It will focus on what is needed to support all future new nuclear in the UK.

We continue to make progress on key issues such as nuclear financing. The Nuclear Energy (Financing) Bill will establish a new model for nuclear projects that will cut the cost of financing and, importantly, reduce costs to consumers. The Bill will also help us reduce our reliance on overseas developers for finance, and open opportunities for British companies in the nuclear industry and our closest partners to develop projects across the UK without compromising on our nuclear ambitions.

We have also invested £210 million, matched by Rolls-Royce, to develop its design for one of the world’s first small modular reactors. Each small reactor is potentially capable of powering a million homes. As well as providing energy for the UK, the project will also create high-quality jobs, helping us to level up as we drive emissions down.

Moving to AMRs, the Government have recently announced that we will focus on high-temperature gas reactors as the technology of choice for the AMR research, development and demonstration programme, with the ambition for this to lead to a HTGR demonstration by the early 2030s. That does not preclude the Government looking at other forms of advanced modular reactors, which I know the noble Lord, Lord Grantchester, was concerned about. However, we have to put our backs behind one technology in order to make it happen in the timescale available.

Alongside our efforts on nuclear fission, the UK is widely recognised as a world-leader in the most promising fusion energy technologies, with the Government committing £220 million towards the first five-year phase of the Spherical Tokamak for Energy Production programme—STEP. Fusion is no longer decades away, and recently I know that the programme managed to produce more output than input into the project, which highlights the fact that it may not take another 30 years. We might be talking more like 15 years.

The value of nuclear is not seen only in terms of energy generation but in the socioeconomic benefits that these projects will bring to the UK. Hinkley Point C is providing an enormous boost to both the local and national economy, providing 25,000 new jobs, with £3.5 billion spent with companies in the south-west to-date—figures that we hope to be replicated at Sizewell C in Suffolk. Hinkley has also trained more than 800 apprentices. I also know that the Culham fusion project also has an apprenticeship programme that takes in 120 graduate apprentices a year who learn all about nuclear fusion.

We are committed to levelling up. For example, there is the National College for Nuclear, with two hub campuses in Cumbria and the south-west delivering training on its behalf. We also recognise the potential to develop clusters of nuclear expertise in other nuclear communities such as those in the North West Nuclear Arc. The noble Lord, Lord Wigley, will know of my particular interest in developing this arc further into north-west Wales, using Trawsfynydd, Wylfa and Bangor University’s excellent nuclear department as part of that building-up exercise.

Energy security is also an absolute priority for this Government. We have highly diverse sources of gas and electricity that ensure that households, businesses and heavy industry get the energy they need. The Government are working closely with Ofgem, National Grid and industry to monitor supply and demand, and the gas and electricity system operators have the tools they need to manage operability requirements in all scenarios. We remain confident that Britain’s energy security will be maintained.

However, we recognise the pressures that businesses are facing due to the significant increases in global gas prices. We are continuing to engage constructively with industry to further understand and help mitigate the impacts of global gas prices. Our priority is to ensure that costs are managed and supplies of energy are maintained. We will work with industry to put it on a more stable footing in the longer-term. That includes continuing to build a robust domestic renewable energy sector so that we are not as exposed to global trends in natural gas supply and demand.

In just this past year, we have seen incredible progress in our ambition to deliver new nuclear, including a comprehensive net-zero strategy that sets a clear direction and unprecedented representation of nuclear on the world stage at COP 26. It is that momentum that we must now build on, as we look to secure our future energy needs, with nuclear playing a key role.

My noble friend Lord Howell of Guildford asked me two questions. First, who pays for Hinkley Point C? I can confirm that EDF and all investors are committed to the project. On his second question of whether we are committed to large plants or waiting for SMRs, we believe that a diverse mix of low-carbon generating technologies in the UK is the right answer. We will need to progress all forms of low-carbon generation if we are to meet our decarbonisation targets, including large-scale gigawatt and advanced nuclear technologies such as SMRs and AMRs.

In response to the noble Viscount, Lord Hanworth, and a number of other noble Lords who talked about nuclear financing, as previously mentioned we have recently introduced into Parliament the Nuclear Energy (Financing) Bill, which has passed its Second Reading and Committee in the House of Commons. I can reassure noble Lords that we will be holding a number of Peer engagement exercises before the Bill arrives in this House—I suspect before the end of January. We had hoped that that would happen in December, but I suspect that it will now be early in the new year. However, I encourage everyone who has spoken in this debate to get involved in this interesting Bill.

I know the noble Viscount, Lord Hanworth, was concerned about the intergenerational gap of financing for large nuclear projects. I direct him to Dieter Helm’s excellent work on this subject. The whole point of the RAB model is that it separates the risk of the construction phase from the rewards of the operational phase. We need to compensate the investor for the cost of capital at a rate in the construction phase that is derived through a market pricing discovery process, and it will then be set as part of the RAB licence. But when it comes to the operational phase, the regulator will set the cost of capital, balancing his financing duty with the duty to the consumer to help keep costs down. In this, it will mirror any other large-scale infrastructure projects, which use market mechanisms to set costs. In this way, investors will be incentivised to keep costs down. Therefore, it does not just de-risk the whole project but, because it reduces the amount of rolled-up interest that grows over many years in the construction, can reduce the cost of a Hinkley Point by up to £30 billion, as other noble Lords will have read in other briefing notes.

So the Nuclear Energy (Financing) Bill enables the use of the regulated asset base model for new nuclear projects, including both current technologies and potential advanced nuclear technologies and small modular reactors. This Bill will help to reduce the capital cost of nuclear projects, which is likely to be the key driver of the overall costs of a nuclear project, and it does this by sharing risk. Experience has shown that financing these sorts of projects through private capital can instil greater discipline than if they are done through government funds alone. This can help to ensure that the project is delivered on time and on budget, meaning that consumer costs are kept to a minimum.

Within the RAB model, we are creating incentives to encourage developers to deliver new projects in an effective way. To help protect consumers, we are creating a regulatory regime under which Ofgem will have full oversight and audit rights to the project activities throughout its construction.

I thank the noble Lord, Lord Broers, for his considered comments. I agree with him on the safety record of nuclear and the longevity of its operation compared to other technologies. I have already covered cost but, on his points on waste, the UK has in place an effective and robust regulatory regime to ensure that radioactive waste is managed safely, securely and in ways that minimise the impact to human health and the environment. That is why we believe that a geological disposal facility will allow the NDA to complete the decommissioning and clean-up of the nuclear estate. I should mention that I have read that some of the advanced nuclear technologies being worked on by some of the AMR designs may, over time, find the holy grail and be able to reuse some of the embedded energy in all that stored waste at Sellafield, which would mitigate the scale of the geological disposal facility that we might otherwise need.

I take issue with one of the noble Lord’s comments: we need to invest in all these technologies, because some of them will have a very long-term benefit for what we do with nuclear waste. I also remind him that the large-scale nuclear reactors have lasted so much longer than they were originally intended to that we have actually been gaining from the production of energy from them long after we financed them in the 1970s and 1980s.

As my noble friend Lady Neville-Rolfe mentioned when responding to the noble Lord, Lord Howell of Guildford, CGN currently has a 20% stake in Sizewell C up to the point of final investment decision. The final configuration of investors for constructing the plant is subject to negotiations. Our aim is to bring at least one large-scale nuclear plant to the point of FID by the end of this Parliament, subject to value for money and all relevant approvals. We announced up to £1.7 billion in the spending review to help deliver this objective. In the Net Zero Strategy, we announced up to £120 million for a new future nuclear enabling fund to provide targeted support to address barriers to entry, and will look to accelerate nuclear projects.

The noble Lord, Lord West of Spithead, mentioned CGN and Taishan. These issues are under investigation, and we do not want to prejudice the outcome of that. But the Bradwell B project is at such an early stage of development that the Government are not making any decision at the present time. He also mentioned Wylfa, as, of course, did the noble Lord, Lord Wigley. I agree that this remains an excellent site, if not the perfect site, for new nuclear. We regularly discuss a range of proposals with all interested and credible investors— of which there are a number—and discussions are progressing.

The noble Lord, Lord Goodlad, referenced the speed of decision-making. I hope I have given some reassurance. We are currently in negotiations with the developers of Sizewell C with the aim of reaching a financial investment decision in this Parliament.

[Lord West of Spithead (Lab)]

There was another question to do with Chinese involvement with these power stations, what discussions we have had with them and what threat we see in that.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

I cannot answer specifically on what discussions we have had. As the noble Lord will know, we welcome any investment by foreign investors, but the final decision about the future involvement of the Chinese in Sizewell C will be taken only at the point of the financial investment decision. I cannot speculate on the outcome, but the noble Lord will be well aware of all the talk about Chinese involvement in our nuclear fleet.

The noble Lord, Lord Wigley, referred to hydrogen. The Government believe that nuclear could have a role in low-carbon hydrogen production and have published the UK’s first hydrogen strategy, alongside policy detail on their support for low-carbon production across the UK. On his points regarding Trawsfynydd, the UK Government have noted the growing local and regional interest, and indeed support, for several sites for further nuclear development, including Trawsfynydd, and we welcome conversations with stakeholders who are considering whether their assets are potentially suitable for the deployment of nuclear facilities. With regard to Trawsfynydd, BEIS officials regularly engage with Cwmni Egino, the Welsh Government-supported company that is exploring options at the site. Indeed, yesterday I saw a letter from John Idris Jones to the Secretary of State for Wales and the Secretary of State for BEIS on that very subject. We recognise that siting policy is a key part of the enabling framework to bring advanced nuclear to the market.

I thank my noble friend Lord Trenchard for his interesting speech—I know he is extremely knowledgeable about advanced gas reactors. As he mentioned, we recently announced that we intend to consult on including nuclear in the green taxonomy. We are aware of the knowledge and experience that Japan can bring on high-temperature gas reactors because of conversations with the Japanese atomic energy authority about its test reactor. We are considering a range of options on how to design and deliver the UK’s AMR demonstration programme effectively, and continue to engage with other leading nuclear nations. Our ambition is to share next steps on the demonstration programme by next spring.

I am afraid I profoundly disagree with much of what the noble Lord, Lord Oates, said, but he raised points about waste and the solutions being over the horizon. I hope I have reassured him that we are slowly moving towards resolving that. I know that there are competitions out and various people bidding in the process to host one. I reassure him that the process is under way. Working groups are being formed and further announcements are expected in coming months.

The noble Lord talked about the cost and risk to consumers. I reassure him that any decisions will be fully cognisant of all the risks, as well as ensuring value for money for consumers and taxpayers. I believe that the RAB model will reduce the cost to consumers of future technologies. We cannot stop trying now. This Government are investing heavily in scientific research and development across the whole nuclear piece, and I remain strongly optimistic that, in 10 years’ time, we will look back and say thank goodness we resisted the blandishments of the noble Lord, Lord Oates.

[Lord Oates (LD)]

In the light of what the Minister has said about the RAB model, what assessment have the Government made of the example of the United States’ ECR model? Have they learned any lessons from that and can they explain why we will not suffer from the same problems they had in the States?

[Baroness Bloomfield of Hinton Waldrist (Con)]

I apologise for not having answered that point. I was coming on to say that I would write to the noble Lord on that specific issue because I do not have enough details to hand to give him a satisfactory answer. I will share that answer with other noble Lords.

[Lord Lea of Crondall (Non-Afl)]

My Lords, I raised the question of how we are going to produce annual reporting on progress towards meeting our Glasgow targets when nuclear, for example, comes in big chunks and it is hard to know how to do an annual metric. This is the only way of finding out how we are doing as we go along. Does the Minister agree that this should be studied in Whitehall, from the Treasury to the department for the environment and all the other departments, because it is the centrepiece of what we are committed to?

[Baroness Bloomfield of Hinton Waldrist (Con)]

It is a point well made and I take it seriously, but I think we will get much more information coming out much more regularly than just an annual report of progress as we move forward with all these projects.

I am conscious of the time and I want to respond to the comments of the noble Lord, Lord Grantchester, on foreign ownership. As I have said, we welcome the role of overseas investors: we would not have EDF had we not welcomed overseas investors into the UK’s nuclear sector, but all investment involving critical infrastructure is subject to thorough scrutiny, as he will well know. Having taken the NS&I Bill through this House, we are very careful to evaluate the input of foreign interests in such critical infrastructure as nuclear.

On the noble Lord’s question about the Government’s choice of high-temperature gas reactors crowding out other advanced modular reactors, I can again confirm that we are interested in seeing all types of advanced reactor being developed. He also asked about the long-term levy to consumers. This will be determined for each project as a result of negotiations. We will protect consumers through effective due diligence on the project and, as I have said, through the role of Ofgem, and by incentives on investors to manage costs and not to have time overruns. Ultimately, the lower cost of financing achieved through the RAB should lower overall project costs for consumers. With that, I undertake to look at Hansard and, if there are any specific questions I have not answered, I will of course write to noble Lords.