Building New Nuclear: the challenges ahead - publications.parliament

184 Pages·2013·4.03 MB·English

House of Commons
Energy and Climate Change
Committee
Building New Nuclear:
the challenges ahead
Sixth Report of Session 2012–13
Volume I
Volume I: Report, together with formal
minutes, oral and written evidence
Additional written evidence is contained in
Volume II, available on the Committee website
at www.parliament.uk/ecc
Ordered by the House of Commons
to be printed Tuesday 26 February 2013

HC 117
Published on 4 March 2013
by authority of the House of Commons
London: The Stationery Office Limited
£20.00
The Energy and Climate Change Committee

The Energy and Climate Change Committee is appointed by the House of
Commons to examine the expenditure, administration, and policy of the
Department of Energy and Climate Change and associated public bodies.
Current membership
Mr Tim Yeo MP (Conservative, South Suffolk) (Chair)
Dan Byles MP (Conservative, North Warwickshire)
Barry Gardiner MP (Labour, Brent North)
Ian Lavery MP (Labour, Wansbeck)
Dr Phillip Lee MP (Conservative, Bracknell)
Rt Hon Peter Lilley MP (Conservative, Hitchin & Harpenden)
Albert Owen MP (Labour, Ynys Môn)
Christopher Pincher MP (Conservative, Tamworth)
John Robertson MP (Labour, Glasgow North West)
Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine)
Dr Alan Whitehead MP (Labour, Southampton Test)

The following members were also members of the committee during the
parliament:

Gemma Doyle MP (Labour/Co-operative, West Dunbartonshire)
Tom Greatrex MP (Labour, Rutherglen and Hamilton West)
Laura Sandys MP (Conservative, South Thanet)

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The Committee is one of the departmental select committees, the powers of
which are set out in House of Commons Standing Orders, principally in SO No
152. These are available on the Internet via www.parliament.uk.
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Office by Order of the House. All publications of the Committee (including press
notices) are on the internet at www.parliament.uk/ecc. A list of Reports of the
Committee in the present Parliament is at the back of this volume.

The Report of the Committee, the formal minutes relating to that report, oral
evidence taken and some or all written evidence are available in a printed
volume. Additional written evidence may be published on the internet only.
Committee staff
The current staff of the Committee are Sarah Hartwell-Naguib (Clerk),
Liz Bolton (Second Clerk), Jenny Bird (Senior Committee Specialist),
Tom Leveridge (Committee Specialist), Luanne Middleton (Inquiry Manager),
Shane Pathmanathan (Senior Committee Assistant), Jonathan Olivier Wright
(Committee Assistant), Joe Strawson (Committee Support Assistant), and
Nick Davies (Media Officer).
Contacts
All correspondence should be addressed to the Clerk of the Energy and Climate
Change Committee, House of Commons, 7 Millbank, London SW1P 3JA. The
telephone number for general enquiries is 020 7219 2569; the Committee’s email
address is [email protected]
Building New Nuclear: the challenges ahead 1
Contents
Report
Page
Summary 3
1 Introduction 5
Context of the inquiry 5
Our inquiry 6
2 Nuclear new build in the UK 7
Plans for nuclear new build in the UK 7
Consequence of failing to deliver new build 7
Will the new nuclear programme be delivered? 9
Lessons from other countries 9
Is a Plan B needed? 11
3 Financing new nuclear 13
Where will the money come from? 13
Barriers to raising finance 14
The Government’s solutions 15
Contracts for Difference 15
Generic Design Assessment 16
UK Guarantees Scheme 16
Alternative approaches 17
4 Public attitudes 19
Public opinion at the national level 19
Fukushima 19
Foreign ownership of nuclear power stations 20
Local level opinion 20
Building public support 21
Government leadership 21
Trust, understanding of risk, and risk governance 22
Community benefit 24
5 Supply chain and skills 26
Potential for bottlenecks and delays 26
Opportunities for UK businesses 27
Skills 28
6 New technologies 30
Thorium 30
Pebble bed reactors 30
Fast reactors 31
7 Conclusion 32
8 Recommendations 33
2 Building New Nuclear: the challenges ahead
9 Annex 1: Summary of private session with Hitachi 37
10 Annex 2: Visit to Bridgwater and Hinkley Point C 40
Formal Minutes 41

Witnesses 43
List of printed written evidence 44
List of additional written evidence 44
List of Reports from the Committee during the current Parliament 45
Building New Nuclear: the challenges ahead 3
Summary
As a low-carbon technology, nuclear power could play an important role in helping the UK
to meet climate change and energy security goals. However, all but one of the existing
power stations are due to close by 2023. New build is therefore crucial if nuclear power is to
remain part of the UK’s energy mix in future decades.
If the projects currently under development are all delivered as planned, 16GW of new
nuclear capacity will be added to GB’s electricity system by 2025. Without these power
stations, it will be extremely difficult to meet our low-carbon obligations, and potentially
more expensive too. A failure to deliver new nuclear would have a lesser impact on energy
security, but could result in an increased use of gas to make up the shortfall. This could
bring indirect security concerns if the UK were to become more dependent on imported
gas as a result. Finally, if this tranche of new nuclear projects is not successful, it could
undermine investor confidence in the sector, making it difficult (or impossible) to finance
any subsequent attempts at nuclear new build.
Many stakeholders consider the plans to build 16GW by 2025 as “ambitious” at best and
“unrealistic” at worst. Given the delays and problems that have dogged nuclear new build
projects in neighbouring European countries it is worrying that the Government does not
have any contingency plans in place for the event that little or no new nuclear is
forthcoming. These should be developed as a matter of urgency.
Raising finance remains one of the biggest potential barriers to nuclear new build. We hope
that the introduction of Contracts for Difference will help to reduce the policy and revenue
risk associated with nuclear new build projects and thereby lower the cost of capital.
Construction risk remains a problem for the nuclear industry and it was not clear to us
exactly who will bear this risk in the UK; consumers, taxpayers or project developers. We
seek to gain clarity on this aspect.
Public opposition to new build projects could also present a barrier. While there is overall
support for new nuclear at the national level, attitudes at the local level can be more
polarised. During our visit to Bridgwater, we discovered that local concerns focused much
more on the disruption that would be caused by the construction process than on the risk
of a nuclear accident.
There is scope to improve engagement with members of the public on issues regarding
risk. The Office for Nuclear Regulation conducts some public engagement work, but this is
separate from the planning process, although that is the process through which most
members of the public will tend to engage with any new development. In addition, it is
“one-way” in nature, rather than a two-way dialogue, which is a more effective method of
risk communication. We would like to see better coordination between the ONR,
Environment Agency and developers in their public engagement. We also believe there
might be merit in establishing an independent advice service for communities living near
to nationally significant infrastructure projects, since permission for these projects is
granted by the Secretary of State, rather than local planning authorities. This service could
support local communities in interpreting complex planning documents and improving
4 Building New Nuclear: the challenges ahead
understanding of the process for obtaining planning permission.
The UK’s nuclear supply chain industry and skills base has withered significantly since
Sizewell B was completed in 1995. A nuclear new build programme presents an
opportunity to rebuild this industry and to create new job opportunities in the UK.
However, potential suppliers to nuclear new build projects need to have a proper
understanding of the safety and quality requirements associated with nuclear projects in
order to take advantage of these opportunities. Stronger leadership from Government will
help to build confidence and to attract workers into this sector of the economy.
Building New Nuclear: the challenges ahead 5
1 Introduction
1. Around 19% of the UK’s electricity generation is from nuclear power.1 However, all but
one of our existing nuclear power stations are currently expected to close by 2023. As a
low-carbon source of electricity, nuclear power could contribute towards the UK’s long-
term climate change and energy security goals, but a new generation of nuclear plant will
be required to deliver this.
2. Although the Government does not set deployment targets for particular types of
electricity generation, The Department of Energy and Climate Change (DECC) has always
supported the idea of a “balanced mix” consisting of renewables, nuclear and fossil fuel
with carbon capture and storage (CCS) as the route to delivering its energy and climate
change policy aims.2
3. A number of steps to help facilitate nuclear new build in the UK have already been
taken. These include the introduction of the Generic Design Assessment process (see
chapter 2) and changes to the planning system for nationally significant infrastructure
projects (including nuclear power stations). Most notably, the Energy Bill—before
Parliament at the time of writing—will introduce a new system of long-term contracts for
low-carbon electricity generators, which are intended to bring forward new investment in
these projects.
4. The industry has set out plans to develop up to 16GW of nuclear power in the UK by
2025. Our inquiry was prompted by concerns that there may be barriers to delivering such
a programme in the UK. We sought to identify these and to ascertain how they might be
overcome.
Context of the inquiry
5. Shortly before we launched our inquiry, energy companies E.ON and RWE npower
announced that they would not be proceeding with their plans to develop Horizon Nuclear
Power. This was a joint venture between the two companies with proposals to build new
reactors at Wylfa on Anglesey and Oldbury in Gloucestershire. The sale of Horizon was
on-going throughout most of our inquiry. In late October 2012, it was announced that
Horizon had been acquired by Hitachi Ltd.3
6. The UK European Pressurised Reactor (EPR) design—which EDF plans to use for its
new build project at Hinkley Point C in Somerset—was the first design to complete the
new Generic Design Assessment (GDA) process. It was granted a Design Acceptance
Confirmation in December 2012, shortly after we finished taking evidence for our inquiry.4

1 DECC, Digest of UK Energy Statistics 2012, July 2012
2 See, for example, DECC, Electricity Market Reform: policy overview Cm 8498, November 2012, para 16 - 17
3 “Ministers welcome Hitachi new nuclear investment programme”, DECC press release 2012/135, 30 October 2012
4 “UK regulators confirm acceptance of new nuclear reactor design” Office for Nuclear Regulation press release, 13
December 2012
6 Building New Nuclear: the challenges ahead
7. EDF were in negotiations with DECC about the terms of the “Contract for Difference”
that would be offered to Hinkley Point C under the new market arrangements set out in
the Energy Bill. Although it was hoped that an agreement would be reached by the end of
2012, at the time of writing, no announcement has yet been made.
8. There was also a change of Minister of State for Energy during our inquiry. We were
fortunate to hear from both Charles Hendry MP and John Hayes MP in the course of our
inquiry.
Our inquiry
9. The National Audit Office provided a useful scoping note, which helped us to formulate
the terms of reference for this inquiry. 5 We are grateful for their input.
10. We received 34 submissions of written evidence and held four oral evidence sessions. A
full list of witnesses can be found at the end of this report.6 We are very grateful to all those
who have contributed towards this inquiry. We visited Bridgwater and the site for the
proposed new reactor at Hinkley Point C, where we met with representatives from EDF,
local councils and the local community. We also visited the Energy Skills Centre at
Bridgwater College. We would like to express our thanks to all those who took the time to
meet us and to impart their first-hand knowledge of the opportunities and challenges for
building a new nuclear power station in the UK.
11. We invited Centrica to give oral evidence to our inquiry. However, they turned down
our invitation without offering an explanation. We note that on 4 February 2013, Centrica
announced its decision not proceed with new nuclear investment in power stations at
Hinkley Point and Sizewell.7
12. Dealing with nuclear waste is a complex subject. Given the limited time available in our
inquiry programme, we were not able to look at this issue in any detail. Indeed, it would
not be possible for us to address this important topic adequately without holding a
dedicated inquiry into nuclear waste. We received several submissions stating that new
nuclear should not go ahead until questions relating to long-term storage of nuclear waste
and sea discharged radioactive waste have been resolved.8 After we had finished taking
evidence, Cumbria County Council voted to withdraw from the process to find a host
community for an underground radioactive waste disposal facility. As the last remaining
Council taking part in this process, the question of long-term storage is now even more
relevant than when we initiated our inquiry.9

5 NAO, The nuclear energy landscape in Great Britain, April 2012
6 Page 43
7 “Centrica announces decision not to participate in UK nuclear new build and launches £500 million share repurchase
programme”, Centrica press notice, 4 February 2013
8 Ev w7, Ev w39
9 “Energy Secretary responds to Cumbria nuclear waste vote” DECC press notice 13/010, 30 January 2013
Building New Nuclear: the challenges ahead 7
2 Nuclear new build in the UK
13. Before exploring the potential barriers to nuclear new build in more detail, we start by
examining the significance of failing to deliver new build projects as they are currently
envisaged. In this section, we set out some of the key risks and challenges that will be
encountered should planned new reactors not materialise. We also examine the likelihood
that programmes will not deliver as planned.
Plans for nuclear new build in the UK
14. The Government does not have targets for the deployment of particular electricity
generation technologies. However, DECC is clear that it believes that a mixed portfolio
containing nuclear, renewables and fossil fuels with CCS will deliver a cost effective route
to delivering on our climate change and energy security goals.10
15. The Government’s Low Carbon Plan cites industry intentions to bring forward 16 GW
of new nuclear power stations by 2025, with the first new power station beginning
operation in 2019.11 The 16 GW consists of:
•
proposals from EDF and Centrica to build four new reactors (with a total capacity of
6.4GW) at Hinkley Point;
•
plans from NuGen (a consortium of GDF SUEZ and Iberdrola) to build up to 3.6GW
of capacity at Moorside near Sellafield; and
•
the Horizon Nuclear Power scheme to develop around 6GW capacity at Wylfa and
Oldbury, now owned by Hitachi Ltd.12
Consequence of failing to deliver new build
16. The primary major consequence of failing to deliver new nuclear would be the impact
on the UK’s ability to reduce carbon emissions and thereby tackle climate change. 13 The
impacts on energy security are likely to be less severe (see paragraph 19). Mr Earp
(Institution of Civil Engineers) told us that it might be impossible to meet the UK’s climate
change targets without new nuclear.14 However, environmental NGOs Greenpeace and
WWF-UK (who do not support the use of nuclear power) claimed that the targets could be
achieved without new nuclear.15 Nick Butler (author of a blog on energy and power for the
Financial Times) believed that “nuclear could be part of the story if the price is reasonable
but it is not absolutely essential [for meeting carbon targets]”.16

10 EV 81
11 HM Government, The Carbon Plan: Delivering our low carbon future, December 201, pp 75-77
12 EV 81, Ev 93, Ev 118, Ev w21
13 EV 81, Ev w24, Ev w35, Q 173 [Mr Earp, Dr Fox], Q 328 [Mr Butler]
14 Q 173 [Mr Earp]
15 Ev w86, Qq 323-327 [Mr George]
16 Ev 118
8 Building New Nuclear: the challenges ahead
17. Whether or not it is possible, it would certainly be much more difficult to achieve in
practice. If there is little or no new nuclear, then much tougher action to reduce electricity
demand will be needed, along with greater use of other low-carbon technologies. The scale
of the challenge can be seen by comparing the difference between DECC’s “low cost”
scenario as part of its 2050 pathway analysis, with the alternative scenario provided by
Friends of the Earth.17 Under the “low cost” scenario, there is more than 40GW of nuclear
power in 2050, along with 1,400 offshore and 4,400 onshore wind turbines in 2025, which
fall to zero in the longer term as decommissioned sites are not replanted.18 Friends of the
Earth’s scenario has no new nuclear but requires more than 10,000 offshore and 8,000
onshore wind turbines in 2050 (as well as greater effort on insulating homes).
18. Furthermore, DECC preferred a mixed energy portfolio including renewables, nuclear
and fossil fuels with carbon capture and storage (CCS). Given the lack of progress that has
been made to date in bringing forward CCS technology in the UK, the role for new nuclear
in delivering on our decarbonisation goals seems likely to become even more significant.
19. If new nuclear capacity is not delivered as expected, some other measures will be
needed to make up the resulting gap between demand and supply. Professor Steve Thomas
(University of Greenwich) noted that gas, renewables and energy efficiency were all
potential candidates for this task.19 Since any of these options could be delivered more
quickly than a new nuclear power station, failure of the nuclear programme should not
pose an immediate threat to energy security.20 However, greater use of gas could introduce
new challenges for energy policy. Most obviously, increased use of unabated gas would
make it much more difficult to meet carbon targets.21 There may also be energy security
implications if the UK was to become more dependent on imported gas (but this risk could
potentially be mitigated by increased use of domestically produced shale gas).22
20. DECC argued that if offshore wind and CCS were used to make up for any shortfall in
nuclear delivery, there would be adverse cost implications for consumers. It estimated that
the cancellation of the nuclear programme would lead to a welfare reduction of £22 billion
relative to a baseline scenario where plants are deployed in line with lowest cost in order to
meet renewables targets, decarbonisation and energy security objectives.23
21. We conclude that while the cancellation or reduction of the UK’s new nuclear
programme may cause challenges for energy security, it would have a much more

17 Other example pathways include: “doesn’t tackle climate change”, “maximum demand, no supply”, “maximum
supply, no demand”, “analogous to MARKAL 3.26”, “Higher renewables, more energy efficiency”, “Higher nuclear,
less energy efficiency”, “Higher CCS, more bioenergy”, “Campaign to Protect Rural England”, “Mark Brinkley”,
“National Grid” and “Atkins”.
18 http://2050-calculator-tool.decc.gov.uk
19 Ev w30
20 Ev w30, Ev 111
21 Ev 81
22 Q 173 [Mr Earp, Dr Fox]
23 Ev 81 – DECC explained that: “These results are influence by three targets: (i) meeting the renewables obligation target of
110TWh of renewable generation in 2020; (ii) meeting an assumed decarbonisation target of a grid intensity of 100gCO2/kWh by
2030 (it is recognised that this target is not agreed across Government); and (iii) keeping the de-rated capacity margin above 10% by
using a strategic reserve capacity mechanism.”