My Lords, the Bill establishes a new funding model for new nuclear projects, known as a regulated asset base—RAB—model. This funding model would allow a company to receive funding from consumers through their energy suppliers in relation to the design, construction, commissioning and operation of a new nuclear project. By using a RAB model, a company’s investors share some of a project’s risks with consumers. This can lower the cost of finance for funding new nuclear plants, which is the main driver of project cost. This could deliver nuclear plants at a lower overall cost to consumers than if we relied on existing funding mechanisms alone.
As the National Audit Office observed in its 2017 report on Hinkley Point C, by using a model such as a RAB, which shares more project risk while providing the developer with a revenue stream, the required return to investors could be lower, resulting in lower project costs overall. As well as introducing a RAB model for nuclear, the Bill takes steps to remove barriers to private investment to further incentivise the development of new nuclear projects in the United Kingdom. These measures will reduce the UK’s reliance on overseas developers for finance and deliver better value for money for consumers. This legislation is vital in getting new nuclear projects off the ground and will help the UK meet its decarbonisation targets. As well as contributing to achieving our net-zero commitments, new nuclear will complement renewable energy to ensure that the UK has a resilient, low-cost, low-carbon electricity system for the long term.
With all but one of the UK’s current nuclear reactors scheduled to close by 2028, representing 85% of our existing nuclear capacity, the need for new nuclear projects is more urgent than ever. The UK was the first country in the world to establish a civil nuclear programme and the sector has a proud history of innovation and of creating high-skilled jobs across the length and breadth of the country. The Bill is an opportunity to boost this vital sector and its supply chain by getting projects off the ground, while supporting the Government’s recent levelling-up White Paper.
My Lords, I strongly support the Bill. I recall some years ago being on a boat on the Thames with Thames Tideway and being briefed about the massive new tunnel. When the financing was explained, I was not alone in asking whether it had been used for any other big infrastructure projects as, frankly, it seemed too good to be true. That sounds simplistic, but the fact is that I was sold, as were others, on the system of finance. An operational nuclear power station is not the same as a tunnel taking sewage away from London, but the cost, infrastructure and quality-of-life implications are very similar. At the end of the day, of course, the consumer will pay. You cannot hide that fact and nobody seeks to do so. But over the next 30 years, the use of electricity in the United Kingdom will double compared to the 2019 figure. The overall use of energy will go down, and we will use a smaller proportion of oil and gas, and, of course, introduce renewables and hydrogen. This this makes electricity absolutely fundamental. We will always need a baseload, and nuclear is the best form.
I do not think you can be taken seriously as a political party in 2022 if you are not in favour of civil nuclear power: it is as simple as that. I do not want to disparage people, but I am reminded of the brown bread and sandals brigade attacking nuclear not on a scientific basis but on an almost mythical, quasi-anti-religious basis, yet it is clean, green and cheap to operate. We know from our regulatory information powers that it is safe. We started it—we invented it—and we used it to make electricity. We cannot do nothing, given that our older Magnox stations will be phased out in a few years. We have to prove that we have learned the lessons from Hinkley Point C. The National Audit Office has given its approval for the use of alternative financing models, hence this Bill.
I want to be brief, and I have just two key points to make. One relates, as the Minister very fairly pointed out, to customers. The Government have to ensure that customers do not pay more than twice. They will pay twice for this, of course—that is the system; it is split—but they do not need to pay three times. Paying for construction and operation is one thing, but they should not pay for aborted projects or massive cost overruns. There has to be something which gives a degree of confidence. The Government have to prove that they have customers’ interests as a top priority, as energy policy requires that customers change their behaviour. We are asking the citizens of this country to massively change their behaviour, and they have to understand why. We know from the pandemic that behaviour will change if people understand why. We have to be transparent and open about this.
My Lords, first, I declare my interest as a director of Aldustria Ltd, which is an energy storage company. I thought the noble Lord, Lord Rooker—who I have huge regard for—was back into Corbynism there for just a moment. I knew someone who worked for the Central Electricity Generating Board. It was a great time in history.
The Minister mentioned both value for money and zero carbon, and I want to come back to both. One of the basic things about zero carbon is the circular economy, and one of the first questions on the decision tree of circular economy is whether you need something or not. I will go down that route in a minute. I have always been favourable to nuclear power but, over the last decade, facts have changed. That is why I am sceptical about the need for this type of nuclear development altogether. Let me say why.
First, we still have not solved the nuclear waste issue—and it is a real issue. Conversations with local authorities and communities are going on throughout the UK about finding a way forward but, even if we do, those facilities will not be ready for many decades, as we have seen from previous experience in Finland. Secondly, I come to the area of baseload because this is, if you like, a 1990s argument. One thing about nuclear power—particularly with Hinkley C, which I have visited, and Sizewell C—is that, for it to be effective, it needs to operate consistently: it does not go up and it does not go down. If we have large renewables in this country, nuclear must go up and down from hour to hour, day to day, week to week. It is not a technology suited to that. It becomes inefficient. It is inefficient not only operationally but in terms of what the Bill is trying to do, which is minimise capital costs. I know from my experience in industry that, when you have capital, you work it day and night as long as you can: you sweat the assets. With a large renewable input into our electricity system, that becomes not possible with nuclear power after a certain threshold.
My Lords, I declare an interest, as I am advising a company involved in the power construction sector—Mitsubishi Electric—and a long-standing interest as a former Secretary of State for Energy. That was many decades ago, I am afraid, when I tried to get a nuclear power replacement programme going but failed, which is why we are back at the same issue now.
The Bill has excellent intentions and purposes, so I of course welcome it, as does the noble Lord, Lord Rooker, but some questions must be asked and, if not answered here in Parliament, will be asked again and again by investors. Let us be clear: the basic aim of the Bill is to make future nuclear power projects more widely attractive to private capital, such as pension fund money, of which there is plenty around to invest today. With the regulated asset base model, it is eventually consumers, via the licensed suppliers, who will find themselves bearing more of the risk from the start.
There are two key questions which investors, licensed suppliers and consumers will want answered. First, for how many years can consumers be asked to pay this extra levy on top of everything else and carry the risk of all the delays and vast cost overruns so familiar in this industry to date? Of course, the answer depends on what sort of nuclear plant is being financed and “on offer”. The one immediately before us and mentioned in the Bill is Sizewell C: a very large-scale project billed as a “replica” of the only other one being constructed in the UK, which is at Hinkley Point in Somerset. Is it a replica? Perhaps it is technologically, but definitely not financially. That is the reason we are here looking at a new financing model.
At Hinkley, the returns to the two main investors, Électricité de France and China General Nuclear, are due to come through by requiring that electricity produced, when it finally flows, is purchased by wholesale distributors at what looked at the time of the deal to be an enormously inflated “strike price”—although, ironically, it is not that inflated compared with the current soaring electricity prices which we are now suffering. Why will this so-called replica at Sizewell, or other future projects for that matter, look any better? These big plants take 10 to 15 years to get up and running, and it so happens that the history of Hinkley Point C, the evolutionary power reactor—evolutionary it certainly is—is not at all encouraging in that respect. None of its EPR design predecessors is successfully operating, has stayed anywhere near planned construction time or is anywhere near planned budget. Now at Hinkley Point C there is talk of parts having to be totally redesigned and further delays and costs. The reactor plant being constructed jointly by CGN and EDF at Taishan in China was meant to be the poster—the model—for being on time and working, but even that has now been closed for security reasons. As for the prototypes at Okliuoto in Finland or at Flamanville on the Cherbourg peninsula—which I visited some years ago with the noble Viscount, Lord Hanworth—one hardly dares look at their time overruns: years and years late.
My Lords, I broadly support the principle of this Bill and the mechanism proposed, but with some reservations and with the need to put this decision and decisions on nuclear policy in general in a wider context. I have long been a supporter of nuclear power, ever since, as a very young man, I worked at Harwell and was infected by the evangelical commitment of scientists to that alternative energy source. I did not entirely buy it, even then. I never really thought we were going to get completely free electricity; nor did I believe our colleagues down the road at Culham that fusion technology was only five years around the corner. Nevertheless, I think—much more so now than all that time ago, because we now need rapidly to move to a carbon-free energy system—that we do need nuclear power.
The problem has been that despite the investment in research and in earlier generations of nuclear power, for 30 years successive Governments have shied away from key decisions. The noble Lord, Lord Howell, mentioned examples during his time. There was a piece of evidence produced for us in a briefing for this debate that rather chilled me because it said the best time for nuclear investment is 20 years ago. That shook me, because 20 years ago, the Labour Government decided not to proceed with a new nuclear plant, just as their predecessors had. I was a junior Minister at Defra at the time and was party to that decision. It was taken largely because of the cost, which was then envisaged as being entirely on the taxpayer—whereas this puts the cost on the consumer and on business—but also because the enormous success of North Sea gas meant that we were going to have relatively cheap power for a long time and we did not need to take a decision at that time. The position of that Government was that we did not absolutely oppose nuclear power and that there would be new stations. We did not completely adopt the more extreme green agenda, although we did take it into account. We left it on the table, as it were.
We also made a number of provisos. I remember saying in the course of making that decision that while we may have not needed nuclear power at that time, we might eventually, and that even if the UK did not need nuclear power, the world would. So, we had to ensure that we retained the UK’s capability in industry and research, which was at that point—to use a phrase that is current now—still world leading. It had already been run down fairly substantially but we had a strong nuclear capability. The other provisos were that we needed to continue to identify potential nuclear sites, which we have started to do, continue to find options for dealing with nuclear waste, which the noble Lord, Lord Teverson referred to, and reduce the eventual cost of decommissioning, which has distorted our energy cost programme and the Government’s contribution to it over the last few years. These were important caveats but regrettably successive Governments ignored those caveats.
My Lords, I support the Bill because it is both urgent and important. It is urgent because, as the history of Wylfa recently demonstrated, the lack of ability to provide funding for new nuclear energy has become a serious obstacle in the way of new building. That applies whether it is a big site or project or SMRs and AGRs.
We need the Bill because, as the Minister has said, it provides an alternative funding method that, as the noble Lord, Lord Rooker, pointed out, has been used for other utilities—it is not quite the same, but nevertheless there has been good experience. We need to get it on the statute book as soon as we can, with early commencement, so that the detailed work on financial flows via the RAB model can go ahead, with some prospect of Sizewell and other possible nuclear sites coming on stream in a reasonable timescale. It is not too much to say that, absent a Bill like this or the funding method that it would give us, it will be very difficult to support and fund Sizewell. So the stakes are high.
I am not an expert on funding mechanisms and will not compete with those who are more competent than I am in discussing them, but I will make a couple of points. As the Minister said, the RAB model enables private sector capital to be brought in, reducing the burden on the taxpayer. As has also been pointed out, we do this by getting a contribution from the consumer—this reduces the loan element and drives down the overall cost. There has been comment on this aspect both in this Chamber and in the other place, and I share the concern that the consumer should not be taken for a ride. The experience in South Carolina was cited, certainly in the other place. It is fair to say that any method of finance can be discredited by poor management and, indeed, fraud.
But the concern for protecting the consumer is legitimate, and I hope that the Minister can assure us that there will be due diligence on the project costing so that we are not faced subsequently with unprovided cost overruns. I hope that he can also tell us that incentives will be placed on the builders to keep costs down and that they will be real and effective.
My Lords, I first declare my interests as an engineer and project director in the nuclear industry, working for Atkins. I welcome the Bill, and given that finance and costs dominated the £92.50 per megawatt hour strike price agreed for Hinkley C—approximately two-thirds of that price—it is clear that the proven RAB mechanism will be transformative in reducing the costs of new nuclear. It will reduce the weighted average cost of capital in new nuclear and, as the Minister said, bring a new range of investors, including pension funds and other institutional investors.
It is worth reiterating why we need new nuclear. I have taken part in many debates in my time in Parliament on the need for nuclear in our energy system. I have always been struck by how often the argument is reduced to nuclear versus renewables, so I would like to say a few words on the economic case for new nuclear, to counter what the noble Lord, Lord Teverson, said.
I started my career a long time ago, as a systems engineer, using systems thinking to design, integrate and manage complex systems. Applying that thinking to the energy system shows that we cannot consider elements of the system in isolation. For example, renewables are achieving competitive costs of power at the generator, in levelised cost of electricity—or LCOE—terms. But as the percentage of renewables on the system increases, so, too, does the cost of system modification and back-up to cover those periods of low renewable outputs. At high penetration, when there are high percentages of renewables on the system, the marginal cost of renewables, measured on a whole-system basis, will be far higher than the reported LCOE. We should therefore be comparing costs on a whole-system basis, rather than on a simplistic comparison of levelised costs of electricity between technologies, and investigating the system architecture that minimises the costs of electricity to the consumer. A multitude of studies confirms that having reliable firm power on the grid, such as that provided by nuclear, working together with renewables—that is the important point—makes the system cheaper. With the further cost reductions provided by the RAB model, not to mention fleet build, which, it must be emphasised, led to the great cost reductions that we have talked about in renewables, nuclear will be a vital part of the 2050 energy system.
My Lords, I am delighted to follow the noble Lord, Lord Ravensdale. I agree very much with what he said, particularly his reference to hydrogen. I also wanted to comment on the speech by the noble Lord, Lord Rooker, who was spot on, not only in his content but in the passion with which he put forward his points.
I speak in a personal capacity, as Plaid Cymru, like most parties, has a spectrum of views on nuclear matters. Plaid MPs did not oppose Second Reading and the two local authorities, Gwynedd and Ynys Môn, which cover the nuclear power sites of Trawsfynydd and Wylfa, are both Plaid-led. Both councils support re-establishing nuclear energy generation on those sites, subject to safety, environmental, employment and community provisions. Indeed, we were moving towards securing Wylfa Newydd when Horizon proposals faltered on financial issues and Hitachi pulled out, so the Bill is very relevant. There is particular support for SMRs at these sites and, while I appreciate that the Bill is a facilitating measure, not tied to specific technologies, I hope that the Minister can indicate greater urgency by the Government for the SMR programme and for securing from the Nuclear Decommissioning Authority a freeing up of land at Trawsfynydd for Cwmni Egino, the site development company created by the Welsh Government, to facilitate an SMR demonstrator plant and develop medical radioisotope production there.
The main purpose of today’s Bill is to speed up investment in a new generation of nuclear power plants. I support the Government’s aim of fully decarbonising the generation of electricity by 2050, but will the benefits of this Bill be felt in time to meet the 2035 interim target of a 78% reduction in carbon emissions compared to 1990?
I accept that nuclear has a key role in guaranteeing electricity supplies for everyone in these islands when full decarbonisation is reached. This is implicitly part of the energy decarbonisation contract between government and the people.
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With construction of Hinkley Point C under way, the Government are aiming to bring at least one large-scale nuclear project to a final investment decision by the end of this Parliament, subject to value for money and all relevant approvals. The recent spending review provided up to £1.7 billion of direct government funding to support this objective. The Government have also provided further funding to support the development of future nuclear projects, including small modular reactors, led by Rolls-Royce.
This funding has been made available to develop and mature prospective projects. In addition, we need a new funding model that unlocks cost-effective nuclear power. This is the main objective of the legislation before us today. We must harness the potential of private capital to be partners in our nuclear sector and widen the pool of available finance for new projects. This will naturally take us away from reliance on single developers financing new projects at their own risk, something which has contributed to the cancellation of recent projects at Wylfa and Moorside. The effectiveness of the RAB model has been seen in the successful financing of other complex and large infrastructure projects, including the Thames Tideway tunnel and Heathrow terminal 5. With nuclear projects, the RAB model has the potential to bring in new sources of capital at a value for money cost to consumers.
In terms of international comparisons, it is important to stress that there are key differences between the RAB model and projects in the US that used the early cost recovery model. At projects such as those in South Carolina and Georgia, the economic regulatory approach taken was driven by unique company ownership models, which had implications for how costs were passed on to consumers. Other differences include the level of regulatory oversight and how incentives were established for projects to be delivered to cost and on schedule.
There were also several project-specific issues, including the maturity of design work at the start of major construction, the experience of the project supply chain, and the structures in place to manage the project. All potential nuclear projects in the UK will be subject to very rigorous due diligence, including the designation process set out in the Bill, which would mitigate against such issues arising in this country.
The Bill consists of four parts. Two of these establish the RAB model. The others take additional steps to incentivise investment and protect the interests of consumers. The first part of the legislation creates a framework for the implementation of an economic regulatory regime for the RAB model. The regime will be designed to share risk in a way that reduces the cost of financing projects, while incentivising investors to manage project costs and schedules.
This part of the Bill will allow the Secretary of State to designate a nuclear company for the purposes of the RAB model, as long as it meets specific criteria and relevant persons are consulted. The designation criteria require the Secretary of State to be of the opinion that the development of the relevant project is sufficiently advanced to benefit from the RAB model and that designation is likely to result in value for money. Once designation has occurred, the Secretary of State will be able to amend the nuclear company’s electricity generation licence, allowing it to receive a regulated revenue stream to support the design, construction, commissioning and, of course, the eventual operation of the nuclear project.
The second part of the Bill covers how funding will flow to a nuclear company that has been given access to RAB funding. This mechanism draws on the contract for difference model. Ofgem will calculate the nuclear company’s allowed revenue for a given period in accordance with its modified generation licence and how much will need to be collected from electricity suppliers. Suppliers will then pay their appropriate share of this to a counterparty, which will be responsible for passing the total amount on to the nuclear company. This will enable a steady flow of funding between domestic and non-domestic consumers and a nuclear company.
The third part of the Bill introduces a special administration regime, which will come into effect in the unlikely event of a project company’s insolvency. Unlike an ordinary administration, a special administrator must prioritise the commencement or continuation of electricity generation from a nuclear power plant which is benefiting from a RAB model. This seeks to ensure that consumers benefit from the investment they have made through RAB payments in the form of the electricity generation that the project will ultimately provide.
The fourth part of the Bill makes technical clarifications to the regime of funded decommissioning programmes in the Energy Act 2008. The Bill clarifies that entities such as security trustees and secured creditors will not be bodies “associated” with nuclear site operators simply by virtue of holding or exercising certain rights relating to the enforcement of security. This will facilitate these bodies’ involvement in the financing of nuclear projects. This part of the Bill also contains a financial provision that provides an indication to Parliament of the spending that may be incurred under the Bill’s provisions.
Finally, the commencement clause sets out the limited number of provisions in the Bill which are subject to early commencement. This is crucial in ensuring that the Government can bring at least one large-scale nuclear project to final investment decision in this Parliament, subject, as I said earlier, to value for money and all relevant approvals.
I have already touched on a number of the benefits that the Bill provides. As mentioned earlier, this legislation could significantly reduce the cost of financing new nuclear projects and reduce the UK’s reliance on overseas developers for financing new nuclear, while providing low-carbon, reliable energy. Consumers will therefore benefit from lower system costs than if the UK relied solely on intermittent power sources.
More broadly, this legislation also represents a significant opportunity for UK businesses. As Hinkley Point C proves, new nuclear build projects create jobs locally and nationally to support the supply chain and boost economic recovery. The nuclear sector employs approximately 60,000 people, which includes a significant proportion of highly skilled jobs, and the nuclear RAB model will help create thousands more.
In terms of the devolved Administrations, the nuclear RAB regime would extend to England, Wales and Scotland only. We understand that the Scottish Government do not share our position on the need for new nuclear projects. However, this Bill does not alter the current planning approval process for new nuclear projects. In addition, the Secretary of State would need to consult with Scottish Ministers before designating a nuclear company whose proposed project was wholly or partly in Scotland.
I was pleased to see the support expressed for this Bill by numerous MPs from all sides in the House of Commons representing constituencies in Wales. We will continue to work closely with the Welsh Government on options for a future nuclear project at Wylfa, and a RAB model remains an option for financing a nuclear project at this site. I was pleased also to see the support that the Bill got from Her Majesty’s Official Opposition as it passed through the other place. I look forward to further constructive engagement—indeed, we have already commenced it—and co-operation as the Bill proceeds through your Lordships’ House.
At Committee and Report stages in the Commons, there were broadly three key areas of debate. One of the issues raised was the role of foreign investment in the UK’s civil nuclear projects. The Government welcome investment but never at the expense of our national security. We recognise the importance of having appropriate protections and scrutiny in place to ensure that any investment aligns with our core interests. The National Security and Investment Act gives the Government significant oversight of acquisitions of control in a nuclear project. It is also important to note that national security considerations will form part of the wider approvals process.
Another issue raised in the Commons was costs to consumers. We recognise that the rise in global gas prices has increased the cost of energy for households. However, in the medium to long term the Government are clear that new nuclear is crucial to providing consumers with reliable, low-carbon and affordable energy.
The Bill also contains measures that will allow the Government to incentivise project developers to avoid cost overruns, providing protection to consumers prior to the approval of a project, as well as during its construction and operation. Ensuring that a project has matured to a suitable point of development will be a central criterion for approving a project under the RAB model. The Government will submit project proposals to a thorough business case process, and intensive due diligence will take place throughout project negotiations. This due diligence will allow the Government to produce a robust estimate of a project’s cost. Developers will then be incentivised to manage costs and timings effectively, overseen by the economic regulator.
Finally, the other place also had constructive debates around transparency. The Government fully recognise the importance of transparency, which is why the Bill places clear requirements on the Secretary of State to publish information and consult key stakeholders at each stage of the project.
The Government are clear that nuclear energy has a vital role in reducing our reliance on fossil fuels, thereby protecting us from volatile global gas prices. Nuclear power will need to play a significant role in the UK’s future energy mix to ensure reliable, low-cost, low-carbon power as we transition towards net zero. I hope that noble Lords will recognise the exciting opportunity that this Bill represents to further develop the UK’s civil nuclear sector, while stimulating economic growth and job creation in support of the Government’s levelling-up strategies. I beg to move.
My second point concerns security. There is no reason at all why the UK, along with other democratic states, cannot ensure security and stability of nuclear technology and get control of it itself. My view is that there should be no finance from China or Russia at all. They cannot be trusted with commercial contracts these days. I remember someone once telling me, many years ago, that the Soviet Union had never reneged on a commercial contract. We do not have the Soviet Union now; we have Russia, and it is reneging on commercial contracts. Leave the security bit aside, if you will—I am worried about that as well—but it cannot be trusted on commercial contracts, and we are talking here about very long-term commercial contracts.
We started the process. Okay, it never came about that electricity was so cheap that it was not worth recording, but we are in a different age. We will not have coal and gas to fall back on for a quickie. Nuclear is going to take on an importance beyond keeping the lights on, whether it is the small modular reactors or new build.
I do not want to turn the clock back—it was never the “good old days”—but when I left school, you could get an apprenticeship with the Central Electricity Generating Board. What I cannot see today among the 20 or more different organisations is the replacement for that, so that we can upskill and give careers and a future to the people of this country. We have lost that. I would like to believe that this Bill could be one of the most important that the Government introduce. It could actually be a factor in restoring that from a bygone age.
Also, you come to costs, and this is where facts come in: the cost curve for nuclear has gone up while the cost curve on renewables has come down significantly, as we know. I congratulate the Government on part of their work in making sure that is the case. In terms of value for money, which was the Minister’s caveat on this nuclear project, it seems to clearly fail. The trend is going that way, but we have the largest energy cost crisis that we have had in many years at the moment, and we are told that it is not going away any time soon. Yet the Bill actually adds costs to consumers, when we have a cost-of-living crisis—fuelled by energy—that is more of a problem than it has been for some time. If I was an adviser to the Government—which I never have been or will be—and I wanted to use nuclear power, I would probably go down the Korean route: you build a fleet of 20, you get your economies of scale and you finance it through the public purse, which has minimum interest cost. What do you have? You have a much cheaper capital cost, zero carbon and greater efficiency. The Government are not going down that route, but that has been shown as probably the only way that you can make nuclear power successful in the modern world.
There is an alternative—and, strangely enough, it is not renewables. It is that boring thing called energy efficiency. The Minister shakes his head, but every government publication with comparisons says that energy efficiency shows the highest return in terms of capital investment that there is. For the £20 billion that this will cost—probably more at the end of the day—it is my rough calculation that you can retrofit 2 million to 3 million homes; those would be some of the worst ones to bring up. This is important for social fuel poverty but also means that energy costs for consumers go down—whereas the Bill makes them go up. Page 55 of the 2019 Conservative manifesto says:
“We will help lower energy bills”—
somewhat ironic—
“by investing £9.2 billion in the energy efficiency of homes, schools and hospitals.”
Fantastic, but it is not enough. Here, twice that could be put towards it. I ask the Minister: how much of that £9.2 billion has already been spent, half way through the Parliament?
Are investors ever going to wait that long for payback? However guaranteed the cash flow from consumer bills during construction—which may, incidentally, have to be jacked up to cope with construction risks—private money will not find that very attractive. Smaller scale, quicker built models, such as the small modular reactor type, or the advanced smaller reactors, are bound to be far more attractive when they can be built in series with lower waste, fabricated at factory level and begin operating and earning in two or three years. That means a much shorter period of risk for consumers paying up in advance and, of course, capital can be lent at cheaper rates because of a quicker return and less risk. That is obvious.
That is the first key decision, or choice, right now in our nuclear fleet replacement programme which confronts Her Majesty’s Government: a programme which has already had its share of setbacks. Do we plug on with these mammoths at Wylfa, Moorside, Oldbury and Sizewell or turn all our efforts to small and more advanced nuclear power plants? I appreciate that this is a choice the Government would rather not make.
There is a second and really awkward issue to be resolved; namely, how to deal with the Chinese involvement. There is not time in the allocated five minutes to go into detail, but 10 years ago the mood was to welcome everything Chinese and give them a central role in our nuclear replacement programme, and now the mood has swung 180 degrees. There will be little private investment attraction at all at Sizewell until all that is sorted out, even if the EPR design could be assured of working, which none of its predecessors is yet doing.
For this Bill to work and for the RAB model to function, there will have to be a major change of strategy here. Low-carbon nuclear replacement is vital for security, for climate, for cheap green hydrogen and to avoid the kinds of energy bill explosions we are suffering right now. This Bill should help get us back on the right track—eventually—but there are these key decisions to be taken before we can be anything like sure of that.
The research and operational expertise have been run down and dispersed, and we are almost entirely dependent on overseas technology, whether it is French, Japanese, Korean or, indeed, Chinese. Not enough new sites have been identified, and the public in those areas have not been fully consulted. Decommissioning costs of the AGRs, and now the Magnox, have soared, and we are still not clear on waste disposal. Instead of cost considerations reducing the upfront cost of nuclear projects, which is now met entirely by private capital, those costs have continued to escalate with the delays in the various schemes here and elsewhere in the world. Some of this is a worldwide issue, and some of it reflects non-decisions by previous Governments, as I say. But whatever form of finance that we adopt now has to be accompanied by addressing those other dimensions.
The Bill does not sufficiently protect consumers or small businesses. Interestingly, the impact assessment says that there will be no cost to small business. That is not true; there will be costs, and, particularly in the current climate, we will have to explain the fact that we are asking consumers and businesses to meet costs the benefits of which they will not see for many years.
So I am in favour of the Bill, but it needs to be extended and the Government need to surround it with some broader commitments. For example, if we are to have big nuclear sites such as Sizewell, we ought to require them to meet other objectives, such as attaching to such sites major provision for the production of hydrogen. There are other possibilities: CCS and storage. Some equivalent of Section 106, as was, needs to be applied to any nuclear projects, because other aspects of energy provision need to be addressed as we approve the provisions within the Bill.
I said that I thought the Bill was important as well as urgent. The truth is that this country is not going to achieve its statutorily embedded climate change goals of net zero by 2050, nor the decarbonisation of electricity production by 2035, without a contribution from nuclear energy generation, which, as has also been said, is at the moment declining. We need that base power when renewables are not performing. I know there is a big divide on this issue, but it is not just the Government who say we need it; so does the Climate Change Committee. We need the contribution of nuclear-generated power. Frankly, Parliament cannot deny the means to the end that it has ordained.
We need to bear in mind something else that is often forgotten. In a data world, we need a much greater quantum of electricity, above all, to power the world that we are going into, which is going to be so desirable and green. If we want the greenness, we need to provide the means to get there.
I also strongly suspect that, for the foreseeable future, which is quite some time, the era of cheap energy is over and that people will take a different view of what the appropriate strike price is likely to be in an upwards direction.
Lastly, I have a couple of thoughts on safety and security. The UK’s record on nuclear safety is of the highest order and we can have confidence in it. I do not come to the same conclusion as the noble Lord, Lord Teverson, who legitimately mentioned this issue. We already have sound methods for dealing with nuclear waste, but it is absolutely true that we must find a permanent solution. I hope the Minister will confirm that finding that solution remains a high priority. It is important for future generations to be able to cope with the outcome of nuclear power.
On security, if ever the world needed a demonstration that high dependence on international energy markets carries a considerable risk to the economy, Mr Putin is giving us a masterclass. Do we really need more persuasion that we must exploit our undoubted ability to become more self-reliant in energy? Secondly, as discussed in the other place, there is the participation of foreign state money in funding nuclear energy plants. I am not in favour of a blanket ban on this, but I am sure the Government need to be vigilant on the issue and use, if necessary, the power of the special share and the terms of the recently passed foreign investment Act. That is what those bits of legislation are there for. I hope the Minister can assure us that, if we are going to counter it, this would be the case.
The Bill is critical for the future of the energy system, helping to ensure that it is low carbon, secure and cost effective. But I suggest to the Minister an opportunity that could be taken with the Bill, involving another aspect of the net-zero system—hydrogen production, to build on what the noble Lord, Lord Whitty, mentioned. The Minister may recall that in July last year I asked him to consider whether hydrogen produced from nuclear energy should be eligible for the renewable transport fuel obligation, or RTFO, alongside other low-carbon sources. He replied that the Government’s aim was to remain technology neutral but that energy change to RTFO sources would require primary legislation. Now we have an ideal vehicle, in the shape of the Bill, to undertake this change. Now that we have left the EU, we are free to determine our own definitions for clean, non-emitting sources of energy. I am sure that the Minister would agree that the Government’s strategy should be technology-neutral across all sectors, and that opening policies such as the RTFO to a wider range of eligible solutions would create more resilience and cost-effective outcomes.
I know that there are ambitious plans to use the construction of Sizewell C as a world-leading example of UK hydrogen-powered construction, using hydrogen buses, diggers and other construction equipment. The early large-scale use of these vehicles will help drive down manufacturing costs and increase hydrogen demand, helping UK companies to get ahead and invest in long-term job creation. A simple change, adding nuclear-derived hydrogen to the list of zero-emissions sources defined by the Energy Act 2004, could unlock millions of pounds of private investment into hydrogen production in the UK and accelerate the Government’s hydrogen production targets, while also supporting the nuclear industry. I would welcome the Minister’s thoughts on this and look forward to discussing further with him and his officials.
Finally, I support what the noble Lord, Lord Rooker, said—although maybe without wishing for the return of the Central Electricity Generating Board. However, I mentioned the system architect. Who defines the overall system architecture? It is not clear at the moment who that is. I agree with the noble Lord that that is something to which the Government need to give serious thought.
We do not know what the constitutional relationships within these islands will be by 2050, but I believe that all four nations will be part of an integrated European electricity network through which the sale of low-carbon electricity will offer substantial financial returns.
Writing recently in Social Europe, Sarah Brown of the Ember think tank, warned:
“Europe is still in denial about fossil gas.”
She stated that there is an overwhelming consensus that limiting global warming to 1.5 degrees requires
“the rapid and complete decarbonisation of the power sector”.
A United Nations Economic Commission for Europe report, published in October, showed that for each kilowatt hour of electricity generated the grams of carbon dioxide released into the atmosphere are, for coal, 1,000 grams; for gas, 430 grams; for solar, 37 grams; for wind, 14 grams; and for nuclear, 5 grams. These full-life cycle figures include the carbon implications of mining, construction, operation and decommissioning of relevant plant.
We need a complete end to the use of coal, oil and gas for generating electricity and their replacement by dependable low-carbon sources of energy. There is an important role for renewables—solar power, wind generators and tidal and estuarial energy such as the Severn barrage—but they cannot generate all our electricity on the consistent, reliable, 24/7 basis necessary to meet in a timely fashion the needs of each household and place of work. Developments in hydrogen technology and battery capacity will play a role, but the basic challenge remains. Eventually, we may see a renewable, fully decarbonised electricity generation sector if we have the political will, but the clock is ticking towards a global warming profile in which human life on this planet will be snuffed out. Our present trajectory is unsustainable.
Over time, we shall see new clean sources becoming available. We have long awaited fusion as a better source than nuclear fission; recent developments at the Joint European Torus facility at Oxford are encouraging. I hope this Bill might facilitate nuclear fusion investment in due course, but we cannot base our 2050 target on the assumption that fusion will be in place. We have a period of perhaps half a century when the gap between low-carbon supply and demand must be met from a dependable source. Over that timescale, nuclear electricity is an essential part of the clean energy mix.
There are valid questions about the cost of nuclear power. If we are going to support nuclear with this type of financial intervention, how do we ensure that we maximise the UK’s industrial opportunities with technologies and manufacturing capabilities that can be exported as well as used for our own clean energy needs? With the UK taxpayer funding nuclear in this way, we must ensure that the UK economy benefits fully from the opportunity this affords. One major issue of concern relates to the cost of clearing up nuclear power sites; this must be factored into the equation.
I also want assurance that the Bill can cover a variety of sources of nuclear generation, including SMRs and eventually nuclear fusion. We must ensure that the model which has been developed can benefit other developers, and should not be seen as one customised solution for the benefit of EDF at Sizewell C. What commitment can the Minister give that other technologies and potential projects can benefit from this Bill?
I shall also be seeking greater clarity on the role of devolved Governments in designation, licence modification, consultation, transfer schemes and decommissioning.
Because of the pressing need for a new generation of safe, clean, low-carbon nuclear generation facility to underpin our carbon footprint commitments, I am content for this Bill to have a Second Reading.