InterviewsThe Carbon Brief Interview: Tom Greatrex
Tom Greatrex is chief executive of the Nuclear Industry Association (NIA). This is his first in-depth interview since taking up the role on 1 February. Until the May 2015 general election, Greatrex was Labour MP for Rutherglen and Hamilton West. He was Labour’s shadow energy minister in the last parliament and opposition spokesperson on nuclear energy. He also served on the House of Commons Energy and Climate Change committee. Greatrex joins another former Labour MP, Lord Hutton, who is chairman of the NIA.
Greatrex on whether Hinkley C will be built: “I do expect that it will be built. I mean, as we’re speaking, EDF are in the final stages of making the final investment decision…I don’t see any suggestion that it’s not going to happen from EDF, or from anyone associated with EDF.”
On the need for new nuclear: “Our need to have…the low-carbon baseload power that nuclear is able to provide, and has provided for many years, is going to continue into the future.”
On the need for transparency around the Hinkley C contract: “In a previous life, I often argued that the best way of being able to ensure that there is clarity about policy and [that] people understand it, is for there to be the maximum amount of transparency. When you have a commercial situation and commercial contracts, the timing of that becomes important.”
On the best energy mix for the future: “The debate isn’t about, and it shouldn’t be about, and it frankly frustrates me — and it frustrated me when I wasn’t doing this job — that you end up in such a circular, technology versus technology debate…I think we’re probably going to need pretty much all the tools in the box.”
On needing nuclear as well as renewables: “You need the features that you get from nuclear in terms of consistent, baseload, low-carbon supply, as well as the more intermittent renewable supply. You need all of those different things.”
On storing the UK’s nuclear waste: “By the time that [new nuclear plants are] generating we should be a long way further down that track of establishing where the site of that facility will be, and beginning to develop it.”
CB: Thanks very much for finding the time, Tom.
TG: No problem.
CB: Carbon Brief recently produced a map of the world’s nuclear plants and on that map you can see that the UK’s got 15 reactors operating today with an average age of 32, and our nuclear capacity’s in decline. How do you see that changing over the next 15 years?
TG: Well, we have a new build program in the UK, there’s three projects that are in different stages of development and I expect that those will come online during the course of that sort of, during that period, in that period to 2030. We’ve also had lifetime extensions of some of the existing nuclear fleet some to 2025 and some to 2030. So, our need to have — I think it is a need — to have the low-carbon baseload power that nuclear is able to provide and has provided for many years is going to continue, into the future. That’s why it’s so important that we do get that investment, that infrastructure in place. Beyond that there is potential in relation to smaller modular reactors and various other technologies which may or may not come to the point of being commercially viable and available as a complementary source to the existing and new larger-scale nuclear, and potentially as an export opportunity as well.
CB: So, you mentioned the new build reactors, the plan, obviously the most prominent of those is Hinkley C. Do you think it will ever get built? And if so, when will it come online?
TG: Well, I do expect that it will be built. I mean, as we’re speaking EDF [the French utility planning to build Hinkley C] are in the final stages of making the final investment decision. Obviously as people understand the way in which the policy and mechanisms are structured in the UK is that the developer bears, the construction, and the decommissioning and waste management risk. So the capital intensive parts of the building a nuclear station, the start and at the end, that’s all borne by the developer. The consumer contribution through the strike price and through the contract for difference comes at the point at which power is generated. So it isn’t surprising therefore that, on a project of that size and scale, the developer has to make sure they’re absolutely confident and get everything right to be able to, to be able to proceed and to make a final decision. But, I don’t see any suggestion that it’s not going to happen from EDF, or from anyone associated with EDF. The target date is for this mid-2020’s to come online and to be generating power and that’s around about the time that we’re going to need that, because even with life-time extensions, a number of our existing nuclear power stations will stop generating around or near that time. And obviously in the last five or six years now if you take it to the end of this month, we’ll have seen 24 gigawatts of capacity go offline and a lot of thermal plant go offline. We can’t continue without replacing that, and the way we do that is through a range of different technologies, some of which are at very early stages and may come to fruition in the future, some of which are established and are available. We need to make the best use of that broad mix to ensure that we’ve got a lower carbon, more secure supply for the future.
CB: You mentioned the risk that EDF has to take on in terms of bearing the construction risk and so on. Obviously the French government is majority owner of EDF and they’ve recently said that they’re willing to back EDF financially, re-capitalise or forgo dividends. Do you think if they were to do that that would raise questions for state aid rules?
TG: No I don’t, because the state aid consideration that took a year, not on the CFD [Contracts for Difference] mechanism generally but on the specifics of this arrangement, has been through that process with the [European] Commission. The French state is 84% shareholder of EDF, but EDF is not just Hinkley, EDF is a significant and large company involved in lots of projects in lots of parts of the world [with a] considerable footprint obviously in France. And the discussions and negotiations and final work that EDF and their shareholder, the French state, is around the entirety of EDF and a whole range of different issues which they need to conclude on. And those aren’t directly specifically linked to the arrangements in terms of the Hinkley contract. That is a contract agreed with the UK government and that’s the point in which the state aid considerations are relevant. They have been through that process and have been given, with some adjustment, given approval from the European Commission last year, or was it the year before last year, towards the end of 2014.
CB: Do you think that DECC and EDF should be — or should have been already — more transparent about the contract terms that they agreed, and the negotiation process that they went through? I’m thinking particularly of the case that Greenpeace is bringing with the information commissioner to try and get more of the, those details into the public domain.
TG: I mean, any large infrastructure project, and in some ways, quite rightly, attracts scrutiny. And it’s right, there is scrutiny and the scrutiny of energy policy and the choices and decisions that are made in relation to an energy policy. In a previous life, I often argued that the best way of being able to ensure that there is clarity about policy and [that] people understand it, is for there to be the maximum amount of transparency. When you have a commercial situation and commercial contracts, the timing of that becomes important. I think my understanding of this discussion is partly, that’s what’s under consideration with the Greenpeace application through the information commissioner. I think it’s right that the National Audit Office will be entering the…at the appropriate point may take a, you know they take a detailed look, and a detailed examination of the contractual conditions and the agreement between the government and the company. But it’s at a point at which it’s appropriate to do that, I think that it is the right thing to do, because that will also help to, I think, dispel some of the myths. We’ve seen a whole range of myths being propagated in the recent past by people who have, you know, sometimes a long-standing or maybe a temporary objection to either nuclear power generally or to this project specifically.
CB: So, I mean, arguably the decision about whether to proceed with Hinkley has kind of left the domain of decisions about economics and energy policy and entered into the domain of political decision.
CB: Because it has such strong backing from our prime minister, from the French government as well. Do you think arguably it might be better for the nuclear industry in the UK and more widely if actually Hinkley point were dropped, and that it’s really only getting that backing because of the political capital people have invested? Perhaps it would be better if some of the other new nuclear developments, like Nugen and Horizon were really taking the lead in the UK instead, and taking the heat off Hinkley, and maybe it might happen later but, perhaps if those were to come online earlier?
TG: No, I mean I think that’s an absurd suggestion, frankly, that you should stop the project which is the most far advanced, which has the only reactor design that’s being completely through the generic design assessment [GDA] process, the robust process that our regulator the ONR [Office for Nuclear Regulation] undertakes. It’s wrong also to characterise Hinkley as being the only part of the new build program. There are two other significant projects. They are in the final stage, the 4th stage of the GDA process, but they’ve got some time to go to complete that process and then to get up to the point to which EDF and Hinkley has got to. But we have a pressing need for new capacity in this country. There’s no getting away from the fact that, with the amount of capacity that’s gone offline, and our [climate] commitments — which are absolutely the right commitments I believe, both domestically and commitments that will soon be enshrined internationally following on from the discussions and the agreement of Paris — we need to have a mix for the future that is as low-carbon and secure as possible. We need to do that through a range of technologies. Nuclear is and will continue to be a significant part of that for the future, not just in the UK, but around the world. We need to, the combination of that need, and also our situation — you can go back into the history of this and argue about decisions that were made at various points, as to why we’ve got to a point where we’ve got so much of our capacity going off in a similar time frame — but because of those two things, we absolutely need to get on with it. The policy framework that exists and the mechanisms that exist… As I’ve said the construction risk is with the developer. But we shouldn’t be sort of saying to a developer, just stop and pause and wait and maybe come back to it in a few years time and let something else come to the fore, when those other things are already in progress. Because, inevitability what will happen, and this is… it doesn’t really matter whether you’re talking about nuclear or energy generally or any other big infrastructure project, they attract attention and scrutiny. That’s not surprising, it’s not necessarily anything wrong with that. But that will happen to whichever project was going to be the first. That’s, I think, an inevitable situation and if that proposition was followed through then you would find that whichever was the next one would be in that, would be in the box seat in the same position. Frankly I think what needs to happen is that the developers, the government, industry, need to be ensuring that they focus on getting these projects delivered, to demonstrate the confidence that there should be in their ability to be able to deliver them to the timescales that have been set out, following the GDA process and all the regulatory things, which have added time in the case of Hinkley, and that we get on and focus on being able to ensure that we get that new generation capacity, we do that in a way which maximises the UK economic content and the industrial benefits that can come from that, and we can put ourselves in a position where we have a clean and secure energy supply for the future.
CB: Okay, you mentioned the UK’s future energy mix. The current government has said that mix should be based on a combination of nuclear, offshore wind and shale gas. Sometimes it talks about a slightly different variation on that theme but that tends to be where it puts it. What do you think the UK’s energy mix should look like in, say, 2030?
TG: Well we have commitments that mean it needs to be a lot cleaner than it is now. That to me means that you need to take the best features of the available and emerging low-carbon technologies. The debate isn’t about, and it shouldn’t be about, and it frankly frustrates me — and it frustrated me when I wasn’t doing this job — that you end up in such a circular, technology versus technology debate. Particularly, sometimes within different low-carbon technologies and sometimes even within renewable technologies. I can sort of see that it’s comfortable for people to go to that place because it’s a comfortable place to be able to argue the merits of just the technology you’re the advocate for. Actually we should be, the debate is about the optimum mix of those different sources. We will continue to need gas in the short-term, certainly for peaking electricity capacity but particularly for heating. That is why, when we talk about the decarbonisation challenge, obviously the electricity and the power generating sector is the bit that’s up front in that because even with the significant challenges that we’ve been discussing, it’s the easiest part to do. We’ve got transport and heating to also address. That to me suggests that we should be making the electricity generation mix as low-carbon as it is possible to do, working within the time frames and the other constraints and the other priorities we have, both in terms of replacing plants that are going off[line] and also seeking to ensure that we’re not overly reliant on the volatility of global commodity prices, which currently are very low. Again in this wider debate people point to the current wholesale price as a sort of a signal as to why you shouldn’t do certain things. Well that’s a snapshot in time. Take the wholesale price a couple years ago, take the wholesale price in five or 10 years time. I don’t know what it’s going to be, you don’t know what it’s going to be. Frankly, if we did, we wouldn’t be sitting here doing this, we’d be doing something else. And that, that suggests to me that the long-term nature of decisions is critically important. That means there will always be people who will point to short-term factors to suggest you’re making the wrong decision. But actually we’ve got to do that on the best available evidence and use the best available scientific evidence, and the technology that’s available, and we know is going to be developing and emerging to get that best possible mix. That isn’t something that you can unduly prescribe by putting a percentage figure on, on different sources. We should be doing all of the things we can to get to that mix, because I think we’re probably going to need pretty much all the tools in the box to meet those objectives. It’s not something where we can rule out something because, for whatever reason, some people have an objection to it. That goes for whether that’s, whether we’re talking about nuclear power, or some forms of renewable energy, or interconnection, or storage or any of those different things.
CB: So on that question of needing all of the available options in the low-carbon toolbox, do you think that the government’s approach to the wide energy policy piece has been appropriate, since it came to power?
TG: Look, we’ve had, over the course of now into the third government of different political mixes and different political persuasions, all of whom have had an understanding and a commitment to reducing emissions in the power sector, primarily, and the need to do that. During that time, different technologies have been able to reduce their costs, and others have developed and have become much more popular and apparent than they may have been envisioned at a certain time. There is a, the current government has got a strong focus on offshore wind, which I think is important. It’s currently expensive. When you look at the comparison of costs and people talk about the strike price, if you look at the strike price for the FID-enabling [Final Investment Decision-enabling] CFD-agreed offshore wind, it’s about 2.4 gigawatts. If it’s all build, that’s all between £140 and £150 a megawatt hour. So there’s, it’s not necessarily cheap at the moment, but it’s necessary. I think any government, doesn’t really matter whether it’s a Labour government, Conservative government, or a coalition government in between, they’ve got to be clear about the need to ensure we get to that end point, and to be flexible enough within its policy to be able to, for that policy to be able to adapt to different scenarios and technologies developing, but with an end goal and an end point [in mind]. That is… I think to be fair, has been recognised, although it has been put across in different ways and people will use different arguments at different times which might suit them in terms of what’s perhaps more appropriate to the political circumstances but, the end point and the overall objective; we can’t lose sight of that. I don’t think, actually, the government has lost sight of that. Sometimes it perhaps might need reminding of that, but that’s part of the role of the Committee on Climate Change and others to do, and I think they do that very effectively.
CB: Do you think the UK can meet its carbon targets without new nuclear?
TG: I think it would be hugely challenging to meet our existing [targets], and targets that we know are coming relatively soon, without using all the technologies available to us, including nuclear. I think it makes it… it’s a big challenge already. Sometimes the scale of that challenge I think is almost, is overlooked, and in the way in which sometimes people sort of rush to denigrate a particular technology or advocate another one. I don’t see how it’s going to be possible or practical to do that without nuclear being part of the mix.
CB: Okay. In Germany, they take quite a different view on nuclear…
TG: … A different view on level of carbon emissions as well.
CB: …One of the experts over there recently said that the UK would, he thought, build the last new nuclear plant in Europe. He thought that the inevitable cost overruns and delays that he expected Hinkley C to experience would ensure that no one else would be tempted to follow. What’s your view on that?
TG: I always admired the certainty which some people seem to be able to provide, looking well into the future. I suspect that comment is driven by a very strong advocate of the current German policy. The current German policy is, I do not think is, a panacea for reducing emissions. In fact, if you look at it, the level of emissions has increased, the amount of lignite that’s been burnt and actually the political drivers in Germany suggests to me that that is not, that is not a sustainable position to seek to emulate in its entirety. There are good features in Germany, as there are good features in lots of other markets, and the sensible thing to do is to take the appropriate lessons and the appropriate good features from a range of different scenarios. But I don’t necessarily think that’s going to be the case. There are a number of European nations that currently and continue to use nuclear. The difference in the UK is that the age of, with one exception, the age of our fleet means that our nuclear fleet is coming towards the end of its life quicker than in many other places. Now in Germany, you’ve obviously had a political decision to accelerate the shutdown of nuclear power, not towards the end of their lifetime, but for a political decision that was made by the German government a few years ago. In other places in Europe, you’ve got capacity, a nuclear capacity that is… that has a longer time to run before that decision then needs to be taken. And I suspect that the likelihood is that we will appreciate again, in the future, that we’re going to continue to need nuclear in order to meet those wider environmental and energy security targets, that every member state in Europe and every nation in the wider European continent has to meet. And they all have their priorities to do that.
CB: Given what you said about needing everything in the toolbox, do you think actually in Germany they will need to re-appraise their decision about nuclear in order to meet their climate targets?
TG: Well, they need to do something about the amount of coal they’re burning. I am not quite sure what that’s going to be, particularly given the scale of industrial output in Germany and the amount of high energy-intensive industry. There’s no sense, and I wouldn’t imagine there would be any, there’s no sense that the German government is going to abandon that industrial base. In Germany there’s already been a pretty strong reaction against carbon capture and storage technology. So it’s an interesting point, I think, as to where Germany goes beyond the next few years, because they really need to address that if they’re going to be meeting their share of commitments in relation to emissions. So does that mean that there’s nuclear power that might be needed? Actually Germany imports quite a lot of power [and] when you look back to where it’s coming from and where the source is likely to be it’s, whether it’s from the Czech Republic or whether it’s from France and a considerable portion of that is, comes from nuclear generated power, particularly at times when the climate and the weather conditions don’t make large amounts of solar and wind particularly productive. So, whether they do that themselves or do that through reliant on neighboring countries, I think, is probably where that discussion, that consideration will go. But, I mean if I was — and I’m not, obviously — but if I was in the German government, I would be thinking very hard about what do you do about the level of, the amount of coal that’s being burned and the amount of emissions that are produced as a result of that.
CB: Okay, I’d like to come back to the UK. Last year a report for the International Energy Agency and Nuclear Energy Agency found that new nuclear plants in the UK would cost more than in any of the other 11 countries they looked at. Why do you think that is?
TG: Well, we haven’t had, we haven’t built a nuclear power station in the UK since Sizewell in the, well it started generating in the early 90’s, so it was in the 80’s that it was largely constructed. So, there has been a long time since we’ve last done it. That has an impact in terms of supply chain, in terms of skills, and the right mix of skills to be able to fulfill that requirement. It’s an industry in some ways that has somewhat been dormant for a period of time, in terms of nuclear construction. That is something which takes time and I think almost inevitably will be, takes a while to get up to speed. I think that may have some impact. The scale of the challenge in the UK though, I think underlines the reason why we need to, why we will be — the timing of when things are going offline as I’ve expressed before — is one of the reasons why we’ll be before certain other Europe markets. And I think that may have some impact on the cost associated with developing those power stations. It’s quite hard though, to be able to measure one against the other. If you look at the UAE, if you want to take an outside of Europe example, which is the first time they built a nuclear power station, you’ve got a very different situation. There isn’t really a domestic labour market, there isn’t a supply chain. The regulatory regime, although it’s robust, it’s different. The planning regime is different. All of those things are all different factors. That doesn’t meant we shouldn’t have either a robust regulator or a comprehensive local planning regime. I think those things are vitally important for energy, and any infrastructure, including energy infrastructure and nuclear infrastructure within that.
CB: In countries like the UK, costs for nuclear have tended to increase over time. With the prospect of a significant new nuclear program in this country, how do you think that trend in costs can be reversed?
TG: Well there’s a couple things. Firstly, in the past, what has happened with the way in which we built those is they’ve effectively been built on balance sheet by the state, effectively. Quite often, again and infrastructure generally, when you have that model, you end up in a point where costs are perhaps underestimated and sometimes that’s part of the, that tends to be part of the project management and construction process. That almost… that almost always happens and it doesn’t really, again, it’s not particularly a nuclear point or an energy point. It’s large infrastructure [where] that has tended to happen. I think what’s going to be very interesting is the, partly because of that, the framework that we have, the policy framework that we have and the mechanism in terms of the contract for difference and a strike price, where the risk is borne by the developer. The consumer contribution, it doesn’t start until power is being generated. I think [that] may mean some of the way in which that’s expressed may be quite different from how it has been in the past. The second point, I suppose, which is more about real costs as you’re developing a programme, is that as you get a programme up and running, and as you, you’ve made the investment, skills investment, the other infrastructure investment, the support, supply chain support… as that’s started to happen and as you’ve got to a point where people are, and companies are able to benefit from some of those opportunities, then they’re well placed then to be able to benefit from those opportunities in the future which should have an impact in reducing or containing costs further along. Because the investment that needs to be made at the front-end of the, within the supply, within the skills mix, that has to be done. And then you’ve got a, you’re building up again a level of expertise and some of that is quite advanced in terms of some of the technology and some of the engineering that enable you to be able to do that in a range of different scenarios including further new build in the UK, and potentially overseas as well into the future.
CB: Okay. So, the strike price agreed for Hinkley C is £92.50. There’s potential to bring that down by £3. Why should we build that, for that cost, when onshore wind and solar are already coming in at costs well below that? Even offshore wind which, as you mentioned, is currently more expensive [than Hinkley C] is being set a target by the government to come in at £86 for projects coming online in 2026, which again would be considerably cheaper.
TG: Because you need the features that you get from nuclear in terms of consistent, baseload, low-carbon supply, as well as the more intermittent renewable supply. You need all of those different things. There’s issues around scale as well, in terms of what you get for a relatively small site from a nuclear power station, as opposed to the density effectively, of current renewables. I think sometimes, again, this debate about the different prices assumes you get everything from any one source. Well if that was the case, then it would be a very different discussion that you need to have, because you would just go for the cheapest thing and that would give you everything you needed. Now, if that was the case then all we would do is, we would be building coal-fired power stations currently. That doesn’t make very much sense, either in terms of energy security, or climate. We need to be having, you know we need as low-carbon a mix as possible. Some of that will need to be available at times at which other forms of low-carbon generation are not currently able to deliver. We will need centrally dispatched power, and we will continue to need that, I think, for a long time into the future. Storage and demand management techniques and technologies, which are developing, some of them are able to deliver now, to some extent. Others, I suspect, will develop over the next period, and I fully expect them to play a part in the future energy mix. But, you know, to put it simply, to store power you need to generate it. You need to be able to generate it according to the wider needs, both in terms of consumers and households where they may be on some, you know, some levels of microgeneration [and] increased and better energy efficiency, but also in terms of industrial footprint as well. I think for all those reasons, you are going to need nuclear power. Nuclear [is] currently cheaper than the contracts that we were signed for offshore wind, at around about the same time — of course this is all expressed in 2012 prices — [nuclear] is two-thirds the price of that for offshore wind. Onshore wind current prices are lower. Offshore wind is still higher. Offshore wind will still be higher until the mid-2020s. We have got to take into account the broader sense of what those costs give you, and what the different technologies give you, in terms of formulating the optimum mix of those different technologies. Cost is obviously important but it is not, it shouldn’t override the fact that there are different advantages of different technologies and we need to get the best mix of all of those that are available to us.
CB: You mentioned the need for baseload generation that is also low carbon. That is one of the most common arguments for why we need nuclear in this country. Others would take the view that actually nuclear is inflexible, and it is effectively must-run generation, because it doesn’t make sense economically for the plant to turn up and down in response to demand. [They say that] effectively, that makes it difficult to operate a flexible and responsive grid that we are going to need in the future. In fact, in an article, just today Paul Ekins has written that developments in flexible generation and storage may render the idea of baseload obsolete. What is your view? I mean, it seems like things are changing quite quickly in that area.
TG: Well, there is lots of potential for technologies that are not yet developed or not at commercial scale. I think some of those will continue to advance, and there will be some benefit that we can get from storage and demand management techniques, I suspect, into the future. People have been talking about storage for a long, long time. It hasn’t come to complete fruition as yet, during that period, but it may well do in the next period. But that doesn’t mean that we are not, that somehow we don’t need any centrally dispatchable supply, both for grid reinforcement but also for the broader needs. Storage technology will help, I think, as it is developed, will help all forms of generation to be able to be able to meet the demand curve more effectively, wherever that source comes from. But I think the point I made before about, if you are going to store power you need to be able to generate, that is important and it shouldn’t be overlooked. We have also got to think about where the demand level is now, because people will often say, “Well, actually, demand in the recent past has reduced or demand’s going down, so therefore that means we don’t need as much [generating capacity]. So we don’t actually need to replace things, and we can do it all through intermittent generation technology plus storage.” Well, when you look at what we have to do beyond power, in terms of decarbonising heat and decarbonising transport, then the likelihood is that even with the efficiency gains and storage advances and benefits, we are still going to have a situation when overall demand is going to increase. That means we need to be able to meet that demand, because the worst thing that could happen, particularly in terms of, for example, decarbonisation of transport, is we end up in a situation where you haven’t got the available power to be able to help to meet that demand. So every time you see a new charging point for an electric car in a car park, and every time — you know I get the train in on the, what is now called the great western railway, FGW or whatever they rebranded — but lines coming into Paddington which is being electrified. That has a big environmental, local environmental, larger scale environmental benefit, but it will increase demand for electricity. We are moving to a world where the difference between electricity and energy is becoming less pronounced than it was in the past. All of that means we are going to continue to have demand. When people talk about “baseload’s an outdated concept” — I have seen it a couple of times — and Steve Holliday, outgoing chief executive of national grid was quoted in support of this notion…if you look at what he actually said in that interview, he made the point, which I think is entirely right, that we still need centrally dispatchable power. What’s different is going to be the amount of, the way in which consumers and householders will think of what their baseload is. Their baseload may be, for those who have got solar panels or who have got heat pumps, that is going to be a different way of thinking about their starting point. But there is always going to, inevitably be then, there will be times where other power needs to be provided through the grid. I think having that central dispatchable power is important for the grid, but it is also important for the country, that we have that reliable source to be able to underwrite the range of different sources [and the] range of technologies which will also exist. We aim to do that, as I said before, in as low-carbon a way as possible.
CB: I’d like to come back to the question of costs. I think you already mentioned that in the past, nuclear power plants in this country were built on government balance sheets. I know that the Institute for Public Policy Research has suggested that, actually, going back to that would bring costs down by reducing borrowing costs for developing nuclear plants. What role do you think government should be taking in getting that nuclear new build?
TG: Well look the, you know, the policy framework that we have, avoids doing that. Partly I think that is to do with the risks of, the construction risk associated with projects. I think we will see the impact of that, I suspect, once the three current [nuclear new build] projects are built. To see whether, did that exercise and that approach, give you a realistic approach to construction cost in the first place, as opposed to what has happened in the past. In the past, discussion and debate about whether it’s cost overruns sort of depends on how realistic, and how effective, the assessment and the estimates of cost were at the starting point. I think some of that is almost inherent and is almost inevitable in terms of large infrastructure developments that are done in that way. We will have to see how that transpires. Electricity market reform, of which CfDs and strike prices are a significant part, took a long time to get through its process of legislation and to become law. In the period ahead of that, and this is again isn’t particularly a nuclear point, people were holding off on investments, waiting to see what the mechanism would be, and how it would be structured, and what that meant in terms of the amounts available and how the support would be calibrated, a whole of different issues. [That] effectively put on pause a number of investments. Once you get to a point where that was legislated for, and then some of the detail was put in place by the government in the last parliament, then that gave people an opportunity to then be able to see, was their investment, using that mechanism, going to be possible going and to be deliverable. I don’t think we have the luxury of deciding to rip that up and start again, because scale of the challenge that we have, even if you — not that I am suggesting you would — but even if you wanted to leave aside any issues around climate or carbon emissions, and even if you thought that energy security in the sense of reliance on fossil fuels wasn’t important. Even you put all of those things to one side, it is still a massive challenge, and a big effort to be able to replace the amount of capacity that we are losing and that we have already lost. We are going to, as I said, I referred to the 24 gigawatts [that will have closed] by the end of this month over the course of the last six years. So I don’t think we have the luxury of being able to rip it up and start again and come up with a new mechanism. I think we want to, we need to be able to focus — and this is across the energy sector, across the energy industries — focus on getting projects delivered and developed. As I said before, and I’ll say it a number of times in this discussion, I will say it, I suspect, a number of times in the years ahead, we need to do that in as low-carbon way as possible. That is just the sensible and logical position to take and we shouldn’t be, you know, shouldn’t be distracted or blown off course, by some of the theoretical discussion that [people have] around the edges. I don’t think, frankly, we have the luxury to do that.
CB: Okay, so you mentioned the CfD framework. One of the things that quite a lot of people — like the Committee on Climate Change, like Energy UK, lots of other organisations — have been calling for the government to extend its levy control framework…
CB: …into the 2020s…
CB: …is that something that you are also behind, you think that needs to happen?
TG: Yeah, yes I mean, you know, in a former life I used to say that whoever won the election in 2015 would have to focus pretty quickly on the size and the shape and the methodology of the LCF, or whatever replaced it going forward, pretty quickly. That is my view, it’s the view of the Nuclear Industry Association, as much as it is the view of others involved in trying to stimulate and get energy development happening. It’s something which we, as an organisation in our submissions and our representations ahead of the budget, made very clear that that is something which, along with other things, needs to be set as quickly as possible. Because 2020 in some senses sounds like quite a long time away, but 2020, in terms of developing and delivering electricity generation and energy infrastructure for the future, is not very far away. Again, it doesn’t matter what technology you are talking about. The reality is, in terms of planning timescales, that is pretty soon. So it’s something that I think needs to be addressed as soon as possible. That’s not secret, it is not something that hasn’t been made by a number of organisations and bodies and individuals, repeatedly, over the course of the last few months. It is something which I believe the government do, and will need to, address pretty soon.
CB: So are you disappointed then, that it hasn’t been addressed already?
TG: Well yeah I mean, the budget was good in some senses. But you know they put off a decision in relation to the forward trajectory of the carbon price floor — which is again, very important for low carbon investment — until the autumn statement, and have said that that is when they will, that’s when it will be examined for the autumn statement. I think it would make sense for the size and shape and scope of the LCF to be set out, on a similar time scale, and I think the longer we go on without that being the case, the more likely it is that there will be, you know, people will hold back or wait or pause on investment that we need. The government, in many other ways, is very focused on the need for infrastructure improvement and investment. I think, setting out the framework for that for the future, is going to be an important part of helping to ensure that investment happens.
CB: So, assuming that there is a new levy control framework out towards 2025 or 2030, and assuming that Hinkley C and other new nuclear plants are delivered in that similar sort of timescale, how much of the levy control framework cap — if there is one in future — would be taken up by those projects?
TG: Well, it’s difficult to say, isn’t it? Because it depends on where the limit is set, where the trajectory, the forward trajectory of the carbon price — be that through the EUETS [EU Emissions Trading System] or the UK stand-alone mechanism that we have at the moment — and where that sits in relation to what happens in terms of commodity prices and gas prices in that period. So I don’t think it’s possible to say. I mean, I think, what is important, and again, as has been argued a number of times, is that the future of the LCF or whatever name it is given, or whatever way it is set out, enables a number of different technologies to be able to take advantage of that overall part. That is something which we need to, which has to be considered in detail, and I suspect [that] is part of the reason for the time it is taking to get to that end point position. It is not about, and it shouldn’t be about, setting technology versus technology. There will obviously always be a degree — and in many ways it is quite healthy that there is — a degree of competitive tension between technology. But it shouldn’t be about setting one against the other, and I think it would be mistake for government to seek to overly prescribe something, that ends up with that consequence.
CB: I mean you mentioned that it is hard to say, we don’t know, there is a lot of unknowns. But certainly at current wholesale prices, I think you would be looking at at least £1.5bn per year for Hinkley [given] the amount of electricity you could expect it to generate. Even if you look at DECC’s reference price projections for wholesale prices, which includes a rapidly rising carbon price, then it would only come down to £650m. I just wonder how that, how, you know, you said it shouldn’t be about setting off different low-carbon technologies against each other. But effectively, if there is a cap on the total subsidy pot, and there is quite a large demand on that pot from just one of the three new nuclear plants that is being proposed, how do you see that affecting other low carbon technologies?
TG: Well you know, I think it has to be structured in a way that it isn’t about completely seeking, or having the consequence of – because I don’t think it would be the stated intention — but having the consequence of effectively rendering a technology redundant before it started. That is something that has got to be thought through in terms of the way in which that mechanism exists for the future. The reference point to the current wholesale price is, you know, it was interesting, I was reading Lord Howell who has been pretty controversial on a range of different issues but…
TG: ..Yeah, but he made quite an interesting point the other day, when he was talking about how in — I think he was energy secretary in the early eighties, or I think maybe the first energy secretary of the Thatcher government, late seventies early eighties — and [he] was talking about the plan for nuclear build [at the time], of which we built just one, which is Sizewell, which is the only one [of our current nuclear fleet] that is going to be generating beyond 2030 or shortly thereafter in the UK. That was supposed to be part of a fleet, the first of a fleet at that point. But the low commodity costs, effectively derailed that investment, and that programme. Now when you look back at that now, and you look at how volatile oil and therefore associated gas prices have been over the last few years, and the uncertainty about what different spikes in demand at different times, and the geopolitics of what OPEC countries decide, and don’t decide to do. All of those different factors, which is beyond the control of any government, what that might do over the course of the next 10, 15, 20 years, then I think that helps bring into focus that this is about making the right long term decisions, that shouldn’t be overly influenced by the most short-term day-to-day, hour-to-hour fluctuations in a commodity price. I think that sometimes when we make that comparison — whether that’s made in relation to nuclear or offshore wind, or whatever it’s made in comparison to — and people use the current wholesale prices as an indicator about whether something is worth doing, that is going to be generating power for 50, 60 years and will come online in about ten years time, I think it is, either people are being disingenuous about it, and suspect some are, or they really have not got full appreciation of the fact that this is a long-term business and it is about long term decisions. I think that I something which we probably need to, sometimes in this wider debate, we need to refresh our memories on.
CB: …they have been much discussed recently. Do you think that there is a realistic prospect that they can be commercially deployed, at a competitive price, in the 2020s?
TG: I think the 2020s will be, it will be a real push to be in the 2020s. Possibly, potentially, in a period after that, it may well be the case. This is, it is an interesting area because it is, you notice in the wider energy debate that from time to time people light on something, and sometimes there’s a suggestion almost that this is going to be the answer to every single problem. I would always caution against that, no matter what that is, whether it is, you know, go back a couple of years and that was the prognosis that was being used — including by some people in government — about shale gas, for example. Small reactors, I think, the government is doing the right thing in setting out a process to properly evaluate and investigate, and to work through whether that is something that is going to meet the potential that it has, both in terms of a complementary technology to larger scale nuclear in the UK context, but also potentially as an export opportunity. There are theoretical, quite significant advantages from modular construction. But what has to be properly tested — and again that is why it is important that we see what that road map is, that the government said they will publish in the autumn — what that means in terms of citing, what that means in term of potential for combined heat and power, which small reactors can give you potential for, what that means in terms of industrial capacity. There is a range of different things which as yet, haven’t been fully explored, but they might be able to help to make small reactors a part of the future. I think it is important that those who have technologies, or putative technologies — of which there are a number — fully engage in the process that we have in the UK, and that the government competition and road map for future is done in as comprehensive a way as possible to enable, to help to enable that potential to be realised. But I wouldn’t say it is a certainty as yet.
CB: So you wouldn’t say that we should take our eye off the ball with other low-carbon alternatives and focus more on small reactors?
TG: No, I think we should, and I think the government has set out this is what they intend to do, we should certainly explore that potential. I think we should treat it seriously. I don’t think this is in any way a fad or something that sits off in somebody’s imagination as a theoretical concept. There is much more to it than that. But it is about whether the technical capability and the economic situation enables that to develop, in a period in which that could be a complementary source to other sources of low-carbon technology. I don’t think exploring that thoroughly is [or] should be a substitute for getting on with doing other things that we need to do. I think, I see it as — it’s not an alternative, it’s a potentially complementary technology.
CB: Okay. One last question, the question that never goes away I guess. Where should the UK store its nuclear waste?
TG: Well the UK has, the UK and the Welsh governments have an agreed policy on this, in terms of geological waste disposal. That is something which the appropriate part of the NDA [Nuclear Decommissioning Authority] is working on currently, towards seeking expressions of interest from communities who, to host, geologically appropriate communities to host that. I think it is interesting, when you look at what has happen in Scandinavia since we first started this, the earlier iteration of this, the way in which both in Sweden and in Finland they have made significant progress. I think in Finland certainly, they have both identified and established a site for where that [waste depository] is going to be. The amounts of waste we will get from new nuclear power stations are very small, in comparison to our legacy waste. We have to also look at — and I think this is important — that we look at our plutonium stockpile and how that can potentially be reused. This comes back into some of the discussion about SMRs, and what technology, and whether there are opportunities to be able to reuse that plutonium, in terms of fuel stock for the future, as well as the types of waste that will need to be stored. But I think [a] geological disposal facility is the sensible thing to do. We can see from international experience that that is developing in other places, and it is something that we need to get on to establish. But we should also be looking at, and the government should be looking at, plutonium reuse. I think the NDA’s report on that was quite significant and welcome, something we fully support and we want and expect government to be taking that seriously as well. They’re not an either-or, I think we should be doing both.
CB: So is a repository not something that we — in some ways we already need it. So when should we be hoping to establish one?
TG: Well, I mean waste, and again, you know, in terms of volume and size of facilities that need to store it, it is relatively small and has been stored on sites safely for a considerable period of time. That is the current position, but that is in lieu of establishing the geological disposal facility that we need to get towards. I think it is important that is established before, I mean when you think about Hinkley or Moorside or Wylfa, they are all, the time at which they’re going to be generating, they’re all 50, 60 years. We are talking 50, 60 years before we have, from new builds, or you know, 65 years, before you have a position where you need to start to think about how you then store the waste that can’t be reprocessed and reused. I think it’s right then, that the work that’s going on in terms of the depository is happening now, rather than being left until 10 or 15 years prior to having to think about decommissioning those new power stations. It’s right that that’s done now, so that by the time that they’re generating we should be a long way further down that track of establishing where the site of that facility will be, and beginning to develop it.
CB: Okay, well, thanks very much.
This interview was conducted by Simon Evans at the Nuclear Industry Association's office in central London, on 23 March 2016.
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