I thank the hon. Gentleman for raising that point, which I was going to come to. Clearly nuclear has to be cost-effective throughout the whole lifecycle, and there is a burden of responsibility on the Government to ensure that is the case, although I must admit I do not recognise the £132 billion figure.
As we move away from fossil fuels, we need nuclear power more than we did in the ’50s, ’60s, ’70s when we were developing it. As we start using electricity to heat our homes and power our cars, we need more production capacity that is resilient and secure. The hon. Member for Richmond Park (Sarah Olney) made a point about energy efficiency, and I completely and utterly support that, but as we move away from fossil fuels across other
areas of the economy and our lives, the demand for electricity will go up rather than down, whatever we do with efficiency. That is inevitable, so we need to ensure we have more production and more secure production.
The recent spike in gas prices has shown our national vulnerability if we do not have resilient energy suppliers, and we must guard against that happening to electricity suppliers. We cannot risk windless days and dark days leading to blackouts in future. Wind, solar and hydrogen power are wonderful. We have done great in rolling them out—wind power produces more energy than any other source and that is great—but they are not the sole solution. We need every tool in the toolbox. We need to ensure that we can provide the stable, resilient base-load that we will increasingly need as we move away from fossil fuels.
In the various debates I have had about nuclear power over the decades, anti-nuclear campaigners normally pipe up at this point with, “Nuclear power is not a good use of taxpayers’ money.” That is when I know they have largely run out of other arguments. Obviously nuclear has to be value-for-money. I am an economic, fiscal Conservative. We want to go for the best value forms of energy, not the expensive ones. It needs to be financially sustainable, and we need to look at the whole lifecycle costs of nuclear power. Clearly the Government have a duty to do that, and that is what the Bill is about. The Government have to ensure we have the right financial framework to ensure that the nuclear industry can survive and thrive and in the most cost-effective way possible. If companies are to invest multiple billions of pounds to build nuclear reactors, they need to do it in the lowest risk way, otherwise the cost of capital becomes prohibitive and the projects are not viable.
I used to work at Morgan Stanley, the US investment bank, and we had a big infrastructure fund investing in projects around the world—not nuclear, I have to say, but many other different sectors. When assessing new infrastructure investment, we have to factor in many of the risks. There is construction risk: can we build the thing? There is technology risk: if it is a new technology, will it work? There is political risk: what if there is a new Government who change their mind and say no? Then there is demand risk or volume risk: will there be enough demand for the product and will it be at the right price to generate the revenues to pay for the cost of capital being put up front to build it?
The trouble with the previous financing regime is that it did not deal with the first risks and expected companies to bear all those risks up front at cost to themselves. That meant that many companies found they had just too much risk to make the projects viable. It is not surprising that some companies ended up pulling out of nuclear power stations they had been planning to build.
The regulated asset base model that the Bill brings about is a far better model for financing the building of nuclear power stations, because it properly shares construction risk, political risk and technology risk between the public sector, consumers and companies. The RAB model is a completely standard model that has been widely used in other areas of infrastructure for decades and is well understood, as various Members have pointed out. The Government and companies have experience of the RAB model. We know it works well and we know how to make it work well in the interests of both parties. I am delighted that we are on the front
foot again with nuclear power as a country. As we progress and improve our expertise as a nation, as we have heard we need to do, nuclear power will get more standardised, easier to build and better value for money. The Government must continue to have courage in their convictions with nuclear power. I fully commend the Bill to the House.
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