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Michael Fallon's speech to the Nuclear Industry Association.
It’s a pleasure to be with you again at this Nuclear Industry Association event to showcase the many benefits that nuclear energy brings to the UK, and to have the opportunity to speak to you all - the people that are instrumental in turning this new nuclear promise into a reality that delivers clean, safe and affordable energy for generations to come.
2013 has been an unprecedented year for the nuclear agenda and this conference takes place at a pivotal time for nuclear power in the UK.
It brings a timely opportunity for me to reflect on the significant milestones we’ve seen this year, and look ahead to the challenges we must overcome next year as we all play our part in making nuclear new build happen.
HPC Investment Contract
Now, it would be remiss of me not to start with, perhaps, the biggest achievement of the year – the agreement reached with EDF on key commercial terms for a potential investment contract for Hinkley Point C.
Following a tremendous amount of work from many parties we can now look forward confidently to the first new nuclear power station in a generation being built at Hinkley Point.
What we’ve agreed represents a very good deal for Britain. It’s a good deal for UK consumers providing value for money - and also provides an attractive proposition for EDF and its investors - offering a reasonable rate of return for the risks they are taking.
But there are still hurdles to overcome on the path to a final investment decision.
It is dependent on a number of factors, such as a positive decision on State Aid from the European Commission, Royal Assent on the Energy Bill and EDF’s progress with potential investors to secure the capital investment needed to deliver the plant.
We will continue to do everything necessary to progress this in a timely way over the coming months.
But Hinkley is not the only success story this year.
As we heard yesterday, HM Treasury have signed a co-operation agreement with Hitachi, Horizon Nuclear Power Wylfa Ltd, to promote external financing for a new nuclear power station at Wylfa, Anglesey.
This agreement will enable access to the UK Guarantee Scheme that will underpin the establishment of external project finance for the ‘Wylfa Newydd’ project, expected to come on-stream in the first half of the 2020s.
And Government has made good progress over the last 12 months to make new nuclear happen in the UK.
We’ve successfully completed the first generic design assessment for Areva’s UK EPR and starting the process for Hitachi’s ABWR design.
We’ve also introduced a community benefit regime which recognises the contribution of local populations surrounding new nuclear power stations to the long term provision of clean and secure energy for the nation.
And subject to the will of Parliament, we expect the Energy Bill to receive Royal Assent by the end of the year.
We know that investors want certainty from Government and Contracts for Difference will give them the certainty they need.
This Bill will bring unprecedented levels of inward investment into our energy infrastructure, on a scale that will dwarf the Olympics and indeed many other projects in the UK’s infrastructure pipeline from transport, water and telecoms.
Global investment climate
Our market reforms have made Britain one of the most attractive investment markets for electricity in the world, and we have seen £35 billion invested in new, green energy generation since 2010.
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 our new nuclear build programme.
The spread of international interest from countries such as Japan, France, China, the US, Canada and Russia shows that our nuclear market is clearly an attractive prospect. Such interest from around the world can only be a good thing.
Consumer energy prices
And on that very subject, the Government is very aware that rising energy prices are hitting many households hard at a difficult time. We are also facing a looming energy crisis in the next decade thanks to years of neglect and underinvestment.
The best way to keep everyone’s bills down is to help people to save energy, ensure fair tariffs and encourage competition. That is exactly what the Government is doing.
New nuclear will increase energy security and resilience: a safe, reliable homegrown source of electricity that reduces our reliance on foreign gas imports and the associated volatile prices.
Hinkley Point C represents the start of investment in a new fleet of nuclear power stations. This is expected to reduce domestic bills by around 11% by 2030 (or around £77 per year) compared to a non-nuclear future.
And the Hinkley agreement is good value for money compared to the alternative. The strike price will be competitive with large scale renewables and with gas fired generation, based on our current projections.
In addition to the headline grabbing milestones that I’ve already mentioned a lot of work is underway to prepare the ground for new nuclear and ensure that the UK nuclear sector remains vibrant in the longer term. To achieve this, Government and industry are working together in partnership.
A very successful third meeting of the Nuclear Industry Council (NIC) took place in mid November, as many of you in the audience will be aware.
Absolutely central to ensuring UK businesses win contracts in the nuclear markets is the Council’s Business Capability workstream. As joint Minister for Business and Energy this is an area where I have a strong personal interest and I was pleased to hear the progress being made on this front. This work requires an effective dialogue between developers and the rest of the supply chain, underlining the importance of the collaborative nature of the Nuclear Industry Council.
While the Council’s objectives have timeframes that span decades, it was agreed that work must gather pace now if we are to help UK companies seize the window of opportunity for Hinkley work, as well as other developments.
The NIA Programme Management Board has a key role in this area. With my colleague Lord Hutton, a long-time champion of the industry, as Chair of the NIA, I have every confidence it can drive forward this important work in the coming months.
Nuclear skills and supply chain opportunities
Key to the successful delivery of the new nuclear fleet will be a strong domestic workforce and supply chain.
The opportunities are huge and are there for the taking. For example, Hinkley Point C will inject £16 billion into the economy – with the potential for British firms to get the majority of the work.
When we consider the global picture, the opportunities for the UK are also 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.
I want to see the UK take advantage of this and for our nuclear industry to become a global leader.
To highlight the opportunities that Hinkley Point C represents for UK business EDF are holding a conference next week (9 December). The event is targeting Tier 1 and Tier 2 supply chain companies to help them understand the opportunities available and how they can access them. I will be there to support this event as it is an area that I am very much committed to.
Furthermore, I am delighted to announce today the launch of a partnership between AMEC and the University of Manchester’s Dalton Nuclear Institute.
This partnership supports strong collaboration between industry and academia, one of the cornerstones of the Nuclear Industrial Strategy, and will support the UK in exporting its skills and expertise overseas ensuring that we keep our rightful place as the leader in the nuclear sector.
I call on all of you to make the most of the opportunities that exist; both in new build but also in maintenance, life extensions, decommissioning, waste management and environmental remediation. Even gaining a modest proportion of the global market in those areas will provide huge business prospects for our areas of expertise – in design, engineering, project management, professional consulting and so on.
We have done a lot but we need to do more / Challenges ahead
So as we move towards Christmas our thoughts turn to the new year ahead and the challenges we face.
I am looking forward to seeing the regulators move to the detailed Step 2 for Generic Design Assessment of the ABWR and to the department receiving an application for Regulatory Justification of the ABWR.
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.
We remain committed to our policy of geological disposal, and to the overall Managing Radioactive Waste Safely programme. However, we believe that some changes are needed to the selection process for a geological disposal facility, and today is the closing date for a public consultation on potential revisions to that process.
I hope many of you have already taken the opportunity to respond to the consultation and to engage with the policy team, who have been discussing the proposals with a wide range of stakeholders. It is important that we can draw on the real experiences and knowledge of those involved in the industry as we seek to map out a successful path to delivery of a permanent waste management solution.
I am also sure there will be an ongoing role for the industry itself in helping to communicate a clearer picture of the realities of this issue. This needs to be seen as just another step in the process of managing nuclear materials safely, for the benefit of society and not as some sort of uniquely difficult problem to be avoided.
And so to finish as I began let me say how delighted I am to see you all at today’s event.
As Minister for both Business and Energy, I want to see the UK nuclear industry flourish as a global leader in this sector.
I want to see everyone here embracing the challenge we have ahead of us.
And I want to see the continuation of a genuine partnership between government and industry towards making this happen.