Examination of Witnesses (Questions 640-659)
RT HON
ALAN JOHNSON
MP, MR PAUL
MCINTYRE,
MR RICHARD
ABEL AND
MR HENRY
DERWENT
23 NOVEMBER 2005
Q640 Mr Caton: Are you saying that the
structure of the market can be part of the subject of the Energy
Review?
Mr Johnson: Not the structure
of the market so much as the mix; we are looking across the whole
range of renewables, clean coal technologies and nuclear. We are
looking at every aspect of energy policy. There has been movement
from 2003. It seems quite a long time ago in many respects, particularly
in terms of the new technology coming on stream. The market is
looking at the signals from Government as to whether their policy
will change on nuclear vis-a"-vis 2003. It is for
that reason that they have been urging for a review and a final
decision on this question of nuclear within this Parliament.
Q641 Mr Caton: Power companies have told
us that they will not receive further investment until the Government
clarifies the policy and regulatory framework by setting up, for
example, the allocation for phase 2 of the EU emissions trading
system and clarifying the UK interpretation of the large combustion
plant directive. Can you see their problem?
Mr Johnson: Yes, I can. As far
the ETS scheme, on phase 1, the UK Government rushed in pretty
early. We were showing some leadership. We thought this was a
serious issue and that we ought to be in the lead. We are not
rushing in quite so quickly on phase 2, which means business has
to wait before we go through the consultation.
Q642 Mr Caton: Can you give us an idea
when you will be publishing that?
Mr Johnson: I think June is the
deadline for the EU, which means we have to publish before June.
Q643 Mr Caton: When can we expect the
interpretation of the large combusting plant directive?
Mr Johnson: Very shortly, and
that is a good civil service answer.
Mr Caton: If you could harden up on that
and let us have that in writing, that would be useful.
Q644 Chairman: Before we move on to the
question of nuclear, which is exciting, can I ask you another
quick question about the market? Ofgem told us that they had expected
a long-term futures market to energy in energy. It has not happened.
Is there any particular reason for that and is it a problem that
the UK market is so short term?
Mr Johnson: I think some of the
reason for this not developing yet is that there has been a bit
of uncertainty about what is going to happen in the rest of the
EU. Once we get policy translated into practice, that will ease.
It is not something that we are tearing our hair out over, but
it is something I think that will develop naturally over the course
of the next few years.
Q645 Mr Challen: We have had witnesses
from both sides of the nuclear debate telling us that for new
nuclear to happen, assurances and guarantees will be needed from
the Government. Do you think the Government would be prepared
to consider guarantees: for example, a cap on the waste costs
of new nuclear, or sharing initial planning costs, or even guaranteeing
the price of the energy produced from nuclear?
Mr Johnson: I would be very surprised
if we issued that kind of guarantee. The one thing I am clear
about is that when we look at nuclear, we have to look at cost,
safety and waste. Those are the three big issues that were around
in 2003 and they are the big issues now. I expect new plant to
be built and run by the private sector. There is a market here.
In terms of what happened before, Sizewell B for instance had
a cost overrun of around 35%, and there has been an awful lot
of public money invested there. I think with everyone who comes
before your committee, and I think I saw some evidence from the
private sector, there is no expectation. First of all, and I know
this is not the precise question you are asking, there is no expectation
of taxpayers' money being thrown into this. It is down to the
private sector. I would be very surprised, given that that is
the case, if the Government was looking for guarantees, except
that we want to be sure, of course, that safety continues to be
dealt with as well as it is now. The Office for Civil Nuclear
Security is responsible for this. We have safe, secure arrangements
for nuclear now, particularly in terms of their resistance to
terrorist attack. That would have to be the case in the future.
On waste, of course we are waiting for the Committee on Radioactive
Waste Management to report next summer. That report will be an
important part of our decision-making process during this review.
Q646 Mr Challen: You would really scorn
any such interventions in what we have now, the liberalised market,
to assist nuclear in that way and obviously avoid this picking
winners approach?
Mr Johnson: "Scorn"
is another "s" word. We have a list of them now. I do
not want to pre-empt what will be a very thorough and intensive
review taking into account the views of others. In terms of the
Government issuing guarantees, I do not think there is going to
be an awful lot of that emerging at the other end of this review.
Q647 Chairman: What is the industry waiting
for? We have had real trouble getting to the bottom of this. They
are all sitting around saying, "We are waiting for a steer
from Government; we are waiting for a green light, for a sign".
Do you know what sign they are waiting for?
Mr Johnson: It is best to ask
them.
Q648 Chairman: We have and it is entirely
unclear.
Mr Johnson: You might remember
that when I took over this job the private briefing from my private
office was helpfully reported on the front page of two Sunday
newspapers. My predecessor, Patricia Hewitt, told me that when
she took over there was not a queue of entrepreneurs at her door
waiting to build nuclear. When you talk to the private sector,
they say, "The door was left ajar in 2003. We were not sure
whether that meant you were going to go down the German route
or the French route, whether you would replicate Finland or whatever".
I think there is a fair argument that they are waiting to see
what the political temperature is and what the Government's approach
is going to be before they make hard and fasts players. That is
the best sign I can give you.
Q649 Chairman: The Prime Minister was
talking yesterday about nuclear and saying they are going to have
to make a decision. What would a decision involve?
Mr Johnson: What would a Government
decision be?
Q650 Chairman: What would a Government
decision on nuclear power generation be? What form would it take?
Mr Johnson: That is exactly the
purpose of the review. It would need to look at cost, safety and
waste. I am genuinely neutral on this. I promise you that you
will not find a word anywhere in a pretty long career in one form
or another in public life where I have said I am pro or anti nuclear.
I have no ideological approach.
Chairman: I am really interested to know
what, if any, policy change will be involved in any statement
made by the Government about the future of energy supply which
"gave the green light" to nuclear, other than to say,
"We have looked at the cost and safety issues" and so
on?
Q651 Joan Walley: Is there anything that
would be different from the previous report the Government did,
the previous strategy two years ago?
Mr Johnson: I think the sign would
be, if it went this way, and I am being very careful here, and
if we looked at all of these issues and decided that nuclear was
to be a major part here, on the basis of saying, "Because
we are going to lose around 25% of carbon-free emissions via nuclear
and renewables will be at a level of 20% or beyond between 2020
and 2030, we would expect, encourage and hope for a nuclear new
build programme that will help us meet our climate change objectives".
If Government said that, business would say that there was the
prospect and the possibility of Government closing that door.
I take your point. The Government is not going to say there is
tons of cash here and you can all come and get it for nuclear.
We are not and I can absolutely guarantee that. If you ask what
Government has to do, I think we have to do more than we did in
the Energy White Paper in 2003 where we absolutely remorselessly
concentrated on renewables and energy efficiency and left nuclear
to one side.
Q652 Chairman: The issue then and now
I suspect is that nuclear was really unfinanceable. If all the
Government does is issue a piece of paper saying it is encouraging
and it does not actually put in place any practical measures,
whatever those might involve, nothing is going to change the unfinanceability
of nuclear, is it?
Mr Johnson: There might be some
practical measures.
Q653 Mr Chaytor: To clarify this figure
of 25% or slightly less than 25%, this is the figure representing
nuclear's contribution to electricity generation and not to total
annual carbon emissions. Am I right in thinking that nuclear's
contribution to total energy output is in the order of 7 to 8%?
Mr Johnson: Yes.
Q654 Mr Chaytor: If we are talking about
the contribution to the total national carbon emissions, we are
talking of 7% or thereabout?
Mr Johnson: Yes, I think that
is right. I said in my opening statement "25% of our generating
capacity".
Q655 Mark Pritchard: Secretary of State,
as to the review or perhaps the review of the review, is it likely
that the House will have an opportunity to discuss a new energy
bill and is that the sort of context and framework that perhaps
industry is looking for, to have a clear run at new nuclear build?
Are we looking at a new bill before Parliament?
Mr Johnson: I cannot predict whether
that will necessitate legislation. Coming back to your previous
question, I think what we said in 2003 was that if we did decide
to go down the nuclear route, whether with encouragement, practical
considerations or some practical help, then we would require a
White Paper and a further consultation. We have not had the terms
of reference published yet, but the Prime Minister said at our
party conference that the idea is that next year we will produce
some proposals that would then fit into another round of consultation
that might end up with a bill but would certainly point to the
long-term future for energy policy in this country, looking at
those three aspects: security of supply, affordability and carbon
emissions.
Q656 Mr Hurd: Secretary of State, in
his evidence to us Sir David King expressed a personal view that
any energy review should be short and sharp. The process you are
outlining seems to be quite protracted. Do you accept that there
is a risk in that in relation to investor confidence and investor
sentiment towards renewables?
Mr Johnson: I do not think the
Energy Review will be a long, protracted review. What I am pointing
out is that after that has been published, there is a process
to go through. The Energy Review itself will not take a long time.
If there is an energy review that comes up with proposals and
the view of Government is that we need to do all this very quickly,
then it would not be the kind of review we are envisaging, which
is to look at the long-term future of energy in this country.
I think that would be a necessary process after that, but that
does not mean the review will take a long time. You have to wait
for the terms of reference to see how long we envisage this taking
but we are not thinking about a long time.
Q657 Mr Hurd: Do you accept that there
may be a negative impact on investor sentiment towards renewables
just at a time when there is a very real concern about hitting
the renewable target because of the uncertainly about the direction
of Government policy?
Mr Johnson: No, I do not think
so. We are being very clear here about our renewables obligation.
We have a target for 2010 and an aspiration for 2020. It is about
getting that positive climate where you get renewables to a level
where there is no going back. We are almost at that. I know there
is a lot of renewable energy still to be developed. If you look
at what happened last week, last year, with onshore wind, where
we had a record year which will be outstripped this year, there
is a real momentum now on renewables. I do not think there will
be any going back from that.
Q658 Joan Walley: Could I press you a
bit more on that? Is it not the position that case that could
be made for nuclear is directly linked to the amount of time that
it will take for that momentum for renewables to get underway?
I would have much preferred the Government, back at 2003 and in
the work it has done subsequently, to have dealt with all those
issues of uncertainty as far as renewables are concerned because
it take so much time in the short term to get the investment right,
the technology and manufacturing and public awareness right. You
have not really given renewables the time to get that whole momentum
going before you now start to look at whether or not that uncertainty
could be ended and you could have that case for nuclear.
Mr Johnson: With a 60% CO2 reduction
target by 2050, the argument around nuclear in relation to CO2
is, as I understand it, that we are running to stand still. We
are making progress with renewables but, as we close nuclear power
stations, we just make the problem worse in terms of CO2 emissions.
I cannot see any scenario that will not have renewables as a major
part of it.
Q659 Joan Walley: The issue is about
nuclear, whether or not you can get more from the other sources
without giving those messages about nuclear.
Mr Johnson: That will be one of
the questions to look at on cost and how the market will work
in the future. I do not agree with the suggestion or inference
that we have not put an awful lot of effort in and done all we
can to get the renewables market up and running. We are doing
it even as we speak and there has been £500 million of investment
so far. Here is a clear case of Government intervention on the
renewables obligation. In terms of the transmission problems,
we have also announced a package to try to solve that problem
as well. It will be an ongoing debate. I do not see this as being
renewables versus nuclear. It is looking at our total energy policy
right across the range.
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