Memorandum submitted by Greenpeace (EN 02)

 

 

Summary

The Energy Bill, its Explanatory Notes, and the Nuclear White Paper promise a package of measures that will protect the tax payer from future liabilities for decommissioning and waste from nuclear new build. This is not the case.

 

Instead, these proposals will protect the operators and their investors, limit their liabilities and ensure the taxpayer is ultimately responsible if the initial funding mechanisms fail to deliver. The Bill is intentionally vague about the detail of these mechanisms; most of which is still subject to consultation. Parliament cannot protect the public purse if it doesn't know how funding mechanisms will work.

 

We believe this section of the bill should be delayed until all the consultations are finished, that various clauses in the 2004 Energy Act be repealed to ensure complete transparency on taxpayer liabilities, and that any limit on operators' liabilities be outlawed.

 

In addition, the Energy Bill lacks vision and fails to bring coherence to a system that needs radical reform.  As a minimum the Bill should include:

1. Priority access for renewables to the grid network

2. Powers for the Secretary of State to introduce a Feed-In Tariff for small-scale, onsite renewable generation

3. Reform of Ofgem to make carbon emission reductions a duty

 

 

1.1 Greenpeace

Greenpeace Ltd (Greenpeace UK) is the autonomous regional office of Greenpeace, a campaigning organisation which has as its main object the protection of the natural environment. Greenpeace has regional offices in 40 countries, 2.8 million supporters worldwide and around 150,000 in the UK. It is independent of governments and businesses, being funded entirely by individual subscriptions.

 

1.2 Greenpeace was one of the first organisations to campaign for action to be taken to halt anthropogenic climate change. It has built up considerable expertise and has access to independent expertise on the links between energy use and climate change. The expertise includes scientific knowledge, understanding of the economics of the electricity market, and analysis of state subsidy, as well as understanding of how the development of traditional, centralised systems of electricity generation can have detrimental effects on the development of new, cleaner technology to combat climate change.

 

1.3 Greenpeace's expertise and status on climate change and nuclear power is recognised in a number of international and national fora. At international level, Greenpeace holds Economic and Social Council NGO status at the United Nations. Greenpeace has participated in and observed the UN's Climate Change Negotiations since 1989. Among Greenpeace staff members are lead authors on reports of the many chapters for the Intergovernmental Panel on Climate Change. Greenpeace has participated in and observed at the Convention on Bio-Diversity, including contributing to consideration of the impacts of climate change on bio-diversity, participated and observed at the Earth Summit in 1992, the 2002 World Summit on Sustainable development and the UN World Conference on Renewables. Greenpeace also has official observer status and engages in public consultations held by the World Bank, the International Energy Agency, the IMF and the Asian Development Bank.

 

 

2.1 Introduction: Climate Change - the carbon imperative

The Energy Bill is presented at a time when it is universally recognised that climate change is the gravest threat faced by mankind. The recent 4th Assessment Report from the Intergovernmental Panel on Climate Change (IPCC)[1] presented the firmest evidence yet that the imperative of the threat from climate change means the economies of the developed world must be decarbonised within such a rapid timeframe that radical action is necessary. We have less than a decade in which to slow, stop and reverse the trend of greenhouse gas emissions if we are to avoid the worst impacts of climate change.

 

2.2 An average rise in global temperature of 2C above pre-industrial temperatures is widely regarded as the limit beyond which irreversible climate change impacts will occur. Global greenhouse gas emissions, primarily carbon dioxide, have already generated a rise of 0.7C and due to the inbuilt lag in the earth's atmospheric system we are already committed to a further rise of approximately 0.7C. It is therefore clear that the window of opportunity to limit global temperature rise below 2C is closing swiftly. Climate change impacts are already abundantly evident, but if we fail to constrain our carbon emissions, such that we are on a rapidly decreasing emissions pathway by the end of the next decade, then we can expect that within decades from now climate change will be transformed from a key political agenda item into a threat to global security, economies and resources far greater than any seen in the global conflicts of the 20th century.

 

 

3.1 The need for radical changes in the energy system

As acknowledged in the 2003 Energy White paper, tackling UK climate emissions will have to be addressed primarily through the energy system, which must be drastically decarbonised. This can only be done through wholesale change, on a greater scale even than that seen at the time of privatisation of the energy system under the Conservative Government.

 

3.2 The good news is that the policy tools and energy technologies to achieve these demanding carbon targets are already available, and in addition many crucial renewable energy technologies such as wave, tidal and solar photovoltaic energy are on the brink of widespread implementation, in a similar position to wind power around 5-10 years ago.

 

 

4.1 The opportunity presented by an Energy Bill

However, in order to meet the challenge of climate change in the necessary timeframe, visionary leadership in gearing up policy changes and technology implementation will have to be shown. The Energy Bill sits within a progressive political context of a binding EU-wide target of 20% of energy to be generated by renewable energy by 2020, and legislation in the climate change bill to reduce UK greenhouse gas reductions by 30% by 2020. The Energy Bill takes minimal steps to achieve these targets, instead including devices to facilitate the growth of nuclear energy, a technology that will deliver too little too late. The Government's own sustainability advisors, the Sustainable Development Commission, has shown that even an optimistically large fleet providing 10GW of new nuclear power would deliver a mere 4% cut in carbon emissions sometime after 2020.[2]

 

4.2 Greenpeace's memorandum broadly falls into two sections. Part A will consider the key areas that are presently omitted from the Bill, whilst Part B will look more closely at the specific measures that the Bill contains, with particular emphasis on nuclear energy.

 

 

4.3 Part A: The Energy Bill - progress required

Before considering the substance of what is contained within the Energy Bill it is important and relevant to examine a number of key policy areas that the Energy Bill has not considered. These should be given careful consideration when formulating amendments to the Bill:

 

 

5.1 Reform of Ofgem to make reduction of carbon emissions a primary duty

Greenpeace supports changes in the remit of Ofgem. As outlined by the Sustainable Development Commission (SDC) in its report 'Lost in Transmission'[3], Ofgem was created at a time when climate change and the imperative to reduce carbon emissions were not high on the energy or political agenda. But we now live in a country that must have an electricity system that is almost totally decarbonised by 2050; yet Ofgem is not focused on achieving or facilitating this. Ofgem's primary duty should be revised in order that it includes a duty to reduce greenhouse gas emissions in line with Government targets. This would align Ofgem with Government climate change policy and provide a clear framework within which energy companies would proceed, guiding investment and strategic decisions.

 

5.2 Ofgem's remit could also be extended during the establishment of a regulatory framework for heat, which would augment and also be covered by, the revised duties to reduce greenhouse gas emissions.

 

5.3 A central concern of energy companies remains selling as many units of energy as possible, rather than providing a raft of energy services that reduce consumption and maximise efficiency. The Energy Efficiency Commitment (EEC) is an insufficient instrument to deliver the necessary carbon reductions. Energy regulation needs to be completely transformed such that energy companies can achieve benefits by reducing the number of energy units they sell. A framework to incentivise and support the establishment of energy service companies (ESCOs) would help to serve this purpose, enabling competitive and efficient enterprises to be established at any suitable scale.

 

6. Preferential pricing and grid access for renewable energy

Priority grid network access is necessary to clear the backlog of projects awaiting grid connection, best achieved using a 'connect and manage' approach. Recently announced investment in grid connections is to be welcomed[4], but if the Government is to achieve its EU proposed target of 15% of energy to come from renewables by 2020[5] then priority grid access for renewables is essential.

 

7.1 Comprehensive Feed-In Tariff (FIT) system

The Feed-In Tariff (FIT) has proved to be an extremely effective mechanism to incentivise significant expansion of renewable energy within the EU. FITs reward the producer of renewable energy by guaranteeing a long-term premium price for renewable energy sold back to the grid. The UK stands largely isolated in its rejection of FITs; the vast majority of EU states have successfully implemented FITs, leading to massive expansion of renewable energy in Germany for example, which now has 300 times as much solar energy and 10 times as much wind energy installed as the UK, and has turned its back on new nuclear. Freiberg, a German town with a population of only 200,000 has installed more solar energy than exists in the whole of the UK. Jobs growth in the German renewables sector has boomed as a result, now employing 250,000. Elsewhere, FITs have also proved highly successful in Spain and Denmark.

 

7.2 Feed-In Tariffs are highly effective in bringing about growth in renewables, at a cost to the consumer of 0.0056 per kWh in Germany (3% of household electricity costs)[6]. The present government stands alone in its rejection of a FIT, with the two main opposition parties having recently adopted FITs within their policy frameworks. Greenpeace would build on this growing political will by calling for a comprehensive long-term FIT system rewarding all producers of renewable energy. Some industry groups remain to be convinced of the case for a full scale FIT, but the case for a small-scale FIT is widely supported, and should be adopted by the Government.

 

7.3 Marine renewables are a case in point where support of this type could prove crucial in delivering success. The UK has a strategic advantage in developing this technology which can be exported globally, driving economic success and delivering worldwide carbon reductions. The UK is presently in a key position to exploit its position as a global leader in this sector if it puts in place support to deliver effectively, rather than a halfway house of rhetoric and minimal policy support. Further discussion of support for marine renewables is made below in 'R&D support measures'.

 

 

8.1 Comprehensive policy on heat and wastage

Our present centralised electricity system is hugely inefficient, wasting 67% of primary energy input, much of it through wasted heat lost up cooling towers. Other losses through transmission, distribution and inefficient end use mean that on average only 22% of primary energy input is used in the home or business. Losses from the grid networks account for around 7% of the total UK generating mix, which is equal to the entire generating output of Drax power station. Any other concern operating in this way would long since have imploded or reformed. Yet, the monolithic centralised system remains, throwing useful energy away at a time when we can least afford such waste. 

 

8.2 Provision of heat accounts for approximately one third of our CO2 emissions, yet the Energy Bill fails to respond to this through promotion of renewable sources of heat. Decentralised energy (DE), particularly using combined heat and power (CHP) technology, has a vital role to play in delivering energy efficiencies at levels unknown within the highly inefficient centralised national grid system. By generating and distributing energy within local energy networks, and capturing and redistributing waste heat in doing so, radical improvements in efficiency are achieved thereby reducing overall demand. This in turn provides energy security and reduces emissions, the two key Government energy policy drivers. DE is a reality, today around 40% of national electricity demand is met by DE in the Netherlands.

 

8.3 Government figures show there is potential within the UK to generate 25% of our electricity using CHP, mixing efficient use of gas and coal with other cleaner fuels such as woodchip, straw or biogas. A renewable heat obligation could have a major role to play in this area. Planning reform also has an important part to play in delivering DE. All new buildings should be required to incorporate DE technologies, and be compelled to connect to a heat network where one exists. Similarly, no new fossil-fuel generation should be approved unless it includes cogeneration.

 

 

9.1 Carbon standards on power stations

California has introduced a greenhouse gas emission performance standard for power plants. It prohibits utilities from entering into long-term contracts with power plants that exceed 1,100 lbs of CO2 per megawatt hour. (An emission standard equivalent to the emissions from a new natural-gas combined-cycle plant). Similar legislation has also been passed in Washington State. This ground-breaking standard in effect rules out energy provided from coal, the dirtiest fossil fuel, without the plant having some form of carbon capture and storage (CCS) in place - an unproven technology that is not operating commercially anywhere in the world. As Alistair Darling described CCS when Secretary of State for Trade and Industry, "it is commercially untried and untested. It is not being developed anywhere else in the world".[7]

 

9.2 The Government should take a lead in introducing similar standards in the UK, driving energy producers towards clean, efficient energy solutions. Further, it is important to recognise that CCS is not a panacea. The proposed technology is much vaunted but remains commercially unproven. New coal plants should only be approved when they are fitted with carbon capture and storage technology that is demonstrated to work.

 

 

10.1 Stiff energy efficiency measures, including top runner system

Whilst the Energy Bill looks at providing energy security partly through gas storage infrastructure, the fuel giving rise to least security concerns is the fuel you don't need to use, therefore energy efficiency should be a primary element of an Energy Bill. This is especially so for the 86% of our oil and gas consumption which is not used in generating electricity within the power system, being utilised in transport and for heating and hot water respectively.

 

10.2 Government figures state that a 30% energy saving can be made through energy efficiency measures by 2020, saving 12-13 MtC (Mega tonnes of carbon)[8]. Investment in energy efficiency is definitively the most cost-effective way to cut carbon emissions, saving more money than the cost of implementation. A widespread and effective energy efficiency programme aimed at all sectors and delivering cuts of this magnitude, would make very significant inroads towards closing the so-called energy gap predicted to open around 2015-17.

 

10.3 The 'top runner' system introduced in Japan has been very successful in stimulating energy efficiency. Diverging from  the widespread model of minimum efficiency performance standards (MEPS) the top runner system takes the most efficient model in a product category such as TVs or fridges and stipulates that the efficiency of this top runner model should become the standard within a set period, usually 4-8 years. By the target year, the weighted average of the efficiency of all the category products produced by a manufacturer must be at least equal to the top runner. Inefficient models are not banned, but simple labelling indicates those products failing to meet the target, and manufacturers are made accountable and incentivised to gain competitive advantage by producing efficient products. There is no reason to believe that UK legislation of this type would not deliver similar market transformation and carbon savings.

 

10.4 A range of other energy efficiency measures could be implemented, including an acceleration of the planned phase-out of incandescent light bulbs, statutory intelligent smart-meters to be implemented more rapidly than the current Government timetable, wholesale reform of the inadequate and fragmented system of grants for household energy efficiency and renewables installation - to be integrated with a FIT system as outlined, and a vigorous programme for retrofit to raise energy efficiency for existing housing stock.

 

 

 

 

11.1 R&D support measures

R&D in renewable energy has never received the enormous financial backing given to non-renewables, particularly nuclear energy; a level playing field has been a distant dream of renewable developers. But the carbon imperative now means that a range of renewables should receive sufficient support to be developed to the point where they may be brought onstream in a timely manner, making the most of the enormous economic opportunities that exist in green collar jobs.

 

11.2 Expert opinion, given in recent evidence on renewable energy technologies to the Innovation, Universities and Skills Committee[9], stated that although Britain leads the world in marine technology, it is in danger of falling behind if developers do not receive support to take technologies through to full-scale commercial deployment. The Pelamis wave energy system, developed by the Edinburgh energy company OPD, has been successfully enabled by the feed-in tariff in Portugal when a more visionary approach by the UK Government might have seen this technology first sited off the Scottish coast. Funding from the Scottish Executive is now leading to installation of Pelamis in Orkney.

 

11.3 Belated UK support for marine technology has been forthcoming via the 50 million Marine Renewables Deployment Fund, but at relatively low levels, and pitched at a late stage in technical development. More substantial and focused support is needed to make progress on research and development in order to bring about a scaling up of marine technology that can maximise its potential to deliver significantly over the next couple of decades. There are several government and industry estimates published for marine energy potential. A conservative view based on these, including one of the government's own studies into what could be achieved economically by 2020, suggests that 12% of UK electricity - or approximately 1/3 of the so called 'energy gap' - could be met by marine power.[10]

 

12.1 Vehicle efficiency

Grave concerns over the sustainability of biofuels raised by Greenpeace and some other NGOs have now entered mainstream debate and the unsustainable rush to biofuels is being called into question by authoritative bodies and figures such as the Environmental Audit Committee[11], Professor Robert Watson (DEFRA Chief Scientific Advisor) and Stavros Dimas, EU Environment Commissioner. The Renewable Transport Fuels Obligation (RTFO), due to come into force in April 2008, should be suspended until such time as concerns on sustainability have been resolved. Vehicle efficiencies can be delivered in other ways, starting with more robust standards on emissions within a more rapid pathway than are under discussion within the EU.

 

12.2 There are a number of other areas outside the Government's framing of the Energy Bill where Government policy is in direct conflict with its carbon targets, particularly in transport, such as plans for a third runway at Heathrow and road expansion schemes.

 

 

13. Recommendations for inclusion in the Energy Bill

It is clear that the scope of the Energy Bill lacks vision and fails to bring coherence to a system that needs radical reform.  As a minimum the Bill should include:

1. Priority access for renewables to the grid network

2. Powers for the Secretary of State to introduce a Feed-In Tariff for small-scale, onsite renewable generation

3. Reform of Ofgem to make carbon emission reductions a duty

 

 

14.1 Part B: New Nuclear Power and the Energy Bill

The bulk of the rest of this submission will focus on nuclear energy. Examining the detail of the Energy Bill reveals a number of measures that are questionable, requiring careful and painstaking examination in Committee.  

 

14.2 During its recent public consultation on the Future of Nuclear Power[12] the Government was at pains to make clear that there would be absolutely no tax payer subsidy for new nuclear power stations. The Secretary of State for the Department of Business, Enterprise and Regulatory Reform himself said that[13]:

 

"There won't be any taxpayers subsidy for new nuclear if this is the decision we make coming out of the consultation"

 

14.3 Greenpeace believes that the provisions in the Energy Bill will fail to deliver on this promise unless a specific amendment, guaranteeing no future subsidy is included in the main legislation.

 

14.4 In its subsequent White Paper on Nuclear Power[14] the Government has proposed a series of complex interdependent measures to facilitate new nuclear power in the UK. The Energy Bill Explanatory Notes[15] explains that the Government is committed to putting in place a framework that will ensure that,

 

"energy companies which operate new nuclear power stations accumulate funds to cover their full decommissioning costs and their full share of waste management costs. It will be a prerequisite for energy companies seeking to construct any new nuclear power stations in the future to fulfill this requirement." (our emphasis)

 

14.5 However, Greenpeace believes that reading the White Paper, the Explanatory Notes and the Energy Bill[16] itself shows that the proposed legislation will not meet public and Parliamentary expectations regarding funding to cover nuclear liabilities from new build or associated activities. A review of all three documents shows that there is a significant degree of policy slippage between what is in the White Paper and the provisions put down in the Energy Bill. In addition, omissions of key issues from the Energy Bill risk exposing taxpayers to the risk of having to cover new nuclear liabilities in the future.

 

 

15. Summary

Put very simply, the Energy Bill, promoted as a measure which will safeguard the public purse against funding the liabilities of failed future nuclear operators, does not meet these objectives. Through omission it appears to provide more support for the nuclear industry than security for the taxpayer. In summary, Greenpeace believes that the shortcomings of the Energy Bill are as follows:

 

It provides a broad description - but not a prescription - of how funds are to be established and what is covered, albeit with caveats. But it does not cover key areas such as who decides what the charging mechanisms are.

 

The Energy Bill explains how the Secretary of State for the Department of Business, Enterprise and Regulatory Reform will approve or modify funds for decommissioning and waste management. However, this power is not shared with the Secretary of State for the Department of Environment, Food and Rural Affairs, even though this department has many responsibilities covering the issue of nuclear waste.

 

The issue of a financial cap on future nuclear liabilities, and who makes the final decision on this, is not covered in the Energy Bill.

 

The Energy Bill does not repeal the provisions of the Energy Act (2004)[17] that allow for the Secretary of State to direct the Nuclear Decommissioning Authority (NDA) to cover both the management and the financing of liabilities from future private nuclear operators.

 

The body proposed to give scrutiny and advice on waste funding will not have any powers, but be purely advisory and appointed by the Secretary of State for the Department of Business, Enterprise and Regulatory Reform.

 

There is no evidence that review of the adequacy of the nuclear liabilities fund will involve public or Parliamentary consultation, nor is there any compulsory timeline for a review of funding arrangements.

 

Flexibility in funding could potentially be linked to revenue streams, as opposed to monies in the fund. This could make some aspects of decommissioning or waste management reliant on the operators' performance (as is currently the case with British Energy) and is contrary to the White Paper's assertion that funding will not be reliant on company performance. Experience with the NDA has shown that relying on revenue to cover nuclear liabilities is a gamble. Instead this should only be done on known committed funds.

 

This part of the submission will examine seven separate areas of concern and offer suggested recommendations to alleviate the problems raised:

 

- Guiding principles and the Energy Bill

 

- The "base case" consultation and capping of liabilities

 

- Clauses in past legislation that must be repealed

 

- Funding and its coverage

 

- Definitions and defined matters

 

- Decommissioning costs

 

- Nuclear Liabilities Financing Assurance Board

 

 

16.1 Guiding principles and the Energy Bill

There are issues concerning the timing of the passage of the Energy Bill and associated consultations on guidance on funds. The first two consultations during the progress of the Energy Bill will cover:

 

Guidance in assisting businesses in setting out and costing the steps involved in decommissioning and managing radioactive waste.

 

Guidance in assisting operators in setting out acceptable proposals for how sufficient funds will be accumulated to meet the costs identified.

 

16.2 Quite how the responses to the consultation will feed into the Parliamentary debate on the Energy Bill has not been explained. Yet timing is critical because the Energy Bill itself provides little information or direction on a range of issues, e.g. transparency of funding arrangements. Instead these are left to the guiding principles, of which only a brief overview is given in the White Paper (Para 3.55-3.63). These key issues are not prescribed in the Energy Bill, but are too important to be left merely to guiding principles and be risk of misinterpretation.

 

16.3 The White Paper (Para 3.63) notes:

 

"In addition, the consultation on guidance will set out for comment the information that the Government proposes to offer industry in terms of fund structure; fund governance; the process for review of the fund's performance and cost estimates; investment strategy for the fund; how monies should be disbursed from the fund; change control of the operator; winding up the fund; and protection to top up an insufficient fund." (our emphasis)

 

16.4 Greenpeace is not sure that such matters should be left simply to guiding principles. The issue of guiding principles and the risks of how adherence to them might slip as a result of failings in the Energy Bill are highlighted in the Explanatory Notes (Para 203), which explains:

 

"If the nuclear site operator does not follow the guidance in designing a funded decommissioning programme, this will not necessarily mean that the Secretary of State will reject the programme. Where a submitted programme does not conform to the principles set out in the guidance, the operator will have to demonstrate that the proposals meet the overall objectives of ensuring that the operator makes prudent provision to cover its costs of decommissioning and long term waste management and disposal, whenever these liabilities arise. As long as an operator can demonstrate this, a funded decommissioning programme could still be approved. The guidance will not prescribe the arrangements that operators must put in place, but rather it will set out principles to assist operators in understanding how these objectives could be met to the satisfaction of the Secretary of State."

 

This clause will no doubt provide huge comfort to the nuclear industry.

 

16.5 Greenpeace Recommendations:

 

That the passage of the Energy Bill be delayed until the issue of guiding principles is consulted on and fed back to Parliament and the Secretary of State for the Department of Business, Enterprise and Regulatory Reform.

 

Where applicable principles become prescriptions and are specifically included in the Energy Bill. For instance if a principle is that monies from profits are allocated to a liabilities fund before investor dividends are paid, then this should be explicitly spelt out.

 

 

17.1 The "base case" consultation and capping of liabilities

Only on close reading of the White Paper does it become apparent that there will also be a consultation on a "base case" to set out a means for costing waste management and decommissioning. According to the White Paper (Para 3.64) the base case is being undertaken so Government:

 

"Can have confidence that owners / operators of any new nuclear power stations make contributions that meet the full costs of decommissioning and their full share of waste management costs."

 

17.2 This has a direct link to Government plans to allow measures that would allow nuclear companies to cap their liabilities, leaving the tax payer exposed if estimates for dealing with waste increase, as they invariably do. The White Paper (Para 3.74) explains:

 

"The Government plans to use the exercise on waste cost modelling to set a fixed price or upper limit for nuclear operators. This price would be set at a high level, including a material risk premium over and above expected costs. This risk premium will help to ensure that the operator bears the risks around uncertainty in waste costs and will provide the taxpayer with material protection."

 

17.3 Clearly, potential exposure to spiraling liabilities will make finding investment, predicting the right funding levels and providing the necessary funding virtually impossible. So the Government intends to ensure money is available by capping the risk and providing a mechanism for the taxpayer to meet the costs. The flexibility in funding arrangements will be incorporated in the Energy Bill (Clause 44) but it does not cover the issue of capping liabilities. Instead it will be dealt with under the consultation base case exercise.

 

17.4 The base case consultation will cover "what an approvable decommissioning programme should contain" (White Paper Para 3.68) and estimate the actual costs of decommissioning and waste management from new build. Though ostensibly the NDA's responsibility, the Government has very direct control over this matter. It can, for example, "ensure" capping liabilities through deciding the full share for nuclear waste disposal costs. In response to a Greenpeace Freedom of Information request the NDA admitted that Government will decide on funding for a national nuclear waste repository and cost allocation. This will be determined by the neither market nor the NDA. A favourable rate of charging for disposal costs will effectively mean a subsidy to the industry, even if they meet their funding requirements.

 

17.5 Ironically, in the White Paper (Para 3.74) the Government implies a potential windfall for the taxpayer. Yet it fails to mention what will happen if additional costs are incurred. These are highly likely over the timescales involved. Further, the base case will be determined outside the scope of Parliamentary debate on the Energy Bill. This could mean that any positive conditions laid out in the Energy Bill may be lost through the base case consultation.

 

17.6 Greenpeace Recommendation:

 

Make sure that there is absolutely no cap on funding liabilities for future new build operators, their investors or shareholders.

 

That all parties that have a financial interest in new nuclear build (including the plant operators, parent bodies and controlling interests) are defined in the Bill and are required to be party to an approved funding programme.

 

Delay the passage of the Energy Bill until all consultations have been carried out first, then set down legislation that is prescriptive (with any flexibility favouring the taxpayer), rather than rushing through a Bill reliant so heavily on its implementation on guidance and principles that may be fatally undermined by the conclusions of the these consultations.

 

 

18.1 Clauses in past legislation that must be repealed

In its consultation on The Future of Nuclear Power (Para 98)[18] the Government claimed that:

 

"Any private sector developers of new nuclear power stations would be required to meet their full decommissioning and full share of waste management costs."

 

18.2 What the Government failed to spell out in any of its consultation documents was that it had already passed legislation, in the shape of the Energy Act (2004) containing clauses that were specifically designed to allow the Secretary of State to direct the NDA to take over the liabilities of any failed future private nuclear operator. In fact, in 2004 the Government deliberately rejected amendments to the then Energy Bill that would have ended the possibility of guarantees over future nuclear liabilities, stating that there may be some liability to be borne by Government,[19]

 

"But using the NDA as a conduit or interface for any future British Energy-type crisis should not be prevented by this legislation."

 

18.3 This means that the Government can step in, as happened in the case of British Energy, and pay for part or all future nuclear liabilities if funding by nuclear private companies was insufficient to meet this cost. This means that the Energy Bill, promoted as protecting the public purse, will fail by not ensuring full private funding for liabilities and by not repealing those parts of the Energy Act (2004) that could be used for taxpayer bailouts of private company liabilities.[20]

 

18.4 Greenpeace Recommendation:

 

The Energy Bill must repeal those clauses in the Energy Act (2004) designed to allow the NDA to take over the liabilities of any failed future private nuclear operator.

 

 

19.1 Funding and its coverage

The EN (Para 201) explains that a new nuclear operator:

 

must also provide (i) prudent estimates of the costs of decommissioning and clean-up and - to the extent prescribed by order - of the cost of management of waste during the operation of the installation; and (ii) for how it will accrue monies to cover the costs of decommissioning and clean-up that it has identified and, again where prescribed by order, the costs of management of waste. (our emphasis)

 

19.2 From this it would seem that all aspects of waste management, clean up and decommissioning will be covered by a fund. Yet the reference to "prescribed by order" may indicate possible scope for exemptions. The Explanatory Notes (Para 202) in discussing Clause 41 of the Energy Bill notes that the clause:

 

"requires a person (or any subsequent person) applying to construct or operate a new nuclear power station to submit a funded decommissioning programme for approval. Subsection (4) explains that a "funded decommissioning programme" is a programme which makes provision for certain technical matters (for example, the activities involved in decommissioning a relevant nuclear power station) and provision for how certain of those technical matters ("the designated technical matters") are to be financed."

 

19.3 The Energy Bill (Clause 410) describes these technical matters as relating to:

 

"(a) the treatment, storage, transportation and disposal of hazardous material (within the meaning of section 37 of the Energy Act 2004) during the operation of a nuclear installation on the site, (b) the decommissioning of any relevant nuclear installation and the cleaning-up of the site."

 

19.4 Yet is it by no means certain that all of the above will be covered by an approved fund. For, as the EN (Para 209) explains that the Secretary of State has the power to:

 

"Prescribe by order...which of the matters...are designated technical matters...which are required to be financed by the programme. By contrast, the decommissioning and clean-up of power stations and sites must always be financed by the programme."

 

19.5 From this it appears that storage, transportation, and disposal of hazardous material could be funded differently from a decommissioning and clean up programme, which must always be funded by a fund. The distinction between these activities and potential prescription or not under an approved fund is not explained anywhere.

 

19.6 Greenpeace Recommendation:

 

Make absolutely clear how the approach to funding, as laid out in the White Paper, will be properly transparent and clarify exactly what will be covered under it.

 

 

20.1 Definitions and defined matters

A further problem with Clause 41 of the Energy Bill is that it relies on Section 37 of the Energy Act (2004) for definitions of key activities. Although the Energy Act covers some of the "technical matters" the Energy Bill refers to it does not define what disposal means. Omissions such as this could become a contentious matter as disposal is open to a number of interpretations.

 

20.2 In some cases "disposal" could mean the physical transfer of wastes to another operator / handler. Is it intended that disposal in this sense could mean, for example, transfer of spent fuel to a NDA encapsulation plant? Would such disposal have to be "accompanied" by the necessary funds? How will such transfers be covered? Under guiding principles or somewhere else? It is worth noting that the Committee on Radioactive Waste Management (CoRWM) favours the concept of disposal as being deep disposal without keeping a repository open for monitoring and retrieving the wastes, should that prove necessary. Yet many communities and NGOs have expressed a desire for "phased geological disposal" (allowing possibly for 300 years underground storage before closure of a repository) as disposal. How will the Energy Bill and the guidance, principles and base case yet to be consulted on, allow for the possibility of "phased geological disposal" and how would the funding for such an eventuality be covered by the Energy Bill?

 

20.3 Greenpeace Recommendation:

 

The Energy Bill should contain clear definitions of the technical matters to be covered by an approved fund.

 

 

21.1 Decommissioning costs

The White Paper (Para 3.61) notes that a decommissioning fund

 

"should generate a sum of money to meet the operator's liabilities before the station reaches the end of its generating life."

 

21.2 This raises issues around when reactor decommissioning costs should be set aside. Full decommissioning costs should be available from the time a reactor is actively commissioned as it is at this time the plant becomes irradiated and contaminated. Yet historically most decommissioning fund are accrued towards the end of a reactor's lifetime, once capital and interest repayments have been made, grid connections costs repaid and investors given dividends. Timing of the establishment of funds - and when payments are made - is crucial.

 

21.3 The White Paper (Para 3.77) makes some mention of the potential disadvantages of timing for decommissioning:

 

"It is not intended that incentives will be provided through the fiscal regime to invest in nuclear power generation in preference to other types of electricity generation. The Treasury and HMRC are, however, exploring the possibility that the timing of nuclear decommissioning could create a potential tax disadvantage for nuclear operators and, if so, whether it may be appropriate to take action to ensure a level fiscal playing field between nuclear power and other forms of electricity generation." (our emphasis)

 

21.4 The Government does nothing to ensure a level playing field on decommissioning funds by bringing surety up front for reactor decommissioning, as is required for wind farms under the Energy Act (2004).

 

21.5 Greenpeace Recommendation:

 

Require full decommissioning costs to be available up front once a reactor is actively commissioned.

 

 

22.1 Nuclear Liabilities Financing Assurance Board

According to the White Paper (Para 3.76) the Nuclear Liabilities Financing Assurance Board is being set up ostensibly to oversee funds, but critically it will not have any real powers. It is claimed it will "provide independent scrutiny and advice on the suitability of the decommissioning programmes submitted by operators of new nuclear power stations," but at the same time its role will be "a purely advisory body and will have a tightly defined scope focused solely on ensuring that the outcomes intended will be delivered and that robust financial arrangements for decommissioning and waste management disposal are put in place by operators." Quite how it will ensure 'robust' financial arrangements when it has no powers is not explained.

 

 

22.2 Greenpeace Recommendation:

 

Mandatory third-party independent oversight to oversee funding through either the National Audit Office and / or a Parliamentary committee.

 

 

23.1 The Energy Bill: Fit for Purpose?

As well as the omissions from the Energy Bill and policy failures within the Bill as noted previously, the Bill itself signally fails to deliver on the strategy outlined by the Secretary of State for Business, Enterprise and Regulatory Reform. In his statement to the House of Commons on January 10, the Secretary of State said,

 

"Our strategy, as set out in our Energy White Paper last year, is designed to achieve two objectives - first, to ensure that the UK has access to secure energy supplies and, secondly and together with other countries, to tackle the global challenge of climate change."

 

23.2 This correctly highlights two of the most pressing issues of our time, but the Bill does not provide the answers to these issues, particularly with regard to its provisions for new nuclear energy and in respect of the enormous ramping up of renewable energy the Government is now committed to via its commitments to the EU 2020 renewables target. In commending the 2003 Energy White Paper to the House of Commons the then Secretary of State for Trade and Industry, the Rt Hon Patricia Hewitt, stated,

 

"It would have been foolish to announce .... that we would embark on a new generation of nuclear power stations because that would have guaranteed that we would not make the necessary investment and effort in both energy efficiency and in renewables."

 

Nothing has changed since then.

 

23.3 The political pathway that could deliver the rapid carbon cuts needed to combat climate change may not open up until well after the Government's White Paper on Renewable Energy due in 2009, currently being developed in response to the agreed EU target of 20% of all final energy to be provided by renewable sources by 2020. The UK allocation within this target is proposed to be 15% which, given the constraints on achieving renewable energy within the heat and transport sectors, translates into approximately 35% of UK electricity to be generated from renewables by 2020, at a time when the present UK target for renewable electricity is 15% by 2020.

 

23.4 This will require a massive yet achievable expansion of renewable energy, decentralised energy and energy efficiency that this Energy Bill fails to promote sufficiently or appropriately. It is clear that the Energy Bill as formulated will not deliver the visionary transformation required in our energy system. The UK has lost ground dramatically to other states - within the EU only Malta and Luxembourg having installed a smaller proportion of renewables than the UK. But even after more than 10 years of tinkering with UK energy policy, parading admirable rhetoric in international arenas whilst dithering domestically, the UK still has the opportunity to turn rhetoric into reality and grasp the prize of achieving energy security and combating climate change through the policy framework we have outlined. Scope for amendments to this Bill can only go so far, this Energy Bill will require reinvention to seize the opportunity before it.

 

February 2008



[1] Intergovernmental Panel on Climate Change (IPCC) (2007), Fourth Assessment Report:

Climate Change 2007: Synthesis Report - Summary for Policymakers

http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf

 

[2] Sustainable Development Commission (2006) 'The Role of Nuclear Power in a Low

Carbon Economy'

http://www.sd-commission.org.uk/publications/downloads/SDC-NuclearPosition-2006.pdf

 

[3] Sustainable Development Commission (2007) 'Lost in Transmission: the Role of Ofgem in a Changing Climate' http://www.sd-commission.org.uk/publications/downloads/SDC_ofgem_report%20(2).pdf

 

[4] Ofgem and Department for Business, Enterprise and Regulatory Reform (January 22 2008), joint press release 'Offshore renewables to get connected with up to 2 billion investment' http://www.ofgem.gov.uk/Media/PressRel/Documents1/Offshore%20TransmissionFINAL.pdf

 

[5] European Commission (23 Jan 2008), 'Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources' http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf

 

[6] Cited in 'Stern Review: The Economics of Climate Change' (2006), Part IV: Policy Responses for Mitigation - Chapter 16: Accelerating Technological Innovation, Box 16.7 Deployment support in Germany

http://www.hm-treasury.gov.uk/media/C/7/Chapter_16_Accelerating_Technological_Innovation.pdf

 

[7] Alistair Darling (6 Jun 2007), Hansard Column 338

http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070606/debtext/70606-0016.htm#07060669002270

[8] Energy White Paper: meeting the energy challenge (2007), Chapter 2: Saving Energy

http://www.berr.gov.uk/files/file39566.pdf

 

[9] Innovation, Universities and Skills Committee (23 Jan 2008), Renewable Electricity-Generation Technologies - oral evidence session

 

[10] http://www.cabinetoffice.gov.uk/upload/assets/www.cabinetoffice.gov.uk/strategy/piuh.pdf

 

[11] Environmental Audit Committee (2008), 'Are Biofuels Sustainable?'

http://www.publications.parliament.uk/pa/cm200708/cmselect/cmenvaud/76/76.pdf

 

[12] http://nuclearpower2007.direct.gov.uk/

[13] http://www.number10.gov.uk/output/Page13025.asp

[14] http://nuclearpower2007.direct.gov.uk/docs/WhitePaper.pdf

[15] http://www.publications.parliament.uk/pa/cm200708/cmbills/053/en/2008053en.pdf

[16] http://www.publications.parliament.uk/pa/cm200708/cmbills/053/2008053.pdf

[17] http://www.opsi.gov.uk/acts/acts2004/ukpga_20040020_en_1

[18] http://www.berr.gov.uk/files/file39197.pdf

[19] Lord Whitty, Lords Hansard, 15th January 2004, Column GC172 http://www.publications.parliament.uk/pa/ld200304/ldhansrd/vo040115/text/40115-23.htm#40115-23_spnew0

[20] This has already been confirmed by an NDA spokesman. See http://www.nce.co.uk/energy/news/2008/01/operators_to_snub_nuclear_power_programme_plans.html