Ahead of Wednesday's Spending Review, a written Ministerial Statement on energy policy made by Chris Huhne, Secretary of State for Energy and Climate Change, was released on 18 October 2010.

The written statement announces the start of a period of re-consultation on the revised draft National Policy Statements. The publication of the revised policy statements has been eagerly anticipated by developers of Nationally Significant Infrastructure Projects, such as new nuclear power stations, which can benefit from a streamlined consent regime under the Planning Act 2008.

The statement clarifies that there will be no specific public subsidy for new nuclear power plants, although nuclear power may benefit from general measures designed to promote investment in low carbon generation. It also announces the Government's conclusion that following a feasibility study, public funding should not be made available for the proposed Severn Estuary tidal barrage.

In an oral statement, the Secretary of State said he was "fed up with the stand-off between advocates of renewables and nuclear which mean we have neither".

The Statement on Energy Policy contains announcements and policy updates in relation to:

  • the revised draft National Policy Statements;
  • the regulatory justification for nuclear reactor designs;
  • the financing of nuclear waste and decommissioning;
  • no specific public subsidy for new nuclear power; and
  • the conclusion of the feasibility study into the Severn Estuary tidal barrage.

The revised draft National Policy Statements

A Government response has been published to the consultation on the draft National Policy Statements which was undertaken by the previous Labour Government. At the same time the Coalition Government has launched a fresh consultation on revised drafts of the six energy-related National Policy Statements which is due to close on 24 January 2011.

Following the widely reported accidental publication of some of the consultation materials on the DECC website last week, the documents published yesterday are to some extent old news; for example the reported removal of two of the ten sites approved for nuclear new build projects from the revised draft Nuclear National Policy Statement has been confirmed.

Regulatory justification of reactor designs

Chris Huhne's statement announced that draft statutory instruments have been laid before Parliament which contain decisions that the generation of electricity from the EPR and AP1000 nuclear reactors is justified.

Regulatory justification is required under EU legislation which provides that before any new practice involving ionising radiation (such as new designs of nuclear reactors) can be introduced, it must first undergo a high-level, generic assessment to determine whether its economic, social or other benefits outweigh the health detriment it could cause.

The announcement will facilitate the development of new nuclear power stations as justification is an essential step in deploying the approved reactor designs in the UK.

The financing of nuclear waste and decommissioning

According to the Statement on Energy Policy, the Nuclear Decommissioning and Waste Handling (Designated Technical Matters) Order 2010 has now been laid before Parliament.

This piece of legislation forms part of the framework put in place by the Energy Act 2008 to ensure that new nuclear power station operators meet in full their decommissioning costs as well as their full share of waste management and disposal costs.

The draft Order, which will be subject to the affirmative resolution procedure, is intended to give operators of new nuclear power stations greater clarity over which liabilities require monies to be set aside in segregated funds.

No specific subsidy for new nuclear power

Whilst the Coalition Government has expressed support for nuclear new build, it has on several occasions stated that new nuclear will not receive a "public subsidy".

Chris Huhne's statement yesterday sought to clarify precisely what this means,

"To be clear, this means that there will be no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation.

New nuclear power will, for example, benefit from any general measures that are in place or may be introduced as part of wider reform of the electricity market to encourage investment in low-carbon generation.

I would also like to make it clear that we are not ruling out action by the Government to take on financial risks or liabilities for which it is appropriately compensated or for which there are corresponding benefits.

Specifically, within the framework of the Government’s policy under the Energy Act 2008, that new nuclear operators must have arrangements in place to meet the full costs of decommissioning and their full share of waste management costs, we will not rule out taking title to radioactive waste, including spent fuel, at a fixed price provided that price properly reflects any financial risks or liabilities assumed by the state."

The statement also explained that the Government's "no public subsidy" policy will need to be applied having regard to proportionality and materiality, including, in so far as the UK's compliance with its obligations under the Brussels and Paris Conventions is concerned. The Conventions establish an internationally agreed framework for compensating victims in the unlikely event of a nuclear accident. The Government will consult later in 2010 on its proposals to implement amendments to the Conventions, including on whether the limit on operators' third party liability will be maintained (at an appropriate level).

The Government has not ruled out providing support to the nuclear industry in the normal course of business, such as through the activities of the Office for Nuclear Development, and will continue to provide funding to the Nuclear Decommissioning Authority in respect of the clean-up of the UK's civil public sector legacy nuclear facilities.

The feasibility study into the Severn Estuary tidal barrage

The Statement on Energy Policy also announced the publication of the conclusions of a feasibility study into the Severn Estuary tidal barrage. The key conclusion of the feasibility study is that the Government does not see a strategic case at this time for providing public funding to the scheme. The Government feels that the costs and risks for taxpayers and energy consumers would be excessive, especially when compared with other low carbon power generation options which the Government believes would represent a better deal, such as wind energy, carbon capture and storage and nuclear power.

Whilst this may seem to be a blow for the development of tidal power in the UK given that the Severn's tidal range is such that the project could provide up to 5% of the UK's current total electricity generation capacity, the Government has recognised that the feasibility of the project could change over time. As such, there is scope for the Government to undertake future reviews, although the Statement on Energy Policy indicates that this will not happen before 2015.

Further information

The full text of Chris Huhne's Statement on Energy Policy, which includes links to the new documents (such as the revised National Policy Statements) published alongside the statement, is available here.

In his oral statement, Chris Huhne also confirmed support for fossil fuel generation with carbon capture and storage, and the need for further associated network infrastructure.