Stephen Timms MP

Nuclear Industry Association Annual Energy Choices Conference

We are coming towards the end of a year that has been an extremely eventful one for energy policy and for the nuclear industry in particular.

Last week, we introduced the Energy Bill in the House of Lords. It will implement a number of the key measures set out in our White Paper, Our Energy Future: Creating a Low Carbon Economy, published in February. It was the first comprehensive statement of UK long-term energy policy for over 20 years. It set out in straightforward terms the three main challenges facing us, and how we intend to deal with them:

• Global climate change,
  
• Becoming a net importer of energy, and
  
• Updating our energy infrastructure.

It set out four goals of energy policy:

• To put ourselves on track to cut UK carbon dioxide emissions by 60 % by 2050,
  
• To maintain the reliability of energy supplies,
  
• To promote competitive energy markets, and
  
• To ensure every home is adequately and affordably heated.

It set out our commitments:

• To introduce the EU emissions trading scheme;
  
• To increase the share of our electricity provided by renewable energy to 20 % by 2020 and
  
• To achieve significant carbon cuts through higher energy efficiency and through cleaner transportation.

These objectives have secured widespread support. There is growing acceptance that we cannot simply carry on burning coal and oil and gas as we have in the past.

And we want people to be able to track our progress towards the goals we have set. Please do look at the website of the new Sustainable Energy Policy Network if you haven't already. We will keep the information up to date - to ensure that progress towards the targets is widely available and open to scrutiny. This sort of transparent sharing of responsibility between Departments for a project on this scale is very good practice. We intend to make it work.

Of course, the White Paper had its critics. Some complained about the lack of a commitment to new nuclear build. Others criticised us for not shutting the nuclear industry down. Although it is sometimes couched in rather different terms, almost all of the criticisms of the white paper - and I accept that the white paper was actually remarkably well received - but almost all of the criticisms that were made were along one of those two lines.

We are unrepentant. It certainly looks to me that 'keeping the nuclear option open' is the right stance in the current circumstances.

On the one hand, nuclear is a vital source of carbon free electricity today, and plays an important part in meeting our Energy needs - 22% of UK electricity last year.

But on the other hand, the economics makes the option of building new nuclear capacity a rather unattractive one at the moment. And there are important issues of nuclear waste to resolve, including our legacy waste and continued waste arising from other sources. We would need more convincing answers to the public concerns on those matters than are available today. So I agree with those in the industry who have said to me that new nuclear build is not today a realistic proposition.

In the future, though, that might well change. The Government's position is that it might be a realistic proposition in the future. And so we need to make sure our policy is appropriate to deal well with different circumstances in the future.

At some point in the future, new nuclear build might be necessary if we are to meet carbon targets. Before any decision to proceed with the building of new nuclear power stations there will need to be the fullest public consultation and the publication of a further White Paper setting out our proposals. That is what the Energy White Paper said and I want it to be clear that it remains our policy.

People have also asked how, specifically, we intend to keep the nuclear option open. I want to mention some of the initiatives on research and development and on skills that we believe will enable us genuinely to keep the option open.

We will shortly be announcing new opportunities for fission research, as part of the "Towards a Sustainable Energy Economy" initiative. Up to £5 million will be made available.

Research opportunities continue to exist through the European Union's Framework Programme for Research and Development (FP6 Euratom), and OECD co-ordinated research programmes. These cover a broad area of research including safety, waste, radiation protection and innovative reactors.

And we are looking closely at energy research needs across the board in the light of the Energy White Paper, including nuclear fission, through the work of Sir David King, the Government's Chief Scientific Advisor and his high level group. DTI funding is being considered next as part of the 2004 Spending Review.

The UK has also played an active role in the Generation Four (IV) International Forum research programme on future reactor designs that are in the final stages of development. So there are a number of important opportunities looking forward.

We have already taken some early, but significant, steps towards that developing our nuclear skills infrastructure since the Nuclear Skills Group reported last December.

We expect Cogent, the Sector Skills Council (SSC) for the oil, gas and chemical sectors, to be licensed to cover the UK nuclear industry early next year. Work is underway exploring how synergies between these industries can be exploited. They all operate in a heavily regulated environment and require highly skilled scientists, engineers and technicians.

Cogent will work closely with the new Nuclear Decommissioning Authority in making available and sustaining the skills needed in all areas of the nuclear sector, including nuclear waste management and decommissioning.

We said we would review our position on new build in 2006. And we will. But let us be realistic about our priorities for meeting our Energy requirements. I must say that I haven't yet met anyone who wants, in the near future, to build new nuclear capacity, and I think it is right that it is not a decision for now.

One of the main debates we are now having - and in which you share an interest - is how we achieve a secure but sustainable energy supply. I don't think they are - I am optimistic that we will meet them. I have spent a good deal of time in recent weeks on seeing at first hand the progress that is being made, and I am encouraged by the progress that is being made around the UK, including with some innovative technological solutions.

Our Energy Bill is, of course, another signal of our intent. One of its key tenets is the proposal to legislate for the building of offshore windfarms beyond our 12-mile coastal limit.

Security of supply requires urgent attention, as our energy independence comes to an end and we become net importers in the next few years of oil and gas. So, in October, I signed up, with my Norwegian counterpart, Einar Steensnaes, to a set of principles that will underpin future cross-boundary oil and gas co-operation between Norway and the UK and he and representatives of the Norwegian industry were in London again yesterday. The agreement will facilitate the delivery of the equivalent of some 20 % of UK gas demand from the vast Ormen Lange field from 2006.

But the issue in the Energy Bill I would particularly like to focus on - and which will be a major part of your discussion today - is the Nuclear Decommissioning Authority, the NDA. It's a big change for the industry. For the first time, a public body, responsible to Government but working at arms' length from Government, will provide the strategic direction for managing effectively the clean up of our civil public sector nuclear sites, and for securing their decommissioning and clean-up.

Through promoting a competitive market for site management and clean up contracts, the NDA will seek to bring the very best available skills to the task of cleaning up Britain's civil nuclear legacy. The NDA will have a clear focus on safety, security and environmental protection. And it will also focus on value for money. The cost is huge - some £48 billion over the next century on current estimates - so the prize of being more cost-effective is also a very large one.

In July last year, the White Paper 'Managing the Nuclear Legacy - A Strategy for Action,' set out our policies for the systematic and progressive clean up of Britain's civil nuclear legacy. We consulted widely on these proposals and received many positive responses.

We carried forward those policies in the Draft Nuclear Sites and Radioactive Substances Bill, published in June. Again, we consulted on our proposals because we wanted to get our proposals right.

And I believe it has worked. We received comments from a range of interested parties - notably from key players in the nuclear industry and its regulators - and have gained broad support for our aims. I know that the Nuclear Industry Association submitted comments on the draft Bill and I would like to thank you now for that support.

I know also that you all want to see the legislation passed as swiftly as possible. So do I. Our aim is to secure Royal Assent by July 2004, with commencement shortly thereafter.

Our long-standing objective remains to establish a fully operational NDA by April 2005. We are working very hard to this end. It is challenging. But I am confident we can achieve it.

Putting in place legislation is one, albeit crucial, component of dealing with the immense task of cleaning up the nuclear legacy. The Energy Bill sets out clearly the roles and functions of the NDA, it enables the necessary re-structuring of the industry to take place and it provides the flexibility to take account of changing circumstances or policies. This is a very long-term process. It's our job to put the right policy framework in place so that the NDA can deliver its objectives. And we are committed to getting it right.

Establishment of NDA will signal a major structural change for the industry and in the way decommissioning and clean up have traditionally been managed. Our decommissioning policy needs to accommodate this change so that the NDA can operate within an effective policy framework.

So last Friday, we issued a document for public consultation on our policy for decommissioning nuclear facilities in the UK. We decided that a review was necessary for a number of reasons. Existing policy, introduced in 1995, deals almost exclusively with UK nuclear sites. We believe that our policy should be updated to cover all UK nuclear facilities.

In restoring nuclear sites, we now recognise that restoration to unrestricted land use is not necessarily the best option, either environmentally or economically. Our policy should be updated to reflect this recognition.

We also believe site operators should consult interested parties and the public on their plans for restoring sites. There are many different views on what represents the best end-points for sites and it is right that they should be taken into account. We will consult on our revised policy statement for three months, to the end of February. We will then consider the comments we receive before issuing the final statement.

I very much hope that you will take the opportunity to contribute your ideas as part of the consultation exercise. We are genuinely interested in hearing all of your views.

My Department is also working closely with colleagues in the Department of the Environment, Fod and Rural Affairs and the devolved Administrations on policy for the long-term management of radioactive waste. The Committee on Radioactive Waste Management, CoRWM, Chaired by Dr. Kathryn Bryan, is now looking at options for long-term radioactive waste management and will make its recommendations to Government in two to three years.

I know many of you are concerned at the timescale for the Committee. I also want to see these issues resolved as swiftly as possible, consistent with getting the right policy framework in place for the long-term. But there is a real sense of joined-up Government at work here and this will aid the NDA's task over the coming decades.

There is already a welcome high level of interest in the NDA. My officials have been around the country to listen to views at regional and local level. They are already telling us what they want from the NDA, who it should engage with and how transparent and open it should be. We will publish a draft Stakeholder Engagement Framework before Christmas.

And at national level, stakeholders have given us their views already on what performance measures, indicators or targets they want the NDA to set, or to impose on its contractors. This feeds into our current work on the contractual structure and models that the NDA will need to consider adopting.

People also want certainty about the NDA's funding. About the skills it will need, how big it will, where it will be located. People want to know how the NDA will work with the regulators. When competition will be introduced. I welcome that level of interest. Let me touch on some of those points.

We have to make sure that the NDA gets the resources it needs, both in terms of people and funds to pay for decommissioning and clean up. In its first year, the NDA will spend some £2 billion. We are making provision for that.

A successful NDA means appointing the right people with the right skills set to the NDA Board. These skills needed may vary considerably over the lifetime of the clean up programme. Cleaning up the legacy is going to last a century, so the NDA will need to be able to attract the right skills to drive forward clean up over the long-term.

We envisage that the Authority will employ some 200 staff. We expect a fair proportion of these to have site oversight duties - about 40 % - while the majority will be based in the NDA headquarters in West Cumbria.

We will set up a Statutory Segregated Account, credited with money equivalent to that already set aside for decommissioning BNFL's sites and backed by the Government's Consolidated Fund. The Account will operate in an open and transparent way. It will be open to scrutiny by the National Audit Office and the NAO's Report on its activities will be put before Parliament in the proper way. That way, we hope to secure confidence in our funding arrangements for clean up.

The Account will also provide a rolling commitment of funds for a period of at least ten years ahead. Through providing the surety of funding needed by a future clean up market, we will demonstrate our commitment that funding clean up remains a firm priority of Government.

The NDA will also need flexibility in its ability to spend. Nuclear decommissioning is a fast-developing area. Technical challenges will need to be overcome, many of which will be unforeseen at the outset. The account will offer that flexibility without weakening the provision of resources necessary to fund clean up over the long-term.
We are discussing with the Treasury how we will provide the necessary rolling commitment of funds while giving the NDA that flexibility and enabling it to manage the risks associated with clean up.

The NDA will need a broad mix of skills amongst its staff. The precise skills set will be for it to determine, but we expect those skills to be drawn from a variety of backgrounds and people with experience in the nuclear industry will clearly be an important element of that skills pool.

And the need for first-class skills extends throughout nuclear decommissioning. That is why the NDA will have a key duty to develop and maintain a skills base that will support work under its direction.

We will continue to consult on the draft Memorandum of Understanding between the NDA and Regulatory Bodies published earlier this year. The memorandum sets out how we envisage the NDA working with the regulators. We are interested in your views on this.

One of the NDA's key duties will be to promote and develop a competitive market for clean up. Experience in the United States, where clean up work has been contracted out for a number of years, demonstrates that competition can:

• Drive innovative practices;
  
• Increase operational efficiency and lower costs; and
  
• Lead to improvements in environmental and safety performance.

The US model offers many attractions. We are unlikely to follow it wholesale, because our regulatory system is different, but through letting contracts for site management and by providing incentives for contractors to perform, the NDA will seek to attract the best of what the public and private sectors have to offer.

But competition isn't only about principal suppliers. It is in the NDA's - and the UK's national - interest to develop a long-term viable supply chain from which the NDA can benefit. We have been helping to develop this. We have received strong interest from a variety of companies to date. I very much hope that all those interested in working with the NDA will maintain a close contact with the Department in the run up to establishing the Authority.

Let me be clear about the introduction of competition for sites. The first contracts will go to their incumbents. The timing and pace with which the NDA will introduce competition will be for the NDA to decide. Safety, security and due regard for the environment remain paramount. And I emphasise that there will be no change for change's sake. The NDA will seek to let contracts for the management of its sites only where there is scope for improving clean up.

And the NDA will consult before any decisions are taken on changing arrangements for site management. The present site licensees under BNFL and UKAEA will be given the opportunity to become suppliers of choice to the NDA. The challenge is for them to perform.

In short, the NDA represents the focal point of our current nuclear policy. A policy based on the clean up of our legacy waste. It presents huge challenges. And as always with challenges, opportunities. I am confident the industry and its suppliers will rise to the challenge and seize the opportunity.

So on all these fronts and others I am looking forward to working with this industry. There is a great deal to do. I want to express again my appreciation for the work of this Association and of everybody in the industry. Let's take forward our work together on objectives which all of us share.

Thank you.