Parliament 2010-07-08

Energy Security

Motion made, and Question proposed, That the sitting be now adjourned.-(Mr Vara.)
2.30 pm
The Minister of State, Department of Energy and Climate Change (Charles Hendry): I am grateful to you, Miss Begg, for calling me to open this important debate on a subject fundamental to our country's future. Energy security is a high priority on the Government's political and economic agenda. Our view is that energy security and climate change go hand in hand and must be addressed together. At the moment, we need particularly to secure new investment in the United Kingdom's energy generating capacity in order to compensate for facilities that will soon be decommissioned.

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Turning to the specific technologies, we believe that nuclear should be part of the mix as long as it can be built without subsidy; we broadly agree with the former Labour Government in that respect. According to the coalition agreement, if it can be built without subsidy, it will be part of the mix. We are clear that that means the private sector should be responsible for the building, running, decommissioning and long-term waste disposal costs of any new nuclear power stations. The Government must be involved in the effort to remove barriers to investment-the work of the Office for Nuclear Development has been important in that respect-and ensure that the appropriate safety, security and environmental regulations are in place. We see nuclear as part of the mix, but realistically, even if everything goes according to the most optimistic plans, it will be 2017 or 2018 before new plant can be constructed.


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2.58 pm
Emily Thornberry (Islington South and Finsbury) (Lab): It is a pleasure to serve under your chairmanship, Miss Begg. To keep the lights on, the country needs both adequate levels of storage and security of supply, and that cannot be left to the vagaries of the market

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The Minister has for a long time been a supporter of nuclear power, but the Government are unable to give clear leadership on the issue because they do not have a position-they have a large number of positions. They are notionally in favour in nuclear power, but the Lib Dem representative will speak against it, the Lib Dem party will refuse to vote on it, and I have yet to get my head around what the Secretary of State's position is. Frankly, the industry needs to know and to have clear leadership.
Charles Hendry: The heads of all the nuclear companies have said that they are entirely comfortable with our position and understand it precisely. Will the hon. Lady not accept their assurance that our position is rational, sensible and realistic, rather than creating scares that do not exist?
Emily Thornberry: As Christine Keeler said, "They would say that, wouldn't they?" The point is that the nuclear industry needs to know what the Government are doing. The industry will not pick a fight with the Government at such a crucial stage, but it needs to know where they are going. The Government have a number of positions, and it is not easy for the industry in those circumstances. Of course, the industry will not come out publicly and criticise the Government-that is our job in opposition. However, we are confident that it does not help the nuclear industry for the Government to hold four positions at the same time on the future of nuclear power.

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Charles Hendry: There is one position, which is that nuclear will be part of the mix if it can be built without subsidy, and that is it-one position, complete clarity.
Emily Thornberry: That sounds simple and understandable, but we then need to look at how these things are implemented. For example, is the cancelled loan to Sheffield Forgemasters the first casualty of the uncertainty over Government policy on nuclear? There are a number of questions relating to that. Did the Lib Dems' prejudice against nuclear power have a role in the decision to cancel the loan? Was the decision made because of the coalition's policy of having no public subsidy for nuclear? Did that impact on Sheffield Forgemasters or not? Was it right for the Government to give Nissan a grant to make electric cars-a proposal that we support-but not to provide a commercial loan to help a British company be at the centre of an indigenous nuclear supply chain? How do these things fit in?
What we see are the Government's confusion and the refusal to grant a commercial loan to a company worth £40 million. The loan would need to be £80 million, and it would be difficult to get that money from a bank. The refusal to grant the loan means that Sheffield Forgemasters is unable to build the sort of kit we need to build nuclear power stations in Britain. We are not necessarily talking about a subsidy from the public purse. We need a Government who are prepared to look to the future and to decide that the triumvirate includes nuclear, that we are serious about these issues and that we will give such assistance as is necessary. The current situation is very unfortunate, and we have a number of questions as a result.
That is one casualty, but there is another. Will the Minister confirm whether there will be cuts to the Nuclear Decommissioning Authority? If there are to be cuts, when will they be and what will they be? More importantly, will they have an impact on the future of Britain's nuclear power industry? The issue of the public purse paying for cleaning up after nuclear has always been part of the arguments about whether nuclear power is being subsidised, so what will happen? Are we talking about a subsidy or not? Where does that fit with the coalition agreement on nuclear power? We need to know, and the industry definitely needs to know. Publicly, the industry might not be critical, but the Opposition are being critical because a confused picture is being put out.
The expansion of Sheffield Forgemasters represented an opportunity for Britain to make key components for the nuclear industry, which will now have to be sourced from places such as Japan and Taiwan. That is very unfortunate for green jobs and the economy. The Government have tried to defend their position by suggesting that Sheffield Forgemasters should obtain funds from the financial markets. Once again, we see actions motivated by free market ideas that are completely misplaced.
Before the Conservatives made their deal with the Lib Dems, they were highly exercised by the gap between the end of the life of the current fleet of nuclear power stations and the earliest date by which we might get some new nuclear power stations. Why are the Conservatives now so relaxed about that? There seems to have been a change. The Government should be taking up the long-term
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challenge of decarbonising the economy and the job market, rather than just embracing short-termism, but some of the decisions that have been made are simply short-termist.
The Government share our view that the nuclear industry should not receive a direct subsidy from the public purse, but the industry needs clarity and reassurances, not obstacles. In the words of Richard Nourse, managing partner of renewable energy fund novusmodus,

"Nuclear is a long journey and developers need confidence to keep travelling."

Can the Minister provide that confidence? What percentage of our electricity does he expect nuclear to contribute in the next 10 years? Without that confidence, we will surely see delays, which will increase our dependence on gas.

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I am not sure that setting an enormous amount of store by a technology that relies on a fuel of which we produce not one ounce in this country is a common-sense view. Setting aside any of the questions at the front of our minds about build scale, commissioning, public subsidy and other aspects of nuclear power, we must remember that, because nuclear is not renewable, it is reasonable to ask questions about the security of supply of uranium for reactors, should we build them in this country. This is not necessarily to take a side on the nuclear debate but simply to ask that question.
Given the likely reserves of uranium-on the present supply against production-its life is roughly that of oil: 40-odd years. However, if there were a large number of nuclear builds over the next 20 years, the amount would come down dramatically. On present figures, it appears that uranium could become scarce during the lifetime of a future nuclear reactor built in this country. That ought to raise a question mark about energy security, and about the role that nuclear may play in future considerations for the UK.
Indeed, given our concerns about our carbon dioxide emissions and footprint, new supplies of uranium would need to be found. Otherwise, existing supplies would be depleted, and the richness of uranium per tonne of rock mined would be so low that the carbon footprint would eventually equate to that of a gas-fired power station. That would not follow the low-carbon footprint route for our energy supplies in the long term. The figures relate to Australian and, to some extent, Canadian supplies of uranium. There are richer supplies in places
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such as Kyrgyzstan, but they raise the same questions for energy security in an uncertain world set against supplies of oil and gas.
Ironically, we could increase our supply of uranium by sequestering supplies that are kept for military purposes and translating them to domestic nuclear purposes. If we did so in this country, we could double the life of our uranium supplies without taking uranium from elsewhere, which raises the interesting question of developing a domestic nuclear power programme to thwart a military nuclear programme, but perhaps that is a debate for another day.

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3.48 pm
Mr Iain Wright (Hartlepool) (Lab)
I mentioned my final point in another debate in this Chamber on nuclear power, and I give notice to the Minister that I will keep banging on and on about the role of the north-east in energy production and supply. We have all the ingredients in place for my region to be the great powerhouse, not only for this country, but for Europe and, arguably, the world in ensuring that we have a diverse source of energy production and supply. What can the Minister do to ensure that potential? Narec in Blyth is a centre of excellence for renewable energy. Given where we are in terms of marine technology and our proximity to the North sea, all the different sources of energy-oil, gas, renewables and nuclear in my constituency-can provide the 21st century, modern economy that the north-east demands.
We have great things in place. The developments at Narec, the Centre for Process Innovation in the Tees Valley, and Renew Tees Valley, were being led by the regional development agency, One NorthEast, which was adding value by ensuring that we could have a low-carbon economy and energy policy, but confusion over the Government's contradictory advice on RDAs
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has inhibited progress. We have huge potential in the north-east. What steps will the Minister take to ensure that we fulfil it? I have invited him to the Tees valley to look at the potential there, and I do so again. The role of the north-east in the future share of the British economy and energy policy is incredibly exciting.
My hon. Friend the Member for Islington South and Finsbury said that we must not leave the matter to the vagaries of the market, and she is absolutely right. We need big government on energy security in the 21st century, and we need strong leadership. I know that the Minister is up for that, but I question whether his Government as a whole are up for it. I hope to be reassured by his response.

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Charles Hendry: It is a continuing pleasure to serve under your chairmanship, Miss Begg. We have had a high-quality debate. Our numbers may have been limited, but we have touched on many of the key issues that go to the heart of the debate on energy security



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Let me move on to some of the other technologies that were raised. The hon. Member for Islington South and Finsbury rightly spoke about nuclear. We would be further ahead had it not been for the moratorium, but the position of the Government now is absolutely clear. Nuclear will be part of the mix if it can be built without subsidy. There are no ifs or buts; that is an absolutely clear position.
I hope that the hon. Lady will work with us, because in opposition, I was very happy to work with the Government to reassure potential investors, to the extent that I was asked to go to the investors forum a couple of years ago so that investors could be told that the potential new Minister, if there was a change of Government, was attending and could give that continuity of policy. Investors attach enormous importance to that political stability. I hope that, given that the position is absolutely clear, the hon. Lady will decide that she wants to be a serious contributor to the debate, rather than making political comments from the sidelines, because that will do more to undermine the case for new investment than anything happening elsewhere. There are communities up and down the country that want to see parties working together on this issue. We have a clear position, which is essentially the same position as that of the previous Administration, and I urge her to work with us.
An important point about the changes that we are making is that we have said that the national policy statements will be voted on on the Floor of the House. That will send a clear message to investors that there is massive cross-party support for the national policy statements when they are put forward. I hope that that will be the outcome of that process. It is not just a political party saying, "This is our position," but the House as a whole expressing its view on the national policy statements. That makes the process more robust, reduces the risk of judicial review and enhances the prospect of making progress.
Emily Thornberry: The problem with the changes to the planning system is not just who will make the national policy statements and how they will be decided, but how they will be implemented and the fact that a Minister will be implementing the decisions. That is the reason why many people and organisations are concerned that there will be delay. That is a vital issue in respect of the development of our infrastructure.
Charles Hendry: Let me seek to reassure the hon. Lady. The discussions that we have had with industry have reassured it about the changes that we are making. Our concern about the Infrastructure Planning Commission was that it had no democratic accountability. Decisions on nationally significant issues were being made with no prospect of contributions from Members of Parliament and without the opportunity for parliamentary scrutiny. We believed that that was not just democratically wrong, but enhanced the risk of judicial review, so the change that we have made is that the back-office function-the work of analysing the individual planning applications-will go ahead as originally planned but within the planning inspectorate, and the recommendation will then be made to the Secretary of State, who will have three months to make a decision. That is exactly the same time scale as would have been the case under the IPC, but there will
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be less chance of judicial review and there will be greater parliamentary accountability. Also, transitional arrangements will be in place so that whichever system an application starts under, it will complete under it. There will be no risk, when the system changes, of an application that was two thirds of the way through having to start again. Whichever jurisdiction it starts under, it will continue under.
The process provides the speed that is necessary and that industry is keen to have. It provides greater scrutiny, greater acceptability and less risk of judicial review, which might delay the whole process by six or 12 months. Those are the reasons why we have made the changes, but we have been extremely conscious throughout of the need to maintain investor confidence, and the work that we have carried out with the investors reassures us that we have got the balance right.
Emily Thornberry: I am very interested to hear what the hon. Gentleman is saying, and it is clarifying a number of issues, but there is the additional residual problem. He talks about the national policy statements being agreed on the Floor of the House and party politics therefore being taken out of it. Nevertheless, if an individual Minister will in the end make the decision, surely party politics comes straight back in again.
Charles Hendry: The hon. Lady is absolutely wrong. The Minister is acting in a quasi-judicial capacity. He is acting not as a party politician, but as someone who has a legal responsibility. A recommendation will be put to him through the planning inspectorate as to whether to accept or decline an application. He will not be able to say, "That's a little bit close to a Conservative seat"-or a Labour seat-"so I won't give it the go-ahead." He must decide on the basis of the argument put to him and must explain why he has either accepted or declined the application. The process is intended to maintain political impartiality.
I can tell the hon. Lady that I do not believe that in any decision I am making, there is a political imperative about where a national grid connection, a nuclear power plant or a new gas-fired plant goes. My job is to look after the national interest and to ensure that applications are made in line with planning law. To me, this is not a party political issue, as I hope the hon. Lady will accept. We are deciding on projects of national significance and trying to get the right outcome as far as the country is concerned.
Emily Thornberry: The hon. Gentleman talks about political impartiality and a quasi-judicial function, but surely a Minister has choice. If a Minister is to act in a judicial fashion, he or she simply has to step out of the arena and make a quasi-judicial decision. I do not understand, if someone is to make a decision in some sort of judicial capacity, how that is democratically accountable. Either they are allowed to use their political brain and make a decision, which is then democratically accountable, or they use a judicial one, which steps outside the arena and outside politics.
Charles Hendry: The fundamental difference is that a Minister sits in Parliament. A Minister can be questioned by Members of Parliament. They can be called before Select Committees much more readily. There can be debates in Westminster Hall or Adjournment debates in
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the main Chamber. There is a range of areas where the Minister can be subject to scrutiny on the decision made. It is a quasi-judicial role, but we believe that it provides a degree of democratic accountability that is simply missing within the IPC. We may simply have to disagree. We believe that the process maintains the speed and the important elements of the IPC-changes that the previous Government put in place-but it rectifies the democratic deficit.
The hon. Lady raised additional matters relating to the nuclear sector. She asked about the work of the Nuclear Decommissioning Authority. We take very seriously the legacy issues, but we separate out the legacy responsibilities from new build. There is no doubt that clearing up the old legacy issues, which are a combination of civil and military nuclear issues, is something for which the nation, the taxpayer, the Government have to be responsible. The previous Government addressed putting that right with a degree of seriousness that had been missing historically, for which I give them credit, but much is guided by independent legal assessment. The Government are not at liberty to decide which bits they want to do themselves. They are required by law to carry out certain actions now in respect of the clear-up, and that work is central to the work of the Department.
The hon. Lady will be aware that the NDA's budget is about half the entire departmental budget, so if there are areas that are not absolutely necessary and there are areas where we can gain additional resources and revenue, we will, rightly, consider those as well, but I ask her to be in no doubt whatever about the moral imperative that we attach to addressing the legacy issues.
The hon. Lady also asked about Sheffield Forgemasters. I repeat the assurance given by the Secretary of State in the Chamber last week during oral questions. He said that it was purely about costs, and that the nation could not afford many of the projects that had been approved-it was on those grounds rather than because it was related to the nuclear industry. He also highlighted the fact that had the directors involved been willing to dilute their shareholding it would have been easier to get a commercial loan. Is it the Government's job to put public money into a private company to enable directors to maintain their shareholdings if commercial arrangements could have enabled them to secure that loan elsewhere? The directors now say that they will seek to carry this forward through other mechanisms, seeking loans and support elsewhere. We believe that that is right. At the end of the day, however, it is not about nuclear; it is money that the Government simply do not have. We have run out of money, as the former Chief Secretary told us.
Emily Thornberry: The problem with the Minister's explanation is that he was talking of a commercial loan. Given that the company is worth £40 million and the loan was for £80 million, it was not a question of selling shares to raise money; the company was not worth the amount of the loan. That is the problem. That is why we need a forward-thinking Government, that has ambition but which understands the importance of moving to a low-carbon economy. The Secretary of State for Business, Innovation and Skills often criticised the banks for not being forward looking enough by when he was in Opposition; now, in Government, it would seem that he is falling into exactly the same trap with the banks that he used so readily to criticise.

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Charles Hendry: We are considering a whole range of things to which the previous Government were committed. Many were laudable, worthwhile projects, but we have to accept that we have run out of money. That was the fundamental problem. There was nothing about the nuclear industry, the locus of her original charge; we had to consider major areas of expenditure, and commitments that had been made that could not be funded. It is a good company and a good project, and we want it to happen, but we have to decide whether public money should be contributed, given that we are trying to reduce some of the pressures and burdens on taxpayers. I assure the hon. Lady that the decision was based on the fact that the money was not available; it was no reflection on the company's workmanship, which is outstanding, or the nature of the project itself.
The hon. Member for Hartlepool spoke about the north-east and the contribution that it can make, as he has done before. I asked whether I could visit the area rather than him inviting me, but my offer to visit is still there. I shall have to be slightly careful about those nuclear plants that are going through the planning process, as I may subsequently be involved in some of those decisions. However, I am particularly keen to see some of the supply chain opportunities and the industries that ride on the back of them. I recognise the fantastic opportunities and potential of the north-east, and of those elsewhere.
What is exciting at the moment is that many parts of the country are looking at their energy potential. Cumbria is calling itself the energy coast, and Anglesey calling itself the energy island. Many see it as a key point in selling their areas to potential investors. The skills base of the north-east and the extraordinary depth of experience in the engineering and technical sectors must be an incredible attraction to industry. People looking to come to the United Kingdom will undoubtedly consider the north-east to be a priority area. I would very much welcome the opportunity to see some of that potential with the hon. Gentleman.
Mr Wright: Before the Minister moves on from the economy of the north-east, will he comment on the prospect of One North East and the regional development agencies in providing such leadership to potential investors on the energy potential of my region?
Charles Hendry: I am sorry, but I should already have done so, as the hon. Gentleman raised the matter earlier.
We believe that some of the things that the regional development agencies have done were truly strategic, but that others were slightly artificial. People's view of RDAs is different in the various parts of the country. Having been to see One North East, it is clear that the area had a better sense of regional identity than in my region of the south-east. There is not an enormous amount binding the western end of Oxfordshire with eastern Kent; people have different perceptions in different parts of the country. However, there must be rationality.
Most coastal RDAs say that they are the No. 1 place in the United Kingdom to develop offshore wind facilities, but they cannot all be No. 1. If we are trying to attract big international investors, there may be a case for considering the wider national interest rather than breaking things down further. However, RDAs have undoubtedly done some exceptional work. For example, Yorkshire
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Forward has been considering how to put a carbon capture and storage infrastructure in place; it is ahead of anything else in England. I hope that some of that work will be continued, even if RDAs are not part of that future-they may be in some parts of the country-but local authorities, which are responsible for business development, might see it as a particular advantage for their communities, and be keen to ensure that it is part of the mix. Again, I am happy to visit the north-east to talk to those in the RDA about how we can build on the work that has already been done.