Conclusions and recommendations
Overview
1. We
believe that, in determining its policy on the future of nuclear
energy, there are a number of issues that the Government needs
to address. Our inquiry has sought to examine these to provide
a comprehensive overview of the matters for debate, and to highlight
those we believe are absolutely crucial. In so doing, we have
not sought to reach a conclusion either for or against new nuclear
build, but to reach definitive conclusions on those issues where
the evidence base allows us to do so. (Paragraph 3)
2. Most of the technical
objections to nuclear power, such as the availability of fuel
and the carbon profile of nuclear power stations, have answers.
Political issues, such as security and proliferation, are matters
of judgement. There are other questions, however, that are both
technical and political in nature, such as waste management. The
purpose of this Report is to help focus debate on the issues that
really need to be discussed and not those that have definitive
answers. (Paragraph 4)
3. If the Government
really wishes to meet its objectives for carbon emissions and
energy security, its policy must sustain those technologies it
wishes to be part of the energy mix. However, we do not believe
that the way to energy security is for the Government to fix the
proportion of the energy mix that should come from particular
technologies. Rather, it should ensure a fair competitive environment
for existing technologies, while supporting innovation in new
ones. A policy designed to enable the construction of new nuclear
power stations would be credible only if it was based on four
key elements:
- A broad national consensus
on the role of nuclear power, that has both cross-party political
support and wider public backing;
- A carbon-pricing framework that provides long-term
incentives for investment in all low carbon technologies;
- A long-term storage solution in place for the
UK's existing radioactive waste legacy; and
- A review of the planning and licensing system
to reduce the lead time for construction. (Paragraph 5)
4. Two
of these areas require action for the successful implementation
of energy policy, regardless of a decision on nuclear power. The
planning system and carbon pricing are as much issues for renewable
energy and the future of fossil fuel plants as they are for nuclear.
Moreover, it would be necessary to ensure any decision in favour
of new nuclear build would not undermine efforts elsewhere, such
as in energy efficiency. (Paragraph 6)
5. In addition, there
are issues which the Government and Parliament must consider that
have a strong ethical dimension and will ultimately require a
political judgment. These include:
- Whether, as a country, we should
create new radioactive waste, which subsequent generations will
have to manage;
- Whether the UK's nuclear policy poses internal
security risks and undermines efforts to prevent proliferation;
and
- The extent to which the UK needs to demonstrate
leadership in reducing carbon emissions, given the modest contribution
it can make relative to the rest of the world. (Paragraph 7)
6. Finally,
our Report highlights issues surrounding nuclear power, where
there has been debate, or where, underpinned by the principles
outlined above, the market and the Government should be able to
find a solution. Among our conclusions are that:
- Although new reactors may be
able to use existing sites, this cannot be guaranteed. Further
research would be needed to identify alternative sites;
- There are reactor technologies that could seek
licensing in the UK now, although we would be amongst the first
in the world to use them;
- Constraints in the domestic skills capacity could
be overcome with sufficient investment and use of international
resources;
- Constraints in infrastructure capacity could
be overcome with sufficient investment, although there are concerns
regarding certain reactor components;
- There should be sufficient uranium supplies to
meet any future UK demand;
- Financing the management of decommissioning and
waste storage is possible, provided a system for charging the
industry is in place from the start;
- The UK has the market players willing to deliver
a programme of new build, although the current electricity market
does not provide favourable conditions for them to do so;
- Nuclear power is a low carbon source of electricity,
comparable to renewable energy; and
- There is a clear understanding that the costs
of developing new nuclear power stations, including subsequent
decommissioning and waste disposal, would be met by the private
sector developers of each station. (Paragraph 8)
7. Finally,
we are concerned about the manner in which this Energy Review
has been conducted. Throughout the process, the Government has
hinted strongly that it has already made its mind up on nuclear
power. The last review took three years to complete, yet this
one has been conducted in the space of six months, and has focused
primarily on the electricity sector, at the expense of consideration
of transport and heating—both equally important sources
of carbon emissions in the UK. This has not been an Energy Review,
but an Electricity Review. (Paragraph 9)
8. What is more, it
is clear to us that the outcome of the Energy Review has largely
been determined before adequate consideration could possibly have
been taken of important evidence that should inform the Government's
policy decision. This includes the Committee on Radioactive Waste
Management's final report and recommendations for the long-term
storage of the UK's high level radioactive waste, expected at
the end of July 2006; and the Heath and Safety Executive's recently
published expert report, which includes analysis of the potential
for pre-licensing of nuclear reactors. Further, there has been
insufficient analysis of the extent of the 'energy gap' the UK
faces, for example, given the potential for further lifetime extensions
of some of the existing nuclear fleet. All of these areas bear
crucially on the key principles we have highlighted above. (Paragraph
10)
Building a national consensus
9. A
clear government commitment to the future role of nuclear power,
based on a broad cross-party political consensus, would be necessary
for the power industry to be willing to invest in a new programme
of reactors. However, market delivery of new build, and the absence
of public subsidy and guarantees, would constrain the Government's
ability to determine the scope of any new programme. What is more,
the way in which it has conducted its Energy Review to date suggests
that the Government will have to work hard if it is to gain cross-party
and wider public support for its policy decisions. (Paragraph
23)
10. Public opinion
on new nuclear build is mixed. Where it is favourable, this is
contingent on factors such as the UK reaching a long-term solution
to its existing radioactive waste legacy, and the assumption that
new nuclear power would be within the context of a range of other
low-carbon technologies contributing to the energy mix. Of itself,
the Energy Review does not represent a sufficient public engagement
on the long-term issues of energy policy. With regard to nuclear
power, this would require continuing dialogue both at a national
level on wider policy issues, and at a local level on, for example,
siting issues. Both approaches are vital for building a national
consensus on the Government's energy policy. The Energy Review
statement cannot be the Government's final word. (Paragraph 31)
Planning and licensing
11. Evidence
that we received stated that the current planning and licensing
systems are a significant deterrent for investment in new nuclear
power stations in the UK. To overcome this problem, the Government
would need to take a more managed approach to the entire regulatory
process, including resolving the national debate on nuclear power
early on, and through the pre-licensing of generic reactor designs.
Whilst we accept that the Government should do what it can to
manage the regulatory risks faced by potential operators, we have
doubts as to the extent to which it will be able to achieve this.
Factors militating against success include its past experience
with planning reform, the role of the Scottish planning system,
the available skills base, and the extent to which the Government
would be willing to close down public debate in order to meet
any regulatory timetable, and whether such changes would maintain
public confidence. Finally, we note that the issue of planning
delays applies to the whole of the energy sector, and is not a
concern specific to nuclear power. (Paragraph 53)
Finding suitable sites
12. The
siting of a potential new generation of reactors in the UK could
be aided by locating them next to existing nuclear power stations.
There are possible advantages from doing this with regard to public
acceptance, licensing and grid access, although none of these
is guaranteed. However, the availability of some of these sites
may be affected by rising sea levels and coastal erosion, arising
from climate change. As a result, more research would have to
be carried out on these potential effects before the industry
could proceed. In addition, we are unclear as to how the Government
would make existing sites available to the nuclear industry, given
that many of them are privately owned. There would need to be
a potentially difficult commercial negotiation with the current
owner—probably British Energy—before development could
proceed. (Paragraph 64)
Choosing the right technology
13. Of
the two main reactor designs viable for the UK, neither has yet
been built anywhere in the world. There will, therefore, be both
technical and cost uncertainties associated with any new nuclear
plant, the risk of which could be mitigated by using a single
reactor design for all new build. However, in a liberalised electricity
market with competing consortia, each vying to build one or more
new power stations, there is no guarantee that a single reactor
design would be chosen for all new build. To a certain extent
investment decisions would be influenced by pre-licensing generic
designs, as those so licensed would have a significant cost advantage.
Moreover, costs will decrease as each reactor of the same design
is built. (Paragraph 73)
Accessing skills and plant
14. The
UK's domestic supply chain could meet only a proportion of the
skills requirements that a programme of nuclear new build would
pose. Although there are considerable concerns with regard to
the current shortage of domestic nuclear skills, there are signs
of a pick-up in this area. The domestic supply chain could also
meet a proportion of the infrastructure requirements of a new
build programme. Where there are shortfalls, the global market
should be able to fill these gaps, though there are constraints
regarding a few important reactor components. The growth in worldwide
interest in new nuclear build also means that the relatively small
UK market will face fierce competition in accessing skills and
plant from other countries. As such, a clear and long-term commitment
to nuclear power from the Government would be key both to timely
investment in the domestic supply chain and for ensuring the global
sector's willingness to engage in the UK market. (Paragraph 84)
Fuel availability
15. As
regards fuel availability, demand for uranium is set to increase
markedly in the future, with greater global energy consumption,
particularly in East Asia. In the short-term we have concerns
about the availability of fuel supplies as secondary sources,
such as commercial inventories, are used up. However, in the long-run
we believe increased prices and global demand will help maintain
reliable uranium supplies, thus not representing a constraint
on any new nuclear build in the UK. This provides some reassurance
about fuel availability, as it currently seems unlikely that new
nuclear power stations would be in a position to use fuel reprocessing
to recycle their nuclear waste back into re-usable uranium.
(Paragraph 95)
Security and proliferation
16. The
importance of security and the risks of proliferation are of the
utmost concern to the Government in protecting its citizens. As
such, it is vital for the UK civil nuclear industry to adhere
to international treaties and uphold the highest regulatory standards.
While these considerations should not be neglected in the debate
on new nuclear power stations in the UK, we do not believe that
such a programme would pose a significant additional security
or proliferation risk, although by definition it extends the period
of that risk. However, we accept, too, that there are ethical
considerations to take account of in this debate, and that the
UK's position should not necessarily be determined on the basis
of the relative risk any programme would present. (Paragraph 108)
Managing decommissioning and long-term waste disposal
17. Regardless
of a decision on new nuclear build, the UK has a significant radioactive
waste legacy requiring a long-term solution. Advances in technology
mean that the decommissioning of new reactors should be cheaper
and simpler. The volume of waste generated would also be smaller—10
new reactors would add only 10% to the existing volume of radioactive
waste in the UK—although the radioactivity of this waste
would be substantially greater. Moreover, in addition to considering
the extent to which new build would increase the UK's future waste
problem, the Government must also address the ethics of producing
new radioactive waste versus the environmental consequences of
not doing so, for example with regard to climate change. (Paragraph
122)
18. Clearly, the more
advanced the Government's planning for a long-term repository,
the greater will be the certainty of the cost of that solution.
Given the current pace of the Energy Review process, the Government
appears to be cutting off this possibility. If it decided in favour
of a new nuclear programme, it would have to act quickly in taking
forward and building on the CoRWM recommendations, for the issue
of waste to be resolved by the time investments were being made.
This would also be vital for gaining public acceptance of new
nuclear build. While we do not believe that this is impossible,
the Government would have to prove that it can perform better
than previous governments in developing a long-term solution.
(Paragraph 136)
19. The nuclear industry
told us that a fundamental pre-condition for new nuclear build
is that the Government puts in place a strategy for the long-term
disposal of its existing radioactive waste legacy. This would
not only be in accordance with its existing policy, but would
be necessary to gain the support of both industry and the public
for a programme of new build. However, successive governments'
record to date in delivering a long-term solution has been woeful.
The Committee on Radioactive Waste Management's recommendations
provide an opportunity to put right this situation, although these
should in no way be taken as giving a 'green light' for new build.
Key to finding a long-term storage site will be the active engagement
of local communities under the principle of 'volunteerism', bearing
in mind the need to have clear definitions and processes to allow
local communities to decide on the issues. With regard to a long-term
storage facility, the waste and decommissioning costs arising
from any new build would have to be borne by the operator. This
poses risks given it is still many years before a repository will
be in place, and hence its potential cost is highly uncertain.
(Paragraph 142)
Financing nuclear new build
20. The
UK's liberalised electricity market does not provide favourable
conditions for investment in new nuclear build. Nuclear's high
capital cost and long lead times act as a disincentive to investors
in a market where the focus is on short-term pay-back and where
prices in recent years have been uncertain and volatile. However,
the structure of the market, dominated by a small number of large
firms with the ability to raise sufficient finance, could be conducive
to the delivery of new nuclear power stations were the Government
to create the appropriate framework. (Paragraph 150)
21. The Government
should set a policy framework that treats each source of energy
fairly, letting the market determine the generation mix, based
on its own view about the relative risks and costs. Here, 'fair'
treatment includes areas considered in this Report, particularly
the need for a political consensus, a rational and long term carbon
allocation, and the planning system. It should also cover the
way in which different forms of generation are rewarded in the
market. (Paragraph 163)
22. There is a high
degree of uncertainty surrounding the cost of nuclear power because
of a lack of data relevant to the UK. That which exists suggests
nuclear energy may be economically viable in a scenario where
gas prices remain high, but we do not feel this is a sufficient
basis on which to draw robust conclusions. However, if the Government
wishes the market to deliver new nuclear build, we recommend that
it should be for the market to decide to what extent it has confidence
in its own cost estimates in deciding whether or not to invest.
The Government should make it clear that all the costs of building,
operating and decommissioning new nuclear power stations will
fall to the private sector investors who build those stations.
These costs are a concern for investors—not the Government
or the taxpayer. The role of Government, in the first instance,
should be to ensure that all sources of generation are treated
'fairly' within the market. (Paragraph 164)
Pricing carbon emissions
23. If
the Government were to support nuclear power on the basis of its
contribution to reducing emissions, then it would need to do this
within a policy framework that rewarded low carbon technologies.
(Paragraph 170)
24. Our predecessor
Committee argued on several occasions that the CCL was neither
a straightforward carbon tax, nor, because of the complexity of
the Climate Change Agreement arrangements, was it a very effective
means of encouraging energy efficiency. They felt it detracted
from the effort to provide a long-term market-based costing of
carbon emissions. So do we. (Paragraph 174)
25. The nuclear industry
believes that some form of stable long-term carbon pricing is
the only means by which new nuclear build could be funded. We
think that a technology-neutral form of long-term carbon pricing
is essential if the Government is to achieve its objectives of
reducing carbon emissions and allowing the market to determine
the precise energy mix. This applies whether the Government decides
for or against new nuclear build. The current EU ETS does not
provide an adequate mechanism. There are various ways in which
the Government could provide a long-term price for carbon, including
carbon contracts and fixed price guarantees. Of these, we are
attracted by the proposal of auctioning long-term contracts for
future reductions in carbon emissions as a means of creating the
incentives for investment in all low carbon technologies. We note
that the Government is already beginning to accept the principle
of this through the auctioning of allocations in Phase 2 of the
EU ETS. (Paragraph 185)
Is nuclear power low carbon?
26. There
are some carbon emissions associated with the life-cycle of nuclear
power stations, as there are with some renewable sources of electricity
generation. However, nuclear power can still be considered a low
carbon energy source on a par with hydroelectricity and wind power.
The contribution nuclear power can make to the carbon reductions
required to meet the Government's 2050 objective is relatively
small. However, this reflects the scale of the challenge faced
and the fact that electricity generation, though significant,
is only one source of carbon emissions: space heating and transport
emissions are of at least equal importance. The extent to which
this should matter to the Government, with regard to nuclear power,
depends on its determination to create a low carbon economy, and
whether it believes other low carbon technologies or energy efficiency
can fill the gap left by closing nuclear plant, which otherwise
would almost certainly be filled by gas-fired generation. (Paragraph
194)
Nuclear power v. energy efficiency
and renewable power
27. The
Sustainable Development Commission argued that further nuclear
power would send out a message to energy consumers that the Government
has plugged the 'energy gap'. In so doing, this might reduce the
incentives to cut electricity demand. Whilst we agree that this
is a risk, we note that the promotion of energy efficiency should
take place through separate policy instruments that seek to raise
consumers' awareness of the carbon impact of their energy consumption,
and also, for example, through regulation of building standards.
In addition, we note the need to take action on energy efficiency
across the whole of the energy sector, including in the transport
and heating sectors—not just for electricity. The general
public is unlikely to support new nuclear power stations unless
they are part of a wider strategy that also encourages renewable
energy and energy efficiency. There is a risk that a Government
focus on new nuclear build would distract from efforts in these
two areas. To prevent this, it would have to ensure that nuclear
power did not receive preferential treatment, either in the planning
system, or in a long-term carbon pricing mechanism. It would also
have to demonstrate a genuine political commitment to these two
means of reducing carbon emissions in building a long-term national
consensus for its energy policy. (Paragraphs 198 and 199)
Impact on the electricity grid
28. The
UK has a centralised electricity grid network, although growth
in renewable energy and, in the future, microgeneration are beginning
to challenge this approach. We were told by National Grid that
a new nuclear programme aimed at doing no more than replacing
existing capacity would not act to prevent the further development
of decentralised generation. The siting of new nuclear plant,
whether near existing nuclear sites or not, will affect the level
of investment required in upgrading the transmission network,
which could be in the range of £850 million to £1.4
billion—these are costs that will have to be met by developers,
thus influencing their investment decision. (Paragraph 205)
Will there be an 'energy gap'?
29. The
apparent urgency of the current Energy Review seems to be predicated
on the assumption that the country faces an imminent crisis. We
agree that some generating capacity, such as the remaining Magnox
power stations, will certainly be decommissioned in the coming
years, and that the replacement of this poses a challenge for
the market. However, whilst we acknowledge that it would not be
sensible to presume lifetime extensions for all of the remaining
nuclear fleet, equally it would not be prudent for the Government
to make long-term policy decisions on the future energy mix in
haste, and without full consideration of the evidence, simply
because it has assumed that this capacity will certainly not be
available. Indeed the fact that British Energy has begun to evaluate
possible extensions for two of its reactors suggests the company
believes there is a chance that they will carry on operating.
We consider that a full and proper assessment of the projected
future generating capacity should have been conducted to inform
debate before the Government undertook its Review. (Paragraph
212)
30. There is a possibility
that a proportion of the UK's existing nuclear power stations
may receive life extensions over the coming years. If this is
the case, then the potential 'energy gap' faced by the Government
will not be as severe as that which the current Energy Review
assumes. Whilst we accept that the long lead time on nuclear build
requires a decision soon if new capacity were to come on stream
before the end of the next decade, we question the haste with
which the Government is seeking to conclude its current Review,
especially given the short timeframe it has allowed for consideration
of certain key pieces of evidence. Changes in the energy mix,
such as increased wind power and potential new nuclear build,
will in the future increase reserve capacity requirements. Developments
in this area will require close monitoring by the Government and
Ofgem as, if there is any sign of market failure, a swift policy
response—perhaps in the form of some capacity payment—will
be necessary. (Paragraph 216 )
|
