Nuclear Energy (Financing) Bill

Baroness Worthington Excerpts

Report stage
Thursday 24th March 2022 Lords Chamber

Finally, another question to address was raised by the noble Viscount, Lord Hanworth. He suggested that the Liberal Democrats were not interested in sustaining our industry, but if our industry is competing with a world that has gone for far cheaper renewables, and our industry is relying on expensive new nuclear power, then that is not the way to sustain our industries.

[Baroness Worthington (CB)]

My Lords, I shall speak to this group of amendments, particularly Amendment 1, moved by the noble Lord, Lord Oates. As I said in Committee, I have some sympathy with the greater transparency of the assessment of the value for money of new nuclear, partly because it will prove once and for all that there is a very strong case for pursuing reinvestment in our nuclear capabilities at every scale, whether the large-scale reactors that we are considering at Sizewell and Hinckley Point, or the SMRs, which I hope will be pursued with a considerable increase in speed as we address our needs for secure, affordable and zero-emission electricity.

As noted by the noble Baroness, Lady Bennett, we will be seeing a greater need for electricity. We will, I hope, see a huge increase in energy efficiency as we move to electric vehicles, because they are inherently more efficient than the combustion engine fuel supply chain, but there will be a greater load on the grid so we will need vastly more electricity, even as we get more efficient. We need a varied set of technologies providing power reliably and with resilience throughout the year. Nuclear can clearly play an excellent role alongside greater increases in solar, wind and other forms of renewable electricity. There is no need for these to be seen as competing; they complement each other very well.

I suspect that the Minister will reply that it is not necessary and that there will be information in the public domain about the choice. The noble Lord, Lord Howell, made a very compelling case for how difficult it would be to provide a full value-for-money assessment when such things as national security are so hard to translate into a sum of money. As we noted in Committee, there are countries much less concerned by the terrible events in Ukraine because of the nature of their electricity supply. It is right and proper that the UK should pursue the Bill—that we get on with it and see money flowing in the sector, which has been very stop-start. If we get this going, can sustain our interest and not do stop-start, the value for money will increase. The Bill is all about making these investments less costly for the taxpayer and the consumer and I support it. I am sympathetic to the amendment, but I do not support it.

[Lord Stunell (LD)]

My Lords, there were a couple of paper tigers dancing around in the Chamber today. I will deal with one of them straightaway. We are not unique in this Chamber in thinking that it is a good idea to do a value-for-money study on these projects. In Clause 2(3)(b), one of the criteria for designation is that

“the Secretary of State is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”

Given that the Government themselves believe it is appropriate to have a value for money study, those who think we have somehow dreamt up something totally unfeasible, ridiculous and stupid need to address their remarks to the author of the clause, not the authors of the amendment. The two amendments actually say two things, the first of which is that we believe the Secretary of State thinking it likely to result in value for money is not a sufficiently high level of evidence. It needs to be that it

“will result in value for money”.

I would express that as being the difference between “the balance of probabilities” in a civil case and “beyond reasonable doubt” in a criminal case. Basically, we want a better than 50% chance that the value for money guess comes out right. I do not think that unreasonable or contrary to the spirit of value for money, as Governments ought to be exercising it when spending public money. That needs to be considered quite carefully by those who think that value for money is somehow a Liberal Democrat evil which has been conjured out of nowhere.

The second of our Amendments says that when that has been done it should be published. My noble friend Lord Oates drew on examples in the nuclear industry in the past 60 years of evidence and material being gathered and kept very, very quiet. Of course, eventually it all comes out, if only in the decommissioning costs or from the actual unit cost of producing the electricity, which nobody can any longer avoid. The first generation was built on the basis that the electricity would be so cheap we would not need to have electricity meters. We tend to forget that those kinds of claims were ever made, but they were never supported by evidence because the evidence was never published at a relevant time when it could have affected the decisions being made.

The two amendments the Liberal Democrats have put into play are based on making sure that the Secretary of State does a proper value for money exercise and that they base their decision not just on the balance of probabilities—“If we’re lucky it’ll be all right; if we’re unlucky, well there we go”—but with some reasonable level of certainty that the exercise has produced the right result. Making it transparent and putting it on the public record is a good way of making sure that those who make a professional evaluation of value for money are well aware that what they put into their report will be in the public eye and open to challenge and discussion.

If only that had been the case with previous generations of nuclear generation decision-making, we would have got a better outcome. I do not mean that there would be no nuclear plants built, but we would have perhaps avoided what the noble Baroness, Lady Bloomfield, speaking on behalf of the Government, complained about in relation to the decommissioning process. The noble Baroness, Lady Worthington, said that it is necessary to avoid “gold-plating” decommissioning costs

“that deliver millions of pounds to contractors unnecessarily”.—[Official Report, 8/3/22; col. GC 434.]

I thought those were powerful words. She was talking about decommissioning costs, but should we not be doing the same with commissioning costs? What can be wrong with testing that out?

Also, value for money is not something that can be assessed anyway, because there are impenetrable questions which make valuing the outcome completely unfeasible. When one looks at the value for money of any project, there are two issues. The first is the actual cost of the project. Have the costs been realistically assessed and are they properly built into the estimates being presented? For generation after generation of nuclear plants, it has been perfectly obvious that the cost of building them has not been correctly assessed. Indeed, that is true of the plants currently under construction.

The second thing that needs to be quantified is the nature of the rewards that one gets from the project when it has been built. What are they? The rewards from a nuclear plant consist of the electrical output and the security factor. The noble Lord, Lord Howell, made an excellent contribution on that topic in Committee, the essence of which he repeated just now. I do not reach quite the conclusion that he did, but I will say how I think we might best analyse it.

We know that at the moment, the electricity that will be produced will be at least 50% more expensive than if it came from offshore wind power, for example. The noble Baroness, Lady Bennett, gave some of the figures. This plant will not come on stream for another 15 years. We do not know what the unit cost of offshore wind will be in 15 years’ time but, if you follow the graph, it is reasonable to suppose that it will be quite a lot cheaper than it is now. So it is a competition where nuclear starts 50% ahead; it will probably be more like 70% ahead when it comes online. I am setting aside any consideration of whether any allowance should be made for decommissioning costs.

Then, we get to the security argument: what happens when the wind does not blow? Well, we have a strike price that is nearly double that of offshore wind. It is therefore obviously a premium product. It is not something you would indulge in unless you could see a substantial value that was related not to its electrical output but to something else. The carbon reduction is real and not to be neglected but, of course, other renewables—certainly offshore wind, solar and onshore wind—have those carbon savings. It is a matter of debate whether they provide more or fewer savings per gigawatt than nuclear but, as I understand it, nobody is really saying that other renewables would not deliver the same carbon savings. So security of supply is the point in play. For me, the exam question, therefore, is this: can we get that security of supply in any other way that is cheaper and faster, with less or no impact on the RAB figures, which consumers will have to pay at the end of the day?

By coincidence, yesterday morning, I attended a presentation given by National Grid. It was asked some quite poky questions about whether it thought that the national grid would have the resilience for all the electrical power that will be demanded to flow through the system. Its answer was surprisingly upbeat. It said that it would be relaxed about the grid’s capacity if, for instance, there were 15 million or 20 million electric-powered vehicles dispersed widely throughout the United Kingdom, and, incidentally, concentrated in the places where electrical demand is greatest, such as the south-east of England. It sees the grid as a fundamental element of the storage of power to cover the times when it is needed. It did say, however, that there will have to be additional investment by the distributive network organisations, or DNOs, to reinforce the local distribution grid.

--- Later in debate ---

To my mind, the questions of the taxonomy, qualification for ESG and whether we regard the new nuclear generation as part of the green transformation are completely central. In fact, they will determine whether that green transformation happens at all.

[Baroness Worthington (CB)]

My Lords, I rise to speak in support of Amendment 12 in the names of the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Neville-Rolfe. I will not detain the House for too long.

The question of whether nuclear should be classed as a green investment and therefore within the taxonomy should not be in doubt in any way. The reason it is even discussed is that the European Union turned it into a highly political question and ignored the advice of its own research agency, the Joint Research Centre, which was commissioned to assess whether nuclear should be considered sustainable and therefore be included. It unequivocally found that it should but, for political reasons—mostly centring on Austria’s vehement objection and the politics of Germany—this issue has been dragged out and treated separately, alongside another controversial aspect of the EU taxonomy: whether natural gas should be considered a green investment. To my mind, this was entirely regrettable and could have been avoided.

Since we have left the European Union, we have the good fortune of being able to set the record straight and make it absolutely clear that nuclear should be considered sustainable and green, and should therefore be included in our green finance definitions and the taxonomy. I look forward to the Government and the Treasury confirming as such, because to do anything else would be a great shame and would fly in the face of science. If anyone has had the pleasure of going through a pension screening survey to assess the greenness of their investments, they will note that, in many cases, nuclear is still listed alongside arms trading and pornography; this is a hangover from a different era and needs updating. I look forward to the UK setting the record straight and therefore sending a strong signal to other countries and the European Union.

I will not go into Amendment 14; my view on whether it is the right way to approach the waste issue was clear in Committee. It is a serious issue but we should not overexaggerate it in any way just to achieve the slowing down of this investment.