Examination of Witnesses (Questions 240-259)
E.ON UK AND EDF ENERGY
6 JUNE 2006
Q240 Miss Kirkbride: Taking on board
what you have just said, that, nevertheless, there must be some
streamlining of the process to make it viable, is it acceptable
to have pre-licensing of sites and certain acceptable designs
given that the kind of reactor to go on any pre-licensed site
may depend on whether it is located inland or in a coastal area?
Can you really have off-the-shelf designs and put them together
in any way you see fit, or should greater attention be paid to
what matches?
Mr de Rivaz: A lot of attention
has to be paid to how the technology matches with the sites. Obviously,
that is part of the whole process. It is not a matter of taking
a reactor off the shelf and building it anywhere. What we are
saying is that national safety authorities in any country which
are serious about new nuclear build will have the opportunity
to build on the experiences acquired by other countries. We are
advocating, for instance, that the European nuclear safety requirements
which have been built up in European countries can be used by
the UK safety authorities to make their own safety assessment
and applicable principles. There are a number of technological
developments which fit the bill, if I may say so, and it is wise
to use them rather than reinvent the wheel and create a brand
new technology just for us in the UK. It will mean a loss of time
and money and in reality it will not contribute to safety because
the requirements of other countries can be useful. As to the site
issue, there are two elements. How does the technology fit the
site? Beyond those aspects there are other elements: connection
to the grid and the consequences for the river or seashore according
to the site. That has to be assessed locally. I think that clarification
would be very helpful in creating public confidence and acceptance
that we all look for.
Q241 Miss Kirkbride: What about the
capacity and resources of the NII? Are you happy that it is doing
its work as quickly as it should? Does it have the necessary skills?
Is there a skill shortage? How do you see its role as affecting
your ability to deliver on these matters?
Dr Golby: Historically, it has
had some difficulty in obtaining qualified and experienced people
to do this work, and certainly there will need to be increased
resources particularly if it is to look at a number of potential
designs. It will need to think about greater use of contractors
and use of information that is available from other licensing
authorities. At the beginning the UK was leading the way but a
number of other countries have now built nuclear reactors and
there is a lot of safety and design information available. It
will need to make use of a lot of work that others have done,
in exactly the same way that the CAA makes use of information
from other national aviation authorities, the US and French equivalents.
They cooperate with one another and share information on aircraft
design, for example.
Q242 Miss Kirkbride: Do you think
that skill shortages will create a problem for your industry in
both the regulatory process and construction?
Dr Golby: There is a skill shortage
generally in this area. We are faced with a massive programme
of investment in electricity infrastructure in this country; it
will probably be of the order of £50 billion over the next
decade. We will certainly face a skill shortage. We need to improve
the number and quality of graduates and craftspeople who come
through our education system, but these are also international
skills. One of the benefits of both our companies as international
groups is that we have some of these skills elsewhere around the
world that we can use to deploy in the United Kingdom.
Mr de Rivaz: It is also a matter
of attracting the talents. If young engineers who have to opt
for one career are told there is no future in nuclear they will
not be minded to study in that field. If nuclear is back on the
agenda as a key element in future energy policy in our countries,
in particular this country, I have no doubt that we shall be able
to attract, train and retain the talents and skills we need. But
it is absolutely clear that nuclear is an industry where the human
factor is very important. We cannot make any compromise about
the ability of people to design, build, operate and maintain nuclear
power plants with the highest safety standards. It is clearly
a challenge for all of us, but on that point and the others all
of us expect that ongoing debate will lead to a clear policy that
will engage the industry, citizens and the talents of young people
so that they join the nuclear future.
Q243 Mr Weir: Obviously, assuming
you were planning new build nuclear stations the chances are that
if they were constructed on existing sites they would be less
likely to meet public opposition than if they were located in
other areas. Given that many of the present nuclear stations are
built on the coast and there are problems with rising sea levels
and the threat of coastal erosion, how much of a problem does
that present with new build on existing sites, and will they be
available for potential new build?
Dr Golby: Clearly, very detailed
study of the existing sites would have to be undertaken, but I
do not believe that to be an insurmountable problem. I think that
civil engineering solutions can be deployed. It just so happens
that both our companies participated with the Met Office yesterday
in the launch of a new climate change programme. Part of the output
of that suggests that sea levels around the United Kingdom might
change in the range of 200 to 800 millimetres. To deal with that
particular problem is well within the range of civil engineering
capability, but clearly it is a serious problem and would need
a lot of detailed work to make sure we got it right.
Mr de Rivaz: I agree with that.
One of the key elements of the policy statement that we expect
from the Government in the coming weeks is site availability.
There are clear benefits in delivering this agenda in using existing
sites for various obvious reasons. They are designed for nuclear
power plants; there is already a form of local public acceptance;
there are connections to the grid, etc, etc. It is very important
that in moving forward there is a level playing field in the process
which gives to the investors minded to invest in new build nuclear
the availability of existing sites without which they would not
be able to deliver.
Q244 Mr Weir: Do you think that if
the existing sites are not available it will slow up any new nuclear
build or stand in the way of it? How will it affect the planning
process? Will it be much longer if you go for a completely new
site?
Mr de Rivaz: I am very optimistic.
If the policy which is to be decided includes nuclear new build
the Government, the authorities and all the relevant parties will
want to talk and make site availability part of the solution and
not part of the problem.
Q245 Mr Weir: I do not quite follow
that. You agreed earlier that there had to be public acceptance
which would necessitate a planning process, presumably in most
cases a public inquiry, before there is a site. But you seem to
suggest that in some way the Government should make the site available.
Surely, it does not have the power to do that without going through
the process?
Mr de Rivaz: It is linked to the
legal status of those sites and it is part of the matter that
has to be investigated in detail so that new players and investors
can have access to existing sites.
Dr Golby: I do not think anybody
is suggesting that there should be an overruling of local planning
issues. I believe that the existing sites are advantageous because
they carry the existing infrastructure. In a lot of cases the
local community not only accepts the nuclear sites but in my experience
welcomes them. That makes the process simpler and perhaps faster.
If those sites are not available alternative sites can be looked
at; it is not an "either/or" but one is perhaps a simpler
way forward. We fully take on board public opinion.
Q246 Mr Weir: I take it from what
both of you say that, obviously, the existing sites are run mostly
by BNFL or British Energy, but if you were looking to build a
new nuclear station you would seek access, if I understood Mr
de Rivaz correctly, to one of these sites. You would want to takeover,
if not an existing station, an existing site. Is that your preferred
way to proceed?
Dr Golby: I think that on the
information we have available that would be preferable, so we
would look to gain access to those sites at a commercial market
rate. We are not asking anybody to give us sites or anything like
that. Equally, we do not want to be held to ransom for those sites
which is the other side of the coin.
Q247 Mr Wright: We have moved on
significantly from the first generation of nuclear power stations
and we have to give serious consideration to decommissioning before
we even start the planning process. What is your preferred approach
to the decommissioning of nuclear build? Should the industry pay
a separate body to carry this out, such as the UK Nuclear Decommissioning
Authority, or should we follow, for example, the preferred model
of another country, for example France?
Dr Golby: My company would expect
to fund and carry out the decommissioning of any nuclear plants
in our ownership, as we have already done in Germany and are currently
doing in Sweden. The existence of the Nuclear Decommissioning
Authority and the competitive process that it is now engendering
means that there would be a far more competitive and robust market
to carry out that work in due course. I think that decommissioning
from that point of view is relatively straightforward. Of course,
new nuclear power plants are designed far more with decommissioning
in mind than the early versions that we have in the UK. I do not
know whether you want me to extend my answer to waste management.
Q248 Mr Wright: You mentioned the
Swedish model and what you are doing there. Perhaps you would
answer the question in terms of decommissioning and say how the
Swedish model works in terms of waste disposal.
Dr Golby: Obviously, long-term
waste management is a different issue. As an operator we would
expect to pay for that, but because it is such a long-term issue
we think that it needs to be dealt with in a separate way. We
need a very clear framework to be agreed with the Government to
do that. As a company we support the deep disposal route that
was identified as the preferred option in the interim report of
CoRWM. That means burying the waste deep underground in granite
(or other suitable geological) formations. My company is involved
in the design and operation of the Swedish facility. I extend
an invitation to the Committee. If it would like to visit that
facility in Sweden we are more than happy to arrange it. The way
it is dealt with there is that effectively all the nuclear operators
contribute to a waste fund that is ring-fenced and invested in
long-term government securities to provide a growing fund for
management of the waste long term. That fund is then drawn down
to manage the long-term storage of waste. That is one way in which
it can be done and I am sure that there are others as well.
Mr de Rivaz: To dwell on that,
recently EDF in France announced its decision to invest in a new
reactor. The decision has been taken on the basis of the economics
of it. The cost will be €46 per megawatt hour compared with
a market price of about €50 per megawatt hour. This cost
includes, obviously, the construction, operation, maintenance,
decommissioning and waste disposal. We know that the cost of decommissioning
is of the order of 15% of the cost of construction. We also know
the cost of waste disposal because we know of the technical solutions
that are available at the moment and are safe. The question of
waste disposal is no longer a technical issue; it is a political
issue because, rightly so, public opinion is asking government
to be accountable and responsible for the choice to be made which
is concerned with the very long term. For potential investors
in new build in the UK the resolution of the long-term waste management
issue is important. For this aspect as for others it is important
that the framework is clear. Perhaps I may make a suggestion about
this debate which is obviously very important. I fully understand
the concerns expressed by many because it is a very long-term
issue. Politicians are in my view accountable and responsible
to make a choice between two types of risk. One is the risk of
not knowing for sure what will happen in 400 years, which is the
horizon when we know that the available technologies for all that
period will be absolutely safe. I think the risk that in 400 years
the behaviour of mankind will not allow decision-makers at that
time to make the right choice is very low. This risk is remote
and its likelihood is very slim. That has to be compared with
another risk which is climate change. We know for sure that in
40 years we may have reached a point when the impact of climate
change on our populations and economies will be such that the
damage will be huge, so there is a real political choice between
the certainty of that risk if we do not address the carbon emission
challenges and a very much more remote risk which in my view would
be under control at that horizon. The decision, therefore, is
not a technical one but a political one. Because of the public
concern about this problem it is very important for investors
that the Government has accountability and the responsibility
to make the decision.
Q249 Mr Clapham: I want to come back
to the major issue of nuclear waste. We have been searching for
a long-term solution for a number of years. Is it important to
you that government makes a decision on this matter in order to
ensure that you will be able to make your investments?
Mr de Rivaz: Yes.
Dr Golby: Yes.
Q250 Mr Clapham: Therefore, we need
a government decision on long-term waste management before you
make your decision to invest in new nuclear stations?
Mr de Rivaz: Yes.
Dr Golby: Yes, indeed.
Q251 Mr Clapham: As to the location
of the repository, Dr Golby referred to what is happening in Sweden.
Do we need to identify where the repository is to be?
Dr Golby: No. We need to understand
the process and the regulatory arrangements. The plants that we
might build would not be decommissioned until about 2080 and there
is quite a lot of time to decide the precise location, but we
need a very clear view on the policy and framework.
Q252 Mr Clapham: Given you are aware
that the Committee on Radioactive Waste Management has suggested
that it could take decades to identify regionally the location
of the repository, are you quite prepared to wait that long before
you make your investment?
Dr Golby: No. I said that to make
the investment we would need a very clear policy. I would not
need to know precisely where the repository is sited in order
to make that investment. That could take a couple of decades,
but it would be more than that length of time before the plants
would be decommissioned.
Q253 Mr Clapham: That is true, but
at the same time because of the technology of the new plants we
shall be producing more high-level waste and there will be a need
to deal with and manage it properly?
Dr Golby: No. We shall be producing
less high-level waste. If we replaced the entire UK fleet we would
be adding to the current nuclear waste stockpile by only about
10%. The new reactors are far more efficient.
Q254 Mr Clapham: Although there may
be less waste overall, is it not correct that there will be more
waste of a highly radioactive nature?
Dr Golby: That is not correct.
I think that in the old fleet we have a lot more low radioactive
waste, but the spent fuel is essentially the same.[2]
Mr Clapham: We have had some evidence
that contrasts with that.
Q255 Roger Berry: I want to look
at long-term incentives for investment. In paragraph 1.37 of EDF's
memorandum we are told that in the event that there is no internationally
agreed framework on emissions reductions there may be a need for
"contractual carbon price hedging mechanisms". Briefly,
can you clarify precisely what you mean by that?
Mr de Rivaz: Thank you for the
question. I recognise that we have so far been the only one among
our peers in the industry to propose these contractual carbon
price hedging mechanisms. One has to recognise that the Emissions
Trading Scheme is still an emerging market that does not at the
moment fit the bill. It has been designed to reduce carbon emissions
but so far it has not contributed to the reduction. It has contributed
to increased prices of electricity. How does one find a mechanism
that gives predictability in the long term and visibility of market
price for carbon which will incentivise investors to reduce carbon
emissions? Our proposal is a contract or a kind of win-win commitment
between investors to invest in technologies—not only nuclear
but any technology which effectively reduces carbon—to commit
to a certain reduction and to receive a kind of guarantee by market
mechanism that the value for the money it puts into the investment
will not be undermined by the volatility and unpredictability
of carbon prices. You are aware that perhaps three weeks ago suddenly
the carbon price—nobody knew what was happening—plummeted
from €20 per tonne to a figure below €8 per tonne. It
is now back to more or less what it was before. This kind of volatility
is dangerous. The ETS scheme does not exist beyond 2012, which
is very soon. The investment that we have to make is for decades
ahead and the cycle of the ETS today does not match the cycles
of our investments. I believe that the UK Government is to be
praised for its leadership in the battle about carbon emissions
to get all the 25 countries in Europe to agree on phase 3, which
will be much longer than five years. Be aware that phase 2 is
not yet agreed. In the meantime we have to make our choices. I
do not suggest that in the coming weeks we are about to create
a new mechanism which will substitute the ETS, but that there
is a clear commitment from the Government that in the case of
ETS phase 3 not being available there is plan B and governments
and industry will work together in the coming months to have something
ready to complement, substitute or reinforce the Emissions Trading
Scheme for the long term. In a nutshell that is the proposal that
we make, and it is a very serious issue. We have to move from
the short-term to the long-term world, or from a world of volatility
to a world of sustainability. The billions that we need to invest
will not be there without this kind of framework.
Q256 Roger Berry: Are you not very
nervous about the long term? Clearly, the ETS has had its difficulties
and, as you suggest, the Chancellor's nationally agreed framework
looks pretty doubtful for the long term that you contemplate.
In no way has long-term carbon pricing yet been implemented. What
we are talking about here is the need for long-term incentives
and the nature of them, about which some of us would probably
agree, but there is no precedent; no one has done it. You are
talking about whether in the next few months you can get something
together. Does it not make you nervous?
Mr de Rivaz: I am not nervous;
I am trying to contribute to an important question, and I think
it is a proposal that is worth discussing. I do not suggest that
in a couple of months we will have made our proposals and everybody
will agree with them. I am just raising a key issue which we have
to look at as a real one. I believe that the UK is in a unique
position, as often, to take the leadership in this field. We in
the UK have been at the forefront of the battle over the climate
change agenda and we should be satisfied to see so many people
coming with us on this agenda. But it is not enough to have agreement
on the problem; we also have to have agreement on the solution.
The solution today, the Emissions Trading Scheme, is not yet working
well and there is a risk that we do not find the solution through
that mechanism in due time. Let us be prepared to have something
which helps create a level playing field. It is not a proposal
for nuclear but for low carbon technology.
Dr Golby: I disagree somewhat
on the point. To get a trading scheme working like this is unprecedented;
climate change and the threat that it poses is unprecedented.
I would much rather focus upon and be optimistic about the European
trading scheme working. It has had teething difficulties. Some
would say that it is an absolute miracle that it is working as
well as it is at the moment. I think that our effort ought to
be directed towards getting phase 2 sorted out and then to design
phase 3 which will take us beyond 2012. This is an international
problem and unless we can extend the scheme not just throughout
the EU but other countries frankly we will lose the battle. We
have to get India, China and other countries to participate in
this kind of thing. I would much rather the Government put effort
into doing that than trying to design a plan B at this stage.
Q257 Roger Berry: Surely, a scheme
that runs to 2012 is simply not good enough. It will not give
the right incentives for potential investors to know what to do?
Dr Golby: Of course it is not
good enough and that is why the Government must intensify its
efforts with its European counterparts to design a scheme beyond
2012. I know that a lot of effort and discussion is going on to
do that.
Q258 Roger Berry: The cynic would
say that one does not expect this to happen in the necessary timeframe
but one expects a government bail-out if things go wrong?
Dr Golby: I certainly do not look
for any government bail-out here and that is why I am optimistic.
I believe that the European emissions trading system is the way
forward.
Q259 Chairman: Are you saying, therefore,
that you will not make investment in nuclear unless you know about
the price of carbon?
Dr Golby: I will not make investments
in nuclear unless I can see a carbon framework that gives me confidence
there will be a price for carbon going forward, but I am not looking
for guarantees.
2 Note by witness: Understanding and summarising
radioactive waste data is complex. The amount of radioactivity
created for each unit of electricity generated by a new programme
of nuclear power plants will be less than we have seen in the
past. However, the radioactivity appearing in each category of
waste (high, intermediate and low) and their respective volumes,
can be expected to differ between legacy and newly arising waste,
in the same way that there are large variations within the legacy
waste. This is because of the different options deployed for the
management of the waste. For example, much reprocessing of legacy
irradiated fuel has reduced its volume to vitrified high-level
waste, but in doing so has created large quantities of intermediate-level
waste. Back
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