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Coal- And Gas-Fired Power Stations

Volume 570: debated on Tuesday 19 March 1996

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3 p.m.

Whether they are satisfied that there is fair competition between coal-fired power stations and gas-fired power stations.

My Lords, competition is the best means of ensuring that the nation has access to secure, diverse and sustainable supplies of energy. That is why the Government established a competitive market in electricity generation in 1990 and an independent regulatory regime to oversee and promote competition. All licensed generators, whatever their fuel source, have access to this market.

My Lords, do not the long-term gas contracts give an unfair advantage, in that the cost of producing electricity from coal-fired power stations has been reduced significantly? Does not the Minister agree that electricity from the early gas stations which, as he will know, are almost entirely owned by the 12 regional companies, is now at a level 50 per cent. higher than that produced by coal-fired stations?

My Lords, the coal producers currently have contracts which in effect guarantee the sale of significant volumes of electricity from coal plant until April 1998. From that point of view they are well favoured. But, more generally, the simple proposition is that, as regards electricity consumers, it is in their best interests and in the nation's best interests that the electricity should be produced at as cheap a price as possible.

My Lords, does the noble and learned Lord agree that the capital costs of coal-fired stations have long since been written off for the most part, and that therefore their costs of generating electricity—as the noble Lord, Lord Dormand, pointed out—are much less than for any competitive fuel source? Have those factors been fully taken into account in the present situation?

Yes, my Lords, I believe they have. In the course of the past year, something like 45 per cent. of electricity was supplied from coal-fired plant. In those circumstances it would seem to me that coal is holding its position well and will undoubtedly do so until at least 1998. At some point the volume of gas, and the price at which it is available, may well be such that it will be used more widely to generate electricity. However, if that is the position, I am bound to say that I cannot see that that is undesirable if it will be cheaper and cleaner.

My Lords, in declaring an interest as a director of a company selling North Sea gas, may I ask whether my noble and learned friend is aware that coal-fired power stations are burdened by the environmental requirement of desulphurisation?

Yes, my Lords, that is why I indicated that in some circumstances considerably more electricity may be generated from gas-fired plant. I have no doubt that a number of people would consider that to be highly desirable given the lesser impact it has on the environment.

My Lords, bearing in mind the fact that during the cold spell there was widely reported to be a crisis in electricity supply, is the Minister sure that relying on private industry to build for profit will ensure the supply of electricity?

Yes, my Lords. We have had a difficult winter—as the noble Lord will know was the case where he lives—in terms of some extreme weather. However, where there have ten interruptions to the electricity supply that was not—as I have indicated on previous occasions—because there was any significant mismatch between demand and capacity but because of extreme weather. Any circumstances where there might have been any threat to supply have been satisfactorily averted. I know There was some anxiety that in the case of gas-fired power stations with interruptible gas contracts there might be a problem, but they hold in reserve a considerable stock of gas oil. I understand there were a number of technical problems but the industry regulators are at this very moment looking into that matter to ensure that the technical problems, rather than the volumes of gas, will not be a problem in the future.

My Lords, is my noble and learned friend aware that before and after privatisation questions have been asked in this House about the interruption of power supply and that the replies given have indicated that there have been fewer interruptions since privatisation?

My Lords, I am grateful to my noble friend for recollecting a reply that I have given on previous occasions. I have done so more than once and I decided on this occasion that it would not be necessary to repeat the point as it was so well known. Nevertheless I am grateful to my noble friend for making the point so well on my behalf.

My Lords, bearing in mind the fact that there are only two forms of energy mentioned in the Question, have the Government any proposals in the long term on what action to take since one of those sources may fail, as supplies of gas are known to be finite? What other alternatives have the Government in mind, having dismantled our coal industry?

My Lords, the long-term availability of both fuels is clearly guaranteed. In the course of the past week there has been a significant and satisfactory uprating of the reserves of both oil and gas within the United Kingdom continental shelf and in terms of gas reservoirs to which we would have access beyond our continental shelf. I do not believe that there is any risk, for a long time, of either coal or gas drying up.

My Lords, the Minister just referred to a guarantee. What is the nature of the guarantee that he is talking about as regards the future use of coal in generating power?

My Lords, the future of coal as a source for generating electricity will clearly depend not only on its availability but also on the price at which it is made available to those who produce electricity. I cannot believe that anyone would want to see anything other than the cheapest form of fuel being used to generate electricity for consumers in this country.