Nuclear Power Funding

The fire coincided with cold weather, post-covid increased commercial demands for power, gas supply issues from Russia and Norway, and unusually cloudy but calm conditions, which created price increases and what the media dubbed “an energy crisis”. That combination of events illustrates how much our power systems are under pressure from the closing of conventional plants and our growing reliance on inconsistent renewable energy such as wind and solar.

Meeting the sixth carbon budget’s requirements will require all new cars, vans and replacement boilers to be zero carbon in operation by the early 2030s. Meeting the sixth carbon budget’s requirements will require all new cars, vans and replacement boilers to be zero carbon in operation by the early 2030s. However, to move people towards the use of electricity while hitting net zero production by 2035, we must quickly move away from generating that electricity from fossil fuels. Britain currently has slim spare capacity in electrical power generation to feed those changes, leaving both our energy supply and our security under threat.

We should also consider the wider role that nuclear energy can play in achieving net zero. As well as my passion for nuclear, I am a fan of hydrogen. I am delighted that the Government are supporting the Holyhead hydrogen hub in my constituency of Ynys Môn. Our nuclear industry stands ready to provide a significant kick-start to the UK’s hydrogen economy, which will enable us to pull ahead in the global hydrogen race. Others are moving fast to beat us. Emmanuel Macron wants France to be a world leader in green hydrogen by 2030, achieved by producing green hydrogen at scale from nuclear energy. We can outmanoeuvre France and other nations by taking steps such as expanding the renewable transport fuel obligation to cover nuclear, even if just for a time-limited period, to stimulate investment in hydrogen production and support a quicker roll-out of hydrogen, with buses, trains, lorries, ships and planes, all of which can be made in the UK.

Finally, I ask Members to consider jobs and our levelling-up agenda. When we are importing gas from Russia and electricity from France, where are the jobs generating that power located? Who is getting the value added from what we are paying for that power? British people are paying their electricity bills and they are not always funding jobs. At its peak, a large-scale nuclear plant employs around 10,000 people. At the moment, while constituencies such as mine of Ynys Môn suffer low gross value added, underinvestment and a lack of quality, well-paid local jobs, we are paying our continental neighbours to provide us with energy. For all those reasons, the UK needs to look closely and urgently at its energy strategy.

There is an answer. The road map to net zero published earlier this year by the all-party parliamentary group on nuclear power states:

“Nuclear is the most powerful and jobs-rich form of low-carbon energy.”

Nuclear has the ability to give the UK energy security and stability for decades to come, but we need to get to grips with nuclear sooner rather than later. For years, successive UK Governments have prevaricated, argued and changed position about what we are going to do with nuclear energy. I was delighted when the Government announced their Nuclear Energy (Financing) Bill, which had its Second Reading last week. My hon. Friend the Member for Copeland (Trudy Harrison) and I have been pressing for that since setting up the nuclear delivery group last year.

The need for that Bill brings me back to the fundamental problem with nuclear. Yes, it has by far the lowest land footprint and thus the lowest knock-on environmental impact of any clean energy source. Yes, it would create an estimated 90,000 well-paid, quality UK jobs, along with huge supply chain opportunities. Yes, it would keep producing reliable energy regardless of whether it is sunny or windy. And yes, it would give the UK energy security and stability. But—and it is a big but—building a large nuclear plant takes time and money, and therein sits the big grey elephant in the room.

As I have already outlined, Hinkley Point C began construction in 2014 and it is not expected to begin energy production until at least 2026. It is not possible just to say, “I’m going to build a nuclear plant,” and then begin construction. It takes years to go through the planning and environmental concerns, submit a development consent order, and consult, debate and clarify before getting an agreement even to stick a spade in the ground. Fifteen years is a long time to expect an investor to wait to see any return on their capital, and that is why the financing of large nuclear plants has been such a big issue. It was cited as the main reason why Hitachi withdrew from Wylfa Newydd in my constituency of Ynys Môn, pulling the plug on nearly 20 years of hope for my constituents. Traditional sources of private and commercial funding for large-scale infrastructure developments include pension funds and investment vehicles, but they are generally less willing to come forward for projects that will take 10 to 15 years before there is any return on investment.

Financing for small modular reactors is potentially more straightforward, and I welcome the Government’s work on funding for SMRs. I also welcome the fantastic news today that Rolls-Royce has funding for its SMRs, thanks to a lot of hard work in both private and Government funding for this UK initiative. As modular builds, advanced modular reactors require less in up-front costs and time, but they are intended for local energy production and are still in the development stage. A single SMR on Anglesey could produce enough energy for north Wales, which is primarily a rural area, and a large plant in the same location would power the whole of Wales, with a little bit left over for England, if we were feeling generous.

That is why the Government are progressing the Nuclear Energy (Financing) Bill through Parliament, to de-risk new nuclear projects and attract private sector financing for large-scale and advanced nuclear power projects through the RAB—regulated asset base—model. Under this model, an independent regulator sets a price which a developer is subsequently allowed to levy on consumer bills in return for the provision of certain power infrastructure, even before they begin generating power. This allows developers to have a guaranteed return on their investment and lower costs when raising the capital required for building a power station, which accounts for much of the costs of nuclear projects. RAB is already used in other UK infrastructures, such as the Thames Tideway tunnel.

After months of raising the issue, I am keen to see the Bill progress, and I hope that it will lead to large-scale new nuclear power development across the UK. I implore colleagues to support its passage through the House. Although the debate last week was poorly attended compared with other more thrilling rides, such as the Environment Bill, it could none the less be the most significant piece of legislation that we pass for the long- term benefit of our country.

We should seek to use the Bill to fund not just one but several large new nuclear builds. Building one plant takes time, as we see at Hinkley Point C, but if we act now, those specialist resources can be redeployed on our next plant, and the next and the next. With each plant, we develop more specialists, which means that build time is shorter, costs are relatively lower and efficiency is greater. Each time, we will develop local specialists, employ local apprentices and leave generations of local people with high-quality, specialist well-paid local employment.

The Bill is incredibly welcome, but we may need other financing tools initially in addition to the regulated asset base and contract for difference models. We must continue to explore other innovative ideas. We need to give our scientists and innovators the help and support that they need to overcome barriers beyond financing. The Advanced Research and Invention Agency Bill is a great example of how we can do that.

The recent Budget allocated £1.7 billion of public funds to support new nuclear projects, and we have seen the Government commit to £385 million in the advanced nuclear fund; £215 million for small modular reactors; £170 million for research and development on advanced modular reactors; £120 million for the enabling fund announced in the net zero strategy; and an additional £40 million for developing regulatory frameworks and supporting UK supply chains.

By embracing nuclear we can secure not only our future energy security, but our future employment security, as the levelling-up agenda and the net zero agenda coincide. When Hitachi withdrew its development consent order for Wylfa Newydd at the beginning of the year, citing programme financing as the main factor, my constituency was devastated. Companies such as Bechtel, Westinghouse, Shearwater and Rolls-Royce are all keen to establish new nuclear on Anglesey and are looking at other sites in the UK.

The model proposed in the Nuclear Energy (Financing) Bill could be the starting point for regenerating areas of the country that desperately need levelling up. Alongside the Advanced Research and Invention Agency Bill and other initiatives and legislation, it offers hope for a new tomorrow. With that in mind, I appeal to colleagues across Westminster: now is the time for us to come together and embrace the opportunities before us. We cannot afford to stay in our partisan corners and we cannot afford to stay silent. We cannot afford to let this opportunity slip through our fingers. New nuclear has the potential to be a game changer locally, regionally and nationally.

To conclude, I welcome with open arms the finance and support structures that the Government have put in place for new nuclear. For the sake of our young people and future generations, I ask that we all put our political differences aside and work together to make them a reality. Diolch yn fawr.

In the Budget, the Chancellor committed £1.7 billion to progress Sizewell for a final investment decision. That was in addition to the £500 million earmarked for the development of nuclear. As I said, the Government’s previously stated position was that building a suite of new large-scale nuclear power stations would lead to competition and cheaper costs. If they are using the same design as Hinkley, and a second station is easier and cheaper, as they have told us time and again, why do the Government need to commit a further £1.7 billion up front for outline design and costings? I am sure the Minister will answer that in his summing up.

Let us remember that that is essentially £1.7 billion just to make a final decision on its construction or otherwise. The truth is that not only is nuclear hideously expensive now and for the 35 years following construction; it will be horrendously expensive for hundreds of years to come. It will cost £132 billion just to deal with the existing nuclear waste legacy. Tories are usually keen on dealing with issues now and not leaving them for future generations to deal with. That is the excuse they give us when they freeze public sector pay or remove the £20 universal credit uplift. Why do they want to create another costly, needless and dangerous waste legacy for future generations to deal with?

The Minister rather let the cat out of the bag by essentially admitting in a recent letter that accompanied the Bill that the Government were introducing an alternative funding model that might save the taxpayer between £30 billion and £80 billion, and that the Hinkley Point C project was very poor value for money. I am certainly not going to argue with that. That being the case, how much money does the Minister estimate has been wasted on Hinkley? Crucially, how many billions of pounds are the Government willing to commit bill payers to, and what are all the future costs locked into nuclear power? If they say that they can save up to £80 billion, there would surely have to be a commitment of hundreds of billions of pounds.

The hon. Member for Ynys Môn alluded to the announcement made yesterday that Rolls-Royce has essentially match-funded the £210 million from the UK Government to develop small modular reactors. Initially, the hope is to have five SMRs at an estimated £2 billion a pop. We all know what happens with estimates in the nuclear industry, but that is another £10 billion that will likely end up on our energy bills in capital cost alone.

What else could we do with that amount of money? For starters, as the Minister has heard many times from my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), Scotland is crystal clear. We do not want any new nuclear power stations. A YouGov poll showed that only 30% of Scots want nuclear to have a major role. The experts are clear that we do not need nuclear energy to decarbonise. In the 2019 world nuclear industry status report, Mycle Schneider, who was the lead officer of the report, said that nuclear power

“meets no technical or operational need that these low-carbon competitors cannot meet better, cheaper, and faster.”

The previous chief executive of National Grid, Steve Holliday, said that the idea of large power stations for baseload was “outdated”. He went on to say:

“From a consumer’s point of view, the solar on the rooftop is going to be the baseload.”

We could upgrade our homes to energy performance certificate band C. We could have wave and tidal generation, in which Scotland currently leads the world. This is a position that will be under threat unless this Government can find a fraction of the money that they are committing to new nuclear to help scale this up. There needs to be much greater investment in carbon capture and storage. The Government really must reverse their disgraceful decision not to select the Acorn Project cluster bid at St Fergus—the stand-out project—as one of the track-1 CCS projects. If the Tories were serious about decarbonisation, they would have approved the St Fergus carbon capture, utilisation and storage site, instead of the lesser pork-barrel options in the red wall.

There is a false argument, made by many in this place, that nuclear is required for when the sun does not shine and the wind does not blow. Pumped storage hydro, a renewable energy source that utilises surplus grid energy to fill the reservoirs and dispatch electricity when required, is cheaper, greener and more efficient. Pumped storage hydro is the perfect complement for intermittent renewables. An Imperial College London report suggested that there could be a system saving of £700 million a year from using pumped storage hydro instead of nuclear. Why should Scottish bill payers be forced to pay for nuclear energy that they do not want or need? This is another democratic deficit for Scotland, especially when so much of our renewable energy is not being supported at the moment and we are stuck with the highest grid charges in Europe.

To conclude, Scotland is very poorly served by UK Government energy policy. It is crystal clear that we need to control our own energy decisions through independence; that day will be coming a lot sooner than the Members in this room think.

As the hon. Member for Ynys Môn mentioned, building and financing a nuclear power station is a really hefty commitment. One has to put the money forward and not get any return on it for about 14 years, while the processes of generic agreement for the reactor, planning, construction and so on all proceed. One does not make a penny from the production of electricity from the power station before that. We know that funding new nuclear by private sector means is not a viable way of financing new nuclear. We must put that behind us.

EDF is building Hinkley C power station partly with its own finances, and that has caused a lot of problems for the viability of the company as a whole. However, it is aided in this build by a second form of nuclear financing, which is, effectively, a foreign Government part-financing the operation. In this instance, that is the 35% interest in Hinkley of the China General Nuclear Power Group, which was the result of a deal brokered by the then Chancellor, George Osborne, in 2015. The Chinese state nuclear corporation would have a 35% stake in Hinkley C, a 20% stake in Sizewell C and complete control of the third programme in that consortium’s plans, the Bradwell power station, whereby the China General Nuclear Power Corporation would install its own reactor—known as the Hualong One, I think—and have complete control of the financing, the planning and the operation.

As we have seen, that way of doing things appears to no longer be regarded as tenable. The Government have not said this explicitly—it would be interesting to hear whether the Minister is able to do so this afternoon—but the Bradwell proposal under Chinese control is no longer a reality because of the Government’s desire to remove Chinese influence from the future of the UK nuclear programme. I am sure we will discuss that further when we debate the Nuclear Energy (Financing) Bill over the next few weeks, as mentioned by the hon. Member for Ynys Môn. That second financing option—namely, getting a foreign Government involved—is probably not a good idea. As the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) said, the latest Budget costings include a sum of £1.7 billion, which I understand is to be put towards not only the development of and early works on Sizewell C, but buying the Chinese out of their Sizewell stake. I do not expect the Minister to confirm whether that is the case, but I think it is fairly probable that at least part of that sum will be directed towards removing that 20% stake from Sizewell C.

Further on financing, there is the possibility, as was tried with Hinkley, of funding the end product of the power station—that is, the energy that comes out when the permissions, the planning and the construction are finally complete. In the case of Hinkley, that will happen a long time after the original date of 2026 or 2027. I distinctly remember the then chief executive officer of EDF saying we would be roasting our Christmas turkeys on new nuclear power from Hinkley C in the winter of 2017. That is how far they are behind the original plans. I have on my wall the chart of the original EDF plans for the development process for Hinkley.

As the hon. Member for Paisley and Renfrewshire North said, the contract for difference arrangement for Hinkley was probably one of the worst deals that could be entered into for nuclear funding. Although it was supposed to introduce a back-loaded arrangement to secure the price for production and therefore increase investor confidence that the project would generate income when construction was concluded, the deal struck was disadvantageous for the customer and for this country’s electricity production. The CfD deal is at twice the likely market price for electricity over the period, and we are stuck with that for 35 years down the line. It is very unlikely that such a deal would be repeated, especially since it does not overcome the problem of how investors get any money back from their investment before the plant has started production. Hence the RAB—regulated asset base—arrangement that the Minister and I will discuss over the next few weeks as the Nuclear Energy (Financing) Bill makes its passage through the House.

The RAB arrangement has advantages and risks. An advantage is that it enables investors who might not have put their money into Wylfa or Moorside to invest in a project because they know they will begin to get a return on their capital before production starts. The RAB model, among other things, allows that to happen by setting, as the hon. Member for Ynys Môn mentioned, an allowable cost ceiling, which enables that cost to be distributed throughout the life of the project rather than only at a certain point. It has a substantial advantage from that point of view, but at the same time it has risks. It is a deal that lands on the public consumer’s purse. It effectively puts a levy on energy bills for the whole life of the project––40 years from now for Sizewell C––on consumers’ backs at various levels at various points of the process. There is a high levy during construction and a tail-off as the project proceeds.

Should the project not go well––go over cost or, as at Hinkley, go well over time—there is an increased risk to the consumer. There is an even worse risk if the project does not go ahead, as was the case with a couple of projects in the United States that were built on the RAB model. Consumers then have nothing to show for a large amount of money they have spent in their bills in the expectation that there might be a plant that would give them cheaper electricity in the end. I know that the Government have taken some steps in the Nuclear Energy (Financing) Bill to mitigate that risk and ensure that there are ways out of a company being unable to deliver. Nevertheless, the risk remains. Using RAB repeatedly for new projects simply adds to the cost of consumer bills by aggregating the total levies, making it potentially even worse for the consumer, if that is the model that is proposed.

That leaves one method of financing, which is simply that the Government pay for the construction of a new nuclear power station and then lease it out to the operator at the end of the construction period. I am not suggesting that the Government get together their own workforce to build it. They would put the contract out for bids to build the power station, which would be owned by the public and leased out for operation. That will have to be considered for any further nuclear power stations, rather than these various devices that, to a greater or lesser extent, have either failed or have some risk attached to them.

From our side, as the Minister knows, we gave the Second Reading of the Nuclear Energy (Financing) Bill a clear run and we look forward to Committee discussion when we deal with some of the finer points of RAB. Nevertheless, we will go forward on the basis of a supportive environment for the construction of Sizewell C, since it is the only nuclear power station that could conceivably get under way before 2030, because of all the other withdrawals.

We look forward to our debates in the House and to discussing some of the issues I have raised this afternoon about how best to finance nuclear power for the future. The hon. Member for Ynys Môn made a powerful case for ensuring that Wylfa at least gets noticed in the next phase of discussions, but I suspect that if that happens, it may be under yet another model of financing and different from Sizewell C’s.

My hon. Friend welcomed hydrogen power, and I know she is a great enthusiast for every aspect of our energy strategy. There is definitely more for her in the hydrogen strategy, which we launched in August. She mentioned Hitachi at Wylfa. The great advantage of the Nuclear Energy (Financing) Bill—a significant piece of legislation—is that it will allow more optionality, flexibility and more types of finance to come in, including British pension funds as well as institutional investors. I am delighted, as she and I well know, that Westinghouse Electric Company, Bechtel and others are interested in this new financing model. She asked about building multiple plants and whether we need more plants. The answer is that the Bill will not be technology specific within nuclear. It will allow for large plants. AMRs and SMRs can all be financed using the means in the Bill.

The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) made some familiar points. He described the UK Government as being blinkered, but I would say that the same charge might be made against him in letting down communities in Scotland that are reliant on and determined to have nuclear power, with fine nuclear traditions, and electricity customers benefiting from a cheaper, more resilient, lower-carbon electricity system going forward. He asked why the £1.7 billion in the spending review is for Sizewell C. It is not specific to Sizewell C. He said that we do not need nuclear to decarbonise. Well, actually, the United Nations, no less, disagrees with him. The UN Economic Commission for Europe has stated that international climate objectives will not be met if nuclear power is excluded.

Of course, the Acorn cluster has not been rejected. The Acorn cluster for the CCUS—carbon capture, utilisation and storage—decision a few weeks ago is first reserve. It is very much not rejected but very much recognised. We look forward to continuing to work with the Acorn cluster.

The hon. Gentleman then attacked the Government for choosing two projects that happen to be in the north of England and said that was favouring the Government’s levelling-up agenda. I think he implied that there might have been something not quite right about it, but that is actually not the line that the Scottish National party has been following in the past couple of weeks. The hon. Member for Kilmarnock and Loudoun (Alan Brown) was here only two weeks ago congratulating the two successful clusters on being designated as such by the UK Government.

The hon. Member for Southampton, Test (Dr Whitehead) rightly points out Opposition Front Benchers’ in-principle support last week on Second Reading, which we very much welcome. In terms of his specific questions, he is right that the RAB model has advantages and has challenges. We agree, but we think that it will save the average bill payer about £10 per annum over the 60-year life of the project’s construction and operation. On Bradwell, the Government’s position has not changed: it is not a decision for now. In any case, CGN does not have regulatory approval for its reactor. He asked about Hinkley Point C, which we think will save the equivalent of 9 million tonnes of CO₂ during operations over an estimated lifetime, again, of 60 years. On Sizewell, he asked whether the £1.7 billion is designed to buy CGN out of Sizewell. No. CGN has a 20% stake in Sizewell up to the point of final investment decision. Negotiations are ongoing and no decisions, including on the final configuration of investors, have yet been made.

We are fully committed to our key nuclear objectives of approving at least one large-scale nuclear project during this Parliament and supporting the development of exciting new technologies, including small modular reactors. Good progress has been made on both counts. We have been engaged in constructive negotiations on Sizewell, as I mentioned, and we have also, just overnight, had a major announcement about funding for the Rolls-Royce SMR project. Funding for that project will be matched by private investment. The question at the centre of this debate—that of funding nuclear projects—is one of the key challenges given the scale and complexity of nuclear plants and the time they take to build.

We have already mentioned the Nuclear Energy (Financing) Bill. I am delighted that it will now start its progress towards Committee. I am looking forward to engaging with the hon. Member for Southampton, Test on it as early as next week. It will be a good chance to work together across all parties to show that the UK can do this. The spending review set out a series of other measures in terms of extra financing—the £1.7 billion already referred to and the new £120 million future nuclear enabling fund.

In conclusion, I once again thank my hon. Friend the Member for Ynys Môn for securing this debate. With her constituency in mind, and both the historical and current contributions that Wales makes to the UK nuclear sector, I am excited for the opportunities in Wales overall, and on Ynys Môn in particular, which could be unlocked by the measures that we have described. As I said, new nuclear is crucial to addressing climate change, ensuring our long-term economic security, and supporting national prosperity. I look forward to further engagement as we continue the passage of the Nuclear Energy (Financing) Bill.