Sizewell B Power Station: Costs (Hansard, 20 April 1990)

§ Viscount Ullswater
My Lords, the evidence given by the CEGB to the Sizewell inquiry included the best cost estimates for the station then available.

§ Lord Hatch of Lusby
My Lords, I must ask the noble Viscount to reconsider that Answer in view of the evidence which has been produced since that inquiry. I refer particularly to the Greenpeace report written by Alex Henney who was chairman of the Central Policy Working Committee set up by the Prime Minister.
Perhaps I may ask the noble Viscount two questions. First, is it the case that the original estimate for the construction of Sizewell was £ 1.2 billion and that that has now escalated to £4 billion? That will add a minimum of £75 million a year for 30 years to our electricity bills. Secondly, is it the case that at the Sizewell inquiry Sir Frank Layfield accepted the CEGB estimate of £2 million per year for cortinuing research and development into PWRs whereas at that time the true figure was around £30 million?

§ Viscount Ullswater
My Lords, the original cost as given to the Layfield committee was £1.2 billion. The noble Lord is correct in that regard. I have no idea where the noble Lord obtained his figure of £4 billion The latest estimate that I have given the House is £1.87 billion for the completion of Sizewell.
The Government recognise that the relative economics of nuclear have changed since the Sizewell inquiry. Oil prices have fallen; interest rates have risen. The CEGB has revised its cost estimates and the provision for back-end costs. The additional costs of nuclear power in the short to medium term are reflected in the fossil fuel levy. We believe that this nuclear premium is justified because of nuclear's contritiution to diversity and security of supply and to the reduction of fossil fuel emissions. The levy will be set initially at 10.6 per cent. but we expect it to decline over an eight-year period as nuclear plant performance improves.

§ Lord Hatch of Lusby
My Lords, will the noble Viscount answer my second question regarding the estimates for research and development given by the CEGB as £2 million per year, although at that time the true figure was about £30 million.

§ Viscount Ullswater
My Lords, I think that I have answered the noble Lord. I said that the relative economics have changed. I cannot confirm the figures that the noble Lord has given. However the Secretary of State was fully appraised of all the figures given to him by Layfield when he reported and he took the decision on the best available advice.

§ Lord Ezra
My Lords, is it not a fact that when the Layfield Report was debated in this House on 2nd March 1987, there was already evidence in the light of the substantial fall in fossil fuel prices that even the estimates contained in the report were likely to be optimistic? Is it not correct that the costs of nuclear generation based on those figures were already likely to be higher than those for fossil fuel generation? As the noble Viscount has already said, the gap has widened since then. Can he give us an indication of when the Government feel the gap will start to narrow?

§ Viscount Ullswater
My Lords, in the longer term no one can predict what will happen to fossil prices. Environmental considerations may well strengthen the economic case for nuclear power. Unlike other fuels —particularly fossil fuels —nuclear power bears the environmental costs of the fuel cycle. The relative economics of nuclear might improve if a comparable basis were used for fossil fuels.

§ The Earl of Lauderdale
My Lords, does my noble friend agree that there is never a mean point of equilibrium in energy prices? They move up and down like the moving stairways on the Underground.

§ Viscount Ullswater
My Lords, I am tempted to comment on that but shall not. My noble friend is correct: over the past 15 to 20 years we have seen quite a see-saw in oil prices. I know that even some noble Lords opposite would not consider that oil prices would remain at their low level for the next 10 or 15 years.

§ Lord Williams of Elvel
My Lords, does the noble Viscount recognise that his estimate of £1.87 billion for the cost of Sizewell B is already way out of date? Will he give the House his latest estimate of that cost? Secondly, does he accept that even at the initial stage the technology of the Sizewell PWR was miles behind the technology of the equivalent French reactors? We have already started and are continuing to build something which is technologically out of date.

§ Viscount Ullswater
Yes, my Lords. The costs of building Sizewell are being reviewed at the present time. That is an ongoing review. The review is likely to be completed by the end of this month. However, it would be reasonable to give Nuclear Electric time to review the CEGB figures. Nuclear Electric is a new company and it needs time to review the figures. Therefore, that review may be delayed by a month or so.

§ Lord Williams of Elvel
My Lords, I am sorry to press the noble Viscount, but will he answer the second part of my question?

§ Viscount Ullswater
My Lords, as regards the technology I feel that the Secretary of State was confronted with the report of the Layfield Committee. The inspector had in front of him all the available evidence on which to base his judgment. He came to the conclusion that the building of Sizewell B was the right thing to do at the time.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that, leaving aside the prejudices of certain noble Lords against nuclear energy, it is the common experience of all major capital projects today that the original estimates prove to be quite inadequate? Will my noble friend contemplate, for example, the case of the Channel Tunnel?

§ Viscount Ullswater
Yes, my Lords. My noble friend is correct. I should point out to the House that Sizewell is also a major infrastructure project in its own right. It employs some 2,700 people on site and provides prestige work for British contractors all over the country. The project will give UK manufacturers and plant suppliers the experience and capability to compete for similar work in export markets. Well over 90 per cent. of the contracts placed for the construction of the project have gone to UK firms.

§ Lord Molloy
My Lords, in view of the quite considerable discrepancies in figures that have been referred to by noble Lords on this side of the House and which the noble Viscount has found unacceptable, and bearing in mind the statement that has just been made by the noble Lord, Lord Boyd-Carpenter, would it not be reasonable for the noble Viscount to ask his right honourable friend to issue a statement so that the House can have some idea of the real position? At this moment in time we do not know what the position is, and I believe the House is entitled to know that.

§ Viscount Ullswater
My Lords, I believe I have given a commitment to the House that Nuclear Electric, the successor company to the CEGB, is at present reviewing the cost of building Sizewell. That review is not yet complete. The figures will be presented to the Secretary of State and obviously he will want to consider them before any decision is made as to whether they should be made public and in what form.

§ Lord Hatch of Lusby
My Lords, with the greatest respect, the noble Viscount has not answered my Question yet. The matter has nothing to do with prices going up and down. If the noble Viscount looks at the Order Paper, he will see that I asked whether Her Majesty's Government were satisfied with the evidence of costs. I have already given the noble Viscount the figure that was submitted by the CEGB for research and development to the Layfield review. The figure that was submitted was £2 million whereas at that time the figure was around £30 million. That has nothing to do with prices going up or down. Will the noble Viscount reply to that question? Is it not self-evident that this country would save a vast amount of money and would save on the increasing costs of electricity if Sizewell B were to be cancelled now?

§ Viscount Ullswater
My Lords, I have answered the noble Lord's Question. The evidence was available to Layfield when he reported. He reported on the evidence that was available to him. The noble Lord suggests that it would save money if Sizewell B were cancelled, but it would not. Some £1.5 billion of contracts have been placed. If we were to cancel the project now—the Government do not intend to do that—we would be involved in termination negotiations on those contracts. As a result more money would be expended and I daresay that the site would have to be returned to its original state. Some 150,000 cubic metres of concrete have been used on the site and the removal of that would be considered to be rather a waste of money.

§ Lord Hatch of Lusby
My Lords, will the noble Viscount not admit that the evidence given by the CEGB to the Layfield Committee was inaccurate?

§ Viscount Ullswater
My Lords, I refer the noble Lord to my original Answer.