Tom Thackeray, Tom Greatrex and Rebecca Groundwater gave evidence.

We will now hear from Tom Thackeray, director for decarbonisation, Confederation of British Industry; Tom Greatrex, chief executive officer, Nuclear Industry Association; and Rebecca Groundwater, director of external relations, Energy Industries Council, all of whom are giving evidence by video link. We have until 4.15 pm for this session. Could the witnesses please introduce themselves for the record?

Tom Thackeray:

I am Tom Thackeray, the programme director for decarbonisation at the Confederation of British Industry. We are the UK’s largest business representative organisation, representing small, medium and large businesses right across the country. My role is aiding businesses’ decarbonisation efforts and pursuit of sustainability. Part of that is influencing Government policy to enable them to invest, and part of it is working with businesses directly to drive down their own carbon footprints.

Tom Greatrex:

Good afternoon. I am Tom Greatrex, chief executive of the Nuclear Industry Association, which is the trade association for the UK civil nuclear industry, representing companies throughout the supply chain.

Rebecca Groundwater:

I am Rebecca Groundwater, and I am responsible for external affairs at the Energy Industries Council. We are a supply chain energy trade association. We represent all the energy sectors, not only in the UK but internationally, and we have five other offices in Houston, Kuala Lumpur, Dubai, London and one other that always escapes me—apologies.

Thank you very much for attending, all of you. Could Members please indicate to me whether they have any questions to the panel? Dr Alan Whitehead.

Q Good afternoon, ladies and gentlemen. Good afternoon, Tom—I ought to explain that I have known Tom Greatrex for a very long time, and we go back a long way on a number of these issues. What was your reaction to the proposals that came forward about Chinese involvement in the nuclear programme, particularly in Sizewell C, and what views does the Nuclear Industry Association have about their continued involvement and its effect on Sizewell C funding overall?

Tom Greatrex:

Apologies, but I missed part of the question; it cut off partway through, but I think I got the gist in relation to Chinese investment in UK nuclear. I think that is what you were asking about—is that correct?

Yes, basically.

Tom Greatrex:

You will recall, I am sure, the original arrangements that were made to facilitate Chinese investment in UK nuclear. China General Nuclear, who are currently the minority financial shareholder in Sizewell C, are also a member of the Nuclear Industry Association and have a potential project at Bradwell. In terms of technology, it is very clear that any reactor technology has to go through the same process to be approved, and that is done independently by the Office for Nuclear Regulation. I do not think there is any difference in the thoroughness of that approach, wherever the technology comes from.

However, making decisions on the larger geopolitical issues is, I am afraid, way above my current—or ever anticipated—pay grade. As far as I am concerned and as far as the industry is concerned, Chinese companies have significant expertise in nuclear capacity and have built quite a lot of nuclear capacity, working with different reactor designs in China. Whether, and to what extent, they should be involved in the UK is not really for me to express a view on.

Q I presume the Nuclear Industry Association has been informed of the decisions that were reached in the recent Budget about funding that has been put aside in the Red Book—£1.7 billion for works leading to a financial closure of the Sizewell C plant. Did you have any input into the procurement of that £1.7 billion and what is your understanding of its purpose?

Tom Greatrex:

In terms of that funding being available, for a number of years, the Nuclear Industry Association and companies that we represent have made representations to Government about the costs associated with large-scale projects prior to getting to final investment decision. Significant amounts of money were spent on projects that have not happened during that process, and that pre-development funding is something that needed to be considered.

As to what that announcement covers, we have asked Government for further information on that. At the moment the information we have is that that is funding that could be available to a range of different projects and opportunities, but nothing specific. In relation to what I think was your implied question, on whether this is instead of buying out the CGN stake in Sizewell, it has not been made clear to us that that is what it is for.

Q Forgive me for being a little surprised, but the Nuclear Industry Association does not know any more than the rest of us about what this funding is supposed to be for. Is that right?

Tom Greatrex:

Yes, we have had the announcements and spoken to officials about the announcements, but we do not have any more detail than is currently available.

Q Not a happy state of affairs, is it?

Tom Greatrex:

Well, I hope that there will be clarity on that and other aspects of what has been announced by the Government in recent announcements as we proceed.

I have a simple, open question for all three of you. You all run trade associations, effectively, and you will have gone through the Bill in detail and looked at what you like and do not like. Are there any gaps in it? Are there any things you think should be in there that are not in there? We heard earlier, for example, about how, if there are overruns, you allocate the risk between consumers and investors and construction companies. That is obviously not covered in this Bill, but what gaps do you think there are?Q

Tom Greatrex:

The Bill sets out a framework for a mechanism that we as the industry welcome. We think it is very important to be able to facilitate development of new projects. There are levels of detail that are not covered in the primary legislation, and I think you have touched on some of those in relation to exactly how aspects of risk sharing will be undertaken and the role of the regulator, which will be Ofgem—the expertise available to that body, and the fact that transitioning into being able to undertake what is effectively a new role is going to be significantly important. I am not sure those would necessarily be in the primary legislation, but there are aspects of this where there will need to be further information and development before a regulated desktop-based model can be used for nuclear development.

Tom Thackeray, are there any gaps or things you would want changed?Q

Tom Thackeray:

From the CBI’s perspective, we do not have any significant concerns around what is included in the Bill, but as has been noted previously, there is a framework for the establishment of a regulated asset base model, and the details around designation and the risk-sharing profile are things that will be worked out on an individual project basis further down the line, which should be the case when legislating in this way.

You do not think it needs to be in primary legislation. It is better to be secondary legislation.Q

Tom Thackeray:

Yes, from our members’ perspectives, they are comfortable with that way of operating.

Q Rebecca, does the Energy Industries Council have any particular concerns? Are there any gaps in the legislation? Are there any things that are not there that you would like to see included?

Rebecca Groundwater:

I would echo what previous panellists have said. We have engaged with our members on this and, although the Bill is a framework and there will be more detail going forward, they are happy with how things are at the moment. There are no big gaps for them as the Bill currently stands.

Q That is reassuring to hear from the three trade associations. I have one other question. This is obviously about the nuclear industry, but there are other forms of energy out there. Wind power famously gets contracts for difference, but things like tidal power are also coming on. Carbon capture and storage is not a form of energy, but it is part of the battle to net zero that we were talking about earlier. Are you concerned that having this regime just for nuclear will favour one form of energy versus another and disadvantage other sectors, and that we will end up without the optimum different types of energy supply? Do you think that we might choose something different if we had a controlling mind of the energy supply, as it were? Are you concerned that this will end up distorting the sources of energy that we have? It is difficult for Tom Greatrex to answer that because he represents just one sector, but the others represent all the different sectors.

Tom Thackeray:

I think that the Bill recognises the particularities of the nuclear sector and the state that we are in, in terms of having built the first of a kind at Hinkley and the next stage of that process, with the RAB being the apt model for this technology at this time. The RAB has potential in other parts of the energy mix. Carbon capture and storage is one of those areas where we might look to expand it, although we are probably not at that stage of development just at the moment. Across the energy mix, others have tried-and-tested routes to market through the contracts for difference regime. So this adds another piece to the puzzle in providing the diverse energy mix that businesses want to see. The Bill provides a useful framework that could be replicated if we wanted to use the RAB model in other forms of energy generation in the future.

Rebecca Groundwater:

I think the funding model here works for nuclear because of the investment required. At the moment, the other energy sectors are working in their own areas and they have the strategies, the legislation and the sector deals that are working for them and helping them to get to the point where they need to be. The Bill is very sector-specific, and it works for nuclear. I agree with Tom that, if and when it gets to that stage, it can be rolled out further. If you look at this in terms of the nuclear energy system, it works, and it is okay to look at each one in silo while having a holistic view of how all energy systems work together to get us to net zero.

Q My last question is one that we touched on in a previous evidence session, which you probably did not hear. In the 1950s and 1960s the UK led the world on nuclear power. Then we hesitated, shall we say, and we have ended up with an industry in which most of our power stations are on their way out. The Government is now pro nuclear power, as I am, and I assume you all are. Do you think the RAB model is enough to get us back on the front foot with nuclear power and build the capacity and industry that we need, or is something else also needed?

Tom Greatrex:

This is a really important part of it. We have had policy under successive Governments for a while now for new nuclear capacity. It should not be a surprise to anyone that our current fleet is coming towards the end of its generating life, even after life extensions. The barrier that has existed to a number of different projects that were cited in the Second Reading debate, for example, has been about the financing regime, given the long lead time to develop an asset that then lasts for a very long time. So this is the biggest single thing.

I think that what needs to go alongside it—to be fair to the Government, we have seen this in recent times—is a commitment in words of the need for nuclear to be part of that future mix. All those things help to give investors, potential investors and developers confidence that this decision will not be changed on a whim. That clarity of purpose is important. The financing framework has been the thing that has scuppered various projects, and I think it will be vital in getting our capacity levels back up again.

Q Rebecca, do you think this is enough to get the UK back on the front foot in nuclear power, or do you think other things are needed?

Rebecca Groundwater:

This model provides certainty, and I know that the supply chain needs that certainty. We have been speaking to our members, and we engage with them. We know that they are diversifying out of energy. They are just not sure, despite what is needed, where the actual pipeline of projects coming down is from. They are not entirely sure what to go into. A lot of work has been done around the nuclear sector and with the supply chain. It is there and it is viable, and this commitment towards investment, and showcasing that it is seen as part of reaching net zero and part of that commitment to getting there, provides the stability for the industry to commit properly to it and to drive not just the local capability but the export capability, which UK businesses are very good at doing. I think this is a very welcome piece that we can move forward with.

Q Tom Thackeray, from the CBI’s point of view, is this what is needed to get the nuclear industry going again, or are there other parts of the jigsaw that we need to put in place?

Tom Thackeray:

I think this is a really important step for the nuclear industry and could establish our credentials as world leaders once again. From the business customer side of this, obviously, the bulk of the CBI’s membership are people who are concerned about energy from an energy bill perspective, and they are all setting net zero targets for their own operations. That is not going to be achieved unless we decarbonise the energy supply, and that cannot be achieved unless we have the roll-out of nuclear over the years ahead, and in quick time. From the point of view of UK credibility towards net zero and business leading the way generally, outside and inside the nuclear industry, it is a really important step.

Those are all my questions. Thank you.

Are there any other questions from Members?

Q I have two open questions for the panel. The first is on clause 1 of the Bill, which I hope you have had a chance to look at, on designating a nuclear company. In previous evidence sessions, some of the witnesses who attended suggested there might be a lack of detail. What are your thoughts on whether there is sufficient detail in the Bill, both on who designates a company and how you designate an appropriate company?

Tom Greatrex:

I am sorry, but you cut out slightly. I think you were referring to clause 1 and designated companies, but I missed the question.

Sorry, Tom. From what you have seen, is there enough detail and clarity in the Bill about who designates a nuclear company and whether that is appropriate, and is there enough in there to be clear about whether we are designating the appropriate type of company?

Tom Greatrex:

Thank you; I understand the question now. The detail of the designation process is set out in subsection (3) of clause 1, on procedure. I am not absolutely sure that it necessarily gives the full, detailed approach to the designation and who the designation will be of. As this is a framework Bill, we work on the assumption that the detail of that will be set out in regulations subsequently. We are quite comfortable with that being the approach. The broad principle is set out in the Bill, and I think that gives us enough to go on for now.

Rebecca Groundwater:

The transparency piece and the openness of the process was mentioned by our members, but the assumption is that the detail will follow.

Tom Thackeray:

I don’t think we have picked up strong views from our membership worrying about the level of detail in the Bill at present. I note from the previous comments that political statements and backing are really important in this industry, and making sure there is no ambiguity around the backing that the Government provide. Perhaps that leads us to a decision on who should do the designating, with Secretary of State-level backing for it. We can take further soundings from members on that.

Q My second question is on the total amount of nuclear capacity we require going forward. I am quite clear in my own mind that the Bill is primarily about Sizewell C, but we have had talk of nuclear fleets, SMRs and what might come forward in years and decades to come. Do any of you challenge the Climate Change Committee’s central scenario of its balance pathway, which is that we need 10 GW total nuclear capacity by 2035, and 8 GW of new build. If you take Sizewell B and C and Hinkley, we are talking about a remaining gap of 1.6 GW to 2.5 GW. Do you work on that assumption? Do you think it should be higher or lower? I am trying to get the sense, beyond Sizewell C, of what this funding model might be used for.

Tom Thackeray:

I think we are comfortable that the Climate Change Committee’s analysis in the balance pathway is a reasonable assumption. We think nuclear will be a strong part of the energy mix in the years ahead. Obviously, we will need a much bigger electricity capacity up to 2050. As we learn more about the process and the cost of technology starts to drop, there might be slight adjusting of those assumptions in years ahead, but at the moment we do not diverge markedly from what the CCC has said.

Rebecca Groundwater:

We are aligned with the CCC report. I have nothing further to add.

Tom Greatrex:

It is important to underline that the CCC scenario is for 2035 and towards the sixth carbon budget. I think it is broadly in the right area. The 2050 net zero modelling that was published alongside the energy White Paper has a broader range to 2050. We have to bear in mind, looking beyond 2035 towards 2050 and net zero overall, that the overall proportion of our energy that will come from electricity will be high. It is reasonable to assume that we will be beyond 10 GW by 2050, although 10 GW by 2035 is probably the right ballpark figure.

Q What more do you need to see from the UK Government to get us back into leading in this critical sector on the global stage? We have had the energy White Paper, the Prime Minister’s 10-point plan and the net zero strategy announced by the energy Secretary a few years ago. We have the RAB nuclear financing model and we had a good presence from nuclear at COP26 in Glasgow. What more do we need?

Rebecca Groundwater:

I would go back to that stability and the pipeline of opportunities that are viable. The supply chain is ready and equipped with the people, skills and capability. It is world class. We have a brilliant energy sector here in the UK. In the market forces piece, it is unclear which one will take the lead out of all the technologies. It has caused uncertainty, and that is not what the supply chain needs. When we talk about the supply chain, we are talking about the breadth of it. Each organisation has different needs, but they need that investment piece; they need to know where to upskill and when; they need to know the timescales.

That is why this legislation going through quite quickly is helpful, because it showcases that decisions can be made now to drive forward investment in what is needed. That ongoing dialogue and conversation—the message, “This is serious, and we’re taking it forward,”—will give that stability and the ability to the financial markets to come in. We know they are talking about the sustainability goals and we know that parts of the supply chain are struggling with how to implement them and what that will mean for them, depending on their size. That wider conversation now needs to start to break down a little, so that we are looking at how that impacts each of the different sectors. That way, we can drive it forward and bring it all together.

Tom Greatrex:

All the things you mentioned have been important, significant and welcome for the sector over the last period. This legislation is key, as I mentioned previously. As for what else we need, we know that development of the taxonomy is ongoing—the Treasury has an expert group leading on that. It is important that the taxonomy is objective and avoids some of the mess the Europe-level taxonomy has managed to get into, in terms of setting a framework for investment in infrastructure that will contribute to a low-carbon future and to net zero. The requirement will be to pace delivery of agreements, to enable projects to go forward—for example, negotiations are ongoing between EDF and Government on Sizewell C, although that goes beyond the scope of the Bill, and with others on the SMR programme; last week’s announcement was very welcome. A number of things are in the purview of Government to deliver—siting, for example. We need all those things to happen. If I were to characterise what is needed in one phrase, it would be: an appropriate sense of urgency, given the urgent situation of our current and future power mix requirements.

Tom Thackeray:

I would echo many of the points the others made: detailing objective, sustainable finance taxonomy for the UK including nuclear will be really important over the next few years. More holistically, there is the extent to which the Government can build out their export and skills strategy, taking advantage of the technology developments we are making in a lot of the clean areas. I have a slight concern, not in the nuclear sector but potentially in other green economy areas, that there will be a squeeze on the labour market, with multiple industries going after the same labour pools, which will probably put a brake on our capacity. We need to think really strategically about some of that stuff.

You invited general comments about the 10-point plan. In some areas, there is a need to detail the routes to market for things like the hydrogen economy. That goes back the points the other Tom made about pace of delivery and urgency. However, having just come back from Glasgow, I think it really hit home how far advanced the UK is in some of these plans compared with others. We can always ask for more, but I think we are genuinely world leading in a lot of these areas.

Q There has been a lot of talk today about our domestic energy market, but Tom Thackeray and Rebecca both mentioned export. What does the RAB model mean for our ability to export our technology? What would that mean for the steel sector in the UK, for example?

Tom Thackeray:

I think it will be a huge opportunity, particularly if we generate those fleet opportunities in the year ahead. One of the great risks of not moving ahead with the RAB model straightaway is that you lose supply chain capacity, you lose innovation, and you lose the skills you have in the supply chain. There is a fantastic opportunity to build out an industrial strategy approach around the supply chain that we built up through Hinkley and will continue through Sizewell C, and to look at how we can use that in international markets as well. In addition to that, we have the exciting developments around small modular reactors, where UK-developed technology is exciting clients around the world. That will obviously be a huge part of the UK’s potential in the years ahead.

Rebecca Groundwater:

I agree. I think this helps to anchor the UK as a model on which the expert piece really comes into play. We have been mapping where the proposed capacity is coming from, looking at new build projects from 2021 to 2080. With the RAB model, if this goes ahead and everything falls into place, we will be one of the top investors in nuclear. That allows us to then export that to the other countries that are coming up behind us. If you want, I can pass on the data that we have from our members on the international market piece.

Tom Greatrex:

I underline the point that this mechanism will enable projects to happen. When projects happen, you have a supply chain that is engaged. Just think about some of the announcements made in the run-up to and in Glasgow over the last couple of weeks from other places—France, Canada, the USA and Japan—in terms of restarting. There is a whole load of potential opportunities there. If the UK is ahead on developing and delivering through its supply chain, those export opportunities become real. I echo the point that the other Tom made: if we leave it and do not do it, the danger is that those opportunities will be lost.

Q May I ask one more question? In terms of the RAB model, what does this mean for our dependence on overseas investment? We are dependent on EDF and the French, and on CGN and China. What does RAB mean in terms of us being much more financially independent here in the UK?

Tom Greatrex:

There is a distinction to be made between the technology. Sizewell C is obviously effectively a Franco-German technology by origin, and the amount of UK content in the supply chain at Hinkley is about 65%. That is likely to increase if Sizewell goes ahead. One of the opportunities that a RAB model opens up is interest from a greater pool of investors because of the way in which the returns will accrue. People will have mentioned, I am sure, long-term infrastructure investors, pension funds and various others, who use and have used RAB models in other infrastructure that they have been investors in, and have made it clear that they are interested in potentially doing that with nuclear. It broadens the scope of investment, which may then have some impact in terms of where some of the other financial stakeholders that you alluded to in your question are.

Rebecca Groundwater:

Some of our members feel that the RAB model provides more opportunity for the UK supply chain content to increase. With investment coming in, there may be greater options for the supply chain.

Tom Thackeray:

I echo the points already made, and note that we have a great history of private investment in infrastructure. Deployment of the RAB in other infrastructure assets has been hugely successful, and the examples are well known. That means that we have a mature investor base here in the UK, who are looking at other opportunities to spend their money. The opportunity to invest in environmental, social and governance is growing. Providing that opportunity in nuclear through the RAB model is a welcome next step.

If there are no further questions from Members, I thank the witnesses for their evidence.