This is a transcript of an interview with Malcolm Wicks, energy minister, by Christopher Adams and Ed Crooks of the Financial Times. It has been edited for clarity, although this is not possible in some sections, where […] indicates the recording is unclear
Speaker key: MW Malcolm Wicks; CA Christopher Adams; EC Ed Crooks
CA: Would you speak about what the public have been telling you a bit?
MW: About what?
CA: About the energy review and the nuclear bit, that’s presumably where the…
MW: Yeah, well can I start in a slightly different way, by saying, let me you mention about my coming back as energy minister and actually notwithstanding that I enjoyed the science brief, I am actually really pleased to be back as energy minister.
I’m rather conscious, having been minister in one or two other places, that there is a vanity on the part of politicians that you immediately read yourself, think yourself into a subject, and imagine that your portfolio is the most important thing in government, and it’s terribly good for the ego, but I thought that when I was pensions minister, not least because everyone was saying there were a few issues around on pensions two or three years ago, but I’m not saying it’s the most important job in government. The Prime Minister’s probably got that, but I actually do think we’re in a very critical time when it comes to energy policy, to put it mildly, because on the one hand, you’ve just got a lot of what I call mainstream decisions to be made, many of them by the market, rather than by government.
So, there’s lively debates about nuclear, which we’ll come onto. There are lively and it seems controversial issues around renewables. There is the whole energy efficiency programme etc, and there’s the fact that whatever decision one makes about nuclear or whatever, a lot of our existing infrastructure, plants are old, need to be decommissioned, it needs to be replaced, so in terms of investment, there are some huge things happening at the present time, so all of that is very important, plus 10 other things that I could mention, but the interesting thing about energy and why I do think it is a rather important thing we’re doing at the moment, is that it more than touches base with two huge international issues.
One is climate change and global warming, which we’re becoming increasingly familiar about, but clearly judgments that we make about energy policy are absolutely critical to that, by definition, and whatever the mix will be in the future, nuclear or not, we’ve just got to bring up investments, and other policies that help us tackle carbon emissions, and when I think about the government’s target, which is that by 2050, so it’s long term and justifiably so, we want to reduce carbon emissions by 60 per cent, against where were in 1990, I don’t know if there’ll be many other challenges to my saying that that’s probably the most ambitious target ever set by government in the United Kingdom, and rightly so.
So, you’ve got all of that, which is now very familiar ground, but we need to do things about it, and the other issue, which I think is almost of equal importance. I’m not sure that’s scientifically correct, because I think climate change is the big issue for the 21st Century, but I was going to say energy security, and in the past, although obviously I’m not naïve and I have a sense of history of geopolitics and oil and so on, that there’s always been a heady mix, nevertheless I think often in the past in Britain one would have talked about gas power stations or coal or something, without thinking, this is absolutely critical to the nation’s security, but I do think now that, when someone looks back on the 21st Century, as well as climate change being up there as one of the really big issues.
I think geopolitically energy security will be seen to have been perhaps a huge issue, for reasons you understand. There’s huge global grab going on for energy. You’ve got the great emerging nations in China and India, but not just those, South Africa, South American nations all requiring energy to fulfil their perfectly justifiable economic ambitions for their economies and their people, and I think that geopolitics around this is going to get quite tough and quite serious, which leads me to conclude that, although there’s no one, single answer, I do think we’ve got to get the balance right in the coming decades, between the energy that we will need to import, and there’s a figure I was just looking at, but it’s one that we’re fairly familiar with, we’ve only recently become an importer of gas, yes?
Given all the richness of the North Sea […], but by 2020, maybe 80 per cent of our gas requirement will come from foreign fields, from overseas. Now, that’s a huge change in a fairly short period of time, so I think strategy has to be about getting a proper balance between on the one hand needing to import energy, oil and gas, coal as well, and what we’ve got to ensure there, what the market’s got to ensure, and I don’t think we’re in a bad place, by the way, but we don’t just source it from one region. We source it from different regions, different countries, and we source it in different ways.
CA: Sorry to interject, how do you feel about our anticipating probably growing reliance on Russia?
MW: Well, Russia already is a major supplier for the European Union as a whole, and that will grow in importance, and at the moment the amount of energy we in the UK import from Russia is minuscule.
CA: But, looking ahead?
MW: Looking ahead, where will our energy supplies come from? Thinking of European, but also UK, they’ll come from the Middle East. Russia could well become, certainly at a European level, and that has knock-on effects for us, far more important, but they come from other places as well. Norway, it depends on the week and it depends on the circumstance, but let’s say a fifth of our gas could be coming from Norway in the future. Qatar is going to be very important as well, the liquefied natural gas will start to flow quite soon. A terminal at Milford Haven has been built, and that is a similar figure. That will be another 20 per cent of our requirement, so that’s my view about this, that we’ve got to be pretty smart, and the […] has got to be smart, and I think they are, by the way.
It’s not a bad place we’re in about sourcing the stuff from different regions, because it would clearly be catastrophic if we were only reliant on one region, or any one power block, so we do need to import the stuff, but where I was getting to, is I think we would be wise as a nation if we nevertheless tried to build up supplies of what I would simply refer to as home grown energy. Traditionally we’ve been self reliant, but we had a lot of our home grown energy, I guess it used to be wood once upon a time, and then it was coal, and then we had the riches of the North Sea. Where will this home grown energy come from in the future? And, there are answers to that question. One is renewables, and one of the reasons why I’m actually keen on renewables is not just because of the climate change objective, but because it is about energy security as well. These renewables are sourced here onshore or offshore, and that’s very important. It’s also the reason why energy efficiency is so important. That’s not just about climate change, because the energy we don’t use helps our nation’s security, and this is a very scarce and precious resource, and we’ve got to look after it. We’ve got to get a lot better at that, and it is the reason why the N word, nuclear, crops up in conversation, and why the government has taken a position, in principle, that we think nuclear could well be part of the mix in the future.
All of this depends on the market of course, don’t forget, as you know. We’re not a centrally controlled economy, where I’m the minister for power or something, and I say, yes, we’ll have all these things. We’ll only have nuclear if the market wishes to invest in it, but it needs a green signal from government, and as you know, we were subject to a judicial review, and we lost, and we are now going through a very thorough consultation period on all of that, so they’re preliminary words, but why I do think at the moment, alongside all the nitty gritty issues about where our supply is coming from, when you relate it to climate change, and you relate it to energy security, national security, this is quite an interesting time to be.
CA: You’ve been around. What are the public telling you about nuclear, about whether or not they want another nuclear plant?
MW: Obviously the conversation about nuclear has been going on a long time. We’re going to have a much better conversation. I think it’s on September 8. And, on September 8, we’ve got a major deliberative exercise going on in nine cities. I’m not sure it’s been publicised much. It’s not secret, but in nine cities across the United Kingdom, we’re deciding a deliberative exercise. We’ve tried it before with pensions and aspects of healthcare.
EC: Like a citizen’s jury?
MW: It is like that, and these people, as I understand it, have been randomly selected from the electoral register. They’ve been asked whether they’d like to help government in a major consultation. They’re not told what it’s about initially, and then they come along. There are going to be 1,100 people involved altogether. It’s quite serious stuff. It’s going to be led by Opinion Leader Research, so we’re not ourselves organising it in that sense, because that probably wouldn’t be appropriate, and the idea is they’ll be introduced to the issues in as objective a way as possible. We’ve consulted the green groups, unions, the power companies, all these people to determine how they feel.
CA: This is a polling organisation, isn’t it?
MW: They’re a polling organisation, and the idea is people talk through issues, and ministers are going to be in attendance. I’m cutting short my holiday to come back for it, which is a privilege, because it is important and so that’s my vague answer to your question, because obviously one has conversations all the time.
EC: Have you guys had a lot of conversations by now, because you said that the public are broadly in favour?
MW: I think what I would say is that probably compared with whenever, 10 or maybe 15 years ago, when this was hugely controversial, and we all saw it in black and white terms, and people were angry, and there’s still some of that, no doubt, but I just think people are now more willing to take part in the discussion. I think that obviously there’s the concern about climate change. I also find that people are aware of the national security stuff, that people are saying to me, we don’t want to be over-reliant on foreign supplies. I think there is that national security thing, it’s something that people are aware of, so it think it’s a good time to have the debate actually, and we genuinely want people to be talked through the issues.
CA: Has anybody said to you that they want to see another generation or another nuclear power plant or not?
MW: Oh yes, some have.
CA: What have they said about that?
MW: I think what some have said is we’ve got to be serious about climate change. We can’t just do it with renewables, nuclear has to be part of the option, but other people have said, over our dead bodies. No way do we want this, so there’s still quite a fierce debate, but I think there’s a middle ground now, which is up for the argument, which I think is good.
EC: So, what do you expect to get out of these sessions then, next month? What’s the intended output?
MW: What we hope to get out of it is we’re doing these deliberative events, and we’re also in the middle of a number of stakeholder events, and I went to one in Newcastle and we can give you details on those, how many people, so we’ve been meeting the industry, the green NGOs, many other local government, RDAs, all those people, so we’re going through those, and the idea is that at the end, when we’ve considered the results from the consultation, government can finally make up its mind whether to stick to our original feeling that nuclear should be allowed to be part of the mix, or not, and I think the situation is that if new evidence or new arguments came up that made us think again, then we would think again. I regard this as a serious consultation.
EC: And, is one of those new arguments that might sway you, if you hold these deliberative exercises, and it turns out that once the arguments on both sides are put to them, the general public say, well, sorry, we don’t think this is a good idea.
MW: If the public say that. Although these people are being selected randomly, it is not a referendum, and the government is still going to make the difficult judgment at the end of the day, but I think if some really new perspective was brought to bear on this, and new arguments came forward, then we would think again. So, I regard this as a serious exercise, actually.
CA: I’m sure you do. Some people might say though that really you’re just dotting i’s and crossing t’s. You’ve already made up your mind […] Really this whole exercise is just about complying with a court judgment.
MW: Well, it went to court and they won, we lost, and we’ve taken the court judgment seriously, and we’re doing a very thorough and serious exercise on this, but no court judgment can somehow wipe away all knowledge and prejudices and views from ministers’ brains, can they? We’ve got what we now call preliminary review on this, but I couldn’t spell them out, but I don’t think it’s inconceivable that in the end we might change our mind.
EC: What would you say the chances of that are?
MW: I can’t predict chances. Our preliminary view is that nuclear should be part of the mix. We’re doing a consultation and we’ll then have to make a judgment on that by the end of the year, that’s the sort of time scale, because don’t forget we’ve got an energy bill, which we’re preparing, but I can tell you that in the department, we’re doing some preparatory work for a possible situation where the government decides not to go for nuclear, and I think that shows our serious intent. If nuclear is not part of the mix in the future, it is 18 to 19 per cent of our electricity. It’s quite a big chunk. They’re going to be decommissioned anyway, those reactors, they’re helping with climate change at the moment. They’re certainly helping with national security. If that chunk wasn’t there in the future, what would be there, given our overriding objectives in terms of security of supply and climate change, so we’re doing work on that.
EC: What’s the answer?
MW: Well, when we’ve done the work, I’ll tell you.
CA: Something I suspect will never see the light of day.
MW: It might do. I’m going to be meeting with officials quite regularly.
EC: Because part of the debate is to make clear what the alternatives are?
MW: Yeah. There could be different answers, but what I wouldn’t want to see as the answer, to be blunt, is an even greater reliance on energy imports, for the reasons I spelled out, so the more serious answers would have to be some kind of mix of clean technologies, possibly. Many of the things are in the mix anyway, but they’ll have to play a greater role, like renewables, and so on.
CA: Let’s talk about the possibility that you do this. There was a paper, not policy, but nevertheless informative, which envisaged quite a few nuclear power stations built on existing sites around the coast. Is that where you would see policy going in the future?
MW: The official answer has to be that this is for the market to decide, but I think it is a rather sensible scenario that many of these, if they go ahead, would be built near where we have existing nuclear capability, and what you find in those communities is that people are supportive of nuclear. They’re crucial parts of the local economy, Cumbria, Sellafield for example, and you’ve got the skilled manpower and womanpower there as well, so if one was an investor, you can see the attractions to that.
CA: England, rather than Scotland?
MW: Well, of course there’s huge demands in England. My department is the UK energy ministry, for the whole of the United Kingdom, but in terms of planning the big stuff, it is down to the Scottish Executive.
CA: I ask in part because […] and also of where the networks are closest to the consumer and everything else.
MW: You might well say that, but this is for the market to determine.
EC: How would that actually work? A lot of debate about this does seem to be based on the misunderstanding that you are Gosplan of the Central Electricity Generating Board, or something like that, and you can say, right, we’ll have nuclear power, and it’s not like that. It is the industry that’s going to do it, the private sector will make the investment, and what they talk about is wanting the framework in place in government, to make those decisions possible. As you say, if you do decide to go ahead, what are the essential parts of that framework, the specific policies that you would want to put in place to enable this?
MW: As an area of public policy, I do find this interesting, not least because my background is in social policy, like the pensions. At least the government has some direct levers. Here, we have a liberalised market, a market framework, and yet this is hardly Adam Smith, because more so than 10 years ago, the government has some major public policy objectives, climate change, energy, security, tackling fuel and poverty. So, how do you square what seems an interesting ideological circle there. I think in different ways. One is by setting this very significant target about carbon emissions. Don’t forget, the supply companies have a duty to supply, that’s how they get their licences. I think the European Union emissions trading scheme is really very important in bringing on these low carbon technologies, so that’s a major instrument which the UK government takes very seriously. We’re aware of all the difficulties of this. I likened it to a little toddler that’s learning to walk, it’s a fragile creature, and we’ve got to drive this forward with a strong view from the European Commission, so that all nations take it seriously, and I’m pleased in the way in which the Commission have rather toughened things up, and I hope future phases will be tough, and as a result of that, a carbon price will be at a reasonable level, to help influence decision, so that’s important as a major policy instrument. With renewables, we’ve got an obligation, in other words we say to supply companies, and with direct intervention in the market, you will source x per cent of your energy from renewables.
EC: Are you going to do that to nuclear?
CA: Why not?
MW: I don’t think we want to be in a position as a government where we so intervene in a market that we’re saying, y per cent should be culled and z per cent should be nuclear. I don’t think that would be right. You could say renewables is an exception here.
CA: You wouldn’t be saying that. You would be saying x per cent should be zero carbon emissions?
MW: We’ve given those signals on carbon.
EC: Yes, in a broader sense.
MW: How you bring down carbon emissions, the judgments to be made about investing in carbon capture storage, or nuclear, if that goes ahead, or renewables, or the supply companies really taking seriously and helping householders to become energy efficient, they’re best for the market. If we were to say, subject to approval, so much per cent should be nuclear, then the industry would say, okay, so how are you going to help us bring that about and what are the subsidies? And, we’ve made it clear that we’re not in the business of subsidising nuclear.
EC: No, but as you said, there is a balance to be struck between the free market operating and government making its policy objectives, and if the government decides that having some nuclear generation in the mix is one of its policy objectives, how does it make that happen? And, the carbon market is one, but you’ll have to do more than that. The industry is clear that the carbon price on its own won’t be enough.
MW: One thing we’re going to do is look at planning, and the other thing that makes it very interesting to be energy minister, because we’ve got a window of a few years, where really very important decisions are going to be made that will determine scenarios for future decades, we’ve got three projected pieces of legislation all relevant to this. The energy bill, which may subject to consultation include some nuclear provisions. Secondly, we’ve got the climate change bill, where because of our objectives, we’re going to establish an independent committee to help us monitor that and keep us on track, and thirdly, we’ve got a major planning bill, and it’s not just about energy, but about the British problem that it’s just so damned difficult to do anything within a reasonable time span.
MW: Yes, it would have all that and set up a planning commission, so that in future if you want to build a new wind farm or new nuclear, or maybe carbon capture storage, the planning inquiry wouldn’t be an occasion every time for a great national, international debate, because judgments would have been made about that before. Also relevant here is the concept of pre-licensing, that if you’ve got kit, once it’s been judged by proper authorities fit for purpose, you don’t have to have that debate every time.
EC: That does need legislation?
MW: Yes, it does.
EC: And, that will be in the energy bill? The process has started already, we’ve had the first designs submitted.
MW: That process has started.
EC: What goes into the energy bill?
MW: A range of different things. There’s stuff about renewables obligation, for example.
EC: We mean specifically on nuclear?
MW: It’s putting in practice our principle that the taxpayer should not be subsidising any nuclear, and a lot of that is about waste and decommissioning, so there’s this issue of the owners of new nuclear will ultimately have to pay for the waste. We’ve said they’ve got to pay a share.
EC: So, you see that mechanism going into the energy bill?
CA: Where are you on that, because I thought there was someone being appointed to try and sort this out, who is going to decide what that share should be and how it is decided. How are you with that?
MW: You know where we are on nuclear waste, we’ve got loads of nuclear waste anyway, when they are decommissioned, we’ve got the decommissioning authority and all of that, so you’ve had the forum process, led by Defra, recommending a final repository, so that process is going on, which is the main thing. Once that’s determined, that provides a framework and an answer to where future nuclear waste might be deposited.
EC: Is industry paying the bulk of that cost?
MW: The stuff we’ve got at the moment, the taxpayer has to take the responsibility. The body are a huge body and the costs are enormous, but in terms of new nuclear waste, which is your question, we’re clear that the industry have to pay for that.
EC: Pay for all the costs?
MW: Yeah, because we made it clear that the taxpayer is not subsidising new nuclear.
CA: Are they happy with that?
MW: Most companies I know would be happy for large cheques to come from government.
EC: But the energy bill will set out the way in which that will flow?
MW: Yes, and we’ve got experts looking at that now, to help us achieve that.
EC: Because of these ideas of funds, when a small proportion of the electricity bill every year goes into funds, which the government might sponsor, even if the company is actually paying for it?
MW: Well, I won’t say more now. We’re looking at some of the details of how that’s achieved. It’s difficult territory, complex financially, but the principle is absolutely clear that the taxpayer shouldn’t be funding this.
EC: As you all know, debate is about where the risk lies, that’s the essential thing.
MW: Yes, that’s why in terms of the detail we’ve got to be looking at the financial arrangements.
CA: How many operators have come to you and said, we want to build a reactor?
MW: They haven’t come to me formally, because that’s not where we are actually.
MW: My feeling is that there are a number of companies up for this. I’m not going to site names. We’re not in an environment where this is theoretical discussion and no companies are interested. There’s a lot of interest.
EC: Back to the point about risk, looking at lots of different options on this, is the idea of the government in some way standing behind the financial risk, because that’s a possibility?
MW: No, I don’t see us standing behind the financial risk, but trying to make arrangements so that over time money is being paid in. Obviously, there’s got to be a framework.
EC: I read that at the time. It was quite thin, I thought. What would you say about timing, then?
MW: Well, the intention is for a decision […], but the bill itself, presuming it is in the Queen’s Speech, then you’ll probably be looking at October/November time, but it’s got to be subject to parliamentary time, and obviously depending on the results of consultation could or not have […].
EC: So waste and financial risk, would you be explicitly wanting some guarantee from the private sector that suppose in the event of bankruptcy of one of the generators, or costs turning out to be massively higher than anyone expected, things like that, that the burden wouldn’t fall on…
MW: You’ll appreciate I can’t say too much now, because all this expert financial work is being done, but on the hypothesis that we do, we’ve got to work this up in detail for the bill, so you can imagine the work is going on at the moment, but the starting principle is that if we go for nuclear, the private sector have to pay for it, and that includes this area of nuclear waste. How we achieve that is what we’re working on at the moment, but it is not sensible to think of them being asked to write a cheque in 50 years’ time. There has to be some ongoing arrangement, so that we can be sure that our principle about no taxpayer’s liability is put into practice.
EC: So, they would contribute on a regular basis to a pot of money held?
MW: That’s what we’re looking at now.
CA: Presumably that pot of money would have to be state administered, because we’re looking at a liability that could run for hundreds of years.
MW: All I can say, obviously there’s got to be a state framework here, so we can be sure that we look after the taxpayer.
EC: We’re done on nuclear. Let’s talk about renewables. We invite you to just get it off your chest now. There is absolutely no chance of hitting the 2020 energy renewables target, and it would be a good idea just to admit that?
MW: That’s very kind of you to give me that opportunity, however let me say this, that we’ve had for a while UK targets for renewables, which have been about renewables for electricity, and you know roughly where we are on that, from a point of none, we’re now between 4 or 5 per cent, by 2015, it’s going to be 15 per cent, and our aspiration is 20 per cent by 2020, so that’s where we’ve been in the UK. However, what they’re talking about now is that the heads of state, the whole European Union at the summit, came up with a far more ambitious target of going 20 per cent of 2020, but this time of all energy across the European Union by 2020. Now, is that ambitious? Yes, it is, and what I’ve been saying this week is we’ve got to work through, but the whole of the European Union is, how that can be achieved, and it is a target for the whole EU, although some people haven’t quite understood it. Some will get more than 20 per cent, because of natural resources, hydro or where they’ve been on renewables and so on, and it’s difficult.
EC: So, would you expect that the UK will be one of the ones going for less than 20 per cent, because we can rely on all these unspecified countries to go for more than 20 per cent.
MW: That’s the conversation, and we’re still at a very early stage of that.
EC: Would you be able to name any of these countries who you expect to get to more than 20 per cent?
MW: Not for me to name, they should name themselves, there are certain countries in Eastern Europe that might be more than 20 per cent. They exist, but this is tough.
EC: Do you see some leeway there for the UK not to hit 20 per cent, would it be all right?
MW: That’s what we’ve got to look at.
EC: So, on renewables, do you think the UK will get to 20 per cent?
MW: I think it’s very difficult, and that’s not saying that we’re not committed to renewables, the new energy bill is bringing about a reform of the obligation, to try and give more encouragement to the newer technologies, like wave, tide or marine technologies, etc, but there’s no doubt that 20 per cent of all energy is very demanding, but I can’t say more, because we’re now trying to think through the implications of that target, and discussing it with the European Commission.
EC: The figure I’ve seen people quote is on 10 per cent of biofuels in road transport, heat is just about entirely impossible and we can get from renewables, so therefore you have to have something like 37 per cent of your electricity being generated from renewables to get to 20 per cent.
MW: It’s very difficult. Other nations will be able to make a bigger contribution, so therefore across the EU we have to look at how we hit the EU figure.
EC: Are you still committed to trying to hit for the European Union?
MW: Well, the heads of state have said it is a target, and we’ve got to try to hit that target
EC: Is there a possibility that they will drop it?
MW: That’s a matter for the heads of state.
EC: The theory which is widely circulated in Brussels is that they didn’t know what they were signing up to. They thought it was electricity, and thus in conformance to the UK targets.
MW: Well, I don’t subscribe to that, because it was all the heads of state signing up anyway, and I think they were aware of what they were signing up to, and the good news is it shows that the determination now across the European Union on climate change is there. I think Britain can take some credit for that, in terms of leading the charge.
EC: What about some of the ideas, like defining nuclear as a renewable, under the targets?
MW: No, nuclear is not a renewable. It’s a very clean and green form of energy technology, but it does require uranium and therefore is not a renewable.
EC: Thank you very much.
19 August 2007
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