Lord Goldsmith of Richmond Park
Main Page: Lord Goldsmith of Richmond Park (Conservative - Life peer)New Nuclear Power
Lord Goldsmith of Richmond Park Excerpts(11 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
Martin Horwood
Clearly not, because in the case of onshore wind, for example, there are many competitive developers developing different varieties of technology. It is a competitive market still, in a way that nuclear, as I shall explain, is not.
The goal, of course, is to provide clean, sustainable and cheap energy while meeting challenging but critically important greenhouse gas reduction targets. Do these contracts for difference represent a subsidy? Well, as the Treasury has confirmed to me in a written answer, yes, of course they do. Every energy bill payer is a taxpayer in their time off; but subsidy is justified for renewables, for all the reasons I have given. However, would it not be extraordinary if into this exciting, young, diverse and competitive energy market, a 56-year-old freeloader—a tailgater, a leftover from another era—tried to slip unnoticed and pick up all the same kinds of advantages and support? Would it not be even more extraordinary if that old freeloader was not even represented by a diversity of competitive companies, but just one or two; and more extraordinary still if the most significant of those turned out to be the state-nationalised energy supplier of another country, already subsidised by its own taxpayers?
That is precisely what is happening with the nuclear industry, and what is more, the level of support—the precise contract for difference and the strike price for specific energy sources—is being negotiated behind closed doors as we speak, before the relevant legislation has even passed through this House. The details are set to be revealed to us only after the event—after the deal has been sealed.
Martin Horwood
I first give way to my hon. Friend the Member for Richmond Park (Zac Goldsmith).
Zac Goldsmith
I hate to jump in front of the Chair of the Environmental Audit Committee, but I am pleased to be allowed to intervene. Only a couple of days ago, EDF issued a warning, effectively, to the Government that unless they guaranteed it profitability—or words to that effect—it would follow Centrica’s lead and abandon nuclear in the UK altogether. If that is not a request for a subsidy, it is hard to imagine what is.
Martin Horwood
The hon. Gentleman is exactly right. In fact, the energy chief executive of Electricité de France, Vincent de Rivaz, told the Financial Times:
“the only thing missing is the contract for difference. Once we have that, we’ll have a compelling investment case to attract partners into the project”.
In other words, “If you don’t subsidise us, there is no business case.” Even with the prospect of subsidy, the business case is not that compelling. On Monday, Centrica pulled out of its partnership with EDF, writing off a cool £200 million and launching a share buy-back scheme to return another £500 million of unused capital to its investors. Like RWE and E.ON before it, and like any sane investor in my view, it has decided that it is not going to touch these new nuclear plans with a bargepole.
Mike Weatherley
I thank my hon. Friend for his intervention. If I may, I will ask him to listen to my concluding remarks, which will show conclusively that by not subsidising nuclear, we will have a greener economy, rather than a carbon-dependent one.
If new nuclear is unable to meet the free market test, showing that it is competitively viable in the long term, it should yield to other forms of energy, particularly green forms of energy. When it comes to striking a price now, there are so many unknown variables that this can be done only by accepting that any price agreed will need future Government support. Members in favour of nuclear seem to accept that, which is horrific, given the coalition agreement.
The first of these unknown variables is the decommissioning of nuclear power sites. Decommissioning is a multi-faceted and complex process in which costs are hard to estimate accurately. The Public Accounts Committee last week noted the huge decommissioning failures at Sellafield, where the clean-up will take 120 years and cost £100 billion—twice the original estimate.
Mike Weatherley
I am sorry. I cannot give way because I am allowed only two lots of injury time.
Other factors can cause decommissioning costs to jump. Current laws can be amended. The 2002 White Paper “Managing a Nuclear Legacy” identified exactly this point as being a factor in the Sellafield costs. Secondly, fuel and waste management represent additional unknown financial burdens. Fuel management is particularly problematic. The Nuclear Decommissioning Authority notes, for example, that oxide fuel must be stored for decades before it is possible to place the fuel in a geological disposal facility. That brings me on to a crisis point: no GDF exists in any country. The UK Government have yet to locate an appropriate site for one on UK land. The full cost of constructing and operating such a facility is therefore unknown. Some £400 million of Government funding was spent examining a potential site for a GDF in Cumbria, only for Cumbria county council to vote against the plans last month on safety concerns.
Thirdly, the need for public funding is unlikely to abate over time. As the BBC journalist Richard Black points out, with the full life-cycle of nuclear power stations stretching over such long time frames, it is impossible to guarantee that companies originally involved in the running of the power plants will still be in existence or financially capable of meeting some of the costs of the decommissioning processes. Fourthly, aside from the decommissioning and other costs mentioned previously, the financial burden that a nuclear accident would place on UK taxpayers would be enormous, and this potential liability needs to be built into any pricing structure. Operators have some obligation to limited liability to cover accident costs, but these are capped, with Government underwriting the costs above the cap.
In March 2012 the Government response to the consultation held on increasing nuclear third party liability admitted:
“An incident of the scale of Fukushima would lead to costs that far exceed an operator liability limit.”
The response confirmed that Government intervention would very likely be needed. Proponents of nuclear will say that the likelihood of accidents is low, but the Government’s own advisers have confirmed that it is “not zero”. As recent history has shown, severe accidents do occur—five major incidents worldwide so far.
Mike Weatherley
I will try to give way before the end, if I can.
A good indicator of commercial viability is where the sector’s insurers stand. A 2010 Department of Energy and Climate Change working paper concedes that commercial insurance companies would not be willing to cover some of the nuclear industry’s liabilities.
The UBS financial group said recently that investing in nuclear power is a
“courageous 60-year bet on fuel prices, discount rates and promised efficiency gains.”
As my hon. Friend the Member for Cheltenham (Martin Horwood) noted, the EPR design planned for Hinkley Point has been planned twice before—once in France, where the costs have more than doubled and construction is five years behind schedule, and in Finland, where costs have almost trebled and construction is six years behind schedule.
A further cost which needs to be considered is that of protecting nuclear facilities from terrorist attacks. This includes protecting nuclear facilities from cyber-terrorist threats and providing adequate protection for nuclear materials in transit. Again, the cost is unknown.
Margaret Thatcher was a key advocate of removing subsidies from
“outdated industries, whose markets were in terminal decline”.
Today the market in decline is the British nuclear power industry when pitted against the alternatives.
I leave the Secretary of State with four questions and one frightening statistic. First, why is DECC being permitted to agree a contractual set price for nuclear power, in contravention of the coalition agreement not to allow nuclear subsidies? Secondly, why will this contract be presented as a non-reviewable document to Parliament? Thirdly, will the risks detailed earlier in my speech be taken into account in any price agreed? Fourthly and most importantly, will the Secretary of State consider delaying the negotiations until the relevant Committees have had a chance to review whether it represents value for money?
Finally, the frightening statistic: using formulas developed by Steve Thomas of Greenwich university and Peter Atherton of Citi, at a strike cost price of £161 per megawatt, which they have calculated, set against today’s wholesale price for electricity of around £51 per megawatt, and a 30-year contract life for the two proposed plants at Hinkley and Sizewell, it would cost householders and businesses or taxpayers £155 billion by 2050, and that is without any of the additional costs that I identified earlier. Imagine the renewable energy industry if we had invested over £155 billion in it. We would be world leaders, and I have every confidence that it would be low carbon and meeting all our energy needs.
Paul Flynn
I have some hope that the Liberal Democrat party will return to the paths of virtue.
A few hours ago in this Chamber, I asked the Business Secretary a question in which I praised him for what he has done with Greencoat UK by investing money in wind power and urged him to do the same in relation to tidal power. Let me say a few words about tidal power, because it is ignored.
Paul Flynn
I cannot do so any more because I have run out of injury time.
My constituency, like that of several other Members on the English side of the Bristol channel, is washed by an enormous cliff of water that travels up and down the estuary twice a day. There is immense power there that is unused and wasted. This can be tackled, but not by a barrage, which has so many difficulties and objections that it would be impractical. It is not necessary to build a brick wall across a tidal flow to get energy from it. Water wheels work very simply: the water flows and they tap the energy. The best way in which we could get that energy cheaply and cleanly is through a series of small machines in the water to tap the energy that could then be linked with a pump storage scheme, possibly in the valleys of south Wales. That would provide demand-responsive energy—base load energy—that was entirely predictable and did not alter like wind or any other sources. It would be available, clean, British—
Joan Walley
Energy security is top of my list as well, but I would not want the Government—not just now but in 2050 and beyond, which is why we are looking at the decommissioning of nuclear waste—to be held over a barrel as a result of a decision made now that will have a lasting legacy in years ahead.
Zac Goldsmith
Given recent threats from EDF Energy over the past couple of days, it seems to me that we are already being held over a barrel in relation to the strike price. We are being asked for extraordinary levels of subsidy by an industry whose subsidy appetite should be not disappearing but declining after 50 years. Instead, it seems to be increasing.
Joan Walley
I agree with the hon. Gentleman, and given what has happened this week with Centrica, and the uncertainty over how the new nuclear power stations will be constructed, everyone is being held over a barrel. That does not mean, however, that we should not sit down and work out together transparently a way of creating an energy policy that is fit for purpose and that our constituents deserve.
David Morris (Morecambe and Lunesdale) (Con)
Our future energy needs and how we meet them are critical to this nation. I congratulate my hon. Friend the Member for Cheltenham (Martin Horwood) on securing this debate, and I also pay tribute to the hon. Member for Hartlepool (Mr Wright), who is a friend outside this Chamber.
My constituency is one of the biggest energy producers in the country and my area contains gas, onshore and offshore wind, and—biggest of all—two nuclear power stations. I am incredibly supportive of the nuclear industry and have established Conservative Friends of Nuclear Energy to help advocate it. The nuclear industry is worth protecting and developing. Indeed, I would go so far as referring to it as the ultimate low-carbon industry.
People in my constituency are sick of onshore wind blighting the countryside. My mailbag is always full of letters from various conglomerates that want subsidies to develop onshore wind. Our nuclear power station is a huge employer and incredibly popular among those who live closest to it. In fact, my constituency has been designated for a third nuclear reactor, and we have a good chance of getting it built. For all the good news, however, there are many misconceptions about the industry.
Zac Goldsmith
On that point, is my hon. Friend saying that subsidies are acceptable for nuclear power but unacceptable for onshore wind? That seems to be where his speech is going.
David Morris
No, I think that wind has an important part to play in the mix, but I am unequivocal when I say that we should have subsidies in the nuclear power industry as well.
There are many misconceptions about the nuclear industry, not least the energy market reforms that are hugely generous to companies such as EDF. The reality is rather different. All three new-build companies—Horizon, EDF and NuGen—are building plants at their own expense. Contracts for difference guarantee a price for the electricity produced, but that is done for one simple reason: it is impossible to raise £7 billion to build a nuclear power station unless the banks have some idea of what the turnover will be. That is why we need contracts for difference to bring predictability to the price.
A recent report by the Department of Energy and Climate Change suggested that contracts for difference could lead to a fall in bills of between 6% and 8%—welcome news during these difficult economic times—but to characterise that as a subsidy is wrong. In fact, DECC has made it clear time and again that it will not subsidise new nuclear energy. I have not always supported that position, but it would be remiss of me not to point out that the Department is firm in its view.
Every study I have seen shows nuclear energy as one of the cheapest large-scale low-carbon technologies. It is also a huge employer and will soon account for 0.4% of British GDP, equating to 32,500 jobs. I believe that nuclear is the future of low-carbon technology. It is clean, cheap and provides employment opportunities in areas that really need them. I support nuclear energy and the energy market reforms. They are the way forward and will keep the lights on for decades to come.