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Energy Policy: Nuclear Power

My Lords, it is a privilege to be the first speaker to congratulate the noble Lord, Lord Cunningham of Felling. He comes to us after a career of great distinction in another place, and for me it is an added pleasure to follow someone who I hope I can regard as a fellow Cumbrian. He was the MP for Whitehaven and Copeland for 35 years. He has spoken to us with real authority and robustness, with just a touch of controversy that always adds a little spice to a maiden speech. I am sure we all look forward to his future contributions here, as we will to the maiden speech of my new noble friend Lord Turnbull, whom we will listen to shortly. I add my thanks to the noble Lord, Lord Jenkin of Roding, for giving us an opportunity to discuss the Government’s consultation document, and to do so explicitly in the nuclear context, for surely that is the key issue. It is an issue that the Government have consistently ducked. Nevertheless, one detects a wind of change—and not before time. It seems sensible to start with the Government’s four goals: first, to cut our carbon emissions by 60 per cent by 2050; secondly, to ensure reliability of supplies; thirdly, to promote competitive markets—I prefer the words ““competitive energy supply””, but I will leave that; and, fourthly, to ensure affordability. I go along with those goals except for ““affordability””, because that surely is a social issue and should be dealt with as such. We need to remind ourselves, however, that these goals are not independent of each other and how we weight them is a matter of judgment—and so, by simple extension, is the importance of the different fuels, the fuel mix. Here I take exception to the statement in the consultation document that,"““it is not the role of Government to decide the fuel mix””." I do not see how the Government can possibly duck fuel mix in broad policy terms. In the short time available, I shall restrict myself to renewables, gas, coal and nuclear. I do not think that we will get very far with renewables, notwithstanding the biomass lobby, the wave and tidal enthusiasts and the wind farm fan club. Even with the considerable implicit subsidy—the Government put it at £30 billion by 2020—we have made little progress. We all know the problems with wind: the need for back-up above 10 per cent; its dispersed nature; the environmental costs, not least the huge land take; and the huge cost of offshore. Of course renewables have a role to play, but I suggest that it will be of the second order. Then there is gas, which is by far our major energy source today. We all know that we will have exhausted the North Sea by 2020. We may be prepared to rely on the Norwegian interconnector, but, as others have suggested, we should surely not rely on gas from the former USSR area. Moreover, the advent of China and India onto world energy markets makes it seem likely that gas prices have reached levels which will remain for some years to come. We also need to remind ourselves that gas has 50 times the carbon emission rate of wind or nuclear on a lifetime basis. Nevertheless, it is probably only realistic to assume that it will be our major energy source until at least 2030. Thirdly, there is coal. One suspects that coal in cost terms will be as attractive as gas. But it produces twice as much carbon and so, surely, it is important—and one acknowledges the interest that the Government are beginning to take—to put considerable effort into tackling the costs of carbon sequestration and capture in coal. The same goes for gas, of course. It is surely also important that any new coal stations are designed to allow retrofitting in due course. Coal can, of course, be stored much more readily than gas, so I am sure that in due course it will become a major and reliable contributor. Finally, there is nuclear. It seems generally agreed that the stations now being ordered and built around the world will score highly on reliability and are probably cost-comparable to gas—nuclear has gained from the China factor. There is of course a caveat as to how they will be financed as the unit costs are sensitive to the discount rate. So there is the important question of what sort of regime would enable nuclear stations to be part of a commercial market. Decommissioning and waste disposal is the controversial issue, and here we have to wait for the waste management committee’s report. In the mean time we should remember that the new stations will produce only a fraction of the waste of the old ones, especially low-level waste, and that we have a large legacy of waste from both the old stations and military sources which in any case will have to be dealt with. I therefore conclude, from what has inevitably been a quick tour d’horizon, that a balanced, competitive and reliable UK industry would include a substantial nuclear share and that this will be the only way of achieving our carbon emissions target. The White Paper asked five questions which I hope I have answered adequately. In return, and in the two minutes left to me, perhaps I could pose a few questions which relate to what the Government envisage will be the institutional framework to carry forward their policy—a policy that will have to ensure that the appropriate levels and timing of investment take place. Where will the boundaries between the state and the commercial sector be drawn? How, for example, will the nuclear licensing process be dealt with? Here one must put in a plea for the choice of a single standard design so that new stations will save time and uncertainty by being pre-licensed. That is being done in America, as the noble Lord, Lord Jenkin, reminded us. Equally, of course, in the significant savings from serial production there is surely a lesson to be learnt from the successful French programme. Then again, thought will have to be given to the contractual arrangements on the revenue side, as this will affect the financing arrangements, and so forth. What will be the future of the renewables obligation? Will it apply to nuclear? As the noble Lord, Lord Jenkin, said, it is absurd that it does not get the same subsidy as renewables. Is thought being given to revisiting carbon taxes? There are a large number of difficult technical, economic and administrative issues and one wonders whether the DTI has the expertise and the manpower to tackle the subject. One wonders whether it would be best to proceed by way of an energy agency responsible for nuclear licensing, overseeing the investment in general terms and acting as the price regulator—in other words, to do away with Ofgem, and so on. If we are serious about global warming, time is not on our side—and I see it is not on mine, either.