Nuclear Energy (Financing) Bill

Viscount Hanworth Excerpts

2nd reading
Monday 21st February 2022 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, the recent history of the nuclear industry is evidence of the failure of the Government’s energy policy. The coalition Government of Clegg and Cameron recognised the need to renew Britain’s fleet of nuclear reactors. In 2010, it was agreed that the construction of eight new nuclear power stations should be called for. Several contactors expressed willingness to undertake the projects but one after another they withdrew. The list includes Scottish and Southern Electricity, the German companies RWE npower and E.ON, and the Japanese companies Hitachi and Toshiba.

This has left the French company EDF as the sole nuclear contractor, and at one stage it was doubtful whether it would be prepared to proceed with its project, given the difficulty in raising the necessary funds and the paucity of its own resources. The principal difficulty has arisen from the Government’s insistence that infrastructure investment in the nuclear industry should be financed by private capital.

One is reminded that the construction of our existing nuclear plants was invariably financed by central government. Money borrowed from private lenders is subject to burdensome surcharges comprised within exorbitant rates of interest. These charges consist of a risk premium, a scarcity premium and a discount rate. The discount rate reflects the time preferences of the lenders, whereby future receipts are valued at far less than current receipts. It is a consequence of this short-term perspective that half the cost of constructing a new nuclear power station, which can take as long as 10 years, will be attributable to interest charges. These will eventually constitute a massive transfer payment from the consumers of electricity to the financial sector.

As a provider of finance, the Government should be expected to take a long-term perspective. It should be one that envisages the consequences of global warming and the need to provide a stable baseload of carbon-free electricity, which only nuclear power can provide. The free market ideology of the Government has resulted in a system of contracts for difference, under which the guaranteed payments are entailed in a so-called strike price. Any returns to the investment that are below the strike price will be supplemented and any returns above it will be taxed.

This system has been an invention of neoclassical economists. It has accorded perfectly with their theoretical vision of how the economy ought to work, but it is at variance with reality. Among the economic fictions that support this system is a belief in the efficiency of intertemporal financial intermediation, whereby lenders can be prevailed upon to accept future repayments with little in the way of monetary inducements. In reality, it has proved impossible for prospective contractors to acquire the investment funds without incurring a heavy burden of payments to the financial sector.

The Government’s latest attempt to square the circle is represented by the Nuclear Energy (Financing) Bill. The Bill proposes to provide a stream of revenues to the contractor during the period of construction. The revenue will be derived from a charge levied on existing consumers of electricity. The supposition is that, with a guaranteed revenue stream and the alleviation of some of the risk, the contractors will be able to acquire capital funds from the private sector with greater certainty and at a reduced cost.

This begs the question of where the funds will come from and whether they will be adequate to cover the costs. The Government have also reserved the right to judge whether a proposed nuclear project will represent value for money and there is a risk that they will declare or decide that it does not. The common understanding is that the capital will come from the pension funds. I believe that this is the Government’s assumption. We have yet to hear any assessment of the likelihood that the funds will be forthcoming. Perhaps the Minister could address this point. To my knowledge, the Government have revealed no plans to meet the eventuality that the funds to sustain the regulated asset base will not be forthcoming from the private sector. Perhaps, in that case, the Government should derive funds by issuing designated nuclear bonds, as has been suggested.

In January, the Government announced £100 million of funding to support the continued development of the Sizewell C project, in the hope that this would attract further financing from private investors. This is a trivial sum. It might seem odd to describe £100 million as a trivial sum, but it is small in comparison with the £4.3 billion that is reported to have been lost through Covid-related fraud. The cost of the Hinkley Point C power station, which should open in 2026, is estimated to be between £22 billion and £23 billion. The cost of Sizewell C has been estimated at £20 billion. One should be mindful of the fact that, under existing arrangements, at least 50% of these sums will be paid to the financial sector in interest charges. Stripped of interest charges, the true cost of constructing a massive power station at Hinkley Point or Sizewell can be compared with the cost of the 2012 Olympic Games, which is supposed to have been £14.8 billion. These costs seem small when set beside the accumulated profits of banks and the tax paid by the banking sector.

These figures have been bandied about because I wish to pose a rhetorical question: can we afford to secure our future energy supply and fulfil our carbon reduction ambitions? The Government’s economic philosophy might suggest to them, absurdly, that both of these questions should be answered in the negative and that it will be too expensive to achieve these goals.

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[Lord Oates (LD)]

I am grateful to the noble Baroness. I am sure that the noble Lord, Lord West, is very familiar with Portsmouth and that he will take the opportunity to visit such projects.

As we know, electrical use is highly cyclical, both in terms of daily peaks and troughs and annual swings. Therefore, we have to show much greater urgency about how we use smart pricing to reposition demand rather than simply piling on more production to meet peak load. We also have to invest in energy storage and integrate it into grid planning through batteries, green hydrogen production, pumped hydro, compressed gas storage and other solutions.

Finally, nuclear power generation produces high-level nuclear waste which is deadly for longer than any human civilisation has ever survived. It is notable how few noble Lords who contributed as nuclear proponents to this debate addressed that fundamental issue.

The Minister was keen to tell us, as other noble Lords were, how the UK was the first country in the world to begin a civil nuclear programme, yet decades after that and after promising that a solution to this problem is just around the corner, the Government and industry have still failed to supply one. It is our contention that, quite apart from the other powerful arguments against nuclear, it is morally unjustifiable to build new nuclear stations until we first have a geological disposal facility in operation for the long term to deal with the existing high-level waste we have produced. That is key.

In our view, the case for new nuclear generation projects falls down at every hurdle. They cannot contribute to our 2035 electricity decarbonisation target, they cannot effectively complement renewables, and they cannot even clean up the mess they have already created. So laden are these projects with risk, so staggeringly unable are they to keep to time or budget, and so eye-wateringly expensive is the electricity they generate that the only way to finance them is by passing the risks and costs to consumers and taxpayers who are given no choice over whether to accept them.

It is hard to improve such a fundamentally flawed project, but in Committee we will do our best to bring forward amendments to deal with the specific flaws in the Bill that I identified earlier. We look forward to working with noble Lords across all parties in the House to at least make the best of a bad job.

[Viscount Hanworth (Lab)]

Before the noble Lord sits down, may I ask him to clarify how he proposes that we should accommodate the variability of wind and solar power, which I believe are the sources of power that he prefers or proposes?

[Lord Oates (LD)]

If the noble Viscount had listened to my speech, I set out a range of areas in which we need to completely rethink our energy system, including significant investment in energy storage that we can bring online, demand repositioning and demand reduction. Those are the solutions, but I am happy to discuss them further with the noble Viscount outside the Chamber.

Nuclear Energy (Financing) Bill

Viscount Hanworth Excerpts

Committee stage
Tuesday 8th March 2022 Grand Committee

All this shows that we will not know what the GDF will cost until it has been constructed and is operating. We cannot know the real cost of nuclear generation and decommissioning in the absence of that information. It follows that the Secretary of State will lack the information to determine whether a nuclear project represents value for money, which he is required to determine under Clause 2. For those reasons alone, it is our belief that we should not move forward with new generation until a GDF is operational. However, there is also a more profound reason: we have no business creating more deadly waste until we have proven that we are capable of cleaning up the nuclear mess that we have already made. I would beg to move, but I believe that my amendment has already been moved and I thank my noble friend Lord Foster for that.

[Viscount Hanworth (Lab)]

The proponents of this amendment are trenchantly opposed to nuclear power. They are proposing as a condition for allowing a company to construct a new nuclear plant that a facility for the disposal of high-level nuclear waste should be available. Presumably they imagine they are proposing a condition that cannot be met. The proposers should be aware, albeit that they may have missed the point, that work is already under way to establish a geological facility for such waste. Three locations have been proposed, and there have been favourable responses from the people in the areas concerned. This was announced in a symposium that was held in November in Methodist Central Hall, a stone’s throw away from Parliament by Nuclear Waste Services, which is a branch of the Nuclear Decommissioning Agency. In fact, the Liberal Democrats have strongly opposed the establishment of a geological disposal facility. They have recently organised a petition of local residents to oppose a tentative proposal that such a facility might be created on the south coast under Romney Marshes.

Just a month ago, the Liberal Democrats ago voiced the old trope that nuclear waste is highly radioactive and highly hazardous and that the hazards will endure for millennia. They cannot have it both ways. Nuclear radiation is subject to a geometric or exponential process of decay. The more intense the radiation, the shorter lived it will be. On the other hand, a substance that has a half-life of thousands of years is only weakly radioactive. The methods that have been devised for the storage of nuclear waste can accommodate all these circumstances in a manner that can render the waste harmless. We have had various figures quoted for the cost of this enterprise, but the proponents of the amendment are proposing these figures as if they are a cost to be borne immediately. In fact, that cost will be distributed over a long period. If you take that into account, a very different conclusion arises.

This is an ill-conceived amendment and should be dismissed without further ado. We should not allow the legislative process to be entrammelled by such groundless objections and impediments.

[Lord Foulkes of Cumnock (Lab Co-op)]

I am not sure why my noble friend is so surprised that the Liberal Democrats have moved this amendment. They are always looking in two directions, and this is absolutely typical of them. My noble friend has been in the House of Lords long enough, and he ought to have got used to it by now.

[Viscount Hanworth (Lab)]

Yes, indeed. In 2010, the Liberal Democrats in the coalition Government proposed that 10 new nuclear plants should be built. Of course, they have totally changed their opinion.

[Lord Teverson (LD)]

Perhaps the noble Viscount will explain how the Labour Party in government has made some of the biggest U-turns on nuclear power ever seen in this country.

[Viscount Hanworth (Lab)]

No, I am not in the business of explaining that. There has never been consensus in the party but, right now, I think there is consensus as never before. The party is facing up to realities. I hope I shall have the opportunity to describe what those realities may be if we were to follow the prescriptions of the Liberal Democrats. I think that we would be looking at a scenario of misery and—

[Lord Teverson (LD)]

We all agree with the principle that the polluter pays. I believe that we also have a principle in life that we should not pollute if we have no way of solving that pollution during the time for which we are planning. The issues here are complex, but I do not think they are necessarily quite so straight- forward as the noble Viscount describes.

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[Lord Howell of Guildford (Con)]

What I am saying is that, if the Secretary of State decides to publish his value for money assessment, that assessment will of course include the long-term national security concerns of this nation and a variety of other advantages of moving into a proper low-carbon electric age. That kind of value is not one that the noble Lord is going to agree with, so the disagreement will continue. Value is a totally subjective aspect; that is so with many national projects, but particularly with this one.

If I may say to the noble Lord, Lord Stunell, the rather endearing Lib Dem concept that no public subsidy could possibly be involved—that is, nuclear is all right but there must be no public subsidy—is an absurdity. Of course there is going to be public concern about the national security of this nation; public concern is something that will have to be paid for, either through subsidy by the taxpayer or by ordaining the Government to raise the money in some other way. The latter was the proposition for Hinkley C, which was allowed to have a strike price that was at that time almost twice the going rate for electricity kilowatts per hour from coal, oil or anything else, including renewables. Things have changed since then; now that electricity and gas have soared, perhaps the strike price is quite reasonable compared with other fossil fuels. That raises the question of contracts for difference; perhaps it was not quite such a bad prospect as some of us thought.

Anyway, that is beside the point. The main point is that value is utterly subjective and must contain all kinds of assessments by the Secretary of State, his colleagues and the Government about national security and its contribution to our long-term aim of a decarbonised world, as well as a vast range of other considerations—all of which have to be balanced out in taking these difficult political decisions. We can argue until kingdom come but the reality is that judgments have to be made, and they are much bigger than value in the narrow sense.

[Viscount Hanworth (Lab)]

I quite agree with what the noble Lord, Lord Howell, has just said; indeed, I feel somewhat pre-empted. However, before I address the amendment, I shall talk about cost overruns.

The cost overruns have been substantial in Flamanville and Olkiluoto but they are mainly attributable to the fact that there was a long hiatus in the process of constructing nuclear power stations, so the skills that constructed the majority of the French and our own power stations had evaporated. It is worth looking back at the history of our original nuclear programme to recognise both how rapid and effective it was and that it was not accompanied by the kinds of problems we have witnessed on these large power stations.

Be that as it may, Amendment 4 from the Liberal Democrats is predicated on their opposition to nuclear power and the proposal that nuclear power projects should be assessed in terms, as we have heard, of their value for money. I presume that they wish the assessment to be based on commercial accountancy, and that they hope and expect that on that basis the projects will be judged to be too expensive to pursue. The proposers of the amendment should know that when a nuclear project is financed by commercial funds, the likelihood is that more than 50% of the cost of the project will be attributable to interest costs.

In other words, the costs of projects pursued in this manner will comprise a substantial transfer payment by the beneficiaries of the project, who are the consumers of electricity, in favour of the financial sector. Are the Liberal Democrats happy to see major investments in social and economic infrastructure evaluated according to the criteria of commercial accountancy? If so, they are aligning themselves with a political ideology that I would have expected them to reject.

[Lord Teverson (LD)]

That is not what the amendment says.

[Viscount Hanworth (Lab)]

Be that as it may, when we talk of value for money, we usually have in mind the amount of money we would be paying for an item that is subject to immediate use or consumption. The concept loses its meaning, as we have heard, when considering something where consumption is to be deferred and is liable to take place over an extended period. In such cases, we must attempt to envisage the circumstances likely to prevail in the future. This is surely the case for a nuclear power station, the construction of which may take a decade and which is intended to provide a carbon-free supply of electricity for many years. It is envisaged that such power stations will be able to supply the plentiful electricity needed to power a carbon-free economy and to assist in averting climate change.

The appropriate means of determining the value of a nuclear project is to consider the associated opportunity cost. Opportunity cost is a technical term in economics that denotes the opportunities that are forgone by pursuing—or not pursuing—a particular project. It requires a degree of imagination to assess the opportunity cost of a nuclear project, which far exceeds the imagination required in pursuing an exercise in commercial accountancy. I invite the Liberal Democrats to assess the opportunity cost of forgoing nuclear power. In particular, I encourage them to envisage the consequences in terms of economic and social misery that will arise if we fail to create an ample and carbon-free supply of electricity. Their policies are inviting such a failure.

[Lord Teverson (LD)]

There is a concept in economics—which I am sure the noble Viscount is aware of—of opportunity cost.

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[Viscount Hanworth (Lab)]

That is exactly what I have been talking about.

[Lord Teverson (LD)]

Exactly. My point about it is that, first, it is the Government’s Bill says there will be this assessment. We are trying to find out is what it actually is, in the interests of transparency—which I am sure the noble Viscount would not disagree with. In terms of costs, there are opportunity costs of other forms and ways of meeting climate change targets. That is the point. You can reject opportunity cost, which means other ways of doing this. I do not think the noble Viscount’s enthusiasm for nuclear—which I understand—should disregard some of the other ways of achieving these objectives.

[Viscount Hanworth (Lab)]

Let me answer that. Looking at the alternatives proposed by the Liberal Democrats, I could go into a long discourse to outline what will happen to our industries if we forgo an ample supply of electricity to power them and maintain our economy. This is what the Liberal Democrats are inviting. They simply have not faced up to the realities of their proposals. The noble Lord says the Bill already asks for an assessment; I think that is a trivial point, because I am trying to tell him that such an assessment is probably not the appropriate way of proceeding—as we have heard very eloquently from the noble Lord, Lord Howell. I am not defending the proposal that a value for money assessment should be made. I am suggesting that such an assessment should be put aside because it is irrelevant and inappropriate.

[Baroness Bennett of Manor Castle (GP)]

I am sorry to intervene on the noble Viscount’s private discussion with the Liberal Democrats, but he referred to opportunity costs and may not be aware of the study from the University of Sussex Business School and the International School of Management—ISM—of 123 countries over 25 years, which was published in Nature Energy. It showed that nuclear and renewable energy programmes do not operate very well together and that nuclear crowds out renewable. That is the opportunity cost when going for nuclear; you lose the renewables.

[Viscount Hanworth (Lab)]

My discourse on renewables would have been on the extraordinary cost of having to accommodate intermittence. I am afraid there are other things to discuss. I have already discussed this in another forum, so I think we can leave that point.

[Baroness Worthington (CB)]

My Lords, I will speak briefly on Amendment 4, as much of what I was going to say has already been covered. I have some sympathy with this amendment, as transparency is nearly always good and it would benefit the industry to have a thorough description of the value of investing in nuclear on this and other scales, so that we have it as an option as we combat climate change and seek to deliver affordable power to the nation.

As the noble Lord, Lord Howell, pointed out, value is subjective. Therefore, it would be hard to use it as an objective way of saying that this should not go ahead. What value does Switzerland currently place on its electricity grid, which is almost 100% hydro and nuclear? That means that, despite its location in the centre of Europe, Switzerland is feeling incredibly safe in these troubled times. What value does it place on that? It is of huge value to Switzerland.

Similarly, the social cost of carbon rapidly needs to be revised as we realise that the impacts of climate change are happening far faster and at far greater cost than we ever thought. How do we factor that into value? Transparency is important and I would welcome a much more open discussion about the value that these large-scale nuclear power projects deliver for us. You can look at the levelised cost of electricity, but I suggest it is not the most important factor. You can pay a lot less for a tricycle than for a tractor, but they do not perform the same job. You must compare like with like.

With renewable technologies you have rapid deployment but very diffuse sources of energy, large land take and intermittency, which then requires a substantial extra cost on the grid for levelling when the sun is not shining or when we have periods of no wind, which does happen in Europe—it happened recently, actually, and contributed to the high gas prices we have seen. Let us have that discussion. I feel confident that the project we are talking about here, Sizewell C, will provide a great value for the money we are about to spend, not least because 50% of its additional cost comes from its financing, as has already been stated. That is a huge overhead, because these are capital-intensive long projects. This Bill will help reduce that and increase the value for money.

We now have two reactors under construction today. We can look at the costs of those to see how they transfer to subsequent projects that are funded under this more efficient mechanism. I have been informed about and questioned EDF about its cost overruns. The costs of the two reactors being built today are in line with what you would expect if you were building a huge construction project through the period of Brexit and Covid. Nearly all the inflated costs are true of all big infrastructure projects and are not unique to the nuclear project currently under way. So I would welcome having this conversation. I think transparency would be a friend of the industry and I therefore have some sympathy with this amendment.

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[Baroness Worthington (CB)]

When we embarked on our nuclear build, we also took government money to build our hydroelectric pumped storage units, which were designed specifically to compensate and were built alongside the nuclear units. We are losing nuclear units, but we still have our hydroelectric pumped storage. The noble Lord can speak to National Grid. As we are not going to be seeing the same parity of nuclear output even after we have built the next round because we are losing the AGRs, we have more than enough capacity on the grid to cope with those fluctuations.

[Viscount Hanworth (Lab)]

I regard this amendment as a complete blind. Indeed, the figures that have been quoted do not tally with the ones to which I am privy. Large nuclear power plants are the only proven technology available today to provide a continuous and reliable source of low-carbon electricity. They have never been afflicted by major unplanned outages, albeit that as nuclear power plants—

[The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)]

My Lords, there is a Division in the Chamber. The Committee will adjourn and return as soon as agreed after Members present have voted.

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[Viscount Hanworth (Lab)]

As I was saying, large nuclear power stations are the only proven technology available today which provide a continuous and reliable source of low-carbon electricity—

[Lord Teverson (LD)]

Geothermal.

[Viscount Hanworth (Lab)]

Can I please proceed uninterrupted, then we can have a real set-to later?

Nuclear power plants have never been afflicted by significant unplanned outages, albeit that, as they have aged, their maintenance needs have increased. These have been fully accommodated by planned outages. Nevertheless, the closure of the Magnox reactors has led to an increase in load factors, which are now considerably above their historical average. The average has risen from an historical 60% to its current level in the high 70s. The recent unplanned outage at Hunterston B, which can be blamed on the age of the plant, limited its nuclear power generation for much of 2018. It was accompanied by an average load factor throughout the industry of 72.4%.

This amendment flies in the face of reality. We must turn the matter around by asking the Liberal Democrats and the Greens, who are averse to nuclear power, how they propose to accommodate the intermittence and unreliability of the renewable sources of power they are so keen to advocate. Perhaps I should not raise the temperature by declaring this, although I fear I must, but this amendment is a blind and is a transparent piece of nonsense.

[Lord Teverson (LD)]

I will not respond to that hugely, except to say that the really important amendment, which I think we will all treat seriously, is the one on the cost of energy and the fact that this will add to energy prices. The proposition that we should exempt fuel-poverty households from this is serious; we should discuss it, because it is very current and important.

I gently suggest to the noble Viscount, Lord Hanworth, with whom I have enjoyed serving on the committee for many years, and the noble Baroness, Lady Worthington, that they have somehow fallen into the wrong idea that it is renewables versus nuclear. That is how the argument has gone.

[Viscount Hanworth (Lab)]

If I could interject, we are objecting to the complete exclusion of nuclear, which is the agenda of the Liberal Democrats. It is madness.

[Lord Teverson (LD)]

The answer to intermittency comes back to opportunity cost. As I said at Second Reading, the most effective way of reducing it is energy efficiency. That should be the prime objective. Does the noble Viscount disagree about energy efficiency?

[Viscount Hanworth (Lab)]

No, I do not, but that is not the point. Continue.

Nuclear Energy (Financing) Bill

Viscount Hanworth Excerpts

Report stage
Thursday 24th March 2022 Lords Chamber

[Lord Oates (LD)]

My Lords, I shall speak to all the amendments in this group. They deal with value for money for the taxpayer and for bill payers, the impact on consumer bills of the regulated asset base charge, and the final amendment relates to excluding those on universal credit and other legacy benefits from such impacts.

Amendment 1 requires that the Secretary of State is of the opinion that designating a nuclear company will result in value for money, as evidenced by the publication of the value-for-money assessment. In this sense, it is about both value for money and transparency, which we will also touch on in later groups. We want to know not just that such a designation will result in value for money but on what basis that decision has been arrived at. We know from the history of the nuclear industry that promises about costs have rarely been kept and that finances have been opaque, to say the least. If there was one advantage of energy sector privatisation, it was that the costs which had previously been fairly buried in the accounts of the Central Electricity Generating Board became much clearer. That is a significant part of the reason why nuclear power ceased to be attractive, because it was clear that it did not offer value for money either for the taxpayer or for the consumer.

As my noble friend Lord Foster said when he spoke to this amendment in Committee, the Government have said already that they are going to conduct a value-for-money assessment. All we are asking is that that assessment is published as part of the process of the Minister being clear that it is his position that the designation would represent value for money. In Committee, the Minister notably failed to give any such commitment that the value-for-money assessment would be published, so I ask him to tell the House directly in his response whether the Government will publish that assessment. If he does, he will satisfy many of our concerns on this matter. If he does not, he will simply confirm our belief that the result of the Bill will be that the public are going to be landed with eye-wateringly expensive power generation which does not offer value for money and for which they will be forced to pay on their bills in advance.

Amendments 3 and 10 deal with the impact on consumer bills. Amendment 3 requires the Secretary of State to be of the opinion that designating a nuclear power company will not have a significant and material impact on consumer bills and to lay a report before Parliament setting out the reasons and evidence for that opinion. Again, this is about both the protection of the consumer and transparency over decision-making.

Amendment 10 seeks to exclude recipients of universal credit and legacy benefits from the regulated asset base charge, and I am grateful for the support of the noble Lord, Lord McNicol of West Kilbride, and the noble Baroness, Lady Bennett of Manor Castle, on this amendment. It would guarantee in law that the most financially vulnerable in our country do not see an additional increase in their energy bills to finance the exorbitant costs of nuclear power generation. The most indefensible part of the Bill is that the cost of nuclear generation and the way the RAB charges work would have a disproportionate impact on those who are already struggling to pay their bills. With the energy price cap already set to increase by 54% and with further increases very possible, indeed likely, in the autumn, this is no time to place further burdens on those least able to meet them, as the Bill does. On the Liberal Democrat Benches, we believe that we have an absolute duty to protect those least able to meet these costs at such a difficult time.

As finance expert Martin Lewis has said, the financial strain on families is already the worst he has known. He describes the increase in energy bills as a

“fiscal punch in the face”,

and adds:

“I am out of tools to help people now … It’s not something money management can fix … we need political intervention.”


But what we have in this Bill is political intervention to make the situation worse. Reports from the Joseph Rowntree Foundation have added that the case for support

“to help people on the lowest incomes could not be clearer”—

so why are we doing the opposite? As we all know, the number of people in fuel poverty is increasing at alarming rates; it is estimated that it will have tripled in the space of two years.

Citizens Advice finds that 55% of universal credit claimants are already going without basic essentials. The Government are proposing to increase benefits by just 3.1% at a time when inflation is forecast to peak at 8% to 9%. Many, including the CBI, believe that peak may be sustained over a significant period. This Bill would exacerbate the problem even further. Amendment 10 would at the very least make sure that the most financially vulnerable people in our country are not forced to bear further costs on their energy bills as a result of this unfair policy.

[Viscount Hanworth (Lab)]

My Lords, I wish to speak to Amendment 1. The noble Lord, Lord Howell, disposed of the previous version of this amendment most effectively in an eloquent speech in Committee, yet the Liberal Democrats persist in asking for an unequivocal value-for-money assessment of any project to build a new nuclear power station. It is not clear on what basis such an assessment should be made.

They may be inspired by the expectation that an assessment conducted according to commercial accountancy would cast doubt on the economic benefits of building new nuclear power stations. It has been pointed out to them that such a valuation would entail the commercial cost of capital funds, which are available from the financial sector only at an exorbitant rate of interest. It is precisely for the purpose of overcoming this impediment that the financial device of a regulated asset base, which is what this Bill advocates, has been devised.

Commercial accountancy—if that is what the Liberal Democrats have in mind—would be a most inappropriate means of assessing the value of investment in social and economic infrastructure that would provide us with a carbon-free source of electricity for the long term. Not only will this electricity be making a vital contribution to our climate change agenda but it will serve to sustain our industries in the absence of fossil fuels. Surely the Liberal Democrats should support such objectives.

The Liberal Democrats have been enjoined to tell us how they envisage that we might satisfy these objectives in the absence of the secure and reliable supply of electricity that would be provided by nuclear power stations. They have failed to do so. They have failed to tell us how the problems of the insecurity and intermittence of the supply of electricity could be addressed if it were dependent on the wind, the sun and imports from abroad. We must assume, in the absence of any declaration from them, that this is what they envisage. The truth is that they have failed to address the logistics of the energy supply in a meaningful way.

The value of renewable sources of power must be assessed not only on the costs of what they are able to produce but on the costs of what they fail to produce. At times when this power is not available, other sources must be found. In the absence of a baseload of electricity, they are liable to become exorbitantly expensive when there is a dearth in power. Wind and solar power will not satisfy the demand for a greatly increased supply of electricity, which must arise if our industries and our transport are to relinquish fossil fuels. The renewable sources of power would serve to satisfy the demands only of a wholly deindustrialised and socially immiserated version of the United Kingdom.