Rt. Hon. Helen Liddell - Former Minister for Energy and Competitiveness in Europe (Jul 1999 - Jun 2001)

BNES/BNIF Nuclear Congress 2000

Chairman, ladies and gentlemen. This Congress is one of the major events in the UK nuclear industry's calendar and I welcome the opportunity it gives me to address representatives of the very broad range of interests handled by the industry. I should say right out at the outset, that there will be some time for me to take questions after my speech. I hope that you take this opportunity - especially those of you who don't have much contact with me.

REFLECTIONS ON THE LAST YEAR

Although the theme of this Congress is "Securing the Future" I think it's worth reflecting on what has happened over the past year.

When I was invited to give this address - very much earlier in the year - some very tough challenges were emerging for the industry. It is difficult to talk about the future without reflecting on past year.

It has indeed been a difficult year. The MOX fuel data falsification incident was a considerable blow to BNFL - and indeed regrettably it also set back the Japanese MOX programme. The HSE's report on the MOX data falsification incident, and their report of the team inspection at Sellafield, were critical of BNFL's management and safety culture. Nearly 50 recommendations for changes were made by HSE and I am pleased to say that BNFL responded very quickly. Important senior management changes were made. And - led by the company's new management team of Hugh Collum and Norman Askew - I commend the substantial efforts made throughout BNFL in recent months to get the company back on track and to respond positively and constructively to HSE's recommendations.

It is of course for the company's management - and not the Government - to run BNFL's business. Nevertheless, the Government should not be an absentee shareholder. It is clear that the process of exploring the potential for introducing a PPP into BNFL, and engaging professional advisers, has significantly improved the Government's ability to understand the company's business and to be a better informed shareholder than it has been over the past three decades.

It is going to be very important to maintain this closer understanding. As shareholder, the Government needs to be satisfied that the company has a clear idea of its strategic direction, that this makes commercial sense and that it properly takes account of wider policy objectives.

The purpose behind any PPP would be to introduce greater private sector commercial disciplines into a company to help it to make sound commercial judgements about business opportunities and investment decisions. This must be based on what is right for the company, its employees and the wider public interest in the longer term.

BNFL is not currently ready for a PPP. It needs to rebuild customer confidence, recover from recent setbacks and raise its game. No PPP will be introduced into BNFL before the company is ready, we can ensure value for money for the taxpayer, and we can convince the general public that issues of safety and the environment are being taken into account.

Turning to British Energy, HSE this year published its Safety Management Audit Report on the company. That report made just over 100 recommendations for change. British Energy has put in place dedicated teams to address the recommendations and I understand that good progress is being made in closing them out.

That is also true for UKAEA who are in the process of closing out the 140 or so recommendations in the 1998 HSE/SEPA Audit Report on Dounreay.

PUBLIC CONFIDENCE

Yes, these are signs that the industry is responsive and is determined to bring about the changes that the regulators have recommended. But this alone is not enough to secure a future. It will only help for the longer term if it goes hand in hand with winning genuine public confidence that the highest standards and utmost transparency apply. If the industry is not perceived as being safe, there will be no industry. The UK's record is good but we know from experience overseas that things can go wrong - and when they do the consequences can be catastrophic. The tragic accident last year at Tokaimura bears witness to that. An incident anywhere in the world has an impact on the nuclear industry everywhere.

Everyone here today is very familiar with the issues that the industry has to deal with. I am afraid that that has led to a degree of complacency. We must not allow familiarity to breed contempt. We must not underestimate the degree of anxiety that exists among the general public about what they perceive as a secretive and hazardous industry. And to some extent that anxiety is understandable. Yes, a lot has been done in recent years to make the industry more transparent and to provide reassurance to the public about your commitment to safety. But every opportunity must be taken to build on that and actively to look for ways to inform the public about the business and to demonstrate the high level of commitment to safety and the environment. The only way to do that is to be more open and transparent.

There are I believe, well-recognised issues that need to be addressed effectively as part of that process which I will now touch on.

WHERE HMG IS IN THE LEAD

First, resolving uncertainties over radioactive waste management. Uncertainty only hampers decisions on future technology. During the last year the Government has sought views on a National Strategy for Radioactive Discharges to ensure that our obligations to OSPAR are met. Work on a consultation paper on radioactive waste management is at an advanced stage. My officials have been working very closely with DETR on this document and we regard it as an extremely important milestone in the process of achieving resolution. It is in all our interests that we work together towards an agreed solution.

Closely linked to this, and of fundamental importance, is the effective management of nuclear liabilities. As we all know, the costs involved are enormous. Current estimates put the total cost of dealing with public sector civil and military liabilities in the region of £85 billion. Most of that bill will fall to Government and ultimate responsibility for nuclear clean-up rests inescapably with Government. If the nuclear industry is to have a future we have to deal effectively - and again more openly and transparently - with the legacy of the past and applying the lessons learned for the future.

My Department, in conducting its Quinquennial Review of the UKAEA, has been considering the issues and how they might best be dealt with in the future. Stage 1 of the Review, focussing on strategic and organisational issues, has been completed and I am currently considering its recommendations. I hope to be in a position to make its conclusions public in the early part of next year and to announce the direction of future work.

As well as dealing with UK liabilities, we are involved on an international scale through the recently agreed Whitehall programme directed at addressing the problems in the Former Soviet Union and Eastern Europe. More than £80 million will be spent over the next three years on programmes principally aimed at addressing decommissioning and clean up, safety and security. This work will go a considerable way to ensuring that environmental, safety and security standards in those countries are raised. This is reassuring for the people living there and in neighbouring countries. And it also helps to improve global confidence that the nuclear industry, and Governments world-wide, can operate their facilities safely and efficiently.

The adequacy of current arrangement for nuclear education and training has recently become an issue. Hand in hand with safety goes the essential need to ensure that companies and their contractors have competent skilled operators at all levels. The Nuclear Energy Agency recently published a report which indicates that there may be problems in the future if action isn't taken now to deal with declining nuclear education and training provision, particularly in the university sector. The Agency noted that, and I quote, "Failure to take action now will seriously jeopardise the provision of adequate expertise tomorrow."

BNIF have recently undertaken their own foresight exercise to identify what skills will be required by the UK nuclear industry in 20 years time to meet the challenges of the future. That report recognised the importance to the industry of establishing and maintaining close links with the education sector.

In that context, HSE and DTI are jointly organising a forum to discuss this important issue. This will be held on 16 February 2001 at Risley and I hope that all the nuclear companies and their main contractors will send senior representatives to it. BNIF is playing an active role in helping to prepare for this event and ensuring tat all areas of the industry can be either represented or make their views known beforehand. Clearly it is essential that the industry ensures it has the right skills and competencies to operate its plant safely and to take forward the massive programme of decommissioning and clean up. The industry also needs to be in a position to respond positively to any new challenges and opportunities in the future. Your industry's future as a global player depends on it.

If we can deal successfully with the issues I've just outlined it will, I believe, go a long way to fostering public confidence in the industry.

WHAT CAN INDUSTRY DO

Government and industry has to work in partnership. Your co-operation is essential and I recognise the good relationships that we have established and which I very much hope will continue.

In that context I am therefore pleased that BNIF have become an associate member of the Foresight committee on energy futures. The DTI takes a great interest in the reports of all foresight committees and it is essential that the nuclear industry's view are represented in the energy report.

I would like to briefly outlines other areas that need attention. The first of these - for those of you in the generation business - is the need to concentrate on improving competitiveness in the liberalised electricity market. This isn't a simple or straightforward task and I recognise that it has to be done in a highly regulated environment. But I believe it is achievable. And I am aware of the steps taken by British Energy to identify measures which will enhance efficiency in their operations over the coming year within that framework. And BE is not alone. BNFL is also working towards tough performance targets including reducing its operational costs in the 2000/2001 financial year. This has to be done safely and in a way that bolsters, not limits, public confidence.

Next there is liabilities management which I touched on earlier and where there is still a good deal to be done. BNFL is decommissioning some of its Magnox power stations and others will follow now that the company's station closure programme has been announced. BNFL continues to address the legacy of waste at the Sellafield site. The UKAEA are working hard on clean up at some of the old nuclear facilities such as Winfrith, Harwell, and Windscale. And of course at Dounreay UKAEA recently published its site restoration plan which will see decommissioning and clean up completed in 50 to 60 years. A massive task on any scale.

Next, let me turn to those of you who supply the wide range of specialised and often high-tech skills, goods and services to those operators. Your performance and competitiveness is fundamental to the success of those you supply and through that, the entire industry. There will be a strong market for these goods and services for many decades to come.

Beyond the UK there are important export opportunities to supply the whole range of nuclear goods and services. These opportunities exist in countries with more mature industries like those in the UK, as well as in areas such as the Asian region where new plant is being built. Exports were valued at about £700 million in 1998/99, of which about 20% was exports to developing countries. British companies, with their good reputation for safety, health and environmental performance, are in a strong position to compete for that overseas business.

NUCLEAR AND COP6

There is no doubt that we are in a challenging period. And one of the biggest challenges facing us all today is how we are going to deal with climate change and growing energy demand. That is an issue that will be at the top of the global political agenda for very many years to come.

Here in the UK, there are periodic forays into the debate about whether or not there should be new nuclear build. That is a decision for the market to make and safety and cost will obviously drive that decision. Key to that will be securing public confidence.

And that is not just the position in the UK. The recently published European Commission Paper on Security of Supply - the first time since the mid-1990s that the Commission has addressed energy issues - stresses the potential key role of nuclear. It acknowledges its potential as a response to the Kyoto protocol. But it also recognises that the current long construction times for nuclear plant, market liberalisation and environmental opposition cannot be ignored.

The potential for nuclear power, and the caveats to that potential were identified by the Royal Commission on Environmental Pollution in their recent report. Let me assure all of you that the Government takes the Commission's recommendations very seriously. We are considering these in detail and will be responding fully next year.

I know there is a lot of interest in the potential role of nuclear energy in the Kyoto mechanisms, specifically the Clean Development Mechanism and Joint Implementation which both relate to projects to reduce emissions overseas. I can assure you that the UK fought hard to resist an EU line which would have explicitly excluded nuclear from these mechanisms.

The position finally agreed was for the EU to promote a positive list of relatively uncontroversial technologies for the Clean Development Mechanism. This was the line pursued at the recent international climate talks at the Hague. The EU believes that it is of overriding importance that we gain public confidence and acceptance of the Kyoto mechanisms. So for those less contentious technologies to be the first to be on the list is an understandable approach.

As you may know, the talks ended without substantive agreement on any issue. However, against the background of a compromise package proposed by the Dutch Conference President, there was a consensus at the end of the talks, supported by the EU, that developed countries would refrain from using nuclear facilities (and large hydro-power plants) to generate carbon credits under the two mechanisms. We hope that the issue will be resolved when talks resume next year. But even if the outcome is close to the position reached last week, it is unlikely to prevent nuclear playing a significant role in domestic programmes.

CONCLUDING REMARKS

In conclusion, therefore, nuclear generation has the potential to make a contribution to meeting future demand without adding to carbon emissions. But there is a long way to go to reach that potential and many hurdles to clear. There are no quick or easy answers. And there are no shortcuts to coming to conclusions that people can accept.

I have set out today what I see as the key areas that need to be tackled. I can assure you that the Government is doing its part. Everyone in the industry also needs to play their part. This means dealing effectively and determinedly with historic legacies, whilst improving competitiveness in open markets and demonstrating that all this can be done responsibly, openly and safely. I hope that you will rise to these challenges.

Chairman, ladies and gentlemen thank you very much.

Other speeches by Rt. Hon. Helen Liddell - Former Minister for Energy and Competitiveness in Europe (Jul 1999 - Jun 2001)

(the following are available from the archive)
• Energy Industry & Market Restructuring (19/11/00)
• Launch of the 3e's Initiative (21/09/00)
• Offshore Northern Seas 2000 Conference (23/08/00)
• The Franco-British Club For Higher Education And Training In Entrepreneurship (02/12/99)
• Energy Policy Conference National Assembly (19/10/99)