Nuclear Energy (Financing) Bill

Debate between Chris Skidmore and Jonathan Edwards

2nd reading
Wednesday 3rd November 2021 Commons Chamber

[Chris Skidmore]

That depends on the potential for innovation for the future. We have an energy crunch coming down the line with perhaps just a single nuclear plant open by 2030 and, at the same time, we will move from existing nuclear fission reactors through to small modular nuclear reactors, advanced modular nuclear reactors and, ultimately, fusion.

As science Minister, I assigned Government investment for the spherical tokamak for energy production units. We need certainty and a clear strategy for where the nuclear pathway is going beyond the existing reactors and to front-load that investment now. I will come to why the RAB model is so important as it allows that front-loading.

As I mentioned, nuclear power has resulted in an annual saving of 22.7 million tonnes of CO₂, the equivalent of taking one in three cars off the road. The Government’s proposal to adopt the regulated asset base funding model for nuclear power is bold and ambitious, but it is also needed. The beauty of the funding model is that it inherently encourages a wider range of private investment in new nuclear projects, reducing the UK’s reliance on overseas funding.

As it stands, developers are forced to provide the finances for construction up front and begin receiving revenue only when the station starts generating electricity. Even in the best of times for energy markets, which we certainly are not in now, that lack of certainty diminishes how investable nuclear power projects are. As we have seen, sadly, with the nuclear projects at Moorside and Wylfa, our current funding model is simply not fit for purpose; 5.8 GW of nuclear energy, just over half our current supply of nuclear power, was lost directly because funding could not be secured. Those locations have both been described as highly desirable sites for new nuclear power plants, but even after the Government offered to take the equity, provide all the debt finance and back a revenue-stabilising mechanism, private investors still had to walk away.

[Jonathan Edwards]

I do not question the hon. Gentleman’s expertise or knowledge on this issue, but perhaps he can help me out. From the Minister’s letter, and from what the hon. Gentleman himself has said during the debate, we know that 12 of the UK’s 13 current nuclear reactors are scheduled to close by 2030. The main argument for large nuclear is the baseload protection it gives that other technologies cannot provide, but it seems to me that it is highly unlikely, even with this new financing model, that a large new nuclear plant will be built before 2030. The question that arises from that for me—I admit that I am not an expert—is, how will that baseload be covered while we are waiting for the new large nuclear plants to be built?

[Chris Skidmore]

That is a very important question. It is not just 2030 that I am concerned about, but 2025. Nuclear currently accounts for 18% of electricity generation. The current closure rate of plants means that by 2025, nuclear will go from 18% down to 10%, so we will lose 8% of energy supply in the next three years alone. We will not be able to cover that gap; the hon. Gentleman is absolutely right. We are behind the curve here, which is why the Bill is vital. No one should vote against it tonight, because to do so would simply be to kick the can further down the road.

Nuclear also provides a fantastic opportunity to level up. Think of the jobs that it can provide: no one who lives near an area in which there is a nuclear power plant is against nuclear. Hinkley C in Somerset, relatively near my constituency, provides 30,000 jobs, of which 70% are local. It offers enormous potential for creating a sustainable pipeline of skill and talent for the future.

On the RAB funding model, others have asked during the debate, “What about other technologies?” The RAB model has also been established and received strong support from investors in other large infrastructure projects. Indeed, RAB-based funding has provided the funding mechanism for numerous financings of offshore wind transmission cables and infrastructure, as well as Legal & General’s financing for Mutual Energy’s Gas to the West gas network expansion project in Northern Ireland.

Yet the real advantages of this new funding system will come in relation to emerging innovative nuclear energy technologies. As anyone who is interested in reaching net zero will be aware, plans to develop third-generation nuclear reactors are well under way, with British companies such as Rolls-Royce leading the way. Some of those innovations—I have mentioned small modular nuclear reactors—have been designed to be able to be mass-manufactured at one site, powered by an SMR nuclear power plant, and then shipped domestically or internationally, massively reducing the cost. That brilliant technology will have the added benefit, I believe, of helping to power hydrogen electrolysers, which are highly more efficient if they are given a supply of heat. In turn, those will be able to decarbonise sectors that are the most difficult to decarbonise—the hard-to-abate groups that energy cannot touch, which need liquid fuel. The potential for nuclear heat and energy to generate hydrogen I think has the potential, in turn, to generate a clean energy revolution.

Those exciting technologies look to radically shake up the international energy supply system, but it is only through an adequate and appropriate funding model that we can take full advantage of their possibilities. As we have seen with the recent rise in global energy prices, energy security must be at the forefront of all our minds when debating policy. One of the best ways to avoid the situations that the world currently faces is by having a diversified energy supply, nuclear included. Additionally, it is only through the correct development and deployment of innovative technologies that we can both secure our energy supply system and achieve our net zero obligations. Net zero by 2050 is the ultimate mission for our generation and one that we must achieve as quickly, efficiently and effectively as possible. The RAB funding mechanism provides a clear path for nuclear to play its part in that mission.