Speech

Leading the way; the UK’s new nuclear renaissance

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Michael Fallon addresses the World Nuclear Association Symposium 2013, London.

I am very pleased to be here today at this exciting time for the nuclear new build agenda in the UK. Investing in energy infrastructure is a key part of this Government’s growth agenda and our nuclear new-build programme represents a significant component of the £110bn of investment in our electricity sector required over the next decade.

This conference takes place at a critical time for nuclear power in the UK. We are on the cusp of a new build renaissance. We are transforming our energy market framework to attract the massive investment needed whilst also acting to urgently decarbonise the power sector in an affordable way for consumers.

Global investment climate

The UK recognises civil nuclear power as a safe, low carbon and sustainable energy source that makes a significant contribution to meeting our energy needs. As in many other industrial and service sectors, the UK energy sector is an open and liberalised market and we actively welcome overseas investment. The UK has already attracted significant levels of investment into the new nuclear build programme and we encourage this, recognising the global nature of this industry. Our Electricity Market Reforms, including the Contracts for Difference that will provide guaranteed prices for generated electricity, will further encourage this.

I and my ministerial colleagues have spoken with a number of potential international investors over recent months, both at home and abroad. I’ve been delighted by the strong level of interest in the UK’s new nuclear build programme, particularly from companies who are here today. I want to emphasise that such interest from around the world can only be a good thing in ensuring that nuclear power plants are built at best value for money for the consumer. The spread of international interest from countries such as Japan, France, the US, Canada, Korea and Russia shows that the UK’s nuclear market is an attractive one to be a part of and we will continue to make the conditions right for investment.

Last week the UK Government and Rosatom signed a Memorandum of Understanding (MoU) on the potential for working together on civil nuclear power projects. The MoU is a high level document affirming each country’s expertise in nuclear and the benefits of ‘Russian and British Companies’ working together around the world to mutual commercial benefit.

The MoU shows the continuing strong level of interest and commitment in the UK’s new nuclear build programme.

Let me be clear, while we welcome inward investment into our energy sector, it is of paramount importance that all reactor technologies meet the stringent and independent regulatory standards required in the UK and EU.

Government is committed to creating the highest standards of nuclear regulation. The Energy Bill includes provisions to establish the Office for Nuclear Regulation (ONR) as a statutory body which will retain the best of current practice while creating a modern independent regulator based on the better regulation principles of transparency, accountability, proportionality, targeting and consistency. The ONR will build on its current strengths as a world-class regulator and will be better placed to respond quickly and flexibly to regulatory challenges while protecting people and society from the hazards of nuclear generation.

Strength of the opportunity for industry and recent successes

Let me take a moment to reflect on the real progress made over the last year on our potential new nuclear sites. In addition to welcoming Hitachi to the new build market, we have seen the first nuclear site licence in twenty five years granted at Hinkley Point C in Somerset, and the Secretary of State giving planning consent for construction of that nuclear power station – the first in a generation. Final design assessment has been granted to the UK EPR reactor design, and started for Hitachi’s ABWR design. NuGen has started site assessment work at Moorside, and NNB GenCo launched the phase 1 consultation for their planned new build at Sizewell C in Suffolk.

And whilst it is up to private companies to build, operate and decommission our new fleet of power stations, government must provide industry with the certainty they need to participate in new nuclear.

The Energy Bill, introduced in November 2012 includes provisions for Electricity Market Reform. It is hoped that, subject to Parliamentary Business, the Bill will receive Royal Assent by the end of 2013. We are expecting that billions will be invested into the new infrastructure schemes which will boost the UK economy and promote jobs.

Nuclear skills and supply chain opportunities / NIC developments

Furthermore, the Government is taking action on a number of fronts to ensure that our domestic nuclear industry is fully equipped and ready to capitalise on the opportunities afforded by both the new build renaissance and the longer term operations, decommissioning as well as highly valuable export opportunities.

The immediate priority is, rightly, new build and getting the first project constructed. I’m sure you’ve all been following the press coverage on the negotiations with EDF over the Investment Contract for Hinkley Point C with great interest. Whilst any reports that a strike price has been agreed are unfounded I can assure you that both sides remain committed to the negotiations and are keen to reach a deal. We have been clear throughout the process that we are committed to seeking a fair, affordable and value for money deal which enables the developer to build and operate the plant, provides affordable low carbon electricity to consumers and strengthens the UK security of supply, as well as being a major investment in jobs and economic growth. The same will be true of Wylfa and Oldbury in due course.

But in addition to Hinkley, to prepare the ground for a fleet of new nuclear power stations we must also ensure that the UK nuclear sector remains vibrant in the longer term. To achieve this, Government and industry must work together in partnership.

To this end, the Nuclear Industry Council was formed earlier this year. It represents a practical, action-focussed partnership between government, industry and the research community. The council will ensure that new build occurs to time and budget, and that the skills and supply chains are fully equipped to capitalise on the opportunities offered from the new build programme. But we also have a key interest in the business opportunities that already exist in waste management and decommissioning, where we want to see UK-based companies competing globally for contracts and winning them.

The Council will be looking at a number of issues which will determine the success of our nuclear sector in the future: skills, trade & investment, business capability and how the public perceives the nuclear industry. Let me say a little bit more about what the Government and industry, through this partnership, are doing in these areas:

Skills and supply chain opportunity – jobs and value

The Council’s Skills Workstream brings together the National Skills Academy for Nuclear and the Nuclear Energy Skills Alliance with all areas of industry, Government and the skills bodies to ensure that the skills requirements of the Nuclear Industry will be fulfilled. The Nuclear Workforce Model, for example, is a critical product of this collaboration. It measures existing and future skills demand and supply across the UK’s entire civil nuclear programme. The skills gaps highlighted can be used as a basis for targeted policy and industry interventions to ensure maximum job opportunities are created locally. This will also support effective planning for the retention and transfer of skills during the migration of operations from existing to new plants.

Trade & Investment

When we consider the global picture, the opportunities for the UK are enormous. An estimated £930 billion of investment is projected for nuclear new build globally, with international procurement running at about £25 billion every year from now to 2025.

Opportunities therefore exist in new build, maintenance, life extensions, decommissioning, waste management and environmental remediation. Even gaining a modest proportion of the global market in those areas - and I want our share to be more than modest – will provide huge business prospects for our areas of expertise – in design, engineering, project management, professional consulting and so on.

Industry and government are working closely together to raise awareness of these opportunities among British companies and to highlight their expertise and capability to potential overseas clients.

UK companies have been building commercial nuclear power plants for over 50 years, working across all aspects of the nuclear fuel cycle. The revival of a nuclear new build programme in the UK is attracting significant international interest and is helping to position the UK once again as a serious contender for nuclear work overseas.

The progress we are making in decommissioning is also increasingly recognised and appreciated internationally. UK companies have developed wide-ranging capabilities and are already sharing their experiences with overseas countries facing challenges in dealing with nuclear waste.

UK Trade & Investment (UKTI) is now looking to strengthen its nuclear export work with a more coordinated approach that better highlights the UK’s considerable strengths to overseas customers. UKTI will agree with industry a civil nuclear export strategy with market priorities, and plan to develop specific campaigns to focus on those overseas opportunities that offer the best prospects for the UK nuclear industry.

Business Capability

The Nuclear Industry Council also provides a forum for industry in the UK to come together, exchange views and oversee programmes to enhance their services. As part of this, the Council takes an overview of all the actions contained within the Nuclear Supply Chain Action Plan and ensures that the Nuclear Industrial Strategy is effectively implemented – with a real focus on the jobs and growth angle.

Public Understanding of Nuclear Energy

I also want to emphasise that Government is very aware that public understanding and perception of new nuclear impacts on all aspects of the nuclear industry, and that public trust and support cannot be taken for granted.

We must not forget how the events at Fukushima raised considerable public concern over safety.

As public perception of nuclear energy will have an impact on future developments, it is important to highlight the benefits that new nuclear brings, in security of energy supply and decarbonisation and in jobs and growth. To address this, the Council has formed a public understanding of nuclear energy workstream, which will assess how public communications could be enhanced.

And Government is very aware of the scale and duration of the impact of new nuclear power stations on often small and rural local communities, so it is essential that these communities benefit from the role they play in national power generation. To this end, in July this year DECC announced a package of benefits for the communities that host new nuclear power stations.

The total package will be proportionate to the amount of energy the power station generates, up to a value of £1000/MW per annum for up to forty years. In the case of Hinkley, this could amount to approximately £128m. The package will be delivered in two distinct phases.

In the first phase, authorities will benefit from the business rates retention arrangements which were introduced by the Government in April this year. They will keep a share of the business rates paid in their area and also keep a share of any increase in business rates.

They will get the reward from these increased revenues for up to ten years.

And the second phase is intended to deliver the remainder of the package over the period 2030-2060 which will be an annual payment of equivalent amounts, funded by DECC. These funds are specifically intended to benefit the local communities who are hosting new nuclear power stations and the Government fully expects that the Local Authorities will involve their communities in developing their spending plans, with Government also providing assistance and support in its development.

We have done a lot but we need to do more / Challenges ahead

Delivering a new nuclear renaissance in the UK is a challenging goal. Challenges are to be expected in any project of this size, significance, and long timeframes involved.

I am not underestimating the scale of the challenge that we face.

And we must not forget the need to manage our waste legacy. This has been ignored for too long and we must tackle this issue once and for all.

So it is important to mention that, alongside our commitment to new nuclear build, we continue work to implement a means of managing higher activity radioactive waste in the long-term, which we know is vital to public confidence in the nuclear industry. Our policy of geological disposal is right and, while the site selection process in west Cumbria ended earlier this year, the ongoing Managing Radioactive Waste Safely programme is sound. Today we have launched a public consultation on potential revisions to the site selection process for a geological disposal facility, in order to help communities engage in the process with more confidence and, ultimately, help deliver a geological disposal facility.

Conclusion

And so to finish as I began, let me say how delighted I am to see all of you at this event. I hope you leave here with a real sense of the opportunity available and a real desire to be involved.

I hope you have a successful and enjoyable event!