Hinkley Point C

Lord Grantchester Excerpts

Thursday 15th September 2016 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for repeating the Statement in your Lordships’ House today. I also thank her for contacting me this morning to let me know that she would be making this Statement.

I say at the outset that Labour supports the development of new nuclear power as part of the UK’s energy mix, to ensure the country’s energy security, to deliver thousands of high-skilled jobs across the country and to deliver clean energy in compliance with our legal obligations on meeting climate change targets. Labour has always been critical of the strike price being set at £92.50 per megawatt hour; we have called for a price in the mid-£80 per megawatt hour range.

Critically, this investment must be delivered on time and on budget—two features that all Governments seem to be unable to improve on. Being on time is critical, as old energy plant is phased out, leaving a vulnerable period in the nation’s security of supply in the 2020s. The Government’s Statement today makes no mention of amendments on this following the review. This side of the House has argued that any future delays, which have already added five years to the project at a cost of £6 billion, should result in a penalty clause with a taper being applied to the price. While we may all be second-guessing whether the deal will be a good one in relation to future energy pricing, the country’s need for a new low-carbon energy supply coming on stream is well documented. Any cost overruns should be recognised and welcomed as a cost to EDF, and any underruns are to be shared.

Although the price at £92.50 per megawatt hour may well reduce to £89.50 if Sizewell C is built, nevertheless this is above the price agreed in France for Flamanville. It can be stated with a certain amount of confidence that the technical issues around the developments in light water reactors will find innovative solutions. We do not have a particular issue with this.

The Government were right to subject Hinkley Point to review, but the review should have taken place far earlier than at the 11th hour, when the room for renegotiation and manoeuvre is severely limited. This deal will set a precedent and benchmark for the future. Key review dates should also be set along the way to ensure that this project delivers to plan. The quality mark of having received approval from the globally recognised gold standard of the ONR will be much prized.

I am also wondering why the Government are rushing the Statement out today, the last day of this September sitting, with three weeks’ interval before Parliament returns in October.

I learned that, last night, as energy supplies through solar came to an end around sunset, a price hike occurred with an interconnector to the continent also being unavailable pushing pricing up well over £120 per megawatt. Will the Minister ask Ofgem to monitor and investigate price volatility through the winter months to guard against any possibility of manipulation for whatever reason?

On the Statement, I have a few questions that I would be grateful if the Minister could clarify. The review has concluded with a few alterations around the issue of control. The Government will now be able to prevent the sale of EDF’s controlling stake prior to completion. This is being done via an exchange of letters. Will the Minister clarify what is the legal form or basis under which this agreement by exchange of letters is enforceable? What would the implications of non-compliance be? Will the letters be made public? I would be most grateful to understand better the legal context to this agreement.

After completion the Statement refers to the new legal framework under which the Government will be able to intervene in any sale of EDF’s stake. Can the Minister give any further indication what form this intervention may take and how? Will this intervention be limited to ownership issues only?

The Statement continues with reforms to future foreign investment in British critical infrastructure and highlights three elements: namely, a golden share; reports to the Office for Nuclear Regulation regarding changes in ownership; and new processes within government to scrutinise foreign ownership for national security reasons. In the context of comments made by Mrs May on her appointment as the new Prime Minister, the position of foreign control in takeovers of important British companies was identified as a key issue for the new Government. Given her position within the wider business department that now includes energy and climate change, can the Minister clarify what the next steps and milestones will be and whether this scrutiny will be limited to investment in critical infrastructure only? What will be the parliamentary oversight of these new powers?

Regarding future investments, can the Minister clarify whether the contract includes assurances and guarantees that Bradwell and other plants are committed to the same investors? Does this also include commitments that key personnel and skills will be available to British companies throughout the British economy? Can the Minister give precise terms and details of any link between this and any future investments?

On the wider issues regarding the Statement, why have the Government refused in this review to demand a better deal for bill payers, who will be funding this for decades—at a cost of up to £30 billion according to the National Audit Office?

This investment will result in 25,000 high-skilled jobs with possibly 550 apprenticeships, which should be widely welcomed. It is vital that this contract fulfils in delivering high-skilled jobs and key positions within the organisation for British companies. Will the Minister give the House assurances regarding the timetable and transparency over the contract to ensure job security as well as the security of energy supplies that this country so desperately needs?

I am grateful to the Minister for the Statement and look forward to receiving this vital further information.

[Lord Teverson (LD)]

My Lords, I, too, thank the Minister, but I have a different take on the pricing side. Some time ago, we had the resignation of the finance director of EDF. I have looked at the share price since the announcement was made, and it is going down. Does the Minister expect EDF to be solvent by the time this project is due to be delivered? That is a real risk, given the other problems at Flamanville and—I am not brave enough to pronounce the town in Finland—the Finnish nuclear station. Will EDF survive this? What are the contingency plans?

This decision was originally made some three years ago, and we have had this soap opera ever since, but time and technology have moved on. Given the assessments on smart grids, energy storage and the Government’s brave and correct interconnector plan, is this nuclear power station—and fleet of nuclear power stations—necessary? I for one am not against nuclear technology as such, but is this the right technology to go forward? The previous Minister in the House of Commons, the Secretary of State for DECC, Amber Rudd, was very keen on small nuclear reactors. I would be interested to know whether the Minister is still pursuing that area.

I accept and welcome the various measures put in place to protect taxpayers and the public sector against the future costs of decommissioning, but I am concerned about the nuclear waste issue. I cannot see that there has been any movement by the Government in terms of their nuclear waste strategy or where we are going to put even old nuclear waste, let alone new nuclear waste. How can we be sure that the funding that will be put in place for decommissioning will reflect such an undefined nuclear waste strategy for the future?

Now that we have got through this period of constipation on energy decision-making, when can we expect a decision on the Swansea tidal lagoon?

I want to take up another major element in the Statement that is really interesting and that I have debated with the Minister on previous occasions. The Government are saying that they will take a golden share in future nuclear and other critical energy projects. The Minister will not be surprised if I ask her whether the Government have consulted with the Office for National Statistics about this strategy. She is quite right to be sensitive about the issue and wanting to make sure that, in having even slight government control over a company or a project, it does not become part of the public sector and go on to the public sector balance sheet. However, this seems quite incautious in comparison with previous government policy, and it is quite likely that at some point this project, which is worth £18 billion, will be put on to the public balance sheet. If that is the case, surely we should have put our own public money into it, at a more or less zero long-term interest rate, rather than bother with Chinese and French investment because it is going to be on the public sector balance sheet anyway.

I shall leave my questions at that. Again, I thank the Minister for repeating the Statement.