2012 may have been coming to a close, but the last week of November proved a new start and pivotal moment for the UK’s nuclear energy programme.
Just prior to the release of the Energy Bill, two significant events occurred, providing a significant vote of confidence in the future of the UK nuclear programme. First, on November 26th the Japanese Hitachi Ltd. completed its £700m acquisition of the fledgling Horizon Project from its German owners. The next day, November 27th, NNB GenCo (the EdF-BE subsidiary) received its Nuclear Site License for the construction, commissioning and operation of the new Hinkley Point C nuclear power plant, proving the second important event. Soon after, the Secretary of State for Energy and Climate Change presented the Energy Bill to the House of Commons, which aims to support the move of the UK’s future energy production from a dependence on fossil fuels to a more diverse mix of energy sources, including nuclear and renewables. It is a significant step forward towards realising a stable UK energy future, less dependent on fossil fuels, while presenting a realistic framework for the development of long-term solutions for the future energy needs of Britain.
For new nuclear, the Energy Bill illustrates the necessary commitment needed for both long-term nuclear power developers and investors. Investors, who have, to date, shown justifiable uncertainty, should be reassured by the long-term Contracts for Difference (CfDs) and the establishment of a new government body to act as the single counterparty for the CfDs. Such institutions will serve to provide the stable and predictable incentives for companies to invest in low-carbon generation today.
Perhaps somewhat overlooked but equally as important, the Energy Bill also establishes the Office for Nuclear Regulation (ONR), as an independent nuclear regulator. The ONR, has responsibilities in five key areas relating to; nuclear safety, nuclear site health and safety, nuclear security, nuclear safeguards and the transport of radioactive material. The ONR is currently a non-statutory agency of the Health and Safety Executive (HSE). The Energy Bill sets out a clear governance model for the statutory ONR, its constitution and how its staff and members are to be appointed and remunerated. The establishment of the ONR signals the government’s commitment to securing an appropriately resourced and responsive regulator to meet the future challenges of the nuclear sector. Conversation, consistency and cooperation between the ONR and the HSE are ensured through The Energy Bill. This will help to ensure that the two bodies have a comparable and compatible approach to the regulation of health and safety, and that interfaces between their respective health and safety enforcement activities are effectively managed. The ONR will hopefully satisfy the calls from investors in the development of new nuclear projects for a rigorous, independent, effective regulator with clear authority.
Finally, the Energy Bill further reassures potential and present investors by clarifying previous ambiguities surrounding energy policy in the UK through the Strategy Policy Statement, which sets out the Government’s strategic priorities for the energy sector in Great Britain. The Statement describes the roles and responsibilities of various players who implement, or are affected by, the energy policy and describe policy outcomes which are to be achieved by the regulator. The Strategy and Policy Statement will replace existing guidance for the regulator, on social and environmental matters, and provide much-needed clarity.
Credit is due to the Coalition Government of Prime Minister David Cameron for successfully building on the efforts of the previous Labour governments - dating back to January 2008 with the publication of the nuclear white paper “Meeting the Energy Challenge” - to create a political and investment environment that will encourage the global nuclear industry technology providers and investors to commit to the UK nuclear programme. The UK has all the fundamentals for a robust new nuclear programme: an existing and successful nuclear power programme, an independent and sophisticated nuclear regulator, a strong industry that can be mobilised to support new nuclear projects, an independent and fair judiciary and broad public and political support.
However, despite investing significant time, money and efforts to date, none of the three nuclear development companies and their sponsors (NNB GenCo (EdF-BE/ Centrica), Horizon (Hitachi), NuGen (Iberdrola/GDF Suez) have made a final investment decision to proceed with the construction of new nuclear plants in the UK.
During the debate and implementation of the Energy Bill these, and other potential investors, will be carefully looking for signs of a continued bipartisan support that will ensure that government policies and attitudes towards nuclear will remain the same over the long-term. This will illustrate to these prospective investors that they will find a willing and supportive partner that is fully committed to, and appreciates the significance of, long-term investments in the UK’s energy future.
The building of nuclear power plants goes beyond the building of electricity-producing units. With those units must come a whole new supporting industry, with a multi-generational, society-wide commitment that provides longterm benefits in the form of energy, economic and national security. The benefits of this investment in the UK nuclear programme goes far beyond improving the UK energy future. This investment is an investment in the UK economy and society and will help develop the jobs and growth the Government has been seeking.