Nuclear legacy and marine renewables loom large in Energy Bill

A Nuclear Decommissioning Authority to tackle the UK's huge civil nuclear liabilities, a system for licensing renewable energy projects beyond the UK's territorial waters and a new framework for electricity trading are the cornerstones of an Energy Bill introduced in late November.

The Bill received its second reading in the House of Lords on 11 December. Introducing the Bill, Environment Minister Lord Whitty said that it "supports the Government's commitment to a sustainable energy policy for the future, while also taking responsibility for cleaning up the nuclear legacy from the past."

Many peers were unimpressed. Lord Ezra had been hoping for "a statutory endorsement of the main courses of action and aspirations set out in the energy White Paper... Instead we have three disparate pieces of legislation rolled into one."

Most of the debate was taken up with wider energy policy questions rather than the topics addressed by the Bill. Peers lined up to criticise wind power as intermittent, unreliable and damaging to the landscape - while many invoked the security of supply argument to urge the Government to take more active steps to "keep the nuclear option open".

In response, Lord Whitty dismissed the arguments against wind power as "over the top and irrational". "There are big issues involved in energy policy but by and large they are unlikely to be legislative issues," he observed.

The main environmental provisions of the Bill are set out below. Two key elements, dealing with nuclear liabilities and the new BETTA electricity trading system, were published for pre-legislative scrutiny earlier in 2003.

  • Nuclear liabilities: The Bill will establish a Nuclear Decommissioning Authority to take charge of the decommissioning and clean-up of the UK's civil nuclear sites and oversee management of wastes. Such a body - formerly known as the Liabilities Management Authority - was proposed in a White Paper in 2002 (ENDS Report 330, pp 43-45 ).

    The Government plans to establish the NDA by April 2005. It will oversee the clean-up of liabilities currently put at about £48 billion - and is expected to spend £15-20 billion over the next decade. The Bill provides for the establishment of a statutory decommissioning account, intended to provide stable long-term funding.

    Green Party peer Lord Beaumont called for the NDA to be given "a clearly defined set of environmental principles", backed by a statutory duty to consult the public. He also called for a requirement for future private nuclear operators to establish segregated funds for nuclear waste, in order to avoid a repeat of the problems following the collapse of British Energy.

    Lord Beaumont also called for the Bill to enshrine the Government's earlier proposal that the NDA should review annually the rationale for keeping open its nuclear facilities - including the Magnox reactors and controversial reprocessing activities at Sellafield.

    On a related point, in late November the Department of Trade and Industry consulted on a revised policy for nuclear decommissioning.1 The document places a greater emphasis on the future use of sites in determining clean-up standards and strategies than its 1995 predecessor.

    The Bill also deals with several issues arising from the Government's bail-out of nuclear generator British Energy (ENDS Report 335, pp 37-38 ), which is still awaiting clearance from the European Commission.

    The Bill gives the Secretary of State power to "buy" British Energy's nuclear stations for a nominal £1, "either to prolong their operation where it is economically advantageous to do so, or to decommission them within the private sector," and also to acquire the company's share in waste disposal company Nirex.

    The Bill also paves the way to a requirement for nuclear operators to increase their insurance for third party liability cover from £140 million to £430 million in the event of a serious nuclear incident. This would enable the UK to ratify the revised Paris and Brussels Conventions, which set the tougher liability requirements.

    Finally, the Bill amends the Radioactive Substances Act 1993 to allow the environmental regulators to use a "streamlined and simplified process" in dealing with the transfer of authorisations when there is a change of operator.

  • Renewables: The Bill will establish a legal framework to support renewable energy developments beyond the UK's territorial waters (ENDS Report 335, p 44 ).

    Some urgency is needed. Site leases for the second round of offshore wind farms were due to be announced in late December, and one-third are expected to be outside territorial waters. The new licensing regime would also apply to future wave and tidal energy projects.

    The Bill would give the Secretary of State powers to declare "safety zones" around offshore renewable energy installations and prohibit access to unauthorised vessels. The Secretary of State will have a discretionary power to require a costed decommissioning programme, backed by secure financial provision, before projects are installed.

    Lord Whitty also stressed the need for infrastructure to bring the electricity on shore. He revealed that the Government intends to bring forward amendments to provide for a "cost-effective and efficient offshore transmission system with minimal impact on the marine environment."

    The Bill also paves the way to a UK-wide system of tradable renewables certificates once Northern Ireland has implemented a mutually recognised system. A renewables obligation is expected to come into effect in the Province in April 2005 (ENDS Report 340, p 54 ).

    Finally, the Bill would ensure that any surplus funds arising from the auction of output from projects contracted under the Scottish Renewables Obligation can be passed to the Scottish Executive, which will use the cash to promote renewables. Similar provisions have been made in England and Wales under the Sustainable Energy Act 2003 (ENDS Report 346, p 40 ).

  • Electricity trading arrangements: The Bill will create a single wholesale electricity market for Britain known as BETTA.

    There are concerns that BETTA may act as a disincentive to the expansion of renewable energy in Scotland because it may be a barrier for smaller generators, and because of its locational pricing signals (ENDS Report 339, p 38 ). In its regulatory impact assessment of the Bill, the Government says that "it is hard to be certain of the overall environmental impact of BETTA", but concludes that the effect in either direction is "likely to be small."

    In December, Energy Minister Stephen Timms confirmed that the Government intends to bring forward an amendment which would subsidise electricity distribution costs in the north of Scotland - where much of the UK's renewable energy potential lies. The move will ensure that Scottish customers do not lose out when the £40 million "hydro benefit" is lifted.

    The Bill also amends the definition of electricity supply, in order to close a loophole which allows users who take electricity direct from the transmission network to avoid paying the renewables obligation and the climate change levy.

    It is not clear how many companies will be affected by the move. One company with high energy costs has claimed that the move threatens its viability - leading the Government to propose a five-year transition period for businesses with long-term energy supply contracts.

  • Planning for energy projects: The Bill will streamline the public inquiry process for power stations and overhead power lines in England and Wales under sections 36 and 37 of the Electricity Act 1989. It will allow lead inspectors to be assisted by a team of other inspectors, who will be able to work concurrently on different aspects of the application.

  • Combined heat and power: Conservative spokeswoman Baroness Miller of Hendon complained that the Bill offered nothing to reverse the "downward spiral" in the CHP industry. She promised to table amendments to "ensure that CHP becomes a centrepiece of policy, not an afterthought". These will probably tackle the treatment of CHP under the climate change levy and renewables obligation.

    Lord Whitty acknowledged that the Government is off track for its CHP target (ENDS Report 346, pp 6-7 ) - but pointed to the long-awaited CHP strategy, now expected by the end of March.

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