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Nuclear New Build - the role of the private sector

Lord Truscott,  Former Parliamentary Under Secretary of State for Energy
Copthorne Tara Hotel, London,  26 June 2007

Ladies and gentlemen, I am delighted to join you today at the Nuclear New Build 2nd Annual Summit. This event plays a vital role in bringing together countries to present their nuclear energy policies and investment programmes, to examine the latest developments in the financing of nuclear power plants, and to provide a networking opportunity for governments and the global nuclear energy industry at the highest level.

Energy is vitally important. It is our ability to harness energy that lies at the heart of our development as a society. Since early man used the power of fire to take us out of the Stone Age, energy has played a key role at every stage of human development, from the Bronze Age through to the Digital Age. As a society, we are now almost as dependent upon secure supplies of energy as we are on secure supplies of food and water. However, that dependence has come at a cost. It is an irony that it is our ability to harness energy to develop human society as we know it, which now poses what I would argue is our greatest threat.

I believe that climate change is the single most important threat facing humankind. The scientific evidence is compelling. Human activities, and in particular emissions of greenhouse gases such as carbon dioxide, are changing the world’s climate. According to the International Energy Agency, in 2005, 40% of global carbon dioxide emissions were created by the generation of electricity.

Temperatures and sea levels are rising. There is no scientific consensus on just how long we have to avoid the dangerous and irreversible effects of climate change, but the overwhelming majority of experts believe that climate change is already underway. Without action now to dramatically reduce our carbon dioxide emissions, we will have a hugely damaging effect on our country, planet and way of life. However, the challenge is not only how to tackle climate change; it is how to do so in a way that does not undermine the security of our energy supplies.

We need secure supplies of energy to heat and light our homes, to power our businesses and public services and to transport people and goods. Without a clean, secure, affordable and sufficient supply of energy, we would not be able to function as an economy or a modern society.

This is a real issue for the UK. In the future, we will become increasingly dependent upon imported oil and gas at a time of rising global demand and prices, and when energy supplies are becoming more politicised. At the same time, a significant number of our coal and oil fired power stations are likely to close due to the need to reduce sulphur and other emissions, and as existing power stations reach the end of their expected lives. In addition, most of our nuclear power stations are set to close over the next two decades. So, even with a concerted effort to increase the efficiency of our energy use, if we are to deliver our energy policy goals, we will need lower-carbon power stations to replace existing capacity if we are to make the transition to a low carbon economy.

The UK Government’s 2006 Energy Review Report concluded that there was no single answer to all the difficult issues we face, no silver bullet, and that action was needed on many fronts. Our recent Energy White Paper (Meeting The Energy Challenge), published in May, makes clear the scale and complexity of the dual challenge we face in terms of climate change and energy security.

We believe that the best way to meet this challenge is by ensuring we have as diversified a mix of generating technologies available as possible.

Nuclear power plays an important role as part of the UK’s energy mix at the moment. We currently get around 18% of our electricity from nuclear power stations. Our preliminary view is that nuclear power stations should continue to play a role in providing low-carbon, base load electricity and we are currently consulting on that very point.

This does not mean diverting investment away from renewables - our economic modelling suggests that investment in renewables would continue even if nuclear power were allowed as an option. This is because we have put specific measures in place to protect renewables investment and – as I am sure many of you here today will agree - because private sector investors will always be attracted to invest in projects which offer an attractive return on capital.

For example, the Renewables Obligation with exemptions will be worth £1bn by 2010 and £2bn by 2020; and £500m of spending on capital grants and R&D has been made available for low carbon and renewable technologies up to 2008. In addition, the Energy White Paper sets out our continued commitment to Carbon Capture and Storage with further details of the full-scale UK demonstration.

However, renewable and low carbon technologies may not be able to meet our full energy needs over the medium term, so we must ensure a balanced approach.

And this is why we have taken our preliminary view that, energy companies should have the option of investing in new nuclear power stations, alongside other low-carbon technologies.

Our nuclear consultation invites the public to consider the evidence we have presented in the consultation document, and seeks views on a number of questions. It takes account of the ruling of the High Court in February. We are encouraging as many people as possible to take part in the consultation process and will consider all the responses we receive before taking a final view before the end of the year.

But let me state very clearly that this is not about the Government funding, subsidising or building new nuclear power stations. We have been very clear in the consultation that it would not only be for the private sector to propose, build and operate any new nuclear power stations, but to cover the full costs of decommissioning and their full share of the waste management costs too.

Work to develop a robust financing framework is being led by Dr Tim Stone, who will be addressing you shortly.

We recognise that people do have concerns about the prospect of new nuclear power stations, for example the ethical concerns around dealing with new nuclear waste.

Government initiated a review of nuclear waste policy and appointed CoRWM (Committee on Radioactive Waste Management) in November 2003 to assess and recommend the best options for dealing with higher activity solid waste.

CoRWM published its report in July 2006, concluding that geological disposal was the best available approach, coupled with safe and secure interim storage in the meantime. We have accepted their recommendations and have now begun the process of developing an implementation framework for providing a geological disposal facility.

Indeed, only yesterday the UK government, in conjunction with the Welsh and Northern Irish Devolved Administrations, announced the launch of the Managing Radioactive Waste Safely Consultation on a framework for implementing geological disposal. This consultation seeks views on the technical aspects of designing and delivering a disposal facility for higher-activity radioactive waste, and on the process and criteria to be used in deciding where the future facility should be located.

The challenges we face are significant. Climate change is not a one-off battle we can win or lose over the short to medium term. As long as we continue to emit carbon dioxide into the atmosphere, climate change will hang over us like the sword of Damocles.

And these are not just challenges for Governments – they are challenges for us all. Governments need to put in place regulatory frameworks that will encourage investment and promote competition; industry needs to provide the necessary investment and innovations that will deliver the low carbon technologies we need; and we all need to act to reduce our own energy consumption.

We must act urgently if we are to tackle climate change; and do so in a way that ensures security of energy supplies. The challenges are interrelated and there is no single solution. Neither can be addressed at the expense of the other, nor can they be solved by the UK alone. Energy security and climate security are two sides of the same coin. This is a global problem and it requires a global solution.

This is why events such as this conference are so important. They provide opportunities to share concerns and ideas. I am sure that this event will provide many opportunities for exchanges of views and ideas on the key challenges, and I am sure it will be a great success.
Thank you.