HC Deb 11 February 1969 vol 777 cc1098-100
5. Mr. Ridley

asked the Minister of Power upon what estimate of economic growth for the next five years are the forecasts of electricity demand based.

12. Mr. Silvester

asked the Minister of Power what estimate he has made of the capacity required by the electricity industry by 1973–74 on the basis that the national growth rate will be 2½ per cent. per annum.

21. Mr. Blaker

asked the Minister of Power upon which of the assumptions of economic growth, postulated in his document submitted to the National Economic Development Council in December, 1968, are the electricity demand forecasts for the next five years based.

Mr. Freeson

Many factors besides the economic growth rates enter into the forecasts of electricity demand and there is no exact correlation between demand and economic growth. However, the Electricity Council's forecast last year was regarded as consistent with an average annual rate of economic growth of 3 to 3¼ per cent. during the next five years. Future forecasts of electricity demand will have regard to the Government's latest views on prospects for economic growth.

Mr. Ridley

Is the Minister aware that the annual growth in demand has averaged 3.7 per cent. over the past five years? Why, then, is the Electricity Council planning to spend more thousands of millions of pounds of the taxpayers' money to meet demand based on the rate of 8.2 per cent., which is what the present estimates represent?

Mr. Freeson

The electricity industry makes the most careful calculation possible on the growth of electricity consumption expected. It is on that basis that investment policies are made.

Mr. Silvester

Is not it true that the present over-capacity has partly arisen because of the 1965 forecast in the growth of G.N.P. of 4¼ per cent.? Would not it be more realistic to scale down the estimates for future years?

Mr. Freeson

The investment which is being provided should be sufficient to allow for a somewhat higher economic growth rate than we have been experiencing.

Mr. Blaker

Is it not a fact that the likely surplus in capacity results from the fact that the Government's forecast of growth rate in the past have been so wildly wrong? What assurance have we that in the new document which has been presented to the economic development council a similar mistake will not be repeated?

Mr. Freeson

I do not know why so much astonishment is being expressed. For some time there has been in the industry and in Government an attempt to reach a 17 per cent. capacity margin. We have now moved into the period when we are achieving the 17 per cent.

Sir J. Eden

Will the Minister tell the House that that margin of capacity has been exceeded? Can he say what the forecast is for the years ahead? Is it not likely to be a substantial excess margin of capacity, and does not that represent a gross waste of resources?

Mr. Freeson

I think that the hon. Gentleman did not clearly hear what I said earlier in reply to a previous supplementary question, which is that capacity should be sufficient to allow for a somewhat higher growth rate than has been experienced in the past to be sure that when that growth rate expands to a given degree the capacity is there.

Mr. McGuire

Is my hon. Friend aware that forecasting in this field has been described as the graveyard for forecasters, never more so than when one is forecasting the cost per unit sent out in electricity production? Instead of repeating their errors, will the Government make calculations which facts will support, and not theory?

Mr. Freeson

I believe that there are other Questions on unit costs later in the Order Paper.

Mr. Palmer

Does my hon. Friend agree that because many of the new generating sets coming into commission are not available the excess of capacity is probably not as large as it should be?

Mr. Freeson

There have been teething troubles in a number of the larger units, and at the points in time when these troubles occur the margin drops. As they are put into full commission, the margin goes up again.