Nuclear Energy (Financing) Bill — House of Lords, 2022-02-21
Topic: Energy
Martin Callanan (Conservative, Centre-right): I start by thanking all noble Lords who contributed to this excellent debate. I was encouraged by the widespread support for the Bill across the House, with the honourable exception of the Liberal Democrats and the Green Party. I particularly welcome the support of Her Majesty’s Official Opposition. These are long-term projects and it is good that the only two serious parties of government support the Bill and the need for new nuclear power Before I address the questions raised, I remind noble Lords of the importance of the Bill. The legislation will create a new funding model for future nuclear projects, which can reduce the cost of nuclear power stations when compared to existing funding mechanisms. This will substantially widen the pool of private investors in nuclear projects and, in turn, reduce the UK’s reliance on overseas developers for finance. The lack of a funding model has been the biggest barrier to nuclear projects getting off the ground in recent years and the Bill will help to resolve this issue The RAB model will help ensure a cost-effective approach to new nuclear projects, which will play a critical role in the UK’s future energy mix in support of intermittent renewables, such as wind and solar. That is the key point missed by contributions from the Liberal Democrats and the noble Baroness, Lady Bennett. Of course, we want to encourage renewables; they are good thing. We have some of the largest renewable capacity in the world but, by their very nature, renewables are intermittent and we need stable baseload power to keep the lights on. It is no good telling people that they cannot run their car or cook their dinner because the wind is not blowing in the North Sea. This is an unrealistic way to finance the future energy mix. I think this is the key point that the noble Baroness misses I also agree with noble Lords on the importance of home insulation schemes. The noble Baroness mentioned the figure herself; we are spending £9 billion on insulation schemes. I will come to that later. These are all important things that we need to do—and in fact are doing—but they are not either/or approaches; we need to do both I start by welcoming the support of the noble Lord, Lord Rooker. He does not often support my Bills, so I am pleased that he is doing so on this occasion. I am delighted that he agrees that the funding model will be of benefit to consumers and that he recognises the opportunities for new apprenticeships. As the noble Lord, Lord McNicol, remarked, Hinkley Point C has already trained 800 apprentices and it is on track to meet the EDF target of 1,000 apprenticeships during the construction phase of the project The noble Lord also raised some important questions, to which other noble Lords added, about protections for consumers under a regulated asset base model—a point also made by my noble friend Lord Howell and the noble Lord, Lord Whitty. My noble friend Lady Neville-Jones was particularly keen that the Government should adopt a rigorous commitment to value for money in their approach. Of course, that is a point I completely agree with. The Government totally agree with noble Lords that consumers should be protected. Recognising the unique risks of nuclear construction projects, our proposals for the RAB model include multiple mechanisms for ensuring that consumers are protected from unacceptable costs. This includes undertaking robust due diligence before a final investment decision so as to ensure that the project will be effectively managed. As well as satisfying the requirements of the RAB designation process, for a project to reach a final investment decision it will need to undertake a successful capital raise, complete a government business case and satisfy all other relevant approvals from Her Majesty’s Government. I reassure my noble friend Lady Neville-Jones that any decision to commit taxpayer or consumer funding to a nuclear project will be subject to negotiations with staged approvals and value-for-money tests in line with the Treasury Green Book. Also, during construction a project will be incentivised to deliver to time and to estimated costs through an incentives regime overseen by the economic regulator. I hope that the assurances I have been able to give will provide some comfort to noble Lords that we are very much on the case The noble Lord, Lord Whitty, referred to the Bill’s impact on small businesses, which is indeed an important point. We addressed that in the impact assessment accompanying the Bill, which stated that, if a nuclear RAB model is implemented on a new nuclear power plant in future, it would impact small and micro-businesses by creating jobs in a supply chain and would indirectly impact them as a result of any costs or cost savings passed through to electricity suppliers and then to consumers. The illustrative analysis in the impact assessment shows that society as a whole, including small businesses, could save significantly on the cost of a generic large-scale nuclear power plant, using an RAB as opposed to existing fundamental mechanisms The noble Lord, Lord Rooker, asked me about the role of foreign financing in future projects, an issue also raised by the noble Lord, Lord West, and my noble friends Lord Howell and Lady Neville-Jones. It is important to point out that we welcome overseas investment in the UK’s nuclear sector. We value the important role that international partners have in our current nuclear programmes and potential new projects. Let me emphasise that this will not and should not come at the cost of our national security. The RAB model will help us to attract the significant amount of investment needed for new nuclear power plants, including from British pension funds and institutional investors, as well as from our closest international partners. In doing so, it will reduce our reliance on overseas developers for finance, and open opportunities for British companies and investors to work with our closest international allies to develop projects across the United Kingdom Investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. In particular, as my noble friend Lady Neville-Jones highlighted, the recent National Security and Investment Act 2021 allows the Government to scrutinise and, if necessary, intervene in qualifying acquisitions that pose risks to the UK’s national security. As well as that Act, the independent Office for Nuclear Regulation, the ONR, applies a range of strict regulatory requirements to all organisations seeking to operate nuclear sites in the UK. That includes assessments of the organisation’s capability, organisation and resources to manage nuclear material safely and securely My noble friend Lord Howell mentioned the history of EPR reactor constructions. The projects he highlighted, at Olkiluoto and Flamanville, are first-of-a-kind builds in each of those countries. This brings unique risks and challenges with the construction process. Developers have learned lessons from these projects and several EPR reactors are now under construction or in operation around the world, including, of course, at Hinkley Point C The noble Lord, Lord Teverson, made a number of points about the underlying economic case for new nuclear capacity. He asked specifically about the Government’s action on investment in energy efficiency. As I said earlier, I agree with the noble Lord. The Government recognise the importance of increasing the energy efficiency of homes. It is a difficult and complicated task, as the noble Lord, Lord West, pointed out, but we are spending considerable sums of money on insulating the country’s homes, particularly those of low-income families, both to reach our decarbonisation targets and to tackle fuel poverty in the longer term. That is why we have introduced, among many schemes, the energy company obligation, the value of which we have just increased, to provide energy-efficiency and heating measures for fuel-poor households. In the next iteration, which will run from April this year to 2026, the funding will go up to £1 billion a year We have also released today the results of the sustainable warmth competition. If I remember the figures correctly, another £980 million of investment will be delivered through local authorities to insulate homes up and down the country. A number of other schemes are contributing to the £9.2 billion insulation scheme that the noble Baroness, Lady Bennett of Manor Castle, mentioned. So these are not either/or decisions. We need to do both, and, indeed, we are The noble Lord, my noble friend Lady Neville-Jones and the noble Lord, Lord Oates, raised the important issue of the long-term solution for nuclear waste. It is important to remember that around 94% of the waste arising from nuclear power stations and other sectors is low in radioactivity and is disposed of safely every day in existing facilities such as the UK’s Low Level Waste Repository. The remaining higher activity waste is currently stored safely and securely in facilities around the UK. We have a process in place to identify a suitable location for a geological disposal facility to permanently dispose of higher activity waste. We are making good progress on four areas in discussions with the developer, Nuclear Waste Services, which is a division of the NDA. The vast majority of the higher activity radioactive waste to be disposed of in a geological disposal facility is waste that already exists.