Examination of Witnesses (Questions 300-314)
PROFESSOR JOHN
GITTUS
27 JUNE 2006
Q300 Mr Clapham: I note from your
paper that you are rather sanguine about coal, you say "My
risk analysis shows that the UK's supplies of coal are very unlikely
to be interrupted and Australia and three other friendly countries
each export more coal than the UK imports." The importation
of coal to the UK has to some degree changed; we took quite a
substantial amount from Russia last year, for example.
Professor Gittus: Yes.
Q301 Mr Clapham: We import roughly
35 million tonnes which goes to coal burn. A good part of that
came from Russia and a little from South Africa, and there are
indications that the Australian coal market has now been dedicated
more or less to China. The supply of coal to some degree out there
on the international coal market, is more restricted than would
otherwise have been thought, and certainly I feel that your paper
perhaps misses that point.
Professor Gittus: I did not know
about this arrangement between Australia and China. I know of
it now because they have also sold most of their LNG to China
last week. It is a very fluid sort of situation and that is quite
concerning.
Q302 Mr Clapham: That increases your
worry that we are now becoming dependent upon Eastern Europe,
particularly Russia, for our coal?
Professor Gittus: Yes.
Q303 Mr Clapham: Would you be more
concerned if you knew, for example, that when UK Coal, the company
that owns the British coal mines, reported to this Committee a
week ago they did not foresee the opening up of new coal mines,
they were, in fact, basically saying that the indigenous coal
mining industry in the UK may only have a life of about 20 years?
Does that increase your concerns?
Professor Gittus: It does, I think
that is terrible. We have got enormous reserves of coal and techniques
for carbon sequestration are coming up. They are not with us yet,
but most of my life has been spent doing research and development,
and I can see from my reading that we are going to have that.
It will be economic to sequester three quarters of the carbon
from this kind of resource. From looking at other countries, I
can see that the coal industries are beginning to revive, and
what had been thought of as resources that were not worth mining,
people are beginning to mine them and open up new mines even.
I had thought that we would go the same way in this country. We
have got that resource, and it seems almost criminal not to proceed
with the development of this. As I say, the great advantage that
we have at the moment amongst all our competitors is the high
security of supply that we have. All of the steps which we can
take, like using our coal or making it available, are steps which
we should take, otherwise we run the risk, as I have shown you
in an earlier paper, of going from being the most secure to the
most insecure when it comes to security of supply in the G8 over
the next 25 years.
Q304 Mr Clapham: Given that if a
decision is made to build new nuclear power stations it is going
to be well after 2015 when they are likely to be online producing
electricity, bearing in mind that the decommissioning of nuclear
stations and coal stations in between is likely to produce an
energy gap well before nuclear could be producing, do you feel
that we should be concentrating more on, for example, the supercritical
boiler being refitted to coal-fired power stations and perhaps
a greater emphasis by government on the UK coal industry?
Professor Gittus: I cannot comment
on the supercritical boiler, that lies outside the things I know
about at the moment anyway but, certainly if the market is not
able to keep our coal industry going for more than 20 years—the
figure you used—then government intervention is called for
with coal.
Mr Clapham: Thank you.
Q305 Chairman: I expect you have
made Mr Clapham very happy with those answers. If the Committee
wants to ask some questions, which I may have interrupted earlier,
and you have got the time, Professor, we might return to some
of the nuclear questions if the Committee wants to?
Professor Gittus: I have got time,
yes.
Q306 Chairman: The picture that the
industry has painted for us in evidence is that they do not want
the American model. They would obviously really quite like the
Finnish model, but that also involves long-term contracts with
specific high-level users of the baseload electricity supply,
in the paper industry in particular. What they have said they
want is practical arrangements for pre-licensing of reactor designs,
an improved planning framework to make sure that the inquiries
do not drag on too long with all the national issues which go
to the local level, for example, and above all, in common with
every sector of the energy economy, they want to know how the
carbon price is going to be set over a much longer timescale than
the Emissions Trading Scheme currently allows. They say if you
do those three things and give us a government commitment which
goes beyond the initial path, in other words a cross-party consensus
is built, but the arrangements in it will not be disturbed, they
say at current levels of energy prices they will build new nuclear
power stations. Do you believe that?
Professor Gittus: Yes, I do. I
have read that evidence, and it is commensurate with what is being
said in other countries as well. I do not want to draw examples
from other countries because I know you tend to feel that is a
waste of time, but that is what is happening in the States, and
one can see other countries following the Finnish example.
Q307 Chairman: Are they sharing the
risk?
Professor Gittus: They are sharing
risk out, 24 different bodies are sharing the risk, and clearly
that is the way to go. The other way to go is to parachute nuclear
technology in, which is what was done in South Korea, where they
started their nuclear energy programme simply by having foreign
designs built by foreign contractors, accepting the safety cases
and licensing arrangements which had been proposed by the suppliers.
Under those circumstances people were able to build station after
station to time and cost. We are not going to permit ourselves
to do that as a country, we have got too much experience in the
nuclear sector and too many people who know about it. Clearly,
we are going to have environmental assessment, licensing, safety
analysis, public inquiries perhaps, and our experience with those
in the past, with Sizewell B for example, was that they increased
the capital cost of the thing by about 35% or even more. I was
involved with the inquiries there. Clearly people are going to
say, "We want to know about that, we want a one-step licensing
process like the US NRC have introduced and we want to have pre-qualified
designs of reactor which are acceptable to the licensing authority.
Those things have been done in America. It has cost a lot of money
and has taken more than ten years to bring that situation about
in the USA. I do not see that people are concerned about the difficulties
that we will have in introducing the things you mentioned, which
I have just summarised, in a short timescale here. I do not see
how we solve that, it is a difficult problem. We have left it
all so late when it comes to keeping our nuclear programme going.
Q308 Roger Berry: You advocate government
subsidy of nuclear through risk-sharing.
Professor Gittus: No, government
insurance of the risk, for which they would be paid a commercial
premium.
Q309 Roger Berry: In your article
in relation to Australia you talk about government subsidy?
Professor Gittus: No, that is
the second of two plans. A summary of my Australian report is
available on the Amsted website. All 400 pages of it have been
published, so there is no restriction there.
Q310 Roger Berry: You do not regard
the sharing of risk by government as being a form of subsidy?
Professor Gittus: If they are
paid for taking the risk they are like an insurance company which
does not subsidise the insurer.
Q311 Roger Berry: No, but presumably
the government is sharing the risk because the market will not
pick up such a risk at a price which makes it competitive?
Professor Gittus: That is because
the government has got the diversity which the market has not
got. The Treasury is taking risks in every sector and many of
them are not correlated. If it was an insurance company it would
make an absolute fortune because of that enormous diversification.
Chairman: You are advertising privatisation
of the Treasury!
Q312 Roger Berry: Would you argue
that government should share the risk in relation to other energy
sources as well in the same way?
Professor Gittus: Yes, of course.
Q313 Chairman: That has been very
interesting, not without its moment of frisson. We are
grateful to you, Professor. Thank you very much indeed.
Professor Gittus: I hope my behaviour
has not been offensive to the Committee, I just try to join in
with the general discussion.
Q314 Chairman: Professor, I think
the Committee quite often gives as good as it gets on occasions
as well.
Professor Gittus: Thank you very
much, I have enjoyed it.
Chairman: Thank you.
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