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My Lords, I declare my interests as an engineer working in the energy industry.
I welcome the Government’s commitment to net zero carbon emissions by 2050. However, as noble Lords have already said, this target will involve significant technical challenges. I want to introduce a different slant to the debate today by talking about some of the technical challenges that will be need to be met, the key areas of uncertainty and the options for mitigating them. A comprehensive review of how this target will be met is critical and I hope to see more detail of this in the forthcoming energy White Paper.
The key risk areas we need to consider within the scope of the amendment are on-demand power generation and hydrogen. It is widely accepted that a 100% renewables power generation system is impracticable barring any unforeseen technical advances. This is partly due to the technological limitations of energy storage and the implications of grid stability with a variable power supply. A large amount of on-demand power will be required to counter the variability of renewables and there are two options for that at a high level—gas turbines with carbon capture and storage, or nuclear.
Gas turbines with carbon capture and storage are an attractive option to meet our commitments, but there are several uncertainties with large-scale carbon capture and storage. One uncertainty is the capture rates that are feasible with the technology—whether it can capture the amount of carbon that we need it to—and another is that the economic viability of the technology is still unknown. If capture rates are lower or the technology is more expensive than anticipated, alternatives will have to be sought to large-scale use of carbon capture and storage. It is critical that there is a pilot project from the Government to consider scaling up this technology and the viability of it in more detail.
The concerns are well known about the economic viability of nuclear compared with renewables. It is worth noting that the costs of large nuclear are currently less than the existing offshore wind capacity that has been built. However, the future offshore wind capacity will be cheaper than current large nuclear. It is difficult to make the comparison between nuclear and renewables because of the different characteristics of these technologies in terms of costs.
It is critical that the industry responds to the cost challenge set out in the nuclear sector deal and brings down the costs of nuclear from the £90 per megawatt hour we have seen with Hinkley to around £60 per megawatt hour. Given the doubts over whether large nuclear can deliver, we need to focus on several things to meet that cost challenge: first, small modular reactors, as a fallback and to complement large nuclear, are critical; and, secondly, advanced nuclear technology.
How will these technologies solve the cost issue with nuclear? The first way is through modularisation, which is inherent in small modular reactor design and is already used in other high safety integrity industries such as shipping and air transport. We need to look at moving the production of reactor modules to factories off-site to reduce the cost of reactor technology and to bring down the capital costs of nuclear plants. Secondly, with advanced nuclear, there are several designs out there which are passively safe, simpler and of a much higher thermal efficiency than existing plants and will help in that regard.
Government investment is required to see these promising designs through to fruition and to get them off the ground. On the point made by the noble Lord, Lord Deben, on what happened with offshore wind, we can replicate that with nuclear and use it to bring down the cost of the technology and help us meet our 2050 targets.
Hydrogen also has a key role to play in a net zero economy, whether through heating buildings, energy storage or fuel for heavy vehicles. However, there are many uncertainties about the best means of producing, distributing and storing hydrogen. For example, as has been pointed out by other noble Lords, the preferred means of production—steam methane reforming—will involve large-scale carbon capture and storage and the issues with that that I have pointed out.
Can the Minister say how the Government intend to de-risk these key areas of uncertainty—hydrogen, carbon capture and storage and nuclear—to ensure that the UK can meet the 2050 target as planned? The timing for large investments could not be more fortuitous in many ways, with the Government able to borrow for 50 years at less than 1.5%.