UK Energy Minister underlines nuclear's role

14 July 2016

The UK's decision to leave the European Union has not changed the country's commitment to investing in low-carbon energy, including new nuclear, nor its efforts to tackle climate change, Energy Minister Andrea Leadsom told members of parliament (MPs) today. Meanwhile, a report issued by the National Audit Office (NAO) says the UK "lacks a proven, skilled supply chain to support the construction of a new power station".  

Leadsom, the junior minister leading the Department of Energy and Climate Change (DECC), was speaking the day after new British Prime Minister Theresa May moved Secretary of State for Energy and Climate Change Amber Rudd into the role of Home Secretary.

Later today it was announced that Leadsom has been made Environment Secretary. The Department for Business, Innovation and Skills is to become the Business, Energy and Industrial Strategy department - headed by Greg Clark, formerly Communities and Local Government Secretary. The government has axed DECC in a major departmental shake-up.

Climate goals

Taking questions from MPs in the House of Commons, Leadsom said: "At the heart of our energy strategy is the need to encourage new investment in the UK's energy system, so my department will continue to take action to deliver secure, affordable and clean energy for hardworking families and businesses. This work is already under way. Since the [EU] Referendum, we have accepted the [Parliamentary] Committee on Energy and Climate Change's recommendation for the level of Carbon Budget 5, we've published details of our upcoming capacity market auction, and confirmed that our contracts-for-difference allocation round will go ahead later this year."

Leadsom referred to the government's announcement on 30 June - a week after the EU Referendum - that it had set a fifth carbon budget aimed at cutting the country's carbon dioxide emissions by almost 57% by 2032 compared with 1990 levels. Legislation ultimately aims to cut the UK's emissions by 80% by 2050. The UK's Climate Change Act of 2008 sets the ambitious 2050 target.

Barry Gardiner, Labour MP for Brent North, congratulated Rudd on her new appointment in her absence from the chamber. "Under her charge, [DECC] played an important role in securing the Paris climate agreement and she was a strong and enthusiastic champion for it," he said. Turning to Leadsom, he asked what assessment she had made of the potential effect of the outcome of the EU Referendum on the ability of the UK to meet its climate change commitments.

She said: "The UK’s climate change commitments are grounded in the UK 2008 Climate Change Act, which commits us to a reduction in emissions of 80% by 2050, from 1990 levels. Our membership of the EU has no impact on our commitment to this Act, as shown by our decision to accept the Committee's advice on the level of the 5th Carbon Budget just two weeks ago."

Paul Blomfield, Labour MP for Sheffield Central, noted the Committee had said tackling climate change "is going to be more difficult for the UK outside of the EU". He added: "The vote to leave doesn’t give the government a mandate to undermine the global transition to clean energy." He asked Leadsom to confirm the government's "commitment to meeting the 2020 clean energy target, which was agreed as part of the EU's climate and energy package".

Leadsom said: "The UK is a world leader in tackling climate change; the 2008 Climate Change Act is a UK act that we are absolutely committed to. We are outperforming against our electricity renewables target by 2020 and we remain committed to that."

David Mowat, Conservative MP for Warrington South, asked the minister whether the "real impact of Brexit" is that the UK will have "less power to influence the EU in making progress in decarbonisation".

Leadsom said: "It is my expectation that we will remain closely aligned on global issues such as climate change and we will continue to play a leading role in the world's attempts to tackle this great threat."

Andrew Murrison, Conservative MP for South West Wiltshire, said COP22 talks to be held in Marrakesh in November "will be a wonderful opportunity for the UK to showcase its world-beating edge in renewables technology and our industrial base".

Leadsom agreed, stating that the UK "is leading in both the deployment of renewables in getting the costs of those technologies down through our policies, in our commitment to decarbonisation and tackling climate change and in our commitment to showing the rest of the world how much we want to lead in this area and we will continue to do so."

She also said that leaving the EU "will not make a difference to the innate cost or the challenges for the energy sector". She added: "Most of the transactions that we have for electricity generation are home grown; there is a global market for gas; we have very good connections with European and non-European countries on interconnection, with whom we will continue to make commercial arrangements that will be to the advantage both of the UK and of those partners in energy."

Small modular reactors

Liz Saville Roberts, Plaid Cymru MP for Dwyfor Meirionnydd, urged the minister to accelerate policy supporting small modular reactors. Roberts said: "Policy favouring small reactor technologies offers affordable innovation in low-carbon energy and manufacturing opportunities […] The DECC process to select an SMR technology for generic design assessment should move forward with greater energy and focus on a realistic shortlist of organisations."

Leadsom agreed. "We do need to move forward with this," she said, adding that the government has "recognised the potential" of SMRs and announced it will invest at least £250 million over the next five years in an ambitious nuclear research and development program that includes the competition Roberts mentioned.

"We’ve made a commitment to publishing an SMR delivery road map in the autumn to clarify the UK's plans for addressing the siting issues, regulatory approvals and also, vitally, the skills issues," she added.

Hinkley Point C

Questioning the logic of securing a fixed price for electricity from EDF Energy's planned Hinkley Point C nuclear power plant, Rob Marris, Labour MP for Wolverhampton South West, described the project as a "white elephant".

Leadsom reminded Marris that the UK already sources around 16% of its electricity from nuclear power and that reactor units which are due to be retired by the end of the 2020s, as well as coal-fired plants, need to be replaced. She said: "New nuclear forms a core part of how we replace our electricity supply going forward and Hinkley is a good deal for consumers. Of course, the mark-to-market costs change according to the wholesale process, but the point is that the price of electricity coming out of Hinkley by mid-2020s is guaranteed. It's very important to have that certainty because this government doesn't take the view of, let's just see what happens. What we have to do is to plan for the future because electricity security is not negotiable."

Gardiner asked why it was that, "one year ago, DECC's estimate for the total lifetime cost of Hinkley Point C was £14 billion, but recently that estimate was revised to £37 billion". He added that, following the Referendum, "the government's expert adviser has said that Hinkley Point C is extremely unlikely to go ahead".

Leadsom said this was a misunderstanding of the terms of the government's deal with EDF Energy. "The cost of the project hasn't changed. The difference is because of wholesale prices and because there is a fixed price agreed for consumers, therefore as forecasts and as current wholesale prices change, so will the difference between the fixed price and the wholesale price.

"You cannot simply magic electricity out of thin air; you need to invest, make decisions and be committed to them."

UK steel

Andrew Stephenson, Conservative MP for Pendle, noted that the Hinkley project is "one of the largest construction projects this country has ever seen" and will require more than 200,000 tonnes of steel. This, he added, "provides a huge opportunity" for the British steel industry.

Leadsom added that is an opportunity "right across the supply chain" and the government is working with industry "to develop a demand model that will provide a capability and capacity picture for the UK against the demand". Part of that aim, she said, is "to identify the forward requirement for components that will include steel."

DECC officials meet regularly with developers, she said, "to make very clear the importance we place on sourcing UK content", including steel, in infrastructure projects. "So, for example, EDF say that they expect a large proportion of the steel for Hinkley sourced by their supply chain will come from UK companies."

NAO report

According to the newly issued NAO report, the cost of building new nuclear power plants in the UK ranges from around $60 per MWh to about $140/MWh. This compares with $30-55/MWh in South Korea; $50-120/MWh in France, $45-125/MWh in Finland; and $58-100/MWh in the USA, it noted. The ranges reflect discount rates - an estimate of the cost of capital for a given project - of 3% and 10%.

The costs to build 'first-of-a-kind' nuclear power plants will be "much higher than in countries that have rolled out new facilities, where learning and expertise can be shared," it said. The report said that the UK has not built a new nuclear power plant for 20 years and therefore lacks a substantial nuclear supply chain.

French state-owned EDF Energy's Hinkley project is the only one of three new build projects that already has development consent, a site licence and regulatory approval, the report said. The other projects are owned by Horizon and NuGeneration, which will both require privately backed funding.

The NAO report said very few private companies are able to risk the large upfront investments required by new nuclear projects, which are also characterised as having long payback periods.

Researched and written
by World Nuclear News