Energy: Civil Nuclear Power

Lord West of Spithead Excerpts

Thursday 9th December 2021 Lords Chamber

[Lord West of Spithead (Lab)]

My Lords, I too thank the noble Lord, Lord Howell, for tabling this extremely important debate. It is a very important topic. For too many years, successive Governments have not taken the need for a comprehensive energy policy seriously enough. When I was heading the National Security Forum for Prime Minister Gordon Brown, I said that we needed a proper energy security policy. I had great difficulty because no one wanted one, and no one seems to have wanted one for years, which is unbelievable. To compound the problem, successive Governments were also opposed to the civil nuclear problem. Having led the world in power plant technology, as has been mentioned, our nation now does not have the ability to build a large nuclear power station. A number of key figures over the years should hang their heads in shame that we have ended up in this position.

As has been said, nuclear is crucial for the provision of round-the-clock, weather-independent, low-carbon electricity, as the demand for electricity soars. It is vital if our nation is to reach its net-zero target. National daytime electricity demand is forecast at least to double from 40 gigawatts to 80 gigawatts by 2050. Nuclear will have to provide, I believe, at least 30 gigawatts of that electrical power if we are to meet net zero. The impact of lack of electricity has been shown starkly by the impact of storms over the last few days. Goodness me, people who want the environment to be lovely do not like it when they have no electricity at all, so that has really been driven home.

The current total installed nuclear capacity in the UK is 8.9 gigawatts and, if all stations were fully operational, they could provide more than a fifth of UK electricity supplies. In 2020, they generated about 16% of the UK demand. However, decades of neglect and opposition to the nuclear industry have put it in a parlous state. There are currently 15 nuclear reactors operating at eight stations across the UK, all operated by EDF. All 14 of the advanced gas-cooled reactors will close by 2030. Only Sizewell B, with its pressurised water reactor, is planned to continue generation past 2030. I rather like PWRs. When I was commander-in-chief, I had 18 of them under my command, so I have a soft spot for them. The plan is for Hinkley Point C to be generating before 2030 although, as a number of speakers have said, there must be concerns about the implications of the recent problems with a similar plant in China. Can the Minister confirm that these problems will not delay Hinkley C from coming online?

Things are far more fragile than they appear, with many nuclear power stations closing well before their planned dates. EDF has announced that Hunterston B will end generation by January 2022 and Hinkley Point B by July 2022. Sizewell B is currently offline for refuelling and maintenance work, and Dungeness B is shutting seven years early. We are rapidly heading for a situation whereby we have only one major nuclear power station online with another building. As has been said by another speaker, the building and commissioning of Sizewell C is now a matter of national emergency.

The situation is further complicated by the National Security and Investment Act, which will inevitably lead to minimal and reducing Chinese involvement in Sizewell C and probably the cancellation of Bradwell B. Could the Minister tell us where we have got to in discussions with the Chinese, who saw the building of Bradwell B, as the noble Lord, Lord Howell, said, using their reactor design, as crucial for their future overseas sales? I have to say—although they did not say it—they also intended to dominate the nuclear supply chain in this country. As we reduce their levels of investment, is there a risk that they will pull out all their experts from Hinkley Point C? It would be useful if the Minister could tell us that.

The next question has to be whether Rolls-Royce is able to produce small modular reactors to the timescale that the Government have predicated and hoped for. As I have said, I am a strong supporter of SMRs and, indeed, AMRs. Indeed, if they were able to start producing them now, and Rolls-Royce said that it could do that today, I would have to say that I do not really want to go for any more big plants after Hinkley C. However, I think we are far from that. But with SMRs and AMRs, we have an opportunity, if we grasp it and invest sufficiently in training and recruiting scientists and technicians, to lead this revolution to become absolute world leaders. We can do this when we need to; we did it when we produced our own atom bomb—if we focus on something, our nation can do it—and this is worth doing. Does the Minister believe that Rolls-Royce will meet the timescales that the Government hope for, for SMRs?

The use of Wylfa Newydd—I never pronounce it correctly, but the noble Baroness will put me right on that—for a large small pressurised water reactor, as I understand it, from Westinghouse is good news. A large small reactor sounds lovely, and I am delighted, because that site is particularly good for nuclear. However, is there not some difficulty with Westinghouse and Toshiba? Is the Minister sure that the plan will come to fruition?

The noble Viscount, Lord Hanworth, covered the subject of costs in great detail, and I thank him very much. I think I almost understood it, which is remarkable for a simple sailor. It is often a contentious issue. Using the RAB model to finance new nuclear makes sense, and costs of nuclear plants are beginning to be competitive with other low-carbon technologies, including renewables. Energy prices have risen recently, as noble Lords have said, and the market rate for electricity is currently more than the strike price agreed for Hinkley Point C, so that should be even better for Sizewell C, which will be cheaper, because it is exactly the same build as Hinkley Point C.

I consider that nuclear power stations are essential for our country’s energy security, not just for low-carbon electricity. We must not rely on electricity from the continent or more gas, as has already been said. We absolutely need this as a strategic security measure for the nation; it has that benefit, as well as the ability to produce electricity, which our country will need, without increasing our carbon footprint.

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[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.