Building New Nuclear: the challenges ahead - Energy and Climate Change Contents

8  Recommendations

Consequence of failing to deliver new build

1.  We conclude that while the cancellation or reduction of the UK's new nuclear programme may cause challenges for energy security, it would have a much more significant impact on the UK's ability to meet carbon reduction goals, making our legally-binding long term targets extremely challenging, if not impossible to meet. (Paragraph 21)

2.  We also conclude that failing to deliver the 16GW new build that is currently under development could undermine any hopes of developing new funding models for subsequent nuclear new build. This would make it likely that future projects would not be able to raise the necessary capital, raising the prospect that it would not be possible to build any further nuclear plant without state funding (see paragraph 45). (Paragraph 23)

Will the new nuclear programme be delivered?

3.  We commend both the Government and industry in their efforts to date to learn lessons and adopt best practice from nuclear new build projects in other countries. It is still early days for new build projects in the UK, so it will be important to keep monitoring developments elsewhere in the world for emerging lessons and ideas that could be adopted in the UK. (Paragraph 30)

4.  We note that the first new nuclear power plants in the UK are likely to take longer to build than subsequent plants of the same design. This is because while some lessons can be learnt from experience overseas, differences between the UK context and other countries will mean these projects should still be considered "first of a kind" initiatives. (Paragraph 31)

5.  The Government is taking steps to facilitate and encourage new build nuclear in the UK but the final decisions to go ahead or not will be taken by boardroom executives rather than Ministers. Given that ultimately these decisions are beyond the Government's control, it is worrying that DECC does not have any contingency plans in place for the event that little or no new nuclear is forthcoming. Crossing one's fingers is not an adequate or responsible approach when the UK's legally binding climate change commitments and energy security are at stake. For a department whose principal priorities are to ensure energy security and carbon reductions, DECC appears to be overly reliant on aspiration and hope. While we share the Minister's hope that new build will be delivered as planned, we nevertheless recommend that DECC begins exploring contingency options as a matter of urgency. (Paragraph 35)

The Government's solutions

6.  We support the introduction of Contracts for Difference as a way of reducing revenue and policy risk for nuclear new build projects. However, new nuclear should not be delivered if the price is too high. It is essential that any contract represents value for money for the consumer. We reiterate the recommendation made in our pre-legislative scrutiny of the draft Energy Bill that at the very least, the nuclear strike price should not be higher than that given to offshore wind, which is hoped to be around £100/MWh by 2020. We further note that other low-carbon technologies are likely to receive strike prices significantly below this level and that nuclear will need to offer advantages compared with these technologies if it is to deliver good value to consumers. (Paragraph 49)

7.  The UK Guarantees scheme may help to bring forward investment in Hinkley Point C, but it is not clear whether support will still be available for nuclear new build projects that are further away from making a final investment decision (such as the NuGen and Horizon projects). Given the important role for nuclear generation in the UK's future energy mix, the Government should extend this support to all nuclear new build projects, which may require increasing the amount of available assistance to more than £50 billion. (We note that the UK Guarantees scheme does not involve expenditure, as long as the guarantees are not called in.) (Paragraph 54)

Alternative approaches

8.  As discussed in paragraphs 50-51, above, there is still a great deal of concern about the level of transparency of the strike price negotiations between nuclear developers and the Government. Although Mr de Rivaz told us that construction cost overruns would not be incorporated into the strike price for the Hinkley Point C project, the Minister was less clear on this point. We urge the Government to set out in its response to this report who is going to take the risk of construction costs being higher than anticipated: consumers (by incorporating this risk into Contracts for Difference), taxpayers (through the UK Guarantees scheme) or project developers. (Paragraph 58)

9.  We recommend that DECC monitors progress toward developing small nuclear reactors, so that the possibility of including these as part of the UK energy mix remains open. (Paragraph 60)

Building public support

10.  It is important that local communities have an opportunity to engage in genuine dialogue about risk management with both the regulators and the developers. It is disappointing that there does not appear to be a natural forum for this kind of debate at present. The ONR and Environment Agency should plan their public engagement activities to coordinate better with the planning process, so that regulators and developers can be present at the same public meetings. (Paragraph 78)

11.  There is a mismatch between the capacity of developers and that of local communities to participate fully and effectively in the planning process, particularly where large, complex and technical projects such as building a new nuclear power station are concerned. The Government should consider whether it is possible to provide advice and support to local communities living near to nationally significant infrastructure projects in a more systematic way than the current approach, which depends heavily on individual local authorities. For example, an independent advice service for communities living near to any nationally significant infrastructure project could be established. It could help local communities with interpretation of technical documents and provide advice on what types of compensation might be permitted under Section 106 agreements. It could be funded by levy on developers submitting applications to the Planning Inspectorate. (Paragraph 81)

12.  The Government has argued that communities hosting renewable energy installations play a vital role in meeting a national need for secure, clean energy, and should be able to benefit from hosting such projects. Communities hosting nuclear power stations are contributing towards the same aims, and so it seems reasonable that they should also be able to benefit from hosting new-build projects. We recommend that Government extends the scope of its proposal to allow local authorities hosting renewable energy projects to retain business rates to include all forms of low-carbon energy (renewables, nuclear and carbon capture and storage). (Paragraph 83)

13.  Unlike renewables, nuclear power stations take a long time to build and therefore have the potential to cause considerable disruption to local communities for an extended period of time. Government should investigate whether it could be possible to provide any additional forms of community benefit during the construction period (beyond the compensatory measures already agreed to in the section 106 deal).(Paragraph 85)

Potential for bottlenecks and delays

14.  We recommend that DECC's Office for Nuclear Development (OND) investigates ways in which it might open a dialogue between the different consortia that are involved in nuclear new build in the UK. The OND should aim to facilitate a smoothing out of orders to supply chain companies in order to avoid crunch points and resultant delays. (Paragraph 91)

15.  We were pleased to see that DECC's Nuclear Supply Chain Action Plan (published after we had finished taking evidence) acknowledged that the costs involved in quality accreditation could be a barrier to entry into the nuclear supply chain. However, we were disappointed by the timetable for action - the first meeting with industry to "understand issues" will be held in the first quarter of 2013 and further meetings were not mentioned. If, as is widely expected, EDF makes a final investment decision to go ahead with Hinkley Point C in the near future, potential suppliers for that project might miss out. We urge DECC to bring forward solutions to this challenge by summer 2013 in order to maximise opportunities for domestic supply chain industries. (Paragraph 96)

16.  We asked the Minister whether the Government would provide assistance to businesses who wanted to access supply chain opportunities. He told us "I think we will look again at how the process we have already begun can be tailored to bring about exactly what you suggest, which is the opportunity for as many smaller businesses as possible to engage. When I have done that I would be more than happy to write to the Committee setting out what we have done already and what more we think we might be able to do to ensure that outcome". We look forward to receiving the Minister's report on this matter. (Paragraph 97)

17.  Significant training will be required for the UK to benefit from new job opportunities. Initiatives like the energy centre in Bridgwater College are encouraging, but stronger leadership from Government about the future role of nuclear could help to encourage more people into this area of work. (Paragraph 103)

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