Hinkley Point C Reactor

Philip Boswell Excerpts

Tuesday 8th March 2016 Commons Chamber

[George Kerevan]

I think the hon. Gentleman has summed up the incredible state we have got ourselves into. Somehow, it will be all right on the night. Somehow, the French Government are going to bail out the United Kingdom’s energy policy. I can assure Conservative Members that that is not going to happen. What is going to happen is the following: at some point, I suspect with pressure from the British Government, what is left of EDF’s board and senior management will override the resistance of the minority on the board and green light construction. They will green light construction at a point where EDF cannot guarantee it has the funds to complete building the reactor. At some point, there will be a crisis and who is going to pick up the pieces? I can assure the House that it will be the United Kingdom taxpayer, not the French taxpayer.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

Having previously worked in the industry, like the hon. Member for Warrington South (David Mowat), in contracts management, I looked at Hinkley C online. While forms of agreement have been agreed as far back as October 2015, they are just a vehicle for project delivery. The design phase determines the project. As we appear to be about to enter the detailed design phase, this stage gate requires a more robust estimate to assuage investor concerns. Clearly, that has not happened. Does my hon. Friend agree that, given the very public challenges the project faces if it ever starts, the forecast practical completion date of somewhere between 2023 and 2025 is highly unlikely?

[George Kerevan]

I could not agree more with my hon. Friend. Originally, the two Hinkley C reactors were designed to be off-the-shelf copies of the reactor being built by EDF in Normandy. That has not happened. There have been significant changes. In fact, the way the EPR reactor has to be built—on site, piece by piece; it will be unique—leaves massive margins of error for cost overrun. Who is underwriting any cost overruns? The Chancellor of the Exchequer has given a partial capital guarantee that if there is any problem in the construction phase, the British taxpayer will start to pick up the bill.

[George Kerevan]

Yes, that is entirely true. That is the point. If we look at who is actually responsible for having got us into this financial hole, do I detect yet again that it is the Chancellor of the Exchequer? We are here not out of an energy policy issue, but because the Chancellor wanted to keep the construction costs of £25 billion and rising off the national book. He wanted to keep it off the debt. For the first time ever in the UK, we are trying to build a new reactor with a new reactor design by putting all the risk on to the private sector. This project is too large and the technology is too unproven for that to work. The Chancellor is digging himself a big hole to protect his rickety plan to keep down the deficit and pay down the national debt, but it will not work. At some point in the next 10 years, we will be back here discussing a bail-out.

That is what I am trying to get across. A significant number of EDF board members know that the project cannot be financed through private capital. Even if EDF could raise the £12 billion or £18 billion—its share for building the Hinkley C reactor—it would need four, five or six times that to complete its programme of reactor life extensions in France. The sum total is colossal for a company already dripping with debt. Unless the French taxpayer is prepared to underwrite all of that, which is highly unlikely, something will have to give, and let me assure the House that it will be not EDF’s reactors in France but this project. It will disappear into the wide blue yonder.

The problem is that by 2025, when the two reactors are not on-stream, we will have closed down the 10 coal- fired stations that the Government announced would be closed last November, just before the Paris climate change conference, and suddenly we will have a huge gap in the 2020s—even worse than now—in our capacity to generate electricity. That will all be because we have mortgaged ourselves to an outdated approach to energy, which is to build gargantuan nuclear reactors that cost the earth—literally and financially—and which cannot be underwritten by the private sector because of the risk. The Government have manifestly been trying to pretend otherwise, and that is ultimately why they are refusing to come back regularly to the House to explain what is going on. They are hoping for the best.

I want the Minister to tell us what discussions have been going on with the board, when we might see the decision to go ahead with construction and what will happen if we do not get a timely agreement to go ahead. What happens if the board delays and delays until 2019? Is there a plan B?

[Philip Boswell]

Will my hon. Friend also ask the Minister whether, given the current constraints and pressures in the industry, she foresees the current negotiated strike price of £92.50 being renegotiated—the only way being up?

[George Kerevan]

Of course, the strike price is subject to certain qualifications. Were EDF to build the reactors and make a vast profit—the strike price is more than twice the current cost of electricity and there is an increment for inflation—there would be a clawback. If it makes a profit beyond what was originally envisaged, some of the money would come back to the British taxpayer. The clawback was insisted upon and enlarged by the European Commission, so it was interesting listening to the Minister this morning on the radio, given her position on the UK leaving the EU. It was in fact the Commission that tried to stand up for the British consumer. That is one reason I will be voting to stay in the EU.

I have made the basic point, so I shall draw to a close.

--- Later in debate ---

[Philip Boswell]

The Minister spoke earlier about safety. At Sellafield, engineers estimate that it will cost about £50 billion over the next 100 years to clear up buildings B30 and B38. Will she tell us how much has been set aside for the decommissioning of the Hinkley Point C project, and where that money is going to come from?

[Andrea Leadsom]

The hon. Gentleman knows that that is a completely different matter. I see him nodding his head—he knows he is being mischievous. He also knows that the full cost of decommissioning Hinkley point C is included in the contract for difference—[Interruption.] It is included. It is a requirement of new nuclear to have a fully costed decommissioning programme included in that way.

The Government remain committed to conducting this deal in an open and transparent manner. We intend to honour the commitment made in this House by the previous Secretary of State to place the contracts—with only the most commercially sensitive data redacted—and the value for money assessment for Hinkley in the House of Commons Library once the documents have been entered into. This is a good deal for the British public, and it is one that the UK Government remain committed to. I thoroughly commend the project to all Members of this House.

Question put and agreed to.