Nuclear Energy (Financing) Bill
Debate between Lord Teverson and Viscount HanworthTuesday 8th March 2022
(2 years, 2 months ago)
Grand CommitteeRead Full debate Nuclear Energy (Financing) Act 2022 View all Nuclear Energy (Financing) Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 89-I Marshalled list for Grand Committee - (4 Mar 2022)
Viscount Hanworth (Lab)
Yes, indeed. In 2010, the Liberal Democrats in the coalition Government proposed that 10 new nuclear plants should be built. Of course, they have totally changed their opinion.
Lord Teverson (LD)
Perhaps the noble Viscount will explain how the Labour Party in government has made some of the biggest U-turns on nuclear power ever seen in this country.
Viscount Hanworth (Lab)
No, I am not in the business of explaining that. There has never been consensus in the party but, right now, I think there is consensus as never before. The party is facing up to realities. I hope I shall have the opportunity to describe what those realities may be if we were to follow the prescriptions of the Liberal Democrats. I think that we would be looking at a scenario of misery and—
Lord Teverson (LD)
We all agree with the principle that the polluter pays. I believe that we also have a principle in life that we should not pollute if we have no way of solving that pollution during the time for which we are planning. The issues here are complex, but I do not think they are necessarily quite so straight- forward as the noble Viscount describes.
Viscount Hanworth (Lab)
I quite agree with what the noble Lord, Lord Howell, has just said; indeed, I feel somewhat pre-empted. However, before I address the amendment, I shall talk about cost overruns.
The cost overruns have been substantial in Flamanville and Olkiluoto but they are mainly attributable to the fact that there was a long hiatus in the process of constructing nuclear power stations, so the skills that constructed the majority of the French and our own power stations had evaporated. It is worth looking back at the history of our original nuclear programme to recognise both how rapid and effective it was and that it was not accompanied by the kinds of problems we have witnessed on these large power stations.
Be that as it may, Amendment 4 from the Liberal Democrats is predicated on their opposition to nuclear power and the proposal that nuclear power projects should be assessed in terms, as we have heard, of their value for money. I presume that they wish the assessment to be based on commercial accountancy, and that they hope and expect that on that basis the projects will be judged to be too expensive to pursue. The proposers of the amendment should know that when a nuclear project is financed by commercial funds, the likelihood is that more than 50% of the cost of the project will be attributable to interest costs.
In other words, the costs of projects pursued in this manner will comprise a substantial transfer payment by the beneficiaries of the project, who are the consumers of electricity, in favour of the financial sector. Are the Liberal Democrats happy to see major investments in social and economic infrastructure evaluated according to the criteria of commercial accountancy? If so, they are aligning themselves with a political ideology that I would have expected them to reject.
Viscount Hanworth (Lab)
Be that as it may, when we talk of value for money, we usually have in mind the amount of money we would be paying for an item that is subject to immediate use or consumption. The concept loses its meaning, as we have heard, when considering something where consumption is to be deferred and is liable to take place over an extended period. In such cases, we must attempt to envisage the circumstances likely to prevail in the future. This is surely the case for a nuclear power station, the construction of which may take a decade and which is intended to provide a carbon-free supply of electricity for many years. It is envisaged that such power stations will be able to supply the plentiful electricity needed to power a carbon-free economy and to assist in averting climate change.
The appropriate means of determining the value of a nuclear project is to consider the associated opportunity cost. Opportunity cost is a technical term in economics that denotes the opportunities that are forgone by pursuing—or not pursuing—a particular project. It requires a degree of imagination to assess the opportunity cost of a nuclear project, which far exceeds the imagination required in pursuing an exercise in commercial accountancy. I invite the Liberal Democrats to assess the opportunity cost of forgoing nuclear power. In particular, I encourage them to envisage the consequences in terms of economic and social misery that will arise if we fail to create an ample and carbon-free supply of electricity. Their policies are inviting such a failure.
Lord Teverson (LD)
There is a concept in economics—which I am sure the noble Viscount is aware of—of opportunity cost.
Lord Teverson (LD)
Exactly. My point about it is that, first, it is the Government’s Bill says there will be this assessment. We are trying to find out is what it actually is, in the interests of transparency—which I am sure the noble Viscount would not disagree with. In terms of costs, there are opportunity costs of other forms and ways of meeting climate change targets. That is the point. You can reject opportunity cost, which means other ways of doing this. I do not think the noble Viscount’s enthusiasm for nuclear—which I understand—should disregard some of the other ways of achieving these objectives.
Viscount Hanworth (Lab)
Let me answer that. Looking at the alternatives proposed by the Liberal Democrats, I could go into a long discourse to outline what will happen to our industries if we forgo an ample supply of electricity to power them and maintain our economy. This is what the Liberal Democrats are inviting. They simply have not faced up to the realities of their proposals. The noble Lord says the Bill already asks for an assessment; I think that is a trivial point, because I am trying to tell him that such an assessment is probably not the appropriate way of proceeding—as we have heard very eloquently from the noble Lord, Lord Howell. I am not defending the proposal that a value for money assessment should be made. I am suggesting that such an assessment should be put aside because it is irrelevant and inappropriate.
Viscount Hanworth (Lab)
As I was saying, large nuclear power stations are the only proven technology available today which provide a continuous and reliable source of low-carbon electricity—
Viscount Hanworth (Lab)
Can I please proceed uninterrupted, then we can have a real set-to later?
Nuclear power plants have never been afflicted by significant unplanned outages, albeit that, as they have aged, their maintenance needs have increased. These have been fully accommodated by planned outages. Nevertheless, the closure of the Magnox reactors has led to an increase in load factors, which are now considerably above their historical average. The average has risen from an historical 60% to its current level in the high 70s. The recent unplanned outage at Hunterston B, which can be blamed on the age of the plant, limited its nuclear power generation for much of 2018. It was accompanied by an average load factor throughout the industry of 72.4%.
This amendment flies in the face of reality. We must turn the matter around by asking the Liberal Democrats and the Greens, who are averse to nuclear power, how they propose to accommodate the intermittence and unreliability of the renewable sources of power they are so keen to advocate. Perhaps I should not raise the temperature by declaring this, although I fear I must, but this amendment is a blind and is a transparent piece of nonsense.
Lord Teverson (LD)
I will not respond to that hugely, except to say that the really important amendment, which I think we will all treat seriously, is the one on the cost of energy and the fact that this will add to energy prices. The proposition that we should exempt fuel-poverty households from this is serious; we should discuss it, because it is very current and important.
I gently suggest to the noble Viscount, Lord Hanworth, with whom I have enjoyed serving on the committee for many years, and the noble Baroness, Lady Worthington, that they have somehow fallen into the wrong idea that it is renewables versus nuclear. That is how the argument has gone.
Viscount Hanworth (Lab)
If I could interject, we are objecting to the complete exclusion of nuclear, which is the agenda of the Liberal Democrats. It is madness.
Lord Teverson (LD)
The answer to intermittency comes back to opportunity cost. As I said at Second Reading, the most effective way of reducing it is energy efficiency. That should be the prime objective. Does the noble Viscount disagree about energy efficiency?
Infrastructure Bill [HL]
Debate between Lord Teverson and Viscount Hanworth
Lord Teverson
My Lords, I probably will not detain the Grand Committee for too long on this amendment, as in a way the principle has already been discussed on the amendment tabled by the noble Lord, Lord McKenzie. From our debates so far, we realise that the regulations really are not about zero-carbon homes; they are an approximation to that and we can never get to it. However, a great deal of consultation has gone on over the years with the building industry. We are always told—I accept it entirely—that one of the things that we need to do is make changes in regulations predictable and signal them far ahead, so that there is a degree of certainty, the producers can prepare and everything runs smoothly for the industry. With the Government and the industry, the Zero Carbon Hub spent a great deal of time coming to standards that would be accepted for 2016, and I admit to disappointment that we have not really got there at present. We have also removed a requirement about appliances within those homes being taken into consideration.
I talked about hope value in terms of planning just now, and my hope value in terms of the Bill is that the Government might reconsider where they go in this area, as we are still far away from zero carbon. I fully accept that we have to be practical, but this is the trajectory that we were expecting, it was negotiated with a large proportion of the industry, and it would be a good model were we able to pursue it. I beg to move.
Viscount Hanworth (Lab)
My Lords, it is little more than a week since we received notification of the publication of the Government’s response to the outcome of the consultation exercise on zero-carbon homes and the so-called allowable solutions. Already there has been a flurry of government amendments to the Bill in the name of the noble Baroness, Lady Kramer, based ostensibly on these responses. They have been followed by contrary amendments in the names of the noble Lords, Lord Teverson and Lord Tope. There is clearly a division of opinion among the coalition on these issues.
Much in the Government’s document ought to be considered in detail, but at a glance it is easy to recognise its salient characteristics. It exemplifies the doublethink that we have come to expect of the Government in connection with environmental issues. It also illustrates the perspectives of the persons responsible for drafting the legislation, who have given expression to a kind of neoliberal economic thinking that was at the heart of the Energy Bill which we considered last summer. I shall attempt to characterise those perspectives but, for a start, let me talk of doublethink.
The consultation document on zero-carbon homes and the Government’s response both declare an earnest intention of staunching the emissions of carbon dioxide, yet ultimately subvert these intentions.
Energy Bill
Debate between Lord Teverson and Viscount Hanworth
Viscount Hanworth
My Lords, we know that strike prices will differ across various technologies but I query whether that degree of flexibility is sufficient. There may be a case for varying the strike prices to cater for the different components of the same technology. I am thinking, for example, of the differences within the technology of gas powered LGC generation between the base load CCGT plant and the plant that is devoted to satisfying peak demand, which may be OCGT.
The cost profiles of the two varieties may be very different as will the wholesale prices commanded by their outputs. Should they be subject to the same market reference price and the same strike price? I am asking that question, in all innocence; it is not a tendentious question. But I have observed that the Minister has indicated or implied that there may be special accommodations within certain technologies for interconnection. If I am making any assertion, it is that we need a lot more detail and I am not sure that it has yet come forth. We need a lot more detail that would address the realities of electricity generation.
Lord Teverson
While I am sympathetic towards this, I have the impression that if the Government do not want this to work they will find a way to make it not work. Such an amendment is probably not the thing that saves this. Therefore, I am not sure that this works, but in terms of trying to make sure that there is some commitment to this form of energy generation in the future, I understand the motivation entirely. However, I suspect that any future Government who did not want to do this would find another way around it.