Charles Hendry's speech to the NIA Conference: The road to final investment decisions
- Department of Energy & Climate Change and Charles Hendry
- Part of:
- Energy industry and infrastructure licensing and regulation
- First published:
- 6 July 2011
- Delivered on:
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Introduction: Energy policy This has been an eventful year for the nuclear power and the energy landscape as a whole. The unprecedented events…
Introduction: Energy policy
This has been an eventful year for the nuclear power and the energy landscape as a whole. The unprecedented events in Japan and the impact of the earthquake and tsunami on the Fukushima nuclear power plant has raised the profile of nuclear safety and led to questions around the world about the need for nuclear. But over the last 15 months there have also been a number of other energy challenges that we have had to face: we have had Macondo and what that has meant in terms of oil and gas exploration; the crisis in the Middle East and what this has meant for our oil and gas security; and we have seen the coldest winter in 100 years.
There are potential risks with any energy technology. That is why our energy policy needs to be a mix of renewable, clean coal and gas and nuclear energy.
The challenge we as government face is to come up with an energy policy that delivers safe, secure, low-carbon and affordable energy to 2050 and beyond. And over the next decade up to £110 billion is needed to replace old nuclear and coal-fired power stations and upgrade the grid - that’s twice the rate of investment of the last decade. The equivalent of 20 new power stations is needed.
On nuclear, we did not need to be where we are now. We have emerged from a wasted decade - a decade of indecisiveness and dithering, where the investment and jobs went elsewhere. It is now 16 years since the last nuclear plant was built in the UK, at Sizewell B.
The UK has everything to gain from becoming the number one destination to invest in new nuclear. Nuclear is the cheapest low-carbon source of electricity around, so it can keep bills down and the lights on.
We take what happened at Fukushima very seriously and nuclear safety is a top priority. There are lessons for both government and industry on how to continuously improve both existing and new-build nuclear power stations. This is why we asked the Chief Nuclear Inspector, Dr Mike Weightman, to provide a robust and evidence-based report on the lessons that we can learn.
The UK has a strong nuclear safety record and a robust regulatory regime. We have a world-respected independent nuclear regulator, who has recently led the UN investigations into the Fukushima crisis.
Dr Mike Weightman’s interim report confirms that the UK’s current safety regime is working and that the regulators and industry should work together to learn lessons so that we make continuous improvements to the nuclear safety of both existing nuclear and new build.
The events at Fukushima were a shock to us all. But I am confident that our reaction was sensible, proportionate and based on the facts.
I want people inside and outside of this room to be in no doubt - the Government’s response was not dreamt up, as reported by a junior official from another department, but has been based on solid evidence and the advice of the Chief Nuclear Inspector.
Role of nuclear
I am proud of the leadership we provided at a time the Germans, the Italians, and the Swiss took a different approach. They trashed the technology and chose party politics over pragmatism.
As the Prime Minister and The Rt Hon Chris Huhne MP have both said, we want to see new nuclear as part of a low-carbon energy mix going forward, provided there is no public subsidy. The Chief Nuclear Inspector’s report reassures us that it can - as does the Climate Change Committee, which supports our view that nuclear is a safe power and the lowest cost, large scale, low-carbon electricity source.
Nuclear is vital for our energy security now, and we want it to be part of the energy mix in the future. We don’t just need one nuclear power station; we need a fleet of them that can help to provide secure energy and meet our climate change targets up to 2050.
Investors need certainty, and I want to make it clear that nuclear has a key role going forward, alongside renewables and clean coal and gas.
The UK is open for business. If we had done the same as Germany, Italy and Switzerland, it could have cost an extra £65 billion by 2050.
Today we have published the report that shows the costs of First-of-a-Kind nuclear reactors are not expected to be as high as we previously thought. This is partly down to the fact we are learning lessons from other developments around the world and due to the ability of developers to spread any costs across a fleet of new reactors. The report confirms that nuclear remains the lowest cost, large scale low-carbon generation technology.
Government is continuing in its efforts to ensure that the conditions are right for investment in new nuclear power in the UK.
I hope this is evident not least with the publication of the energy national policy statement including a list of the new nuclear sites. They have been laid before Parliament for approval and I hope they will be designated without delay. This will pave the way for energy companies to bring forward planning applications to develop new nuclear power.
Separately, the regulators are working with industry to take forward the Generic Design Assessment process for new reactors. They will need to factor Dr Weightman’s report into their assessment, but I am pleased to hear that both Areva and Westinghouse are progressing to clear as many issues as they can and working towards IDAC (interim design acceptance confirmation).
In addition, we are reforming the nuclear regulator. The Office for Nuclear Regulation (ONR) was launched as an agency of the Health and Safety Executive in April this year and we plan to bring forward legislation to create a new independent statutory body. The ONR will retain the best of current practice whilst creating a modern regulator based of transparency, accountability, proportionality and consistency. The ONR will be well placed to respond quickly and flexibly to current and future regulatory challenges.
In the coming months the government will look to finalise the framework governing the financing of decommissioning and waste management for new nuclear power stations. This will ensure that operators make secure financial provision from the outset in line with the government’s policy that there should be no subsidy for new nuclear.
We have also been clear that before new nuclear can come forward, we need to be satisfied that there will be arrangements in place to deal with the waste. Last week we published our first annual report to Parliament of the Managing Radioactive Waste Safely Programme, as well as a consultation on how potential sites for geological disposal will be indentified and assessed. This shows we are making good progress. But I still want us to be ambitious in our timescales for delivery by setting a goal of putting the first waste into a disposal facility by 2029. I have tasked the NDA to look at opportunities to achieve this.
Reform of the electricity market
But it’s not just the actions that we are taking for nuclear that will stimulate investment. We need to make changes to the current electricity market to show investors how they can make money by investing in the UK energy sector.
The process we are going through with electricity market reform is the most significant change to the market in 30 years and the most important work we are doing as a government department in this Parliament.
We recognise that as the companies we are appealing to are global companies with global opportunities, they have to find something that makes it attractive for them to come here or they will go somewhere else. So we must continue to make a compelling case - not just to the existing players, but new entrants as well, as competition is central to getting the best deal for consumers. We need to bring in new players both as generators and suppliers in order to drive down prices.
That is why the government’s proposals to reform the electricity market are the best deal for Britain:
- getting us off the hook of relying on imported oil and gas by creating a greener, cleaner and ultimately cheaper mix of electricity sources right here in the UK
- nurturing a new generation of power sources including renewables, new nuclear, and carbon capture and storage
- bringing new jobs and creating new expertise in the UK workforce
- establishing a long-term role for hydrocarbons like gas as well, taking account of how the global market has changed over the years
Working with industry
The wider economic benefit cannot be over-emphasised - around 5,000 jobs could be on offer at each of the eight sites we listed as suitable for development, and as we develop a domestic supply chain, all parts of the country could gain from a nuclear resurgence.
This is an exciting time. We are on the brink of the biggest nuclear renaissance since the 1950s.
Government is playing its part to realise the massive opportunities that are on offer. Nuclear is a key industry for businesses and for providing highly skilled jobs. The16GW of new nuclear generation planned by industry equates to investment of around £50 billion, with the construction of each reactor delivering investment equivalent to that for the 2012 Olympics.
The Nuclear Industry Association (NIA) has previously estimated that with investment in facilities and the training of new personnel, the UK Industry could supply around 80% of the total requirements.
However, the challenge moves increasingly to industry. It is essential we see progress on all fronts so we can all be confident that development plans are real and will be delivered on time.
Already we are seeing that in the development at Hinkley C, £11.5 million is being spent in the local area - even before the preliminary works are underway - and EDF has 47 companies engaged and 800 people registered on their database.
The opportunities will only get bigger as the developments progress - EDF has shortlisted three joint ventures each with UK company involvement for the main civil’s contract for Hinkley, estimated to be worth between £1-2 billion. We expect to see similar opportunities replicated in the projects being taken forward by other developers.
I want to see developers, vendors and the UK supply chain build on the engagement that has already taken place through initiatives such as the sc@nuclear programme and the establishment of the Nuclear Advanced Manufacturing Research Centre. I want to see these relationships grow in a way that works for developers, vendors and UK companies in taking forward new build nuclear in the UK and beyond.
Good collaborative working can be seen in projects such as Bridgewater College’s Energy Skills Centre, where training is provided in science and engineering and there is a realistic working environment to give students hands-on training in decommissioning and operating nuclear power stations. The £8 million Skills Centre is jointly funded by the National Skills Academy for Nuclear, the NDA, the College and a commitment of £3m from EDF energy. These projects are crucial in attracting young people to the growing industry on their doorsteps and we need to see more of this.
It is crucial to see industry’s investment in these important education projects. For example, government has invested to expand facilities at the Dalton Institute at Manchester University and its partnership with the Nuclear Advanced Manufacturing Research Centre, where academia and industry work together and support the technological and skills requirements of the sector.
We have some of the world’s leading academic brilliance right here in our own backyard at universities like Manchester, Imperial and Birmingham. This needs support and we must see more working models like that at Dalton, where academia and industry work together for mutual benefit. And I urge industry to continue to support apprenticeship schemes that encourage small companies to benefit from apprenticeships.
Industry must also take steps to embed best practice in the delivery of a new nuclear fleet in the UK - not just on individual projects, but also to maximise benefits across the whole UK new nuclear build programme. Last October I launched a report by Engineering the Future, into lessons learned from real nuclear construction projects in the UK and overseas, and I am pleased to say that the first stage of this work is now complete and will be presented to this conference tomorrow.
So I hope you are in no doubt about the government’s commitment to new nuclear. We must go forward with new nuclear. We will be a darker, less prosperous nation without it.
My goal as Energy Minister is to make Britain the most attractive place to invest in energy. I want to continue to work with those in this room today to make sure we are able to deliver nuclear energy as part of the future energy. We all play a key role in making sure we make this a country that has secure, low-carbon and affordable energy for the decades in the future.
Published: 6 July 2011