Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 60-79)

DEPARTMENT OF TRADE AND INDUSTRY

6 FEBRUARY 2006

  Q60  Judy Mallaber: A while back you were very positive in your evidence on the possibility of a resurgence in coal and in your opening you talked about a carbon-capture/clean-coal technology. Obviously you have not made any final decisions yet, you will say it is all part of the energy review, but what is your thinking at the moment about the Government's commitment to the future of the UK coal industry and the work that needs to be done on clean-coal technology?

  Alan Johnson: As far as the UK coal industry is concerned, we have put something like £60 million into helping the UK coal industry. The reason I say coal has become much more interesting is because as the price of gas has gone up, coal has become much more competitive. At the same time, you have the carbon sequestration technology which has come along. In a much wider sense than our review, we did a deal last year when we went to China on the EU/UK summit which is the first step to sharing technology with China who will never build tons of wind farms and who believe that developed countries lecturing them about the need to get their carbon emissions under control is just a way to stop their growth. They are suspicious of that but they understand the problems of the environment. So you come along with something like clean-coal technology and it opens up a whole new prospect there. That is why I say coal. Would it be British coal? The figures suggest at the moment that we are getting 31.6 million tonnes of our coal from Australia and South Africa, 18 million from the UK, so there is obviously still an attraction in importing coal from abroad as it is cheaper. What comes out of this review in relation to coal is one thing. The ramifications for UK coal are something completely different and we shall have to wait for the review to see what emerges, but coal is going to be a central feature of that review.

  Q61  Judy Mallaber: I do also have, within my constituency, which is built on coal, continuing pleas from those who are campaigning against opencast mining with a concern that that might get back into the equation and change the criteria which we strengthened against environmental damage through just scooping off the surface of the environment. Is that an area that you are looking at in the review or not?

  Alan Johnson: It is, yes. Opencast mining is one of the aspects that we should have to look at. It is not just about deep mines: it is about opencast mining as well.

  Q62  Mr Clapham: You made the point earlier about my interest in coal and I have always believed that coal can play a very significant part in the economy, particularly as burned in new clean-coal technology units. It is compatible with renewables if it is burned cleanly and a number of people are now coming round to that particular view. What are we doing at the present time, for example, to incentivise the generators to invest in what may be the first phase of clean-coal technology and that is super-critical boilers with carbon capture?

  Alan Johnson: The first thing we have to do is get a proper demonstration model which might be set up with the BP Miller site on carbon capture and storage and a number of other demonstration sites. We have set aside some money to help this process along until we get the full picture here. I understand that carbon capture and storage can reduce CO2 emissions by 80%, which still leaves 20% but is obviously a huge step forward. Not quite renewables in terms of cleanliness, but the first thing to do is invest in the technology and the science to get a proper demonstration model that we can then take further and that is what we are doing.

  Q63  Mr Clapham: Coal burn is much more flexible. Take, for example, nuclear stations: in go the rods, out comes the electricity, it has to be taken down the line. The one thing about coal units is that they are much more flexible and can be turned on and off as demand comes on and, in that context, fitting new clean-coal technology means that there is a much more reliable source. Is that something that you will be looking at as well in the review, how different mixes have the potential for that greater flexibility?

  Alan Johnson: Yes, because it meets security of supply, it meets the challenge on carbon emissions and it also would be an aspect of affordability that we need to look at. I do not know whether we have looked at anything specific on the specific technology that Mike mentions.

  Chairman: I know you are anxious to get away Secretary of State, but there is one whole section on nuclear before we let you go. Could you write to us on that particular point possibly?

  Q64  Mr Hoyle: Mick Clapham has touched on the energy mix and I just wonder whether you have a vision. I know you are a man of vision; you are always saying what is going to happen in the future. Under your vision, how do you see the energy mix coming out? Would you think 30% coal, 30% nuclear, 20% gas and 20% renewables? What mix do you have in mind?

  Alan Johnson: I do not have any mix in mind and I have a vision on many things but I have not had a vision on this, unless one comes to me. We are not starting off on that basis; we are not starting off on the basis of "Wouldn't it be nice to get?" the point about ring-fencing that Mick Clapham made. We are going to have the review. We are going to get all the information, get all the contributions that people want to make to this, look at the whole thing in the round and then I might form a vision or a view about what the proper mix should be. Diversity is the key issue.

  Q65  Miss Kirkbride: It seems to me that you have been a bit schizophrenic today about energy policy. On the one hand the gas market is for the market to decide and on the other hand you were taking credit for the renewable target of 15% which is very much driven by the Government and very welcome. You have rightly said that we cannot possibly have 80% of our electricity supplied by gas because of the vulnerability that would lead to. In the exchanges we have just had it is obvious that carbon capture is not there yet today or even for the immediate tomorrow. Does nuclear not have to be part of that mix?

  Alan Johnson: It does not have to be. I should draw a line between interfering in the market and helping a sector that was non-existent, but perhaps should have been. If we had got into wind farms and wind turbines in the 1980s when the Danes got into it, we could have had a market there, but there was no market at the time of the energy review and creating a market from nothing, given the importance of climate change, was very important. The Renewables Obligation was perfectly justifiable in that respect. There is a difference between that and our clod-hopping into the market on prices and everything else. In terms of whether nuclear has to be part of the equation, no, it does not have to be part of the equation. We do not start from saying we are going to do this review but nuclear has to be part of the equation otherwise the professional cynics, who have said that this is all pre-determined, would be right. They are not right. The only decision we have made on nuclear, as the Prime Minister has said, is that it is time to make a decision because of the long tail between making a decision and having a nuclear power station. If nuclear is to be part of the mix, it is very much for the market to decide that, but the market, quite rightly, would be saying they need signals from the Government if they are going to go down that route. If you look at it from the point of view of climate change, security of supply, affordability and you look at energy in the round, nuclear does not have to be part of the solution.

  Q66  Miss Kirkbride: But this Government have already failed to meet their target; CO2 emissions have gone up since the Government came to power despite the fact that you said that you did not want them to do so. How can we possibly continue at the level of economic activity that we have today and keep carbon emissions under control unless we have nuclear?

  Alan Johnson: That is a question for the review.

  Q67  Miss Kirkbride: You must have a view on that? It is not possibly surely, is it?

  Alan Johnson: I do not actually have a view on this. I have never been particularly pro- or anti-nuclear. The reason why we are having the review is to answer that very question. Does it need to be part of the mix? Is it an essential to be part of the mix? The issues that the Energy White Paper looked at in 2003 about affordability and about waste, toxic waste, are a very important consideration which we shall be looking at.

  Q68  Miss Kirkbride: The Government had a review of energy just two years ago, knowing that the amount of energy produced by the nuclear sector was going to drop from around 19% today to 7% in 2020 and did not refer to this at all. We cannot re-commission the Magnox; we cannot extend the life of the Magnox reactors. We are facing quite a serious crisis now and it is very hard to see, given the competition for energy resources across the world, how we are going to meet that demand here unless we go nuclear like pretty much all the rest of the developed world is.

  Alan Johnson: My view is shared by the shadow trade and industry spokesman who I saw in an interview on Saturday, who was saying precisely the same thing. There is no reason why there cannot be a solution to this, when we have looked at all of this, that says actually nuclear will not be part of this equation. I can see a lot of reasons, a lot of arguments why that should not be a conclusion reached, but it is still perfectly possible to reach that conclusion. We do not start from the basis of saying that we are having this review because it is quite clear to us that we have to have nuclear new build and the review is about how to implement that. That is not the purpose of the review.

  Q69  Miss Kirkbride: So are you saying that we can finish this energy review, not re-commission any nuclear reactors and still meet our climate change aspirations?

  Alan Johnson: If we did, we would say, this was now Government concluding that in our long-term energy policy nuclear would have no role. That is the difference. By the end of this review, we shall either be opening the door to nuclear new build or we shall be closing it. We shall either be Germany or we shall be France.

  Q70  Mark Hunter: I want to probe a little bit further on this issue of nuclear power because obviously it is very central to the whole energy review which is ongoing at the moment. I am pleased that the minister has commented and in fact given reassurances that no decisions have yet been made on this. As he says, there are many cynics, professional and otherwise, out there who feel otherwise. What would you say to the point that many who are opposed to nuclear power are advancing that the Government's priority ought to be to clean up the nuclear waste which already exists in our nuclear power stations around the country before any thought at all is given to an expansion of nuclear power?

  Alan Johnson: Sceptics would have been a better word than cynics; professional sceptics on this. It is a very important point. That was the big issue in 2003, it is the big issue now. We set up the Nuclear Decommissioning Agency. Previous governments of all persuasions ought to be wearing sackcloth and ashes for just not doing anything about this issue of nuclear waste. There are big tubs of it and tanks of it hanging around. The Nuclear Decommissioning Agency, which must be welcomed by everyone, which was set up at the beginning of last year and the money, something like £50 billion that will go into this, shows that cleaning up toxic waste is an absolute priority. The argument of course that we are in the middle of from the pro-nuclear and anti-nuclear lobby is how much we would add to that, whether new technology now makes it safer, whether the waste would be much easier to get rid of, whether, if we continue with fission, we shall then be in the realms of fusion where we will not have the problems of waste. These are big issues that we have to grapple with on the review but whatever comes out of this review, we have to tackle the problem of nuclear waste.

  Q71  Mark Hunter: On a slightly different timetable but still to do with nuclear power, do you think we can have any confidence in the claims which are currently being made for how nuclear power could contribute in the future, given some of the claims that were made for it in the past like, for example, ultimately it will be too cheap to meter?

  Alan Johnson: We have to learn from that experience and the amount of money that governments of all persuasions spent on nuclear research et cetera. Yes, that has to be a consideration, but we have to start from where we are now and where we are now is that we need to get a 60% reduction in CO2 emissions by 2050. We have a situation where the more wind farms, the more wave power, the more sea power we use, the more renewables we produce we do not actually increase the level of CO2 emissions, whilst a very important source of clean energy—that is nuclear, clean in the sense of CO2 emissions—is actually declining. If you look at what has happened in Finland and the debate they had there, an awful lot of environmentalists are now feeling differently about the pros and cons of nuclear. They changed their minds over the last five or 10 years. If you come at this with a fresh mind and you are not in any of the camps digging trenches and you look at it objectively, that is the best way to come to a conclusion and that is the position I am in.

  Q72  Rob Marris: You just talked about nuclear being clean in the sense of CO2 emissions. Are you going to be looking at the energy cost in fossil fuel of building nuclear power stations, for example, all the fossil fuel you have to use to mine uranium and then pour concrete for nuclear power stations and so on?

  Alan Johnson: Yes.

  Q73  Rob Marris: You would accept that nuclear is not entirely clean in terms of CO2 emissions taken in the round?

  Alan Johnson: Yes. If you build anything as big as a nuclear power station, there are going to be CO2 emissions.

  Q74  Rob Marris: In terms of security of supply and uranium, if there is a big trend around the world to go nuclear as it were in terms of power generation, then are you going to look at the question of security supply of uranium because high quality uranium in stable countries is going to run out pretty quickly? Then we shall be down to looking at low quality uranium with a higher energy extraction cost from unstable parts of the world. Are you going to take that into account?

  Alan Johnson: Absolutely.

  Q75  Rob Marris: You talked about the door being opened and the door being closed and so on, whether we are France or whether we are Germany. Can you set the framework here? Could a power generator today apply to run a nuclear power station, a new one, to build and run one in the United Kingdom under current legislation?

  Alan Johnson: Yes. They are not queuing up to do it, but yes.

  Q76  Rob Marris: Are there any such applications that you have heard about?

  Alan Johnson: No.

  Q77  Rob Marris: Would that say something to you about market forces?

  Alan Johnson: One of your colleagues chaired a committee of the Environmental Audit Select Committee which spent a long time on this and I can see the argument that there is not a queue of entrepreneurs waiting. What potential investors would say, having seen what has happened, Germany pledging to close every nuclear power station, France being gung-ho on nuclear energy, having seen the 2003 White Paper as being equivocal, the door was ajar and could close, is that they see no point. They need a clearer signal from Government. They are not going to get a signal from Government that says "Here is a big open chequebook from the taxpayer". It is up to them to put the money in and put the investment in, but it is fair to say it is so long term that they need a signal.

  Q78  Rob Marris: As part of that signal do you envisage, just talking about the framework for nuclear power generation, we could have a situation where the Government would not be effectively the insurer of last resort, either as regards a meltdown of a nuclear power station and the meltdown of the operating company financially as a result, or in terms of disposal of nuclear waste? Surely, the Government would then have to be the insurer of last resort, which is not necessarily a bad thing but does take us a step away from the market forces to which you referred.

  Alan Johnson: On the last issue of toxic waste, Government cannot duck that responsibility; we have ducked it for too long and we cannot duck it now. In terms of the actual cost of building nuclear power stations, we do not intend to provide any of that, it is up to the market.

  Q79  Rob Marris: I am just talking about a framework here, I am not trying to push you one way or the other because you are not going to say, but would you then see that the Government would step away from nuclear power generation completely and say "Oh well, if your operating company goes bust and you leave all that nuclear detritus around, we shall have nothing to do with it and we shall not be the insurer of last resort"? Or do you think the Government would, in that situation, then spend taxpayers' money perhaps on cleaning up the mess?

  Alan Johnson: Those are issues for the review.

  Chairman: These are fascinating questions which we are right to ask, but we shall not get many answers. We shall have to get you back at the end of this process and push you even harder.


 
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