HL Deb 25 June 1991 vol 530 cc493-4

3.23 p.m.

Viscount Mersey asked Her Majesty's Government:

Whether they will subsidise power stations such as Drax which are fitting flue gas desulphurisation units, bearing in mind the inevitable loss of efficiency and increase in cost of electricity generated thereby.

Lord Cavendish of Furness

My Lords, the costs of fitting and running flue gas desulphurisation units, necessary to comply with the emission limits placed on the generators, should properly be met by the companies concerned. That obligation was recognised in the capital structures with which the generators entered the private sector.

Viscount Mersey

My Lords, I thank my noble friend for that rather disappointing reply. I am as green as the next man, but is he aware that the cost of fitting the FGD equipment at Drax power station is £658 million, and that it will make the power station 2 per cent. less efficient? Might there not be a case therefore for regarding Drax as part of the non-fossil fuel obligation? Might that not have the added benefit of encouraging other coal-fired power stations to clean up their acts?

Lord Cavendish of Furness

My Lords, I am aware of the considerable costs of FGD and of the efficiency results. I must tell my noble friend that I do not think it would be appropriate to include a coal-fired station in the non-fossil fuel obligation. It would run counter to the, objective of encouraging non-fossil fuel generation with all its attendant environmental benefits. The industry does not need such incentives. It is obliged to comply with emission limits as set out under the national plan which in turn implements the large combustion plants directive.

Lord Dean of Beswick

My Lords, will the Minister tell us whether the original programme for desulphurisation of those power stations including Drax, which was set in motion under the Conservative Government and the CEGB when the electricity industry was still in the public sector, is being adhered to, or whether there has been a diminution in or abandonment of the programme since privatisation to the detriment of us all?

Lord Cavendish of Furness

Yes, my Lords, there has been a diminution, and for very good reasons. A figure of 12 gigawatts was the early estimate made by the CEGB of what we needed to meet the requirements of the large combustion plants directive by FGD alone. However, the reality of competition brought about by privatisation obliged the generators to find the most economic means of achieving SO2 reductions. In addition, the scope developed to build combined-cycle gas turbine power stations which emit virtually no SO2 and roughly half of the CO2 equivalent of coal-fired power stations. It was a mistake to think that to go from 12 gigawatts to 8 gigawatts would necessarily reduce SO2 emissions.

Lord Ezra

My Lords, in view of the importance of the desulphurisation process and of its high cost, will the noble Lord indicate whether the Government are stimulating industry to undertake research and development which will bring down the cost of the process?

Lord Cavendish of Furness

My Lords, the generators were always aware of the costs—both capital costs and revenue costs—that would result. It is up to the industry to develop that technology.

Lord Stoddart of Swindon

My Lords, is the Minister aware that his reply that the Government will not subsidise the installation of gas desulphurisation plant at Drax is welcome? However, does he agree that the Question this day is most insensitive bearing in mind that the chairman of National Power has been awarded an increase of 59 per cent. in his salary and that the electricity industry was sold to private investors at knock-down prices in order—this was apparently one of the reasons—to install that equipment for the betterment of mankind?

Lord Cavendish of Furness

My Lords, both those questions are wide of the Order Paper.

Lord Peston

My Lords, perhaps I may ask the noble Lord to confirm his first Answer. Am I right in thinking that the costs of desulphurisation have already been included in the capital structure of the new generating bodies and therefore what is happening here, whatever else it does, should not lead to any increase in the price of electricity to the consumer? Is there no way that the producers could argue along those lines?

Lord Cavendish of Furness

My Lords, the noble Lord is absolutely right.

Viscount Hanworth

My Lords, will the noble Lord say what incentive there is for other power stations to install desulphurising equipment when, if they do nothing, they are much better placed for the bids and are more likely to be used?

Lord Cavendish of Furness

My Lords, there are now rules under the national plan to meet with the directive.