The Secretary of State for Energy and Climate Change (Mr Edward Davey): I am grateful to the Backbench Business Committee for the opportunity to set out the coalition Government’s policy on new nuclear power. This has been a well- informed and constructive debate. A wide variety of views have been expressed, so let me start by putting my views on the table and setting out how I see the political reality of nuclear power and policy.
Notwithstanding some of the sentiments expressed today against nuclear power, the coalition Government policy on nuclear power enjoys wide agreement in this House, as we heard from the right hon. Member for Don Valley (Caroline Flint) just now. The national policy statement for energy infrastructure on nuclear power generation, which was debated in the House on 18 July 2011, detailed the case and the need for new nuclear power stations in the UK. It set out how a new generation of nuclear power stations are a key part of our future low-carbon energy mix, tackling climate change and helping to diversify our supply, contributing to the UK’s energy security. That policy statement passed with only 14 votes against. Both the Conservative party and the Labour party are in favour of new nuclear power. That makes for a majority in this House of 450-plus.
The reality of the overwhelming support in Parliament for nuclear power is reflected in the coalition agreement, as set out by my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes). We have implemented a process allowing Liberal Democrat MPs to maintain opposition to nuclear power, while permitting the Government to put in place the requirements for new nuclear construction. I completely respect those who have long been opposed to nuclear technology on principle. I have had my concerns in the past, as the record shows, but I am now satisfied that the safety and legacy issues are manageable. My remaining concern—this has always been my principle concern—is about the cost of new nuclear. I will deal with that later in my speech.
Caroline Lucas (Brighton, Pavilion) (Green) rose—
Mr Davey: I give way to the hon. Lady.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. As a matter of courtesy, after walking into the Chamber Members usually sit for a little bit longer than the hon. Lady has before intervening. I know she has a keen interest in this issue and that the Secretary of State has given way, but I hope she will not intervene again.
Caroline Lucas: It is very kind of the Secretary of State to give way. The Under-Secretary of State for Health, the hon. Member for Broxtowe (Anna Soubry) will testify to the fact that that we were both on a late train. I apologise.
The Secretary of State is right to say that the majority of the House is in favour of nuclear power, but this motion is not about nuclear power per se; it is about public subsidies, and I am not sure that a majority is in favour of the huge subsidies that will go to nuclear power.
Mr Davey: I am grateful to the hon. Lady and am glad that her train arrived. I will deal with the issue of subsidy later.
I urge the hon. Lady and, indeed, all colleagues to consider that the environmental case for new nuclear has got stronger in the past decade or more. I am one of those from the green movement who have been prepared to recognise the low carbon benefits of nuclear generation, which remain even when life-cycle analysis of carbon for a new nuclear station is taken into account. I believe that nuclear, alongside ambitious energy efficiency, renewables and carbon abatement, can play an important role in reducing greenhouse gas emissions.
Nuclear’s cost-effectiveness has to be seen in the context of climate change and decarbonising our power sector. It is right that this House asks the tough questions on the affordability, value for money and cost-effectiveness of nuclear power, for those questions are at the heart of this Government’s policy on nuclear power.
Before I turn to the key issue of the cost of nuclear and of subsidies, let me briefly address recent issues affecting nuclear policy and this debate. The first is GDF—the geological disposal facility for nuclear waste—and what will happen after the recent vote in Cumbria. It was the priority of the previous Government, as it is of this Government, to ensure the safe management of nuclear waste. Britain has a huge legacy of nuclear material to store and dispose of, whether or not we build a single new nuclear reactor. As we develop our new nuclear build programme, it is right that we press ahead with tackling that legacy. I believe that geological disposal is the right policy for the long-term safe and secure management of higher-activity radioactive waste.
Indeed, what happened in Cumbria convinced me even more so, for both Copeland and Allerdale councils voted to participate in the next phase of the work to identify potential sites for geological disposal. The communities that were most likely to host the facility wanted it. However, the Government agreed that Cumbria county council also needed to vote in favour in order to proceed to the next stage, but it did not, which is disappointing. However, the invitation for communities to come forward remains open.
This is a long-term programme, looking at the next century and beyond, to site and build a geological disposal facility. The views in Copeland and Allerdale make me confident that the programme will ultimately be successful. Last week’s decision does not undermine the prospects for new nuclear power stations, but it does require us to redouble efforts to find a safe, secure and permanent site for disposal.
Albert Owen: The Secretary of State is right to say that we need to deal with the legacy waste now. In fact, we should have done so generations ago. Does he also agree that all parties in this House have a responsibility to contribute to that debate, including the Green party, which I know has concerns about it? Much of this waste is not civil nuclear; as I said in an earlier intervention, defence and health projects contribute to some of it. We need to dispose of it safely and quickly.
Mr Davey: The hon. Gentleman is right to say that past Governments failed to tackle this legacy. The previous Government put in place a framework, which we are continuing, and it is right that we now grasp this legacy, because it shamelessly has not been grasped in the past.
Paul Flynn: Will the Secretary of State give way?
Mr Davey: No, I want to make some progress.
On new build, is it is for energy companies themselves to construct, operate and decommission power stations. Industry has set out plans to develop about 16 GW of new nuclear capacity in the UK. This level of new build equates to some £60 billion of new investment, with up to 19,000 jobs created at peak construction, benefiting the communities directly concerned and driving growth right through the supply chain. We want to make the UK a leading destination for investment in new nuclear, which will play a key role in our future energy mix.
We welcome EDF Energy’s continued commitment and determination to take forward the Hinkley Point C project. Centrica’s decision to withdraw from the consortium reflects that company’s investment priorities and is not a reflection on UK Government policy. Indeed, the recent purchase of Horizon Nuclear Power by Hitachi is clear evidence of the attractiveness of the new nuclear market in the UK.
On subsidy, there has been understandable concern about how the programme for new nuclear power will be paid for. After all, expensive mistakes have been made in the past. I welcome this opportunity to explain the no-subsidy policy in the context of electricity market reform.
This far-reaching reform of the UK electricity market will encourage investment in low-carbon electricity generation, which is critical to tackling climate change and meeting our legally binding carbon targets. Electricity market reform is the most transparent and most market-based means of bringing forward the transition to a low-carbon economy. Under EMR, as set out to Parliament in October 2010, new nuclear will receive no levy, direct payment or market support for electricity supplied or capacity provided, unless similar support is also made available more widely to other types of generation.
By similar, we do not mean the same. Whether similar support is being provided must take account of the material circumstances. It is not a mechanical exercise; it is a matter of sensible judgment. It is obvious that the characteristics of a small onshore wind farm are very different from those of a large offshore wind farm and, indeed, those of a nuclear plant. The obvious example is that an offshore wind turbine is expected to last for about 25 years, while a new nuclear power station could potentially generate electricity for more than 60 years. Nuclear energy would provide base-load generation, whereas other forms of low-carbon electricity would be intermittent. These different characteristics are likely to require differences in the support provided under our electricity market reform.
A key element of EMR is contracts for difference, as my hon. Friend the Member for Cheltenham (Martin Horwood) rightly pointed out in his speech. Contracts for difference have been designed to stimulate investment in all forms of low-carbon generation, including renewables, nuclear and carbon capture and storage. They provide a stable price for operators to encourage investment, making it easier and cheaper to secure finance for low carbon.
The key point is that we recognise that CFDs significantly reduce risks to developers and incentivises investment in low carbon. It is right that new nuclear power will be entitled to benefit from Energy Bill measures such as contracts for difference and investment contracts.
Paul Flynn: In secret, without the House knowing.
Mr Davey: I will give way to the hon. Gentleman, who is heckling from a sedentary position, because he is very informed on this subject, even though I disagree with him.
Paul Flynn: I have a simple question. Is the Secretary of State able to provide an assurance that there will be no subsidies to nuclear power without the full knowledge and consent of this House?
Mr Davey: I am trying to explain our policy on no subsidy, but the hon. Gentleman interrupted me. If he will listen, the position is being put on the record in a way that I have never had a chance to do before.
Our aim is for a broadly standardised approach to contracts for difference that will allow for comparability between technologies and the introduction of competition for CFDs. I do not think that what is needed is a line-by-line comparison of the terms of each contract. That is not what our policy says or requires. In fact, there are likely to be variations in CFD designs between one technology and another, and perhaps also between different projects within the same technology. What is important is that the terms agreed deliver a similar result across technologies and projects, and that they result in a proper allocation of risk. In addition, each contract will need to deliver value for money for the consumer and be compatible with state-aid rules. A contract with a nuclear developer that does those things would be compatible with our no-subsidy policy.
Let me be clear—this is not about getting a deal at any price. We have put in place rigorous processes to ensure that any contract for Hinkley Point C, the most advanced nuclear project, represents the best possible deal for consumers. We are also committed to transparency with regard to any contracts for new nuclear—more transparency on nuclear than this House has ever seen. Under the Energy Bill, all investment contracts must be published and laid before Parliament. We have commissioned expert technical and financial advisers to conduct open-book scrutiny on the developer’s project plans and costs, and we will also publish a summary of the reports from our external advisers and our value-for-money appraisal for Hinkley Point C. Hon. and right hon. Members will be able to see the evidence and judge for themselves.
Tessa Munt: Will the Secretary of State clarify a point for me? I understand that, in chapter 5 of the Energy Bill, a single sentence gives effect to schedule 3 of the legislation and that it has been drafted with intentional obscurity to give the Secretary of State the power to make an agreement with the generator to purchase electricity at a fixed price, as well as the power to vary the price that has been set in the contract and to keep secret any details of the price except the reference price and the strike price.
Mr Davey: I might have to write to my hon. Friend about the note on schedule 3 to the Bill. I would say to her that we are being very open and transparent about the approach, as she has previously recognised.
Nuclear power remains a key part of the Government’s strategy for transition to a low carbon future. I recognise the strong concerns that have been expressed about affordability; I share them. That is why this is not a deal at any price. Nuclear power must be affordable and must offer value for money. We have a huge challenge ahead of us. We need to replace a fifth of our power generation in this country in this decade. We need to decarbonise our electricity sector to meet our emissions targets and our responsibilities to the next generation. We are embarked on the largest infrastructure programme in Government, with £110 billion of investment over 10 years. Are there risks? Of course, but the risks to the country and to the planet if we do not meet this challenge are infinitely worse. Affordable, low carbon new nuclear is just one part of the answer, but let the House be in no doubt that it is part of the answer.