Nuclear Update

– in the House of Commons at 11:52 am on 17th January 2019.

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Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy 11:52 am, 17th January 2019

With permission, Mr Speaker, I would like to make a statement following Hitachi’s announcement this morning that it intends to suspend development of the proposed Wylfa nuclear power project, as well as work relating to Oldbury.

The economics of the energy market have changed significantly in recent years. The cost of renewable technologies such as offshore wind has fallen dramatically, to the point where they now require very little public subsidy and will soon require none. We have also seen a strengthening in the pipeline of projects coming forward, meaning that renewable energy may now be just as cheap, but also readily available.

As a result of the developments over the last eight years, we have a well-supplied electricity market. Our electricity margin forecast is more than 11% for this winter, having grown for each of the last five years. While that is good news for consumers as we strive to reduce carbon emissions at the lowest cost, that positive trend has not been true when it comes to new nuclear. Across the world, a combination of factors, including tighter safety regulations, has seen the cost of most new nuclear projects increase as the cost of alternatives has fallen and the cost of construction has risen. That has made the challenge of attracting private finance into projects more difficult than ever, with investors favouring other technologies that are less capital-intensive up front, quicker to build and less exposed to cost overruns.

As I made clear to the House in June, the Government continue to believe that a diversity of energy sources is the best way of delivering secure supply at the lowest cost and that nuclear has an important role to play in our future energy mix. In my June statement, I therefore reaffirmed the Government’s commitment to nuclear. I also announced that we would be entering into negotiations with Hitachi over its project at Wylfa. Given the financing challenges facing new nuclear projects, I made clear to the House that we would be considering a new approach to supporting Wylfa that included the potential for significant direct investment from the Government.

As I am sure the House will understand, while negotiations were ongoing the details were commercially sensitive, but following Hitachi’s announcement I can set out in more candid terms the support for the project that the Government were willing to offer. First, they were willing to consider taking a one-third equity stake in it, alongside investment from Hitachi, agencies of the Government of Japan, and other strategic partners. Secondly, they were willing to consider providing all the debt financing required for the completion of construction. Thirdly, they agreed to consider providing a contract for difference, with a strike price expected to be no more than £75 per megawatt-hour. I hope the House will agree that that is a significant and generous package of potential support, which goes beyond what any Government have been willing to consider in the past.

Despite that potential investment, and strong support from the Government of Japan, Hitachi reached the view that the project still posed too great a commercial challenge, particularly given its desire to deconsolidate it from its balance sheet and the likely level of return on its investment.

The Government continue to believe that nuclear has an important role to play, but, critically, it must represent good value for the taxpayer and the consumer. I believe that the package of support that we were prepared to consider was the limit of what could be justified in this instance. I was not prepared to ask the taxpayer to take on a larger share of the equity, as that would have meant taxpayers’ taking on the majority of construction risk, and the Government’s becoming the largest shareholder with responsibility for the delivery of a nuclear project. I also could not justify a strike price above £75 per megawatt-hour for this financing structure, given the declining costs of alternative technologies and the financial support and risk-sharing already on offer from the Government, which were not available for Hinkley Point C.

Let me reassure the House that Hitachi’s decision to suspend the current negotiations on the project was reached amicably between all parties once it became plain that it was not possible to agree on a way forward. Hitachi has made clear that while it is suspending project development at this stage, it wishes to continue discussions with the Government on bringing forward new nuclear projects at both Wylfa and Oldbury, and we intend to work closely with it in the weeks and months ahead. We will also continue to strengthen our long-standing partnership with the Government of Japan on a range of civil nuclear matters; and, importantly, we will continue to champion the nuclear sector in north Wales, which is home to world-leading expertise in areas such as nuclear innovation and decommissioning and which offers ideal sites for the deployment of small modular reactors.

If new nuclear is to be successful in a more competitive energy market—I very much believe that it can be—it is clear that we need to consider a new approach to financing future projects, including those at Sizewell and Bradwell. Therefore, as I said initially in June, we are reviewing the viability of a regulated asset base model and assessing whether it can offer value for money for consumers and taxpayers. I can confirm that we intend to publish our assessment of that method by the summer at the latest.

Through our nuclear sector deal, we are exploring the possibility of working with the sector to put the UK at the forefront of various forms of nuclear innovation. We are looking into whether advanced nuclear technologies such as small modular reactors could be an important source of low-carbon energy in the future, and we are considering a proposal from a UK consortium led by Rolls-Royce that would result in a significant joint investment.

I began my statement by outlining the challenges that the nuclear industry faces as the energy market changes. I will set out a new approach to financing new nuclear in the planned energy White Paper in the summer. I know that the future of the nuclear sector is of great interest to many Members, and I will ensure that those on both sides of the House, and its Select Committees, have an opportunity to consider the proposals.

I understand the disappointment that the dedicated and expert staff at Wylfa and Oldbury will feel as a result of today’s announcement by Hitachi. New commercial nuclear investments around the world are experiencing the same challenges as new sources of power become cheaper and more abundant. Nuclear has an important role to play as part of a diverse energy mix, but it must be at a price that is fair to electricity bill payers and to taxpayers. We will work closely with Hitachi and the industry to ensure that we find the best means of financing these and other new nuclear projects.

Our commitment to Anglesey—with its nuclear, renewables and deep expertise, it is a real island of energy—will not be changed by this decision. I will work with Albert Owen, the Welsh Government and the local community to ensure that its renown is supported and strengthened, and I will do the same with my hon. Friend Luke Hall.

I pay tribute to the staff of Horizon and Hitachi and to my own officials, those in the Department for International Trade and our embassy in Japan, and those of the Government of Japan, who spent many months doing their utmost to support a financing package. I know that they left no stone unturned in seeking a viable commercial model for this investment, and I very much hope that their work and professionalism will lead to a successful partnership following this period of review. I commend this statement to the House.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change) 12:00 pm, 17th January 2019

I thank the Secretary of State for his statement, but he must recognise that the Government’s new nuclear strategy, adopted by the Conservatives and spearheaded by their Liberal Democrat coalition partners in 2013, is now in complete meltdown. The Government have reacted far too slowly to ongoing concerns from nuclear partners, such as Hitachi’s UK nuclear arm Horizon, which have been raising concerns over funding mechanisms since purchasing the project from RWE and E.ON back in 2012. Today’s decision to withdraw from the Wylfa nuclear power plant lays a significant blow on our economy.

The company’s statement reads:

Horizon Nuclear Power has today announced that it will suspend its UK nuclear development programme”.

That sounds very much like not only is Wylfa on the chopping block, but so, perhaps, are plans for Hitachi’s other nuclear project—the Oldbury nuclear power plant in Gloucestershire. The Secretary of State has stated that Hitachi wants to work on new projects at Wylfa and Oldbury. What does that mean in light of the clear statement Horizon has made this morning?

Only two months ago, the Government’s lack of clarity over funding for new nuclear led Toshiba to withdraw from its new nuclear project in Moorside. With the three reactors expected at Moorside and two each in Wylfa and Oldbury, that makes a total of 9.2 GW of new nuclear energy that will not now be built. Can the Secretary of State tell us where he will find this power—not only through the next winter, but over the next 10 years?

The long-term coherence of the UK capacity arrangements is now significantly disrupted. With the capacity market also falling foul of legal challenge, these elements add up to a strategic energy sector that is now being grossly mishandled by this Government. Now that their nuclear plan has gone up in smoke what plan can the Secretary of State spell out to us for finding new backers for these projects? Given the apparent capacity constraint, is he intending to uprate the coming contracts for difference auction, removing the caps on capacity and funding that he has imposed to provide further opportunity to build new renewable energy capacity to replace what has been lost?

For this plant at Wylfa alone, Hitachi had planned to invest £16 billion. Does the Secretary of State have contingency plans, rather than warm words, that he can announce today for the economies of Anglesey and north Wales, where Wylfa was projected to create up to 10,000 jobs at peak periods of construction and 850 permanent jobs? For that matter, what about Moorside and the plant it lost two months ago? Government dithering leading to the cancellation of that plant has seriously undermined the UK’s energy security, its decarbonisation goals and the economy of Cumbria. The people of Moorside expected the plant, and roads, infrastructure and even apartment blocks had been built in preparation, all of which will now go to waste.

I come back the issue of Wylfa. Given that it is the Welsh economy that has lost £16 billion of inward investment, will the Secretary of State think about the £1.3 billion—less than a tenth of the price—required to build the Swansea tidal lagoon?

Given that energy is one of the sectors that creates the most carbon, today’s news deepens our profound concern about the Government’s ability to meet their own climate targets. The Labour party is proud to have announced our goal of reaching net zero greenhouse gas emissions before 2050 and we congratulate the Government on attempting to catch up with our green ambitions. But given that the clean growth plan was already falling short and the Government were already failing to meet those targets, can the Secretary of State give us some detail today on how he expects to meet UK carbon budgets in light of today’s developments? Can he assure us he is not intending to replace the low-carbon power that has been lost with new fossil fuel plants?

Finally, there appears to be some confusion about what was and was not said about nuclear power when the Prime Minister met Japanese Prime Minister Shinzō Abe last week. Did she raise Wylfa nuclear power station when she met the Japanese Prime Minister? It is an odd coincidence that this decision from Japan-based Hitachi has come so close to those meetings. Either they talked about the project and what was said was unsatisfactory, and the project was cancelled, or the Prime Minister did not think it worth mentioning, and it was still cancelled.

Confidence in the Government is a very live question today. The people of north Wales and Moorside have every reason to have none in this Administration.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I will respond to the hon. Gentleman’s points, but I will start by saying one thing about nuclear investment. I have been clear in maintaining my support and that of the Government for new nuclear, but, for investments of over 60 years, that requires a degree of cross-party support for those commercial investments, which, as we have seen, are difficult to secure.

The hon. Gentleman expressed disappointment that the investment was being suspended, but he himself has said we do not need nuclear power. The Leader of the Opposition has said he is passionately opposed to nuclear power and nuclear weapons in equal measure, the shadow Chancellor said he would end nuclear power within the first 100 days of a Labour Government, and the new Welsh First Minister said:

“I think the attitude to nuclear power we have here in Wales is to be sceptical about it”.

If we in this House want to encourage international investors to invest in new projects, it behoves us to express solidarity and consistency of purpose.

I have been very clear about why Hitachi made this decision. We understand it. It is was commercial decision. The hon. Gentleman did not say whether he would have gone further than we were willing to go. Is he proposing that we take more than one third of the equity—in effect, take Government control and all the risk attached to such an investment? He did not say whether we should be providing a contract for more than £75 per MWh, which would go straight to the bills of customers—both industrial and residential. It is hard to say how we can go beyond financing all the debts. I think, then, that fair-minded Members would accept that we have made a substantial and generous offer, but unfortunately it has not been possible to achieve the outcome that all sides wanted.

The hon. Gentleman asks how we can continue discussions and why the company has suspended, rather than cancelled, the proposals. It is for the reasons I have said. We are going to look at new financing models, including the regulatory asset base model recommended by the Public Accounts Committee. I think it makes sense to do that.

On our future energy needs, the hon. Gentleman was wrong to talk about the next 10 years, because we are talking about supplies beyond that. There is no issue with the future security of supply; the National Grid itself has said that. Plans for Wylfa are long term and there is time for the market to react to this announcement. In many ways, the challenge of financing new nuclear is one of falling costs and greater abundance of alternative technologies, which means that nuclear is being out- competed. Far from there being a difficulty with future supply, those are the reasons why the competitiveness of nuclear is more difficult.

The hon. Gentleman mentions the other projects, including at Moorside in Cumbria. As I said, that decision was taken for different reasons, but in the review and the White Paper we will publish that model will be available to all such sites. Finally, in the case of other renewables, we have seen a great expansion in renewable capacity, and that will continue. He mentioned the case of the Swansea tidal lagoon. No one is more enthusiastic than I about innovation and new technologies, but the truth is that the costs of the proposed project were three times that of Hinkley Point C, and a full programme would make a tiny contribution to our energy supply for a much greater cost.

I hope that we can work together in the weeks and months ahead. The hon. Gentleman is an expert and a dedicated student of energy policy. In considering the White Paper, I hope that we can agree an approach that will command the support of international investors, so that this country can continue to be a nuclear nation.

Photo of Stephen Crabb Stephen Crabb Conservative, Preseli Pembrokeshire

I thank my right hon. Friend for his statement and for the extraordinary lengths that he was willing to go to in trying to create the right conditions for this important north Wales project to happen. However, given Hitachi’s decision, given the decision on Moorside and, in fact, given the failure of a whole swathe of Japanese nuclear projects around the world, are the days of relying on mammoth nuclear power stations that make huge demands of taxpayers’ cash over? Should we not be putting more energy into examining smaller nuclear reactor technology?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

My right hon. Friend is right that small modular reactors have significant potential. The nuclear sector deal that we agreed with the sector and published last year contains a substantial commitment to small modular reactors, many of which would be deployable on the sites of existing and recently decommissioned nuclear reactors. However, even large new nuclear reactors can make a useful contribution. There is a challenge in every country, and this is by no means just a feature of Japanese investors. I have described clearly and, I hope, candidly the challenges that exist given the abundant availability and falling prices of alternatives. That is why we will take forward a serious assessment of whether a different financing model might make the economics more competitive. Again, the sector deal that we struck contains a programme to reduce the build costs of new nuclear, which would of course also help its financeability.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy)

This statement confirms that the UK Government’s nuclear programme is in tatters, yet the Secretary of State comes to the House, commends this statement, and says that he will carry on regardless, which makes absolutely no sense whatsoever. The National Audit Office confirmed that the Hinkley Point C strike rate of £92.50 per megawatt-hour was a bad deal. We know that offshore wind is currently £57.50 per megawatt-hour, but that is based on a 15-year concession, as opposed to a 35-year concession for the nuclear deal.

The Secretary of State has confirmed that the Government were so desperate for Wylfa that they would take something like a £6 billion stake and provide £9 billion of debt financing, yet he pretends that they were being prudent by limiting the 35-year contract to £75 per megawatt-hour. His use of the word “generous” in the statement could not be more appropriate. When Toshiba pulled out of Moorside with the loss of £100 million, its share price increased. At the time, the Secretary of State said, “Don’t worry. The circumstances are unique.” With this latest setback from Hitachi, the UK Government need a proper re-evaluation of their nuclear policy; they should not look just at alternative funding mechanisms.

Four existing nuclear power stations are due to close by 2024, taking over 4 GW of capacity out of the grid, so what is the Government’s plan for replacing that capacity? New nuclear power stations are clearly not an option that could be completed by 2024. When will we know how much money is going to be thrown at Rolls Royce for the small modular reactors that the Secretary of State mentioned? Why are the Government still blocking onshore wind in Scotland when it is clearly the cheapest mode of generation? When is the cut-off date for the ongoing discussions with Hitachi? When will the plug finally be pulled? When did the Government first find out about Hitachi pulling out? It was already being reported in the press, so how long before coming to the House to make this statement did the Secretary of State find out? When will nuclear power be properly benchmarked against onshore and offshore wind? When will the Government wake up and end their ideological obsession with nuclear?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

Given the hon. Gentleman’s suggestion that the strike price for Hinkley Point C was excessive, I would have thought he would welcome and approve of my statement, which sets a limit on what it is possible to provide to finance a private investment. He asks when the decision was made by Hitachi. My understanding is that it was made in Japan at 9 o’clock this morning, and I hope he would accept that I have come to the House as soon as possible.

The hon. Gentleman is critical of the nuclear industry, but I would have thought that he might want to pay tribute to Scotland’s proud tradition in the nuclear sector and to the people that have worked and contributed to our energy supply and still do. Chapelcross, Dounreay, Hunterston and Torness have for decades provided good jobs and employment both directly and in the supply chain across Scotland and continue to do so today. My determination to continue our tradition of being a nuclear nation offers continuing opportunities to Scotland, and I would have thought that he would welcome that.

Far from being at the expense of renewable energy, our energy policies have supported Scotland to become a world leader in securing energy from renewable sources. In fact, we heard earlier this month from WWF Scotland that wind output in Scotland has broken through the barrier of 100% of demand for the first time. That comes as a result of the policies that this Government have put in place to bring down the costs of wind, which is highly competitive. As a result, that is causing some competitive challenges for other technologies, including nuclear, but I would have thought that the hon. Gentleman would welcome the progress that has been made on renewables.

Photo of David Jones David Jones Conservative, Clwyd West

This announcement, although widely anticipated, will be greeted with dismay in north Wales, where Wylfa was and remains an important part of the vision for the future of the north Wales economy, as expressed in the north Wales growth bid. My right hon. Friend will know that the all-party parliamentary group on Mersey Dee North Wales has been working closely with both central and local government in connection with the growth bid. Will he or one of his Ministers be prepared to meet with the group to discuss Wylfa, its future and the potential for other means of energy generation in north Wales?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I pay tribute to the role that my right hon. Friend played in the earlier stages of the discussions for the Wylfa site. As is evident, such matters are complex and difficult to secure, but he laid the groundwork for some of the progress that has been made, and I hope that the process might ultimately be successful. Of course, I have complete commitment to the north Wales growth deal, and I would be delighted to have a meeting with him and my ministerial colleagues. The Secretary of State for Wales will be in Anglesey tomorrow and will be meeting members of the local community.

As I said in my statement, we regard Anglesey and north Wales as having exceptional strengths in our energy future. Bangor University, for example, contributes exceptional world-leading innovation, and we have backed that in the sector deal. Colleagues across Government and I will work closely with colleagues in north Wales to ensure that that potential is realised.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

I thank the Secretary of State for coming to the House at the earliest opportunity to give this statement. He will know the importance of this matter to my local community, to the Welsh and UK economies and, indeed, to the Government’s nuclear policy. With 10 years of planning, a lot of work has gone into this project, as he rightly acknowledges. It started off under the Labour Government and was continued by the coalition Government and, indeed, the current Government. Wylfa is the best site in the United Kingdom for a new nuclear build, but Hitachi’s announcement puts the jobs of 400 people at risk, many of whom are my constituents. There is the potential for some 8,000 to 10,000 construction jobs, hundreds of operational jobs and, importantly, 33 apprenticeships, so I hope that we can work to ensure that we save as much of that as possible. The supply chain and small and medium-sized enterprises are important as well, and they have been planning for this for years.

So I ask the Secretary of State: can we work together to keep this project alive and ensure that we create the momentum so that it can be ready for a future developer, or indeed this developer, with the right mechanism? We need a better mechanism for financing, not just in the nuclear sector but for all large energy construction, including the tidal lagoon. I pay tribute to my hon. Friend Dr Whitehead in this regard, because I feel that an opportunity for innovation has been lost with the tidal lagoon, and the Welsh economy needs it. We know that £16 billion has been taken out of the Welsh economy as a result of that announcement, and we need to redistribute that.

I echo Mr Jones in saying that we need extra help and extra resources to plug the gap following this announcement today. We have a mechanism through the north Wales growth deal whereby the Welsh Government work with the UK Government to create jobs, and I urge the Secretary of State to work with the new First Minister and the Economy Minister on this. The north Wales growth bid can be successful. I will be meeting the Secretary of State for Wales as well, but I want to ask the Secretary of State to work closely with us on this. Will he host a delegation involving myself, key stakeholders and his officials to look at a funding mechanism for the future that will work not just for new nuclear but for all large projects? North Wales is a centre of excellence for low carbon, nuclear, renewables and marine energy. It has the potential; let us work together to make this happen.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I repeat my commendation of the hon. Gentleman. He has been a consistent and passionate campaigner not only for the interests of his constituents but for the excellence of the industry in north Wales, and in Anglesey in particular. I can give him that wholehearted commitment. My officials will certainly meet him, but they will also come with me and my nuclear Minister and we will work together in a completely open-book way on all the options. The hon. Gentleman serves with distinction on the Select Committee, which I think will also want to scrutinise the options and the potential for financing. I repeat the commitment I gave to my right hon. Friend the Member for Clwyd West that we continue to regard the north Wales growth deal as an excellent base to reinforce the strengths of the area, and I will work very closely with him on this.

The hon. Gentleman also mentioned marine energy, which is one of the opportunities that we have in his constituency and around north Wales. Far from having closed the door to marine technologies, we want to continue to invest in innovation. When it comes to deployment, the technologies need to demonstrate value for money, but we will work with them, as we did with the offshore wind sector, to bring costs down so that they can win at auction alongside other technologies.

Photo of John Whittingdale John Whittingdale Conservative, Maldon

Does my right hon. Friend agree that it remains highly desirable to have a diversity of providers and technologies in civil nuclear generation? Will he therefore confirm, particularly in the light of recent concerns expressed about some Chinese investments, that the Government will remain fully supportive of the proposal from China General Nuclear to invest in a new power station at Bradwell-on-Sea in my constituency, subject of course to a generic design assessment and other permissions being obtained?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

As my right hon. Friend knows, CGN is an investor in the Hinkley Point C nuclear power station, which is being built as we speak. That is proceeding at pace. When it comes to Bradwell, CGN is again making successful strides through the approval process. All investment is subject to that process, but I can confirm that it has our full support as it goes through the regulatory approvals.

Photo of Chris Ruane Chris Ruane Shadow Minister (Wales)

I, too, thank the right hon. Gentleman for coming to the House today to deliver his statement. I also thank him for his openness to meeting with north Wales Members on the issue of Wylfa Newydd. In his statement, he said that central Government were now relying more on renewables. May I put the north Wales picture to him? I can tell him that 1,500 wind turbines—sea turbines—were planned for the Rhiannon field off the coast of north Wales, but those plans have been cancelled by the private sector. The tidal lagoons for Wales were key to the development of the Welsh economy, yet the Government pulled their support for the Swansea bay tidal lagoon. That had a knock-on effect for the huge lagoon planned for off the coast of north Wales, and we have heard today about the cancellation of a £16 billion investment in the north Wales economy. This will devastate the north Wales economy. The people of north Wales need to know that the Prime Minister is batting for them and for the UK. Will the right hon. Gentleman ask the Prime Minister to place in the House of Commons Library the minutes of her meeting with the Prime Minister of Japan, to ensure that we know that that is what she has been doing on behalf of the people of north Wales?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The Prime Minister has repeatedly discussed nuclear investment with the Prime Minister of Japan, as have I with my opposite number there. In fact, in November, I flew to Tokyo to discuss the negotiations going on here, given the difficulties that the investor was having, and I met my opposite number at the Japanese Ministry of Economy, Trade and Industry. This has been a substantial, and cordial, Government-to-Government relationship, and the hon. Gentleman has my assurance that we will continue that. I mentioned in my statement the work of our embassy in Tokyo, which has been an excellent and expert source of advice. That will continue to be available.

When it comes to investment in renewables, the hon. Gentleman will know that Wales is a substantial and proud leader in renewable energy. I think Gwynt y Môr is the second largest wind farm already deployed in Europe. I mentioned in my statement the rising availability of alternative technologies. To put this in context, in 2017 we procured more than 3 GW of offshore wind in a single contract for difference auction at £57.50 per MWh. That is more in a single auction than this plant was going to provide. As I have said, the challenge is the competition coming from other technologies, and Wales is a beneficiary of some aspects of that.

Photo of Zac Goldsmith Zac Goldsmith Conservative, Richmond Park

In his statement, my right hon. Friend said that the economics of the energy market had changed significantly in recent years, meaning that renewable energy could now be not only cheap but readily available. Does he share my concern that consumers will not see all the benefits of the reduced prices, given that we are bound into these exceedingly long-term and hugely expensive contracts? An example is Hinkley, whose strike price means that it will probably be the most expensive form of energy in the history of energy generation. Can he give me an assurance or commitment that nuclear power will not result in consumer bills skyrocketing in the years to come?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

That is demonstrated in my statement today. We were talking about a strike price substantially less than that of Hinkley, and I said when I made my statement to the House on Hinkley that we would do that. I say gently to my hon. Friend, who is a lifelong environmentalist, that exactly the same arguments were advanced against the initial contracts for offshore wind—namely, that they would be burdensome and that we should not enter into them. We have now seen substantial capacity becoming available at prices that will shortly be free of subsidy entirely. That is an excellent development for consumers, for the reasons that he has given, but it is also the case that the manufacturers in the supply chain are located right across the UK, which is a further industrial benefit of the strategic policy.

Photo of Edward Davey Edward Davey Liberal Democrat Spokesperson (Home Affairs)

I agree with the Secretary of State that Britain has had huge success in renewables, especially with cheaper offshore wind, thanks to the Liberal Democrat policy that he has kept in place. However, I also want to express astonishment at the generosity of the offer to Hitachi. With the equity stake and the debt finance, it appears to be even greater than that offered to Hinkley Point C, yet Hitachi—like Toshiba at Moorside—is still unwilling to build new nuclear in Britain. What does the Secretary of State blame most for this setback to his nuclear strategy? Is it the fact that renewables are becoming much cheaper than nuclear, is it Japan’s fears about Brexit, or is it something else?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I am disappointed in the right hon. Gentleman who, as a former Secretary of State, I would have thought knows the changing economics of the energy market, which I set out pretty clearly. I gently remind him that, as Secretary of State, he was responsible in his time for the negotiation of the terms of the Hinkley Point C agreement, so it is surprising to hear him being so critical of it.

The right hon. Gentleman wants to take credit for one of the policies for which he was responsible but not the other, which I might uncharitably say is characteristic of his party. As with Hinkley Point, there was a recognition that financing such significant projects—£16 billion from a private company—is hard to do through the conventional channels of private investment. It is desirable to have nuclear as part of a diverse energy mix. If I might put it this way, having a substantial mix of technologies has an insurance quality. We should recognise that, but there is a limit to what we can pay for the benefit, which is reflected in my statement.

Photo of Peter Aldous Peter Aldous Conservative, Waveney

Sizewell C is an important component of the world leading low-carbon energy sector emerging along the north Suffolk coast. Can the Secretary of State confirm that the Government remain committed to Sizewell C and to negotiating a value-for-money deal with EDF?

Photo of Ian Lucas Ian Lucas Labour, Wrexham

Can the Secretary of State confirm what the Prime Minister said to the Prime Minister of Japan when she raised the issue of Wylfa with him last week?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

Sadly, when the Prime Minister was meeting the Prime Minister of Japan, I was in this Chamber winding up the debate on the meaningful vote. I would otherwise have been in their company, but I was doing my duties in this House. I was not at the meeting, but I can put the hon. Gentleman’s mind at rest. The involvement of the Prime Minister in this and other joint investments with Japan has been consistent and very long standing. As I said to Chris Ruane, I have visited Japan many times to discuss this at the highest level with the Government and with the parties.

Photo of Luke Hall Luke Hall Conservative, Thornbury and Yate

I thank the Secretary of State for coming to the House to set out his discussions in such detail. He will appreciate the level of concern in south Gloucestershire this morning, especially among the people who rely on the jobs at Oldbury and its supply chain, because of the uncertainty following this announcement. There are localised issues, such as the properties bought up around Oldbury that now lie vacant. People are unsure about the future of those properties and about some of the more specific, niche issues. Will the Secretary of State come to Oldbury and meet me to discuss the issue with local councillors, workers and stakeholders to make sure we can find a route forward?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

As I said to the hon. Member for Southampton, Test, I recognise that this is a sad time for the staff, who are expert and well respected in their fields. This is a financing decision, and it is no reflection on the quality of their work. They are of the highest calibre.

Of course I will come to meet my hon. Friend and his constituents to discuss how we can make sure that his part of the world, as well as north Wales, continues to have the reputation for excellence in energy that it has long enjoyed.

Photo of Clive Betts Clive Betts Chair, Housing, Communities and Local Government Committee

The Secretary of State made some very supportive comments in his statement about small modular reactors, which I welcome. I thank him for meeting me recently to discuss the ideas put forward by Professor Keith Ridgway and others at the nuclear advanced manufacturing research centre in Sheffield for ways in which we can develop capacity to produce the parts for SMRs in Sheffield. The Secretary of State has issued supportive words about that, but will he now go further and get his officials to work with Professor Ridgway and others to develop these plans, which would be good for both our energy policy and our industrial strategy?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The hon. Gentleman is quite right. I visited the nuclear advanced manufacturing research centre, as he knows, and I was impressed with the facilities. The sector deal makes a commitment to new nuclear technologies, and a consortium has made an application to the industrial strategy challenge fund. He understands that the operation of that fund, as with all science and innovation investments, is correctly scrutinised by a panel of global experts. They have given the application a positive assessment, but it has further due diligence to complete. Of course, I will update him and the House when that process has finished.

Photo of James Heappey James Heappey Conservative, Wells

I welcome what the Secretary of State said in his statement about the decreasing costs and increasing availability of renewables. If we are to embrace a renewables-heavy energy mix, does he agree that we need to look at what changes we must make to the capacity market to allow demand response, storage and other types of digital flexibility to play their part fully in that energy system?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

My hon. Friend is quite right, and he has great experience and expertise in energy matters. We have talked a bit about offshore wind today, but one of the big changes that is taking place in the energy market, and affecting the economics of energy, is in the technologies and ways of working such as demand-side response and storage. We have not mentioned those, but they are contributing to how our energy system can be both more resilient and lower cost than was dreamed possible even 10 years ago.

Photo of Deidre Brock Deidre Brock Shadow SNP Spokesperson (Devolved Government Relations), Shadow SNP Spokesperson (Environment and Rural Affairs), Shadow SNP Spokesperson (Wales)

The Secretary of State rightly points to the fact that renewable energy is a Scottish success story, and such events vindicate the Scottish Government’s decision not to join the UK Government’s vision for the UK as a nuclear nation. Will he please outline the Government’s sunk costs in terms of civil service time and any other development costs incurred as a result of this project?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The model we have pursued is one in which these proposals are private sector-led. I place on record my respect and gratitude for the time, effort and financial investment that Hitachi has made in working with us to develop the proposal to this stage. Of course there have been discussions with my officials, but the vast majority of the costs have been with the proposed developer.

Photo of Paul Sweeney Paul Sweeney Shadow Minister (Scotland)

I declare an interest as a council member of the Institution of Engineers and Shipbuilders in Scotland, which recently published a report by Professor Iain MacLeod of the University of Strathclyde entitled, “Engineering for Energy: A proposal for governance of the energy system.”

This is a major issue because of the risk of blackouts increasing from hours to days, particularly in Scotland. If that does occur, and we are talking about a lengthy delay in restarting the bid, there will be negative consequences for the supply of food, water, heat, money and petrol. It would be a disastrous situation for the Scottish economy and could potentially lead to civil unrest. The root cause of that risk is the closure of large-scale coal and nuclear power stations, and the grid has not been reformulated and replanned to deal with the intermittency of renewables. That is a massive risk that the Scottish Government have not done anything to address. What will the Secretary of State do to reduce this massive existential risk to the national security of this country?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I do not agree with the hon. Gentleman, but I note his interest and his experience in this field. National Grid is undertaking a substantial programme of transformation to make the grid smarter and able to accommodate intermittent renewables. Again, progress has been made. The amount of renewable energy being deployed is vastly in excess of what Sir Edward Davey was advised was possible when he was in office. Great strides are being made. A smarter grid is a more effective and more resilient grid.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

Will the Secretary of State call together the MPs who are affected by the supply chain implications? In my case, Berkeley was predicated on both Wylfa and Oldbury. People with potential are being retrained in the nuclear industry. Does he understand the knock-on effects that that will have, and will he meet us to see how we can try to mitigate them?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I would be delighted to do that. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend Richard Harrington, who is responsible for the nuclear industry, and I regularly meet the representatives of the industry, including the supply chain. I emphasise that it was Hitachi’s decision to suspend the development of the project but, as Dr Drew knows, a bit further down the road from him is Hinkley Point C, one of the most significant pieces of civil engineering being constructed in the world.

People are being trained in construction and in nuclear engineering in a way that has not happened in this country for more than a generation, giving opportunities to many suppliers. Nearly two thirds of the value of the Hinkley Point C contract goes with domestic suppliers. He knows that there is a renaissance of the suppliers of nuclear expertise, and I am happy to meet him and the companies that we regularly meet.

Photo of Martin Whitfield Martin Whitfield Labour, East Lothian

I am grateful for the speed with which this statement arrived at this House today, and I compliment the Secretary of State on that. Part of EDF’s fleet is at Torness is my constituency, and Members have pointed out the many skilled jobs involved and contributions that these workers make. Some of the answers to the problems that will come in 2030, which is, unfortunately, not too far away, lie in not only bigger issues, such as the small modular reactors that have been discussed today, but with smaller, simpler decisions. I am thinking of things such as the simplicity of being able to move apprentices around the fleet in the UK, which is impossible for EDF at the moment because of the differentiation in approach taken by the Scottish Government north of the border and the Government down here. Will the Government confirm that they will continue to work with EDF in particular—I say that on behalf of my constituency—and all suppliers to try to solve all the small problems, as well as the big ones, to facilitate a better, stronger future for the nuclear industry, which we require in order to keep the lights on in the UK?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I am grateful to the hon. Gentleman for such a constructive contribution. He raises an excellent point, and I would be happy to meet him and EDF to solve that problem, of which I was not aware. It seems to me that if we are to benefit from the opportunities that exist across the UK to develop skilled work and make it available to residents of all parts of the UK, we should not put obstacles in the way of that.