My Lords, the capacity market is the market mechanism we use to ensure that the volume of power generation we have available is always sufficient to meet national demand. If Hinkley Point C looks likely to be delayed, we will procure more alternative capacity in the meantime. Taxpayers and consumers will not be affected by the changes that EDF recently announced. The investors are entirely responsible for the project cost and schedule.
My Lords, I thank the Minister for her Answer. Considering the pressures of Covid, EDF is to be congratulated on what has been achieved on site. If you go to see what has been done, you will know that it is quite amazing.
Nuclear will have to provide about 30 gigawatts of electrical power by 2050 if we are to meet net zero. Large reactors are required for electrical generation but, of course, AMRs must be developed for co-generating heat and hydrogen production. Building Sizewell C is now a matter of urgency. The Government’s energy White Paper and national infrastructure strategy rightly put nuclear at the heart of our net-zero future.
The National Security and Investment Bill which is going through the House is likely to scupper Bradwell B. There is grave concern about the withdrawal of Horizon Nuclear Power’s development consent order application for the construction of Wylfa Newydd. Are the Government concerned? This new nuclear reactor is needed now more than ever. There are less than two months in which to find a solution.
My Lords, in a nutshell, Wylfa Newydd is probably the best nuclear site currently available globally. The Government are very keen to find a developer for it. While we are naturally disappointed that Horizon is not going ahead, any other developer will need to make a fresh development consent order relevant to its own technology. We are keen to discuss new-build projects with the investors of any other companies willing to develop these sites.
EDF blames the massive cost increases and delays on ground conditions. It has owned the site for more than 10 years and, if it has not been able to work out what is under the ground, heaven help us. More seriously, these cost increases follow similar stories to EDF’s two other projects in Cap de la Hague and Finland. I question whether they will ever open. Who will fund the cost escalations resulting from these delays and changes—the taxpayer, EDF or the consumer? Somebody will have to.
The cost escalation will be entirely borne by the developer. It is one of the reasons why we will pay £92.5 per megawatt hour for the electricity produced from this site. Delays have increased costs, but it had already been announced in 2019 that there was likely to be a delay and that the increased cost would be £500 million. Covid has had a significant effect. In trying to have workers on a socially distanced site, numbers have dropped from 3,800 to 2,000. Post-Covid, the figure is expected to get up to 7,000 employees.
My Lords, the price of electricity from Hinkley is remaining unchanged at £92.50 per megawatt hour, and EDF is expecting the same profit of more than 7.1% on its investment. Given that, can the Minister explain the points that she has just made about how the additional 30% of construction costs on the initial £18 billion budget is being absorbed at no cost to consumers? As the price of electricity from renewables has dropped—with wind now at £40 per megawatt hour—might not research and development into renewals have been a better investment? Hinkley already looks like transitional technology.
The truth is that we need a blend of all these technologies to produce the low-carbon power we will need by 2050. We negotiated the contract with EDF and CGN so that they would bear the full costs of any escalation in construction. The £92.5 price cannot directly be compared with the price for more intermittent forms of generation. I hope that satisfies the right reverend Prelate.
My Lords, I agree with my noble friend that we need a blend of energy. I welcome the progress on renewable energy since 2010. I hope that perhaps there will be further progress on nuclear fusion and hydrogen technologies. Can she confirm that the power station at Hinkley Point is part of our critical national infrastructure? Are we entirely confident that there are no companies involved that might owe allegiance elsewhere, should there be a crisis? She will of course know that I am talking about Chinese companies.
My noble friend will be reassured to know that the fusion projects are proceeding at a fast pace, and a competition has just been launched to host the first STEP project in the UK. As he will know, the White Paper promised £385 million to invest in new nuclear technologies. On his last point, all investment involving critical infrastructure is subject to thorough scrutiny and needs to satisfy robust legal, regulatory and national security requirements. These will only be enhanced by the National Security and Investment Bill, which arrives in this House tomorrow.
What justification can the Minister provide for licensing new nuclear plants when, 60 years after the UK’s civil nuclear programme began, the Government still have no solution for the safe, permanent storage of existing high-level nuclear waste, which remains deadly for longer than any civilisation has ever survived?
It is a priority of the Government to look after the waste securely. We have been looking for a permanent solution for the geological disposal facility. All developers are responsible for the cost of storage and transportation of nuclear waste, which has been safely disposed of since we pioneered nuclear power stations in the 1960s.
My Lords, I declare my Suffolk interests, as in the register. We will have to leave Hinkley to sort itself out from the muddle that EDF is now making, but Sizewell C is expected to cost £21 billion. Will my noble friend consider that the British Rolls-Royce consortium, which is making small modular reactors, could offer to produce eight SMRs at a cost of only £16 billion, on the same timescale as EDF was scheduled to produce Sizewell but which it will no longer be able to?
My noble friend will be aware that EDF is estimating a 20% reduction in cost for using the same technology that it has been using at Hinkley Point C, which is why we are proceeding with Sizewell C. We need a mix of all these technologies. He is right to point out the potential of advanced nuclear technologies: that is why we are investing in them. The Rolls-Royce SMR is likely to be operational by 2032. Investment in AMR technology, which has the potential to help us in our hydrogen ambitions, will follow shortly thereafter.
My Lords, I declare my interests, as shown in the register. We are losing a large amount of low-carbon firm power capacity by the end of this decade. Much of the debate on future generation has been based on comparison of levelised costs of electricity metrics between technologies. Does the Minister agree that this does not recognise the system costs of intermittent generators, and that an alternative model should be developed which accounts for this and positively incentivises renewable generators, such as equivalent firm power auctions?
The noble Lord makes an interesting point. He is right that we should take all costs of the energy system into account when making choices about our generation mix. The latest departmental modelling does this. It is not as simple as calculating firm power equivalence. A system’s cost depends on what is available across the sector, rather than focusing on each type of generation separately.
“expects that 64% of the construction contracts, by value, will go to UK-based companies.”
Can the Minister confirm that this will continue to be the case, despite the delay and increased costs of that project? Can she translate this into the number of jobs? How widespread or, alternatively, how concentrated, are their location? What is the multiplier effect on local jobs? Will this be reflected in a similar fashion at Sizewell C, at the reduced cost now agreed?
Our aim is certainly to replicate the mix of local construction costs into the UK economy. Hinkley Point has indeed invested £12 billion into the UK economy, which represents 64% by value. I cannot comment on the multiplier effect, but Hinkley Point C has generated 10,300 jobs to date and has had knock-on effects, such as the co-operative group of farmers who now produce food for the entire Hinkley Point estate. I understand that a couple have gone on to supply other local businesses too.
My Lords, the time allowed for this Question has elapsed, which brings Question Time to an end.