LORD SAINSBURY OF TURVILLE

20 JUNE 2006

  Q180  Chairman: To be fair, there is a great deal of difference between what the Prime Minister has traditionally been saying, that we must have a basket of energy sources, and then saying it is back on the agenda with a vengeance. "Vengeance" means a little bit more than we are looking at this as a basket of options.

  Lord Sainsbury of Turville: No, what it means is this is an area you have to take a decision on one way or the other. To say we will not consider nuclear is, I was going to say, ridiculous. Today, given the goals we have for energy policy and the position of there being a very considerable lack of predictability of energy costs and sources and the great importance of energy security, to say simply that it is on the agenda, with a vengeance or not, is merely a statement of the obvious. Across the world there is virtually no country which is not looking at this question. If you go to China, they are looking at nuclear. Many other countries such as America are looking at nuclear. To say that we will not look at this as part of the Energy Review would be extraordinary.

  Q181  Dr Turner: It was the emphasis that the Prime Minister gave, and people are very sensitive on this issue as I am sure you are aware. It is the very large technical issues that are involved in the decision for or against new nuclear which is the important thing, and one of them is the fact that in the past the nuclear industry has been the recipient of massive government subsidy in Britain. There is a very real question mark as to whether new nuclear build would be genuinely economic in the British circumstance with our completely liberalised energy market. We have heard from many different witnesses in different Select Committees from the nuclear industry on the fiscal questions, and it seems fairly clear that some representatives of the nuclear industry do want some government subsidy at some point. The Government has quite rightly said no to that. If they do not get subsidy, they say they can do it but they will not guarantee long-term contracts, so they either want subsidy or they want the market bent in their favour. Are you aware of how the Government sees the financial framework in which investors would have to operate in nuclear power?

  Lord Sainsbury of Turville: This seems to me exactly what the Energy Review is looking at. These are exactly the issues which basically come down to three objectives: energy security, affordable cost and environmental impact. Do we allow nuclear to compete as one of the energy sources to help us achieve those three goals? That is what the Energy Review is looking at. We will need to wait until we have that review to see what they say about the cost level and what they think is the framework within which the nuclear industry should operate.

  Q182  Chairman: Before you leave that question, will the Energy Review actually answer Des's question about where will be the subsidies?

  Lord Sainsbury of Turville: It will be looking at costs and it will be looking at what is the fundamental issue, which is should you allow nuclear to be one of the options, and, if so, in what framework it should operate. I think the Government has made it clear that it has to be on a cost-equal basis to the other energy sources. That is, as I say, what the Energy Review is looking at.

  Q183  Dr Turner: That does not quite answer my real question. The Government has made it quite clear upfront: no State subsidy. Can you state equally clearly whether the nuclear industry would have to sell its power through the liberalised energy market without any assistance or whether, for instance, it would have permanent access to the base load supply, which is what a nuclear reactor needs to make it economic because it needs to run flat out at the highest possible load factor? If you did that, then you would be denying other technologies access to that supply. Can you be clear whether that sort of arrangement is off the board in just the same way that subsidy is stated to be off the board?

  Lord Sainsbury of Turville: I hate to keep saying this because it always seems so feeble, but this is what the Energy Review is looking at. It has been given the task of looking at these issues, and in spite of what people think the decision of what it would be saying has not been taken. It is a review to look at these issues and advise the Government. When it produces its report, we will know what it thinks are the answers to these questions. We have to wait until that report is produced before we can give the answers.

  Q184  Dr Turner: The possibility of the nuclear industry having non-commercial terms of supply which are not available to other suppliers is being considered then?

  Lord Sainsbury of Turville: No.

  Q185  Dr Turner: That is the import of what you are saying.

  Lord Sainsbury of Turville: What is being said is it will have to do it on commercial terms. Exactly what is meant by that has to be determined, but there is no doubt that essentially the idea is that it would be on commercial terms.

  Q186  Dr Turner: Let us look at one of the other major issues, which is nuclear waste. To the best of my knowledge, and I am open to correction, nobody anywhere in the world has an agreed and proven method of dealing with high level nuclear waste. How is this going to be taken into account in the discussion in the review? There is not time to produce, as I say, the agreed and proven method of disposal before the middle of July when the results of the Energy Review are going to be announced. How does the Government plan to deal with the waste issue if it makes a positive decision for new nuclear build?

  Lord Sainsbury of Turville: That again is the role of CoRWM, the Committee on Radioactive Waste Management, which is due to publish its financial recommendation in July and emerging finance work published in April. That will be clearly an input into the review.

  Q187  Chairman: Are you happy with the CoRWM process? There seems to be huge controversy about it with people resigning, people rubbishing the interim findings. You must be concerned.

  Lord Sainsbury of Turville: I think it has been a very long process.

  Q188  Chairman: Is that a delicate way of saying you agree with me?

  Lord Sainsbury of Turville: No, it is just that it has been a very long process to arrive at its conclusions, but it has produced conclusions. The whole point of having this lengthy procedure was to try and get all the arguments firmly on the table, to have a very significant amount of consultation so there could be no doubt that what it recommended was the best way. I hope we can still achieve that.

  Q189  Dr Turner: We still have the basic problem that none of the technologies are proven under the circumstances in which they have to operate. The Finns, for instance, have a highly detailed scheme; they have wonderful geology for the purpose, a great big stable lump of granite, but they do not have the evidence to show that it will actually work, will actually be safe and will actually contain for the thousands of years that is needed. They will not have evidence from laboratory studies until 2008, and they are probably further down the line than anyone anywhere. Do you not think it is remarkable that after 50 years of operation of a technology such a vital aspect of it is still undecided and unproven? We have gone wrong, not just this government but for the past 50 years we have failed miserably on this.

  Lord Sainsbury of Turville: To go back over the history of it, CoRWM was set up basically because there was a proposal to deal with the waste under the previous government, and the government at the last moment ducked the decision on the basis there had not been enough consultation and agreement on the method. The result of this was CoRWM was set up, which could not have had more consultation, and even consulted on the consultation. I would hope out of this we do now have clearly a view as to what is the best way of dealing with this. Whether there are still some people who feel there are risks involved, I do not know, that will come out of their report, but it should at least identify what most people think is the best and sensible way forward.

  Q190  Adam Afriyie: When do you realistically expect new nuclear build to be actually providing energy? What is the timescale?

  Lord Sainsbury of Turville: That seems to depend entirely on what other processes have to be gone through in terms of White Papers, consultations, planning permission, and so on. The actual time it takes to build a nuclear power station today is about four years. You will find that the various power stations which are being built are taking about four years. The Finnish station started in 2005 and is expected to be operational in 2009.

  Q191  Dr Turner: It is already nine months behind schedule.

  Lord Sainsbury of Turville: We are talking that kind of timeframe. The really big time issue is what processes you go through before that in terms of planning. That again will depend on whether you are building it on the sites which already have nuclear facilities on them or totally new sites.

  Q192  Adam Afriyie: It is pretty much undeniable that if new nuclear were commissioned or recommended under the Energy Review Commission, resources and attention would probably move away from some of the other energy forms. Would you agree that would be the case if new nuclear went ahead?

  Lord Sainsbury of Turville: No, I do not agree. I think this debate always takes place in a framework which is completely unrealistic. The reality is that in new energy policy it is quite clear a diversity of sources is absolutely essential to getting the best mix to achieve the objective. You have three objectives. You have a situation where it is extremely difficult to predict prices, costs or technologies of the different energy sources. What that says above all else is that you need a diversity of sources. If you say that, it is quite clear there is room for both nuclear and renewables, and indeed gas and coal. The flexibility between them is also essential.

  Q193  Adam Afriyie: If there is a finite level of resources, and a decision is made that a certain level of one particular type of energy production is desirable, either subsidising it or supporting it in some way, then surely it is obvious that those resources are not available for the forms types of energy production?

  Lord Sainsbury of Turville: I do not agree. The position faced by energy generators will be very similar to that faced by the country at large, which is that they will want to have access to different energy sources because of the unpredictability of which of these will be the cheapest and best in the future.

  Q194  Adam Afriyie: The resources that government will be putting into energy are finite, I assume, unless I am incorrect, that if resources are directed in one direction they are not going in another direction.

  Lord Sainsbury of Turville: This is not about government resources but where the generators put their resources.

  Q195  Dr Turner: There is a fundamental point here because many people are worried. Though we accept we need a range of technologies and a range of energy sources, and that is fine, in terms of the climate change we want the maximum CO2 reduction, but the question is can you, in practice, have whatever benefits there are from nuclear and renewables, or could we be faced with a situation where it is actually and/or to a very large extent? The very large investment needed in any given nuclear unit—and to make it economic there would have to be many units—is a massive investment which would swallow an awful lot of investment capacity, whereas renewables only need a few millions at a time rather than billions but it would soak up investment. It is already happening in the City I am told by my friends in the renewables world. They are finding it difficult to get investors to commit because they are all waiting to see what happens to the nuclear decision. That is a very real worry here. Do you not see that?

  Lord Sainsbury of Turville: No, because everyone keeps arguing this, and this is why it is extremely valuable to put this in a commercial framework. You cannot argue at the same time that it is not commercially viable to have nuclear and then say that investment in nuclear will drive out all the other sources. The answer is if you have a commercial market people will take commercial decisions. Almost without exception none of these energy sources would you want to get above a certain level, which again means that there is room for the other energy sources. It is very difficult to see how you would get renewables in any timeframe above 20%. Equally with nuclear we currently have about 20%, and most people think in terms of replacing that. I think a commercial framework is exactly the right one, and you will see investment going in, which are the commercially viable ones. I think generating companies will do on their level the same as the national level, which is to say they want a diversity of supply because if they do not have that they may get caught out very badly.

  Q196  Chairman: On the next session, Lord Sainsbury, you can ask Des Turner questions. Moving on to strategic science provision, will the Government reconsider its funding mechanisms for university science departments?

  Lord Sainsbury of Turville: In 2004 Charles Clarke asked HEFCE to report whether intervention was necessary to protect subjects of national strategic importance. A group led by Professor Sir Gareth Roberts reported in response to this in June 2005 recommending a target programme of support for strategically important and vulnerable subjects. £46 million has been allocated since then to research capacity in areas identified by the research councils, with further funding to raise aspirations and demand in STEM subjects. While the Government is firmly committed to universities being allowed to decide for themselves which courses they run, we continue to monitor the position of strategic subjects closely. However, the main challenge for us all is to interest more students in pursuing STEM subjects and careers.

  Q197  Dr Iddon: Are you satisfied that science departments are fairly funded according to all the sources from which they collect their funds at the moment?

  Lord Sainsbury of Turville: No. There are three key issues here which perhaps do not get enough attention. The attention has all gone on a particular chemistry department closure and what is the role of HEFCE in this. The three fundamental subjects are do we have the right number of chemistry departments; is it clear that 73 is too many or too few?[1] That is the first question. The second question is are we happy that the money which goes to chemistry departments for teaching fully covers the cost of teaching, or is the reality that Vice Chancellors are having to fund the teaching out of research money and other money so that there is always pressure on to close it? The third question is how do we raise the level of the number of people who want to do chemistry, because there is not really a shortage of places for those people who want to do chemistry. Those seem to be the fundamental questions. To answer your very specific question, there is clearly still debate about whether the funding for science teaching in chemistry is at the right level.

  Q198 Dr Iddon: Are you aware of the report published by the Royal Society of Chemistry, a study of the cost of chemistry departments in UK universities?

  Lord Sainsbury of Turville: Yes. What I was referring to were various reports coming out where, in areas like physics and chemistry, people are saying that the cost for the teaching is not properly covered and we need more information on that. The DfES is putting in the TRAC system to get the costs on the teaching subjects now as well as the research subjects, but I do not think they have at this point the evidence to be able to say we are absolutely certain that we are covering the cost properly.

  Q199  Dr Iddon: It is not just the cost of teaching. This report is on two 5 Star departments, one of which is one of the best in the world I am told, two grade 5 departments—these are RAE 2001 scores by the way—three grade 4 departments, and one grade 3b department. The interesting thing is in figure 5 of this report the two 5 Star departments were more in the red than the other departments that were looked at, eight all together. Of course, the 5 Star departments get quite a lot of the funding from R&D activities, from industry, from the research councils, and so on. It is not just the fact that teaching is a problem, this report suggests that the money is not being put in either for the infrastructure or to support the R&D activity in general in these eight departments.

  Lord Sainsbury of Turville: The difference is on the research. We now have the TRAC system which tells us what the costs are, and we also have the full economic costing system. If in these circumstances a department gets into problems with its funding of research, you have to say that this has something to do with the way that the department has been run. The whole point of the full economic cost system is to say that university research departments should know what the cost of the research is, and if the grant they are getting does not cover the full cost then they have to know where they can use other funds, such as QR money, to cover those overhead costs. That is the point of the system. If that is not happening, then it has something to do with the responsibility of that research department. In the teaching issue, this is more serious because I do not think we have a good handle on what the costs are. It may be we are just systematically under funding the teaching.