Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 640-659)


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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