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19 Apr 2007 : Column 159WH—continued
Security of supply is touched on in some detail by the report. That is probably foremost among the political considerations that energy policy must address. Recent events in eastern Europe have illustrated the dangers of over-reliance on foreign fuel supplies. Somebody quipped to me recently that the
father of the new British nuclear industry must surely be President Putin. I make no comment other than that. Unless a nation can control its energy supply, it cannot sufficiently control its economy. The effects of that can be profound across a broad range of policy areas that I shall outline, such as taxation and public service expenditure.
David Howarth (Cambridge) (LD): I ask the hon. Gentleman to reflect on the point made by the Chairman of the Select Committee that, because Britain has no domestic uranium supply, it has to import all its fuel for nuclear power, whereas for renewables, for example, all that fuel is inside our country all the time.
Mr. Reed: I am grateful for that intervention. In my constituency there are probably more than 100 tonnes of uranium, which may be readily used as fuel for nuclear reactors, and which would last for years. In addition, we have at least 80 tonnes of plutonium. If we were to mix that with oxide fuel, that would increase the longevity of that resource even further.
Peter Luff: May I invite the hon. Gentleman, bearing in mind some of the scepticism that I expressed towards the end of my remarks, to comment on the political stability of countries such as Canada and Australia?
Mr. Reed: I am not sure that I understand the hon. Gentleman’s point. It is clear that countries such as Canada and Australia, in which major uranium mines are situated, are perfectly stable, and relations between those countries and the UK remain excellent. Uranium mining is a red herring for the UK. We have the resources here—in my constituency, as I said. I understand that there is a need for the Committee to investigate the matter; it is right that it should do so. Questions surround uranium supply. However, reprocessing would offer a solution.
Nuclear has a key role to play in ensuring that the UK enjoys reliable, secure energy supplies. Secure energy supplies enable a country to enjoy economic security and prosperity. The British nuclear industry possesses the capability to generate nuclear electricity, to recycle used nuclear fuel and to produce new nuclear fuel. The mining of new uranium is neither essential nor necessary. The already strong case for nuclear will intensify as the UK becomes more reliant on imported fossil fuels.
I think that everybody in this House would accept that climate change is the greatest single threat facing our planet. The challenge posed by that threat has so far drawn a mixed response from Governments around the world, notably that of the US, but there is now international consensus on the existence of climate change and on the environmental effects of the CO2 emissions produced in the burning of fossil fuels. The generation of electricity from nuclear power plants does not produce carbon dioxide. Nuclear is the only proven large-scale generating technology available that can provide clean generation in high volume; renewables cannot yet and may never do so.
The Government aspire to produce 20 per cent. of the UK’s energy needs from renewable resources by
2020. In the event that renewables achieve that goal, the net environmental effects without complementary nuclear generation, which currently produces approximately 20 per cent. of the nation’s energy, will be nil. What would be the point of that? Any energy policy that addresses climate change as its central purpose, as the energy policy of the UK must and should do, requires significant nuclear and renewable generation. Too often a false dichotomy of nuclear versus renewables is presented by people involved in these issues. That is unhelpful as such a polarity is false. Fundamentalist opinions of the pro and anti-nuclear camps should be immediately jettisoned and we should pursue a compromise and a solution.
Evidence already illustrates that, as stations have been decommissioned and have gone off-line, the reduction in the capacity for nuclear power generation over recent years has led to an increase in Britain’s CO2 emissions. More coal and gas has been used to fire power stations and to fill the gap left by diminishing nuclear generation—that is a fact. Given the current and necessary decommissioning programme for Britain’s aging fleet, it is no surprise that current energy policy will probably be unable to deliver the Government’s commitment to reducing the UK’s CO2 emissions by 20 per cent. by 2020.
The effects of climate change will be widespread and will reach developing countries more quickly than the developed world. We know that climate change will become a major driving force behind international instability. Consequently, energy policy, which should have nuclear energy at its heart, will have wide-ranging ramifications for UK foreign policy. That issue should have been addressed by the Committee. Not only the policy obstacles to the new nuclear generation that is happening in this country at the moment, but the policy objectives of new nuclear generation should have been examined.
The efforts to address climate change and to ensure the security of energy supplies are a growing purpose of the UK’s foreign policy objectives. In March last year the Foreign and Commonwealth Office published its White Paper, “Active Diplomacy for a Changing World”, which lists a number of strategic international priorities for the UK. One of those is supporting the UK economy and businesses through an open and expanding global economy, science and innovation and secure energy supplies. I cannot find any reference to that in the report, but please correct me if I am wrong.
In the same way that an over-reliance on foreign fuels would jeopardise our ability to run our own economy, it would also severely compromise our ability to pursue foreign and international development policies, which are in the national and increasingly international interest. Energy policy with nuclear at its heart has a key role to play in enabling that.
Peter Luff:
I am sure that the hon. Gentleman’s comments are absolutely germane, although another Chair may not rule so. However, the Committee faced the problem that all energy policies are interconnected to many other matters in some way and we had to cut the issue down to bite-sized chunks to deal with it. I personally have enormous sympathy with what he is
saying, but there was just not time for the Committee to consider the whole issue of energy reprocessing. That is the simple reason why the issues that he mentioned were not addressed; it was just a matter of time.
Frank Cook (in the Chair): Order. I will explain to hon. Members why I have adopted such an attitude to this debate. The title of the report is “New nuclear? Examining the issues” and if hon. Members choose to identify an aspect of the report that has been omitted, they have the right to do so. That is the basis of my logic and I hope that no one will challenge it.
Mr. Reed: Thank you, Mr. Cook. I am grateful for your guidance. In the interests of other hon. Members who wish to make a contribution I will expedite my remarks.
It is clear that there is a need for nuclear generation as part of a balanced energy policy. In addition, whether we are in the Kyoto protocol or future international treaties with countries including India, China and the US, carbon trading mechanisms will rely on non-CO2 generating sources to offset intensive CO2 generating sources for any system to work. The use of high-volume, non-CO2 emission energy producers must be maximised, as the chance of such schemes being effective without significant nuclear generation is exceptionally low.
Moving on to the more germane issue of radioactive waste, there are no technical or scientific obstacles to the safe disposal of radioactive waste in the UK. To suggest otherwise is simply not true. Scientific research in that body of work is both robust and mature. The decommissioning of UK civil and military nuclear facilities, in addition to existing waste situated around the country, requires a final disposal route, irrespective of whether or not a new generation of nuclear stations is built in the UK. That policy issue requires resolution and, as I said, the Government have made significant progress.
It is misleading to cite the current lack of a final disposal route as a reason for not progressing with a new generation of nuclear power stations. Such arguments lack credibility and do not withstand any serious analysis. New reactor designs, as the hon. Member for Mid-Worcestershire mentioned, produce far less radioactive waste over their lifetimes than current reactor designs. A new fleet of nuclear power stations would, over its operating lifetime, only fractionally increase the already existing inventory of waste. CoRWM has made its recommendations, which Government have accepted.
Many groups and non-governmental organisations seize upon the opportunity presented by a policy investigation such as this to distort the facts of the industry. I am pleased to say that that is not at all present in the report. I thank the Committee for the in-depth and robust way in which it has addressed the issues. In assessing the component parts of a balanced energy policy, which enables the UK to retain a strong economy, secure and reliable energy supplies, an effective and progressive foreign policy and, above all else, the ability to play our role in a global fight against climate change, nuclear power must be used. The
Government are doing and have done the right thing, and must move with some urgency on the issue.
The need for an energy policy that enables the UK to fulfil its ambitions in all those areas is absolutely undeniable. Such a policy must include renewable generation—I think that there will be unanimity in the House about that—in addition to coal and gas-powered generation, but we will inescapably need new nuclear. I understand the purpose of the report. I understand the issues that it homes in on as being problematic, but I believe that the Government have comprehensively and demonstrably shown that they have the solutions to those barriers.
3.22 pm
Mr. Quentin Davies (Grantham and Stamford) (Con): I want to congratulate my hon. Friend the Member for Mid-Worcestershire (Peter Luff), the Chairman of the Select Committee, on an excellent report and on achieving consensus in his Committee on what is always a controversial and emotive subject. He made a speech today that shows that he is a real master of the subject. So there is not very much that I want or need to add. I only want to make two points.
On my first point, I may be nuancing myself slightly from the position of my hon. Friend. He rightly said—here I agree with both him and the Government—that there is no need for, and it would be undesirable to have to resort to, some special form of subsidy in order to build new nuclear power stations. As my hon. Friend said, it is not the view of the industry that that is at all necessary. However, that does not mean that we should simply sit back and wait and see what the market delivers. It is important for the state—Government and Parliament—to be a little more decisive and to be prepared to take a number of strategic decisions about what eventual outcomes the country needs. There are several reasons for this.
The first reason is that there is a co-ordination problem in energy; it is very important for anyone planning one particular increase in capacity—whether through renewables, burning hydrocarbons or nuclear—to know what others are doing. The economics of any one project will be affected by the existence or non-existence of other potential sources of energy. The lead times in this are such that one cannot launch down an investment that may involve 10 years before making any kind of return with the danger that the looked-for cash flows will not be available because of some intervening new investment, which one had not anticipated. A real co-ordination problem can mean market failures. There is a need for state action.
The second reason is that an enormous number of the costs involved in building nuclear generating capacity are imposed by the state. As my hon. Friend said, those costs could be in licensing or the delays—any delay is very costly—in licensing and in the planning process. I think that I am right in saying that Sizewell B’s planning inquiry took eight years. We should all be aware of that terrible example and try to avoid similar situations in future.
We must also consider the costs imposed by the state in its role as regulator. We might be talking about the state in the form of the British Government, the nuclear installations inspectorate, the European
Commission or the agency in Vienna—whatever it is called—that establishes norms for nuclear safety. Real uncertainties are involved. These costs are controlled by the state and could not possibly be within the control of the private sector. In so far as the state is in the position of determining a large number of costs, it must be in a position to give some assurance on their extent; otherwise, it cannot possibly expect the market to take account of what are uncertainties for the private sector but matters directly and explicitly under the state’s control.
The third reason why the state has a natural role to play, which would not normally be the case were one to be building a chocolate factory, a shoe button factory or something of that kind, is that there are enormous externalities in energy. The benefits of building a nuclear power station—this would apply in the case of any power station—are greater than those that are captured in the cash flow available to the company that owns and operates the station and sells electricity.
Equally, there are negative externalities to consider: the negative costs of an economy running into energy shortages or sudden supply shocks, or of an undue dependence on natural gas being imported from unstable places such as Russia, have an enormous external effect on the economy of a negative kind. In other words, the losses to the economy as a whole are a vast multiple of the losses to the power station or generating company that is dependent on that natural gas.
Those are reasons why we should not adopt a laissez-faire policy; we should not just sit back and say, “We will do lots of studies and so forth, but we cannot control the outcome because it is all left to the market.” Given the three factors that I have mentioned, the state must accept the responsibility of establishing a clear, explicit strategy and it must be prepared to take such measures as are necessary to ensure that it can be achieved.
Michael Connarty: I thank the hon. Gentleman warmly for giving way. As a long-term Labour Member, I am naturally attracted to the idea that the state must take responsibility and must therefore think about the fair use of the public wealth for the public good should situations such as those that he has explained not be factored into any private decision. I have spent the past couple of years going round industry and I did not find any private producer or distributor of energy who would wish to use nuclear approaching the Government. There has been a sea change in the way that the private sector is approaching this matter. Am I missing something? I should be happy to hear of pleas of mitigation from the industry that I could advance.
Mr. Davies:
The hon. Gentleman, for whom I have great regard, may possibly be missing something. I think that his attention might have been momentarily distracted when I said that I did not believe that in this case it would be either desirable or necessary to go in for any subsidies to enable investment to take place in new nuclear generating capacity. What I did say was necessary was a clear regulatory framework that is not subject to subsequent change and a co-ordination role on the part of the Government. They should take
responsibility for a general strategy to which they would be committed and within which the private sector would be able to make long-term investment decisions with less uncertainty and, therefore, with a lower capital cost, as my hon. Friend the Member for Mid-Worcestershire rightly reminded the Chamber.
There are good reasons why, in this case, the state should take a role—this is standard classic economic theory, and I have not said anything at all revolutionary. Should it not do so, there would be market failures and we would all suffer as a country. That is my point about abut externalities. Laissez-faire is not appropriate. People like myself, and even the hon. Member for Linlithgow and East Falkirk (Michael Connarty) and most of the Labour party these days, believe in markets, capitalism and so forth, so we have common ground on this matter. I remind colleagues from both parties that there are good, sound, classic grounds in economic theory for accepting a greater role for the state in this case. It is similar, Mr. Speaker—
Mr. Davies: I mean Mr. Cook. I never know whether I am supposed to say, “Mr. Speaker”, “Mr. Cook” or “Mr. Chairman”. I always get it wrong, whichever I say.
There is an analogy with the railroads in the 19th century, when both major parties were totally committed to the idea that the state should not interfere in the economy at all, but realised that because of co-ordination and externalities, which I mentioned earlier—although they would not have used those words in those days—it was necessary for the state to take some action. So they did so. That is why a series of private Bills went through the House, without which we would not have built the railway system. The Americans had to do the same sort of thing in America. On the continent, the state took an even more explicit role in railway building.
I should like to emphasise, as my hon. Friend the Member for Mid-Worcestershire did, the enormous urgency of the matter. I have been looking at the excellent report from my hon. Friend’s Committee, which makes it clear that there is still some uncertainty about how far the advanced gas-cooled reactor stations’ life can be extended. We still do not know about that. Originally, a lot of such stations—Hinkley and so on—were going to be taken out of commission in 2011 or 2012. We might get a few more years, possibly up to 10 more, but it is quite clear to me that from 2015 or so those AGRs will be retired. The Magnoxes, the total capacity of which does not add up to as much as 2 GW—they are not enormous—are being withdrawn at the present time.
We have to act quickly if we are not to find ourselves in an absolutely appalling, disgraceful situation in which, although we proclaim our commitment to reducing carbon emissions in this country and our desire to have a reasonable balance and mix of dependence and a diversified set of risks in energy policy, we would allow the nuclear contribution to fall dramatically. That would be damaging and dangerous,
on the grounds that I have just touched on, and it will happen within 10 years, unless we take action very quickly indeed. I hope that the Government will act even more rapidly than has been anticipated. I would like to see them introduce a Bill in the Queen’s Speech in October this year that will bring about the necessary changes in the planning system to ensure that we do not have another disaster like the eight-year-long planning inquiry for Sizewell B, when Sizewell C happens—which I trust it will—or when Sizewell C’s successors come along. That is unnecessary.
I do not want to go into the mechanics and modalities that we might use to sort such matters out in future. Perhaps we should resort to private Bills. I remember, early on in my service in this place, sitting all night for a couple of nights on a private Bill on the Felixstowe dock and harbour scheme. [Interruption.] I think that my hon. Friend remembers that, too. We were both new in the House and, although it might be a traumatic memory, I do not think that I have ever spent 48 hours of my life more usefully. If we had not gone through two nights on that Bill the scheme would not have been built.
Mr. Frank Cook (in the Chair): Order. I have been very tolerant so far and I am happy to continue to be so, but this contribution is becoming somewhat rambling. We are not talking about Felixstowe harbour; we are talking about nuclear matters and examining the issues. Felixstowe harbour has nothing at all to do with it as far as I am concerned.
Mr. Davies: Mr. Cook, I recognise that. Felixstowe harbour was merely an example, if I may say so, of a successful way of getting a controversial and very necessary infrastructural project built through the planning system. I was making an analogy. I am sorry to be described as rambling and will try to avoid giving any grounds at all for being accused of that in future.
The Government need to do something urgently about the nuclear installations inspectorate. My hon. Friend the Member for Mid-Worcestershire knows more about what is going on there than I do. I would love to know—perhaps we will hear something from the Government—what the staff of the nuclear installations inspectorate have been doing. Have they just been taking salaries for a number of years and doing nothing at all, have they been working on and evaluating new types of nuclear power station, or have they been doing some third thing? I do not know what they have been doing, but it seems to me that their job involves being in a position at any time to license new types of power station.
Sadly, the inspectorate has not had anything to do for many years. I shall not find it easy to accept that it now has a huge backlog to catch up on, and that it will take many years before it can get its act together and approve a new nuclear power station in this country. The least that it should be able to do is leverage all the work that has been done by equivalent inspectorates in other countries.
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