Examination of Witnesses (Questions 480-499)
MALCOLM WICKS
AND MR
PAUL MCINTYRE
10 OCTOBER 2006
Q480 Rob Marris: Do I understand
correctly that it is broadly a question of leaving it to the market
and therefore you do not have in mind numbers of new nuclear power
stations because that will depend on the energy mix as determined
by the market. Do I understand you correctly there?
Malcolm Wicks: Yes. Government
will not be building nuclear reactors, will not say they want
X number of nuclear reactors. I always thought myself that if
at the moment one fifth of our electricity is from nuclear, if
the market came forward with something to replicate that broadly
in the future, from my own point of view it seems to me that would
make a useful contribution to the mix. We are not going to do
anything to facilitate that, nor this percentage nor that percentage.
Q481 Rob Marris: Do I take it that
if you are doing nothing to facilitate that, there will be no
direct subsidies for new nuclear build?
Malcolm Wicks: No direct subsidies,
no.
Q482 Rob Marris: And there will be
no indirect subsidies either.
Malcolm Wicks: No.
Q483 Rob Marris: Is that right? Is
that the Government's position? No direct subsidies and no indirect
subsidies. Am I clear on that?
Malcolm Wicks: No cheques will
be written, there will be no sweetheart deals.
Q484 Rob Marris: Is new nuclear power
station building viable without a high price for carbon under
the Emissions Trading Scheme?
Malcolm Wicks: The carbon framework
incentivising carbon reduction hopefully through the development
of the ETS is very important here. Also of course what is important
and we set out some arithmetic on our cost benefit analysis, is
the economics of nuclear vis-a"-vis the economics
of gas and oil.
Q485 Rob Marris: Under the ETS does
the price of carbon not partly determine the economics of new
nuclear?
Malcolm Wicks: Yes, it does, but
I am also saying that the price of gas and alternative fuels is
also important. Although it would be a silly energy minister who
would predict prices, nevertheless the economics have moved in
favour of new nuclear because of the relatively high price we
have seen recently of oil and gas. It is not just to do with the
ETS it is to do with a wider economics judgment.
Q486 Rob Marris: What if, at the
European level if we get it, the ETS works in a way which most
people would see as desirable, namely emissions fall, in that
scenario the price of carbon is going to fall and that is likely
to make new nuclear less economically viable. What would the Government
seek to do in that situation, which is in one sense a desirable
situation if the price of carbon is falling because there are
fewer emissions because people have cleaned up their act literally
and metaphorically?
Malcolm Wicks: We are certainly
not there yet. The whole objective is to see CO2 emissions fall.
I think this line of questioning is rightly focusing on the importance
of ETS but it is not the only focal point and prices of rival
fuels are also pretty important.
Mr McIntyre: On the point about
the carbon price and the possibility that it might fall if emissions
fall, the carbon price will be determined by the relationship
between emissions and the allocations that the emitters get. It
is not just determined by the level of emissions. On the wider
point, we did publish with the review our economic study, our
cost benefit analysis of nuclear which sets out some scenarios
for the future. The economics depend on a number of factors not
just the carbon price. They depend on assumptions about future
gas prices because gas is probably the alternative fuel for the
generators and also for nuclear costs, so these scenarios take
combinations of those factors and the conclusion we reached was
that on the scenarios which are more likely the cost benefit analysis
for nuclear comes out as positive. There were also some scenarios
where it came out as negative and obviously a judgment has to
be made as to which of the scenarios is more likely, but overall
we felt that the judgment was positive.
Q487 Rob Marris: Are you familiar
with the work of Amory Lovins at the Rocky Mountain Institute
who suggests that the opportunity cost of spending money on nuclear
build is actually bad for the environment because you get a bigger
bang for the buck, a better improvement for the environment if
an equivalent amount of money is spent in energy consumption reduction
and in generation through other means?
Malcolm Wicks: I have met him
in the States and talked to him and am aware of his views. I am
aware of a range of views and they do not all point in the same
direction. Our own judgment, to repeat myself really, is that
to tackle the issue of climate change—there are other related
issues about energy security which are relevant to nuclear but
in terms of climate change—we just have to have a multi-pronged
approach. We made a judgment which might be controversial that
nuclear probably should be part of that. For those who are sceptical
about the economics—I am not myself, but for those who are
sceptical and think it cannot be afforded—then the test
will be, will it not, when the market does not come forward with
any proposals?
Q488 Rob Marris: As long as I can
get you to reiterate—and I was pleasantly surprised at your
statement—that there will be no direct subsidies for new
nuclear build in the United Kingdom and there will be no indirect
subsidies. Did I understand you correctly?
Malcolm Wicks: That is right.
We are not in the business of subsidising nuclear energy.
Q489 Miss Kirkbride: Unlike the whole
of the industry, do you believe that it is possible to see a private
nuclear build programme in this country unless the Government
successfully negotiate the long-term price of carbon? Can it still
happen?
Malcolm Wicks: A thriving carbon
market, hopefully through the ETS, will help bring forward—
Q490 Miss Kirkbride: Help or be crucial,
be the deciding factor?
Malcolm Wicks: I should say help.
We are repeating ourselves on this side now. I think the price
vis-a"-vis gas is also pretty critical in this.
Q491 Miss Kirkbride: The Prime Minister
is going to be very disappointed because the industry does not
believe it can happen unless the Government play their role in
the long-term price of carbon.
Malcolm Wicks: That is not what
I am hearing.
Q492 Chairman: Is the difference
not that the companies which like to build nuclear reactors can
take a view on what is going to happen to gas prices and oil prices
using their informed judgment of the market? However, the price
of carbon is set by Government effectively and they have to know
what the Government's intentions are and you are being a bit Delphic
about it. I actually have to say that I think it would help; I
think Julie is right. What I hear from the industry is that they
have to have greater certainty in the long-term price of carbon
to make that decision.
Malcolm Wicks: We are very committed
to the long-term nature of an emissions trading scheme. We hear
all the time—I agree with you on this—that the industry
wants certainty.
Q493 Chairman: Is the truth not that
you are trying to be good Europeans. You are making the pledge
to ETS but actually in the document you are rightly saying that
the Government will go beyond ETS if it has to in order to deliver
nuclear power. That is what you are saying, is it not?
Malcolm Wicks: I am saying that
the ETS is very critical to this but it is not the only factor.
Q494 Mr Bone: You are very clear
that there will not be any indirect subsidies for new nuclear
build. I am surprised that I have heard that today. Does that
mean there will be not a single tax advantage for building new
nuclear build, as one example, because that would be an indirect
subsidy?
Malcolm Wicks: No, there will
not be any special fiscal arrangements for nuclear. It should
not be a surprise, with respect, because we have said it very
clearly in the Energy Review. You could pursue this if you wanted
by saying that nuclear waste is quite a complex subject and we
are going to look very carefully at that to make sure that the
full costs of new nuclear waste are paid by the market.
Q495 Roger Berry: The thing I do
not understand about the argument is that the Government said
that energy security is a policy objective. The energy security
is being identified as a benefit of nuclear, as indeed for some
other energy sources. I do not understand a policy which says
that energy security is an objective and that nuclear helps fulfil
this objective and yet the Government will offer no incentives
to achieve that objective by providing support for nuclear. I
just do not understand it.
Malcolm Wicks: Where we are in
terms of trends and policy objectives is that at the moment all
the projections show an increasing reliance on imports, particularly
for gas. I gave a figure earlier: by 2020 it could be 90% of our
gas being imported and it is only 10% at the moment. Is that a
worry? I personally think it is a worry and what we have to strive
for in the future is a better balance between the imports we shall
need to make—and we need to be careful about where they
come from; they must not all come from one region and some should
come in as liquefied natural gas, some from pipelines from Norway,
et cetera. We need a better balance between that and a
bit more self-reliance and a bit more home-grown energy. Fortunately
some of the things we need to do about global warming, energy
efficiency, renewables, nuclear, carbon capture storage are some
of the same things we need to do for energy security. We have
set out a framework which we think will deliver that.
Q496 Roger Berry: But if the Government's
policy towards the nuclear industry is that this is a matter for
the market to decide, but we have a problem of energy security
which has to be addressed by Government, I do not understand how
on the one hand in relation to nuclear you say you will let the
market decide and there will be no intervention, yet one of the
reasons we are sympathetic to nuclear is precisely because it
gives us greater energy security. You have a policy objective
which suggests a policy instrument doing something to support
those energy sources which promote energy security, yet you are
telling us that you are not going to do that.
Malcolm Wicks: It is because we
have confidence that the policy framework we are putting forward
will deliver that balance between home-grown energy and imports
that we are achieving. We feel that will happen. One exception
to this, where we are more interventionist, is with renewables.
I do not know whether we are coming onto that. There we have said
that we should like to see 20% of our electricity coming from
renewables by 2020 and through things like the Renewables Obligation
and one or two other mechanisms, grants, we are trying to facilitate
us hitting that target.
Q497 Mr Binley: I am sorry, Minister,
but I really am confused. Last year the Government promised that
they would make a final decision on nuclear for better or for
worse and I hear prevarication on this subject which gets cloudier
and cloudier. The nuclear energy people tell us that decision
needs to be made very quickly because of the timeframe to which
you have alluded. Can you tell us when the decision will be made?
Malcolm Wicks: You have not heard
prevarication from me because we have said in the Energy Review
document that we feel that nuclear should be part of the mix in
the future. I have also said—and this is consistent with
where we are in terms of the balance between government policy
and a liberalised market—that it will be for the market
to deliver that. We are now going to pursue a range of consultations
to see what barriers there might be in terms of planning, for
example, which might get in the way of that. We are not a command
economy. Some colleagues here may regret that. We are not in the
business of saying there will be ten nuclear reactors, one in
your constituency maybe, and we are going to pay for them and
lay the concrete and so on.
Q498 Mr Binley: One in yours?
Malcolm Wicks: Possibly. We are
not in that business and I doubt you would want us to be in that
business.
Q499 Mr Binley: At some stage somebody
has to make some decisions about this.
Malcolm Wicks: I thought we had?
I thought there had been some controversy about that.
| 
