TISC PN45 0506



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PN 45 of Session 2005-06



The Government is at risk of rushing into hasty decisions regarding the future of the UK's energy supply.

MPs on the Trade and Industry Committee have raised concerns that the outcome of the Government's Energy Review has been determined before adequate consideration of important evidence has taken place.

In their report analysing the future of the nuclear industry, the Committee maintains that 'a full and proper assessment of the projected future generating capacity should have been conducted to inform debate before the Government undertook its Review.'

It raises concerns that the review is being undertaken with little consideration of the need for cross-party involvement. 'Whilst we do not deny that energy policy requires political as well as economic judgements, the failure to include the main political parties in the process militates against the possibility that they will sign up to the final outcome.'

MPs suggest that fears of an imminent 'energy gap' may have been overstated.

The Committee argues that if there is a possibility of some of the UK's existing nuclear power stations receiving life extensions 'then the potential energy gap faced by the Government will not be as severe as that which the current Energy Review assumes.'

MPs warn that when announcing the outcome of the review, ministers should not favour one source of energy supply over another. Whilst acknowledging the Government's role in encouraging innovation, ministers should remain 'technology neutral', allowing the market to determine the mix of supply.

The Committee's report concludes that, for new nuclear build to take place, the Government would have to address some of the disadvantages that face both nuclear and other low-carbon technologies, but it should be for the market to decide whether new nuclear power stations would provide an adequate return for investors.

'The Government should make it clear that all the costs of building, operating and decommissioning new nuclear power stations will fall to the private sector investors who build those stations. These costs are a concern for investors - not the Government or the taxpayer'.

However the nuclear industry will build new power stations without direct state subsidies only if the right long term framework is put in place.

Given nuclear's high capital costs and long lead times the Report concludes 'that some form of stable long-term carbon pricing is the only means by which new nuclear build could be funded. We think that a technology-neutral form of long-term carbon pricing is essential if the Government is to achieve its objectives of reducing carbon emissions and allowing the market to determine the precise energy mix.'

Not seeking to give a simple 'yes' or 'no' to new nuclear powers stations, the Report highlights many of the issues that need to be addressed and to provide definitive answers wherever possible. For example, the Committee agrees that there will be adequate supplies of uranium for new power stations and that these stations should be regarded as low carbon sources of electricity generation.

It emphasises that the general public is unlikely to support new nuclear power stations unless they are part of a wider strategy that also encourages renewable energy and energy efficiency.

Believing there is a risk that a Government focus on new nuclear build would distract from efforts in these two areas, the Committee recommends that 'to prevent this, it would have to ensure that nuclear power did not receive preferential treatment, either in the planning system, or in the long-term carbon pricing mechanism'.

The Committee also maintains that there will have to be a broad national, cross-party consensus if new nuclear power stations are going to be built. This would require, in particular, a continuing dialogue both at a national level on wider policy issues, and at a local level on, for example, siting issues. 'The Energy Review statement cannot be the Government's final word' the Committee warns.

Members believe that a clear strategy for the long-term disposal of the Government's existing radioactive waste would be necessary to gain the support of both the industry and the public for a programme of new build. Yet they are concerned that ' successive governments' record to date in delivering a long-term solution has been woeful.'

'Key to finding a long term storage site will be the active engagement of local communities under the principle of 'volunteerism', bearing in mind the need to have clear definitions and processes to allow local communities to decide on the issues.'

In addition to these practical problems, the Committee concludes a number of issues have a strong ethical dimension, and will ultimately require political judgement. These include: whether it is right to create new radioactive waste; whether the UK's nuclear policy poses security risks and undermines efforts to prevent proliferation; and the extent to which the UK needs to demonstrate leadership in reducing carbon emissions.

Commenting, Committee Chairman, Peter Luff, said:

"This unanimous report from MPs with different views on the merits of nuclear power should provide Parliament and the public with a useful summary - a checklist - of the major questions against which the Government's policy on nuclear power can be judged.

"We were told very clearly by the nuclear industry that they neither needed nor wanted public subsidy; the only things required to encourage the private sector to invest in new nuclear power stations were a long-term framework for pricing carbon (to reward all low-carbon technologies, both nuclear and renewables) and a streamlining of the planning and licensing regime

"It is vital that the Government's energy policy is based on a full consideration of the evidence and has broad political and public support €” otherwise, we risk repeating the mistakes of the past. However, the Government's Energy Review risks being seen as little more than a rubber-stamping exercise for a decision the Prime Minister took some time ago.