By Tony Grew - 23rd July 2012
The nuclear power industry has said it offers the “least expensive technology” in the drive toward low-carbon energy as MPs report that the Government's plans need serious revision.
The Commons Energy and Climate Change Committee published its report today on the Government’s draft Energy Bill.
It called on ministers to rethink their plans, “so that the investment that is needed to replace the UK’s aging power stations, cut carbon emissions and maintain energy security can be delivered”.
Environmental groups told the committee the strike price for nuclear was likely to be higher than that for renewables.
The MPs said they are concerned the strike price for nuclear could be driven upwards.
“We hope that industry claims that the cost of nuclear is competitive with other forms of low-carbon energy will be reflected in the offers they put forward during strike price negotiations,” the report said.
“We do not believe that a nuclear strike price higher than that given to offshore wind would represent good value for money to the consumer.”
The MPs said the Treasury has “apparently intervened” to ensure that contracts are not government guaranteed.
“The new model for contracts will spread the liability across various energy companies instead; raising concerns that the plans are now too complex and possibly not legally enforceable.”
The MPs are calling on the Government to use its AAA-credit rating to underwrite the new contracts in order to keep the costs of energy investment down for consumers.
Keith Parker, Chief Executive of the Nuclear Industry Association, said:
“The proposals put forward in the draft Energy Bill are a vital step towards providing the credible means with which the UK will meet three pivotal energy responsibilities: future affordability, energy security and reducing emissions.
“As the Committee points out, we recognise that much detail still remains to be clarified – including the nature of the Counterparty and the negotiation of the strike price.
“However, we are confident that these issues will be resolved.
“New nuclear is set to be the least expensive technology in the low-carbon sector, which as a whole offers enormous potential for jobs and economic growth to the UK - we must not squander this opportunity to decarbonise our energy.”
The strike price negotiations between EDF Energy/Centrica and the Government are ongoing and are expected to conclude later this year.
Commons committee chair Tim Yeo said:
“The Government has a lot of work to do over the summer to make sure that the Bill is fit for purpose in the autumn and is not subject to any further delays."
The Committee heard that the spending cap set by the Treasury – which limits the green levies that can be passed on to consumers in energy bills – could introduce an “unacceptable” level of risk to companies who are looking to build new wind, solar, wave or tidal power plants.
The MPs said this is because the levy cap will ration the number of contracts available, creating uncertainty amongst investors about which projects will receive support.
"Nobody wants to see a blank cheque written out for green energy, but the Government must provide investors with more certainty about exactly how much money will be available,” Mr Yeo said.