HC Deb 08 April 1981 vol 2 cc1072-8

'The Secretary of State shall, within six months of the commencement of this Act, lay before both Houses of Parliament a copy of a voluntary code of practice, as agreed between the nationalised energy supply industries, relating to the encouragement of combined heat and power.

  1. (a) The code will provide guidelines for fair competition in the pricing of fuel supplied by the nationalised industries to CHP plants, and for electricity purchased from such plants by area boards.
  2. (b) The code will provide guidelines to promote fair competition for the marketing of heat and power from CHP plants operated in the private sector or in partnership with local authorities, and recommended the removal of institutional, contractual or monopolistic obstacles to the generation of CHP and to the sale of heat and power.
  3. (c) The code will provide guidelines to the CEGB on the interpretation of its statutory duties, to optimise efficiency in the conversion of fuel, by actively promoting the marketing of reject heal from its existing power stations, and to seek partnerships with industry and local authorities for CHP developments.'.—[Mr. Rost.]

Brought up, and read the First time.

Mr. Rost

I beg to move, That the clause be read a Second time.

The Chairman

With this we may take new clause 3—Amendment of Electricity Act 1957—. 'After subsection (5) of section 2 of the Electricity Act 1957, there shall be added the following subsection— (5A) In executing its duties under subsection (5) of this section, the Generating Board shall promote economy and efficiency in the use of energy and shall, in particular, further the development of methods by which heat obtained from or in connection with the generation of electricity may be used more efficiently, for the heating of buildings, or for any other useful purpose." '

Mr. Rost

The hour is late, but I hope that the House will bear with me, because although the Bill is concerned with energy conservation it omits to refer to the one area of conservation that could make a bigger contribution to energy conservation than any other. I refer to the two-thirds of the fuel that we currently throw away by the manner in which we produce our electricity—the hot water that goes up the cooling towers or into the rivers. It is equivalent to a heat loss of 60 million or 70 million tonnes of coal a year—heat from which millions of our citizens could well benefit.

Energy prices are rising. Millions of our citizens are suffering because they can no longer afford a decent standard of heat and comfort. Yet we discard from our power stations vast quantities of energy—enough to heat every building in the country. My clause is an attempt to remove the obstacles to the development of combined heat and power—obstacles that have been removed in other countries, millions of whose citizens already benefit from cheap heat. There are about 3,000 district heating schemes in Western Europe outside the Iron Curtain countries. There are about three in this country.

In Committee I attempted to insert two new clauses into the Bill. They would have changed the statutory monopoly powers of the electricity supply industry, which are one of the inhibiting factors, and would have insisted on fair tariff systems for combined heat and power. I withdrew the clauses because I received assurances, first, that the Government were already planning legislation to break the monopoly powers of the CEGB and to encourage combined heat and power, and, secondly, that, as a result of the Dr. Walton Marshall report, the Government were sponsoring a feasibility study for one lead city district heating scheme. I have returned to the subject now, however, with a clause that no Government who are dedicated to a more efficient use of energy, a better deal for the consumer, and competition and efficiency in the nationalised energy industries could possibly reject.

The clause sets out a voluntary code of practice that will ensure fair competition within the energy industries in the production of electricity both within and outside the nationalised industries. Secondly, it will guide the CEGB on its statutory powers, so that it will help to promote combined heat and power rather than deliberately frustrate its development, as has happened to date.

On the Continent the system of electricity supply is different. It has not inhibited private development of electricity and it has resulted in a far more efficient use of fuel, to the benefit of the consumer. Whole cities—Paris, Rotterdam, Munich and many others—have large and expanding district heating scemes. Sweden and Denmark heat huge numbers of their buildings by means of district heating. We have practically nothing of that sort. In France and Germany industries go into partnership with local authorities. Industry gets its heat and electricity cheaply because it is producing it, and citizens in nearby towns get their electricity and heat cheaply because the system of production is far more efficient than ours. We are still inhibited from developing the system, and it is time that we did more about it.

First, the clause proposes that we overcome the obstacle within the monopoly electricity supply industry—the restrictive tariffs that prevent the establishment of effective combined heat and power schemes. Under those tariffs the CEGB pays only the base-load price for electricity that it buys from outside production and it charges combined heat and power schemes an unfair standby tariff. Other countries have removed those unfair trading practices and encouraged tariff systems that promote the more effective conversion of energy in combined heat and power. We are still allowing the restrictive nd unfair practices to continue.

12.30 pm

My voluntary code is an attempt to set a fair code of practice for the supply of fuels to outside producers of electricity and heat, an attempt to ensure that a fair price is offered to those who produce it, and an attempt to allow outside producers of electricity to sell it to the market outside the nationalised industry. There are institutional obstructions and unfair competition that prevent partnerships between industry and local authorities, and also prevent the development of combined heat and power outside the nationalised industry.

I hope that the new clause, as posed in the form of a voluntary code of practice, will set a new standard whereby we can make real progress. Most EEC countries have already legislated to encourage combined heat and power. They already have a far greater proportion of combined heat and power. We are at the bottom of the league and slipping further behind because we still have not removed the obstacles that prevent it happening here. It is urgent that we begin to catch up with other countries. Millions of their citizens are already benefiting from heat that is distributed from power stations—the kind of heat that we throw away.

Britain and its citizens are not short of electricity but of heat, yet the by-product of a power station is electricity. The main product is heat. It is nonsense that two-thirds of the fuel that we put into our power stations should be thrown away. The waste might have been justified at a time when energy was a low-cost item in the total production of electricity, but that is no longer so. France, Germany and Italy have legislated and provided incentives for the development of combined heat and power and for local autonomy between utilities, local authorities and industry. The disincentives have been removed.

I give the Government an opportunity, through a voluntary code, to demonstrate their good faith in their declared intention to proceed along these lines, to ensure that our fuel is more efficiently used and that combined heat and power, which could make the greatest contribution of all to energy conservation, is not excluded from the Bill. If it were to be excluded it would be presumptuous to describe the Bill as an energy conservation measure.

Mr. Penhaligon

New clause 3 is directed to the same issue as new clause 7. I am satisfied that the clause of the hon. Member for Derbyshire, South-East (Mr. Rost) was selected in preference to the Liberal clause. It is rather broader-based and contains a series of suggestions that I would be happy to support. I congratulate the hon. Gentleman on his activity on this desperately important issue.

The Government's record on district heating and the use of waste heat from power generation is nothing short of pathetic. The Government have done just a little, and that prevents one from describing their activity as amounting to nothing. We have had the Marshall report, and a survey is taking place. That is an inadequate response to the enormous source of new energy that the use of waste heat from power generation represents. Some of us take the view that of all the alternative sources of energy available this is in many ways the most exciting and the one most likely to succeed. That is why we believe that a tremendous amount of attention should be given to it.

There is not more than one power station which boasts a thermal efficiency of more than 40 per cent. There is no reasonable hope that the thermal efficiency of the conversion of heat into electricity is likely to improve on current figures in the near future. Until man has succeeded in discovering a new generation of steels which can maintain their shape and size at a range of temperatures and pressures that are beyond the imaginations of engineers now, there is no possibility that the maximum thermal efficiency obtained in the conversion of heat into electricity will increase in any meaningful way.

The average thermal efficiency of the British power system is not much more than one-third. That figure is unlikely to be dramatically increased in the near future. One-third used means that two-thirds is thrown away, as the hon. Member for Derbyshire, South-East said. That is a remarkable factor of power generation not recognised by many. Out of every three lumps of coal brought in, one goes out as electricity and two go out in the form of waste heat. We are arguing that that waste heat should he used for the convenience of heating people in their factories, in their offices and in their homes.

It is interesting to speculate that if only half of that waste heat could be saved—I do not say that that could be done next week—and could be used for useful purposes, there would be a fresh power source equivalent to the total generated power of the Central Electricity Generating Board. Such a prize should receive far more attention.

We are all aware of the Government's intentions for the development of nuclear power, even if they appear to be afraid of discussing them on the Floor of the House. We are aware of the sort of money that the Government are prepared to put into that alternative source of energy. However, I cannot comprehend why this exciting possibility is almost ignored. The situation is worsening by the hour as the CEGB continues its policy of closing some of the smaller power stations which are nearer to towns and which are just the power stations from which a refurbishing and district heating system could come at the most economic cost. One could pump hot water a long way, but it is more sensible not to do so, nor is it necessary if there is a power station near the town.

I am prepared to support the new clause of the hon. Member for Derbyshire, South-East. It is important that the Government should stop expressing good intent on this matter and should put some money into it so that schemes can be instigated and so that there is practical feedback on how successful the operation is.

The most obvious place to apply that science is where new estates and offices are being developed. It is easier to make the necessary installations at that time than later.

We have had this debate before. I look forward to the Minister's reply. I hope that he will express confidence that more action will be taken on this great and exciting possibility in the next 12 months than has been taken in the last two years.

Mr. David Crouch (Canterbury)

I cannot let this occasion go by without making some comment. We have already discussed this matter in Committee. Even at this late hour I have to say that this is probably the most important gap in the Bill. We lose two-thirds of a source of energy and appear to do nothing about it. Why? It is because the nationalised industries say that they cannot do anything about it, because if will cost money.

It is important that we realise that we are losing energy in this way. It is not happening in other countries. In this country we are power-rich, from North sea oil and gas and from the coal beneath the ground. Yet we allow energy to be wasted into the atmosphere. My hon. Friend the Member for Derbyshire, South-East (Mr. Rost) has done the House a service yet again by reminding us that we cannot let the matter rest here when nothing is being done by the Government or the nationalised industries. Something must be done. Something has been done for over 25 years in Sweden. Something has been done in Germany and France. yet we do nothing. We say that we are not a sufficiently compact urban society.

There are great conurbations in this country, such as Birmingham, Manchester, London, Newcastle, Cardiff, and Glasgow. Those places are sufficiently compact to use this waste heat. If we do not go forward tonight, I shall certainly raise the issue again and I know that my hon. Friend will do likewise. We are both concerned to become specialists in the study of energy matters. Hon. Members have spoken of the technical probklems facing us. We shall not let this matter drop. We shall keep after it to ensure that we conserve this energy and use it for the benefit of our people.

Mr. Eadie

We on the Opposition Benches are aware of the arguments put forward by the hon. Member for Derbyshire, South-East (Mr. Rost) because we have discussed them in Committee. We put our views then. Because of the lateness of the hour, we believe that it would be best to allow the Minister to reply to his hon. Friend. We shall listen with great interest.

Mr. John Moore

I welcome yet another opportunity to discuss this subject, raised by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) and taken up by my hon. Friend the Member for Canterbury (Mr. Crouch) and the hon. Member for Truro (Mr. Penhaligon). During our Committee proceedings I sought to record in considerable detail the pattern of progress on this key issue of combined heat and power and district heating. Those hon. Members who say that there has been no activity by the Government should refresh their memories by referring to columns 120–129 of the proceedings of Standing Committee A on 24 March 1981.

My hon. Friend's new clause, like the new clauses that he tabled and subsequently withdrew in Committee, is clearly based on his view that the policies of the fuel industries in general and the electricity supply industry in particular are inhibiting the development of CHP En this country. His references to fair competition are indicative of this. Before dealing with this point in detail let me make it clear that although there is always scope for clarifying certain aspects of policy I do not share my hon. Friend's views.

I dealt at length in Committee with the helpful way in which the industries are dealing with inquiries in respect of industrial CHP schemes and are assisting the Government in their CHP-district heating feasibility programmes. The new clause calls for a voluntary code of practice to be agreed between the nationalised energy supply industries and laid before Parliament within six months of the Bill's obtaining Royal Assent. Leaving aside for the moment the need for a code, this timetable is very tight—I would say unrealistic. However, I believe that I can demonstrate forcefully to the House that the new clause is unnecessary.

12.45 am

Paragraph (a) of the new clause seeks to establish a code that will provide guidelines for fair competition in the pricing of fuel supplied by the nationalised industries to CHP plants and for the electricity purchased from such plants by area boards. The policies of the gas, coal and electricity industries in this area were spelt out in considerable detail in Committee, and I am satisfied that the industries' policies are fair and do not hinder the development of CHP. The industries do not keep these policies under wraps; indeed, they are only too willing to negotiate with potential consumers, and I believe that it is unnecessary to make them the subject of a code of practice.

The proposal in paragraph (b), which deals with guidelines for the marketing of heat from CHP stations and the removal of so-called institutional obstacles to CHP development, is premature. The matters that my hon. Friend raised will be for consideration during various stages of the CHP feasibility programme, and it would therefore be inappropriate to try to put together any guidelines on this until that work is completed.

Paragraph (c) would provide guidelines to the CEGB on such matters as the active promotion of the marketing of reject heat from power stations. As I explained in Committee, all electricity boards in England, Wales and Scotland are under a duty to investigate methods by which heat obtained from, or in connection with, the generation of electricity may be used for the heating of buildings or other useful purposes. They have power to provide heat for such purposes, either alone or in co-operation with others. I do not think that it is appropriate for the CEGB to be given guidelines on how to interpret these statutory duties, although, of course, if there is evidence that it is not fulfilling them—I do not think that there is, but if there is—we shall need to consider the matter carefully.

Once again my hon. Friend has used his great knowledge of CHP—I recognise that—and his ingenuity to enable us to have yet another debate about combined heat and power. I welcome this—it is a subject to which the Government attach great importance—but I do not think that my hon. Friend is being entirely fair when he suggests, both in his speech and by implication in the new clause, that the fuel industries are hindering the development of CHP through their policies.

Mr. Rost

If my hon. Friend maintains that there is no hindrance by the nationalised industries of the development of CHP and district heating, can he explain why we are at the bottom of the league and why so little is going on here? Why is CHP and distrcit heating so much more extensively developed in other countries?

Mr. Moore

I did not think that we wished to reiterate the whole of the detailed debate that we had in Committee about the institutional nature of our country relative to its current position in CHP. I had thought that in the new clause we were concerned ?? athe question whether at this time there were institutional barriers, put up by the Government or by the nationalised industries, to the development of CHP from this point forward. I am dealing with the present and the future, and not with the nature of the debates that we had on the way in which our country had reached this point relative to other countries.

I come now to the new clause tabled by the hon. Members for Liverpool, Edge Hill (Mr. Alton) and for Truro. It is clear that its essential point is to lay an obligation on the CEGB to further the development of methods for the efficient use of waste heat from power stations. It seems to me and to the Government that it is superfluous to lay an obligation of this sort on the CEGB by means of new legislation, because as I explained earlier to my hon. Friend, the CEGB already has a duty under section 50 on the Electricity Act 1947 to to investigate methods by which heat obtained from or in connection with the generating of electricity may be used for the heating of buildings … or for any other useful purpose. Under the same section, the CEGB also has the power to conduct, or assist others in conducting, research into any matters relating to such methods of using heat. I cannot help wondering what will be the hard practical difference in amending the CEGB's existing obligation with regard to CHP in the way suggested in the new clause. An amended statutory duty is not necessary to secure CEGB co-operation in the feasibility programme. As I have already pointed out, the CEGB is co-operating fully already. Neither will an amendment make any difference to the feasibility programme, which is the essential basis for any future development of CHP district heating in this country.

I therefore repeat what I said in Committee about our view on the possibility of future legislation on CHP. We accept that new legislation may be necessary when our feasibility work has progressed further and we have a clearer idea of its economic potential and the institutional structures that may be appropriate to exploit the potential, but it is misconceived to attempt a piecemeal approach to the subject. It is likely to be much more complicated than merely making a minor adjustment to the duties that the CEGB already has with regard to CHP, which is what the new clause attempts to do.

I am grateful to hon. Members for giving me the opportunity to reconsider the issue. The Government's feasibility work on CHP shows that we are treating it with the seriousness that it merits. I hope, therefore, that my hon. Friend will feel able to ask leave to withdraw his motion. Neither of the new clauses that we are considering serves a practical purpose in pursuing the objective that is shared by hon. Members on both sides of the House—the objective of testing fully the potential for CHP in this country.

Mr. Rost

My hon. Friend the Under-Secretary of State states that neither new clause will serve a practical purpose in terms of the objective of using some of the reject heat with which we warm our fish and heat the atmosphere. I was disappointed that he did not tell us what practical steps we need to take to do what other countries are doing so much more effectively in giving people heat instead of allowing them to freeze to death because they cannot afford sufficient heating.

There is the lead city experiment, but it does not get to grips with the problem of removing the obstacles to the development of CHP in this country. There is no economic obstacles, as feasibility studies indicate that the development would be cost-effective, but there are institutional obstacles. I hoped that my hon. Friend would accept that and would give us an indication that the Government propose to take action, even if my new clause does not satisfy the needs.

I shall continue to press the matter, which is the most important contribution that we can make to energy conservation, but, having said that, at this stage I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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