THE ELECTRICITY GAS AND ATOMIC ENERGY INDUSTRIES

HL Deb 08 December 1964 vol 262 cc34-85

3.55 p.m.

Debate resumed.

LORD STONHAM

My Lords, after that genial, or nobly genial, interlude, I hope that it will be in order if I try to shed a little more light on the general proceedings. Your Lordships will remember that I had reached the point where I had expressed the Government's hope that in seven years the power plant construction programme would have reached parity with the demand that we then expect; and I said that to do that would entail, as at present estimated, an investment of some £4, 000 million. In that programme the production of electrical energy from nuclear plants will play an increasing part. It will be recalled that the first nuclear power programme suffered, under the previous Government, from several drastic changes of heart, but it managed to survive as a programme to provide 5,000 megawatts of nuclear generating capacity by 1969. Three stations are already supplying power to the Grid. Wylfa, the last station, will be commissioned in 1968 and 1969. All nine stations, including the Scottish station at Hunterston, are of the Magnox type developed by the Atomic Energy Authority at Calder Hall.

Last April, the previous Government announced "The Second Nuclear Power Programme", which planned to provide a further 5,000 megawatts of nuclear capacity to come into commission between 1970 and 1975. This programme which had been agreed by the C.E.G.B. and the A.E.A. was intended to be flexible, and subject to revision at regular intervals in the light of new information. We are all glad to know that the noble Lord, Lord Sherfield, who was until recently Chairman of the Atomic Energy Authority, will be able to take part in this debate. The A.E.A. and the C.E.G.B. having made a joint study of the available reactor systems for the new programme, agreed that the main contenders were: the advanced gas-cooled reactor (A.G.R.), which has been developed by the Atomic Energy Authority; the American water-moderated reactor systems, especially the boiling water reactor (B.W.R.); and, pressurised water reactor (P.W.R.). We really ought to congratulate the experts on providing such initials for these things that a layman like myself can understand what they represent. So often one has to have a special inquiry to see what the initials mean.

It was decided that the C.E.G.B. would invite tenders for an A.G.R. station to be built alongside the Magnox station now under construction at Dungeness, at the same time making it clear that it was also ready to consider tenders from British industry for "water-operated reactor systems of proved design". The previous Government intended to review the tenders with the C.E.G.B. and the A.E.A. before a decision was taken as to the type of reactor to be built. The tenders are to be submitted by February 1 next, and the Board, in consultation with the A.E.A., will then have to assess them and consult the Government. A decision, therefore, cannot be expected until well into the summer of next year. It must be borne in mind that whilst the capital cost of a conventional station is expected to fall to £37 per kw. by 1969, compared with an estimated £100 per kw. at the latest nuclear station at Wylfa, the running costs of a nuclear station are substantially less than those for conventional stations. Indeed, it is possible—some say likely—that by the early 1970's nuclear power may become cheaper than conventional power for the generation of the base load. But because of the many uncertainties it is obvious that the programme must be flexible and subject to review.

Electricity now accounts for an increasing proportion of the nation's total energy requirements. Between 1953 and 1963, it rose from less than 17 per cent. to nearly 30 per cent., and this increase is expected to continue. Last year, nuclear power contributed around 4 per cent. of the total units of electricity produced, but if the two nuclear programmes are com- pleted as planned, the proportion by 1975 will be over 16 per cent. But by then the fuel requirements for electricity generation will have doubled, and ten years hence coal will still be the major fuel used by the industry.

It is understandable that your Lordships' House and the industry are anxious to secure answers to a number of important questions, but my right honourable friend has not yet had an opportunity to consider "The Second Nuclear Power Programme." Meanwhile, arrangements for tenders for the first station are going forward, and it is likely that it will be designed and constructed by one of the three consortia, all of whom have been invited to submit tenders for a comprehensive contract. The consortium method enables the novel design and construction problems of a nuclear station to be tackled as a whole. In the course of time, as standard designs become feasible, it may be found preferable to have direct contracts with specialist firms, as is now done with the building of conventional stations. How soon this may be depends on the way the technique of building these stations develops.

The noble Lord, Lord Hawke, suggests that nuclear stations have a longer life than the present assumption of 20 years, and that the availability is not 75 per cent., but more than 90 per cent. There is one staggering example quoted—I believe it was at Calder Hall—where the availability at one time was 99 per cent. These are points of vital importance in assessing the relative costs of power from nuclear and conventional stations. The noble Lord asked me what was the estimated cost of the latest nuclear station—and I take it that he was referring to Wylfa. I understand that, with less conservative grounds—that is to say, a life of 25 years and 85 per cent. availability—the cost of Wylfa will be virtually the same as the cost from the conventional means of production.

LORD HAWKE

My Lords, before the noble Lord leaves that point, has he by any chance worked out what difference a 30-year life would make? He has jumped up the availability from 75 to 85 per cent., and if he jumps the life up from 20 to 30 years, what difference in cost would that make? Has he the figures?

LORD STONHAM

My Lords, I think that in something so new as this, where there are so many imponderables and where our experience is so limited, one cannot be precise about these matters. I have said that it is possible, perhaps even likely, that in the early '70s generation by nuclear means may be cheaper than by conventional means and I have given the noble Lord the forecast by adjusting the ground rules to the extent which I suggested—25 years and 85 per cent. availability. But we must not forget that this is a hypothetical example. If we adjusted the ground rules up to 30 years, that might lead to the assumption, which might prove quite false, that these stations have a life of 30 years. In any case, these points will be fully considered by the Board.

We are also fully aware that a programme of.5, 000 mw. is insufficient to keep the three consortia fully employed, and in the light of this situation the future organisation of that part of the industry is under review inter-departmentally. Meanwhile, whilst awaiting the results of the inquiry for tenders, all these relevant matters are being constantly and closely considered. Obviously, however, I cannot go further in anticipating the Government's decisions.

The noble Lord, Lord Hawke, said that coal should have been included in his Motion and that it cannot be ignored. Coal must form the basis of the production of a great deal of our energy for some years to come. The noble Lord also said, if I took his words down aright, that continuous production from losing pits would be intolerable unless there were very special reasons for it.

LORD HAWKE

I said that in the short term it would be tolerable, but in the long term intolerable.

LORD STONHAM

My Lords, the noble Lord is aware that I was not trying to misquote him. I was just trying to get the sense of what he said. The National Coal Board's policy is aimed directly at the elimination of uneconomic production. This of course, involves the modernisation and reconstruction of existing pits and the closure of pits which have no prospect of covering their operational costs before deprecia- tion and interest. This process has been going on a long time and is continuing now. When I say that, I exclude, of course, those pits which are running at a loss just at the particular moment—for example, because of temporary geological difficulties, or because they are in process of reorganisation and construction. Pits will not be closed unless modern methods cannot make them viable.

The major part of the Coal Board's reconstruction programme, which was undertaken in the 1950's, when the demand for coal exceeded the capacity of the industry to produce, is now completed. The annual expenditure on major colliery schemes has been reduced by nearly 50 per cent. since 1959 and is expected to decline still further in the next few years. Indeed, in recent years the coal industry has done well in adjusting itself to mounting competition from other fuels. But despite the present level of production, it is still facing a difficult task. Because of the change in the pattern of its markets, the lower-priced electricity coals providing an even greater proportion of its outlets, the coal industry needs a higher annual increase in productivity than most other industries to meet the inevitable increases in wages and other costs, and to keep prices stable. Thus, there is a continuing need for modernisation to improve the efficiency and profitability of existing collieries.

A growing proportion of capital expenditure, now running at about £90 million a year, will be needed on schemes, such as the reorganisation and mechanisation of existing collieries, at the pit face and away from it, and the replacement of existing worn-out or uneconomic machines with more modern and improved equipment. The Board's investment programme includes expenditure on processing coal, for houses, for research and development projects, for brick-making and other ancillary activities. Legislation will be needed to extend the Board's borrowing powers, and that will have to come before the end of next year. As my right honourable friend stated in another place on December 1, he is reviewing, in collaboration with the National Coal Board, the prospects for the coal industry in relation to a coordinating policy for fuel. All matters concerning the Board's long-term investment programme will come under review. The possibility of a capital reconstruction to relieve the coal industry of some of its capital charges has been widely canvassed. That will have to be borne in mind in the course of the review to which I have referred; but this will require legislation. I have no doubt that the objective of securing our fuel supplies on the most economic terms will be viewed against the probable social and economic consequences of declining coal production.

The noble Lord, Lord Hawke, asked what would be the effect of the present interest rates on the power programme. Bank rate naturally has a direct immediate effect upon the structure of short-term interest rates, but its effect on long-term rates, such as those charged to the Electricity and Gas Councils, is less immediate and much more limited in effect. The Councils will already be paying a higher rate of interest on their overdrafts from commercial banks as a result of the recent increase in bank rate, but these overdrafts are not used to finance the capital investment programmes: they are employed for working capital. As far as long-term borrowing is concerned, however, the rise in bank rate will have no effect whatsoever upon existing loans, and the rates for new loans have not been increased. Whether the rate on new loans will be increased depends upon the effect bank rate has upon long-term rates of interest in general; and as it is in the interest of the Exchequer and the industries to avoid frequent changes, it is the custom to await such time as a level establishes itself before making a change. Such a level is not at present established.

The noble Lord also asked about the effect of inflation on generating costs over the next 25 years. It is not possible, of course, to forecast—even Lord Hawke's Old Moore could not forecast it—what inflation will take place over the next 25 years. It is part of the Government's basic policy to seek stability of prices, but much will depend on the success of their incomes policy. However, if the value of money does continue to fall, there is no reason to think that the costs of electricity will increase more than prices generally. Indeed, the probability is entirely the other way. Over the last ten years, while the general price index has increased by about 32 per cent., the average price of a unit of electricity has increased by only 18 per cent. This is because the use of vastly larger generating equipment has brought great economies in capital cost per unit generated, and increased sales have proportionately reduced overheads. Rising coal costs have been offset by more efficient generating plant, by the use of poorer grades and relatively less expensive coals, and by rationalising the transport of coal to power stations. These factors should continue to operate, and, in the long run, nuclear power may also bring economies to offset price inflation.

The noble Lord, Lord Hawke, also mentioned the prospects for pumped storage. Here I cannot hold out hope of any great expansion. We fully recognise that pumped storage stations have a longer working life than the conventional generating plants that would otherwise have to be installed to meet peak demand, and the quick response of hydroelectric plant is especially valuable in coping with sharp fluctuations in electricity demand and emergency conditions. Unfortunately, although the outlook is favourable in Scotland, the topography limits the number of suitable pumped storage sites in England and Wales.

The noble Lord, Lord Hawke, mentioned the pumped storage scheme at Ffestiniog which was brought into operation in December, 1961. Its eventual capacity is 360 mw., and the Generating Board say that the project is providing peak period Lord power efficiently and economically. In North Devon the Generating Board have started exploratory surveys, including trial borings, at two sites to assess their suitability for pumped storage. Then the North of Scotland Hydro-Electric Board have a project at Cruachan which, with a capacity of 400 mw., will be the second largest pumped storage project in the world. It will be commissioned next year and in 1966. The Hydro-Electric Board are also considering the possibility of a pumped storage scheme at Loch Sloy near Loch Lomond. The capacity, at 1,200 mw., would make it the largest in the world. Those are the projects that we have in mind.

With regard to the future of pumped storage, like nuclear generation costs, pumped storage costs have been reduced, but they have to compete with the steady fall in the capital cost per kw. of conventional power stations. However, further gains from advances in the technology of conventional generation are likely to be less spectacular than they have been in the past. This may make pumped storage schemes more attractive, as will the growing availability of nuclear power, when the capacity of nuclear power plant is sufficient to supply the minimum Lord on the system and surplus low cost nuclear energy begins to be available for night pumping. But this is some way in the future. Meanwhile, the Boards are ready to examine any projects where the circumstances are likely to be favourable.

As I said when I began, this is one of the most important items—if not the most important—in the foundation of our economy. On the generation and production of power rest the whole of our hopes for a steadily increasing national productivity, our standards of living and, indeed, our power, in a different sense, in the world. It is impossible to overestimate its importance. The Government realise this, and everything that can be done will be done in order to ensure that the power is there as and when it is required, and that it is produced in as diverse a fashion as required and in the most efficient and economic manner possible.

4.19 p.m.

LORD WOLVERTON

My Lords, I am sure we are all grateful to my noble friend Lord Hawke for initiating this important debate in your Lordships' House this afternoon, because after the policy on Defence, the power policy, or fuel policy, of this nation is in my opinion—and I think in that of all your Lordships—the most important. It is only right, with a new Government in office, that we should examine this policy afresh. My only excuse for getting up to speak this afternoon is that I want to say a word or two on the atomic energy programme for the next five years. I was delighted to see (he has gone now) the noble Lord, Lord Snow.

Following me is the noble Lord, Lord Sherfield. I understand that responsibility for the Atomic Energy Authority will now pass from the Minister for Educa- tion and Science, whose responsibility it was in the late Government, to the new Ministry of Technology. I think this is a good thing, and that they will be able to study this great problem afresh.

We have made tremendous advances as pioneers in developing atomic power stations. The noble Lord, Lord Hawke, and I were privileged to go down last summer and spend a day at Bradwell, and we are most grateful to the Generating Board for the time they gave to us in explaining everything to us. It is a wonderful station. At that time it was the largest station in the world. It has now been superseded by Dounreay, in Scotland.

LORD HOBSON

Hunterston.

LORD WOLVERTON

I think that that one is now the largest station in the world. All these nine stations are based on the Magnox system, and their cost of generating electricity is about ⅔d. per unit, against ½ d. with coal. That is a big difference. As your Lordships know, coal has made a tremendous advance in the last few years on high steam pressures. The noble Lord, Lord Hawke, said that probably we are beginning to see the end of the advancement that can be made on that.

The point I wanted to make this afternoon is that the General Electric Company consortium have nearly completed a very large station in Japan. That is based on the Magnox system. We have an order for another one in Italy, which is, I think, running now and the one in Japan is about to run. I read in the Press the other day that the Japanese are thinking of giving some more orders for stations, but are now looking to America for the boiling-water reactor system. We had a great debate about this in your Lordships' House on June 10. We were assured then that the Atomic Energy Authority had made great advances with the advanced gas-cooled reactor, and that specifications would go out to British manufacturers to quote for a station of the advanced gas-cooled reactor type, to be placed side by side with the station of the Magnox type which is running this autumn at Dungeness.

If the Japanese are now thinking of turning to America for their next stations, it will be a great disappointment to this country. We must do a great deal more research. I think it was agreed last summer that the Generating Board, if they wished, could import one set of American design of boiling-water reactor, to be put up and tested against our own advanced gas-cooled station, in order to see which was the more efficient type. Obviously, we must have greater efficiency if we are to compete with America.

In my view, there is a tremendous future in atomic energy power stations, but so often, as I said in the debate in June, pioneers get left behind. So I am hoping that, as Her Majesty's Government have said to-day, the programme will continue to be flexible, as the late Government said it would be. I also hope that a great deal more research—urgent research—backed up by the new Ministry of Technology, will be carried out by the Atomic Energy Authority, in consultation with the manufacturers and the Generating Board, to see whether we cannot get astride of the Americans. I understand, from a very good speech which the noble Viscount. Lord Caldecote, made in June, that although the Americans have not built any commercial station, the big companies in America have spent a large sum of money on research and confidently expect their boiling-water system of reactor to be the best in the world. We must try to get as good as they have, and it is a problem, in my humble submission, which needs a tremendous amount more research.

We must go on with the present programme of stations which for some years to come, presumably, unless they make big advances at this experimental station on the Magnox system, will not be as economical as the most efficient coal station. We have recently seen an instance of that in these very large power lines, one of which is almost completed. It passes all through East Anglia and Eastern England, coming down from Yorkshire to Waltham Cross.

It is a huge line, a 400, 000-volt line, with four conductors to each phase, and carries a very large Lord to bring the power down from Yorkshire coalfield stations along the Trent to London. I think it has been tapped twice—or it will be, eventually—near Cambridge and King's Lynn. But primarily it is for London, and with this great increase in voltage which they have now been able to develop, it is cheaper to bring down power from the generating station on the Trent, using the East Midlands coalfield, rather than to bring down the coal, even by sea, to the Thames-side station. But these great pylons are very ugly. They are something like 160 feet high, and dominate the landscape. I have great sympathy with some of the views expressed in the debate we had in your Lordships' House the other day on this problem. It is out of the question to put the cables underground, owing to the enormous cost.

I hope that we shall be able to develop more of these atomic energy power stations, which are admirably suited to the South. We already have some, on the East coast, on the Severn, and on the South coast. We must get on quickly with this important research to see whether we can get the reactors to stand up to higher steam pressure, so as to be able to produce the current required at a cost that is more in competition with that of the most efficient coal station.

4.28 p.m.

LORD SHERFIELD

My Lords, if I limit my remarks this afternoon to atomic energy, it is because this aspect of the subject is the one with which I have the larger acquaintance, and not because I wish to press for the preferential treatment of nuclear fuel over other fuels. With the ever-increasing demand, each fuel has its part to play, and the problem for any Government is to strike the best balance between them. There are three points to which I should like to draw particular attention. They are the selection of the type, or types, of reactor to be introduced into the electricity generating system in the United Kingdom between 1970 and 1975; the rate at which atomic energy should be introduced into the United Kingdom electricity system, and, perhaps more particularly, the question of our organisation in this field. On the first point, a procedure for the selection of types has been laid down and, as has been said, we have to await the submission of tenders by the consortia and their assessment. Therefore, no more can be said on this matter this afternoon.

But I should like to make this observation. There must be a very strong presumption in favour of choosing for the next stage of the nuclear power programme a system which has been developed by our scientists and engineers in the Authority, in industry, and in the Central Electricity Generating Board and of which we now have profound experience. The chosen line of development for British power reactors, the graphite gas-cooled system, has technically been extremely successful. After some avoidable and some unavoidable delays, the early stations are working well. For example, Hunterston, to which the noble Lord, Lord Wolverton, referred, at one time almost written off as an expensive failure, was, within two months of the second of the two reactors being commissioned, reported as already achieving an output of electricity some 7 per cent. more than its design capacity. The Tenth Annual Report of the Atomic Energy Authority gave the most encouraging information about the progress of the prototype of the second generation of reactors, the advanced gas-cooled reactor at Windscale.

I have been much concerned by the way in which public statements and many articles in the Press have over three or four years now tended to cast doubt on the products of the British system. Why this is so I do not know. Perhaps it is part of a general tendency to self-depreciation and denigration of our own performance which has recently become rather fashionable. I deplore this, not only because I think it is fallacious, but also because full advantage has been taken of it by our enterprising and vigorous competitors to press the merits of their own systems. My belief is that not only will the present generation of graphite gas-cooled reactors prove to be successful technically, but also that they will, in practice and with greater operating experience, give a much better economic return than at present is expected of them. The noble Lord, Lord Hawke, gave some of the reasons, and, without being dogmatic or going into the various ground-rules which are laid down from time to time to calculate these matters, I am convinced that these reactors will, in fact, perform much better than has been estimated.

As regards the advanced types, there seems very little doubt that any of them could, if built on a sufficient scale, produce power at substantially cheaper rates than that which would be available from any other contemporary source of electricity. Secondly, I think in forecasting their likely economic performance the result in each case and I refer, of course, to the British, American and Canadian types of reactor—would be the same within the margin of error. If this is so, the presumption in favour of the British system must surely prevail.

My Lords, the question of the rate at which atomic power should be introduced into the United Kingdom involves both technical and non-technical considerations. Technically, atomic power stations have a number of advantages over coal and oil stations. They are free from grit, dust, fumes and sulphur dioxide. They can be fuelled by a few tons of fuel elements a month, which can be brought in in a single load, and they are. therefore, almost immune to transport difficulties, for example, in very cold weather. The main hazard associated with them is some catastrophic accident resulting in the release into the atmosphere of radioactivity. But a great deal of research and development has gone into making nuclear power reactors safer than safe, and there is now every assurance that the effects of even the most improbable failure in a nuclear installation would be contained within the building in which it occurs. This improvement in safety devices should lead to a relaxation, where this is necessary, of the restrictions on the siting of nuclear power stations which were drawn up in the days when experience with nuclear reactors was a fraction of what it is to-day. The criterion of that time was what was known as the "maximum credible accident"—and it will be clear, I think, that anybody who regulated his life on such principle would never get out of bed.

It seems, therefore, that atomic power has now proved that it is technically efficient, safe and reliable, and that it has certain advantages over other types of energy for power production. But there is a major problem of finance. Broadly speaking, a nuclear power station costs about three times as much to build and about one year longer to construct than a conventional power station. On the other hand, a nuclear power station costs about a third as much to run as a conventional station. Nuclear power is, therefore, highly capital intensive. As the noble Lord, Lord Hawke, implied (and I know this is a sensitive point) it could be argued, on the assumption that inflation is likely [...] continue at a more or less steady ra[...] that it would be desirable to build a large number of nuclear power stations as rapidly as possible. On the other hand, the nuclear power programme has to compete with other capital projects, such as roads, education and the other huge commitments which successive Governments have assumed.

My own view has been that the target figure of 5,000 mw. of additional nuclear power by 1975, tentatively recommended in last year's White Paper, having regard to the effect of economics of scale on the cost of nuclear power is on the low side—certainly at the bottom end of the desirable bracket. Clearly, there are difficult questions of priorities and national interest, and I am not surprised to hear that the Government need more time than they have had to examine all the aspects of this question before they are able to reach a conclusion.

There is, however, one point of special importance. Most of the systems at present under consideration for future nuclear power generation require the fuel to be uranium enriched in the isotope Uranium 235. It is therefore essential to prepare a source of supply. We have at Capenhurst an isotope separation plant of the diffision type which provides us with a source of indigenous material. Construction of this plant against time some fifteen years ago represents one of the great post-war triumphs of the British engineering industry, little publicised, but, in comparison with the experience of similar plants abroad, highly significant. At present, it is working at a low level in the absence of military demand for enriched uranium, and, for reasons which are fairly well known, its product would not at present compete in price with that which is now available from the United States. However, at the cost of a relatively small further capital investment it could be brought up to date and its product would be, if not equal to, at least within range of, the American price, and no doubt in practice both sources of supply would be drawn upon.

In the past[...] have been suggestions that the factory at Capenhurst should be closed down. It seems to me imperative that this should not be done. Here is a technological process of the most advanced kind in which we have a leading position. Here is a semi-processed material which, quite apart from its military importance, will become increasingly required for civil purposes. It would seem to be to be an act of folly to discontinue this process in the United Kingdom or to fail to bring it up to date and thus leave the production and supply of this material in the hands, however friendly, of the United States, of France, of the Soviet Union or perhaps of some other country in the future.

The rest of the nuclear fuel cycle is now fully provided for by an efficient fuel element factory at Springfield and efficient fuel processing plants at Windscale and Dounreay. All these plants have ample capacity for the foreseeable needs both at home and abroad. With these facilities the production group of the Atomic Energy Authority has in the last year or so been successful in obtaining foreign business worth many millions of pounds. This is an indication that though these facilities were primarily designed for domestic purposes, both civil and military, they are producing a return in the export field which is far from negligible. Clearly a decision on the United Kingdom programme in favour of a British system would greatly help these activities.

I now turn to organisation. At the present time our own nuclear industry is, I think, in a state of uncertainty and transition. There is, I believe, much to be said for the view that this is due mainly to the way in which we have organised ourselves for the production of nuclear plant. In retrospect it seems unfortunate that when it was decided to exploit the graphite gas-cooled reactor system commercially no fewer than five different industrial consortia were formed for the purpose and that five different applications of the system were ordered. Accordingly five different design and development teams had to be established, and the Atomic Energy Authority was given the difficult task of developing simultaneously five different types of fuel elements. No doubt the extent of the market was at that time overestimated. No doubt it was right not to put all our eggs in one basket, or perhaps I should say one pressure vessel. There was perhaps an assumption—fallacious in my opinion—that the existence of five different groups would preserve a degree of real competition for the generating boards.

But, however good the reasons, the fact is that our competitors in other countries have managed to concentrate their industrial effort and their resources from the outset, whereas our effort and resources have been dispersed. The Americans have taken advantage of the economies of scale while we have persisted in the policy of the "one-off"; and although certain changes have now been made, I do not think that on the production side we have yet recovered from the handicaps which our system of organisation has imposed upon us and which certainly in the export field have robbed us of the highest prizes.

On the demand side, the two Generating Boards were already established as monopoly purchasers and the Atomic Energy Authority became, in practice if not as a matter of policy, a monopoly supplier for fuel elements. I believe that the concepts of a monopoly purchaser and a monopoly supplier are bad in principle. Both tend to the exercise of excessive influence, though of course a monopoly supplier is in a weaker position than a monopoly purchaser, since it is always open to the latter to look overseas. The Electricity Council and the Central Electricity Generating Board have single-mindedly pursued the laudable object of cheap power for the electricity consumer. But a single criterion does not necessarily resolve a problem, nor does it follow, to borrow a transatlantic expression, that what is good for a public board is good for a country. Other factors of a political, strategic and social nature have to be brought into the assessment, which only the Government of the day can make. Such matters cannot be settled by public boards, in this case, for example, by the Atomic Energy Authority alone or the Central Electricity Generating Board alone, or by both together.

And let me say, in parenthesis, that this latter contingency is by no means as remote as might be supposed. Indeed, I wish I could do something to lay the ghost of the supposed bitter antagonism between the Central Electricity Generating Board and the Atomic Energy Authority, of which I have read so much. I believe that the supply of fuel elements is now entirely satisfactory both to the Authority and to the Board, and, as far as development is concerned, it is quite natural and healthy that there should be some difference of approach and judgment between the developer and the operator. But I believe that the relationship between these two bodies is now good, and in fact the issue lies, in my observation, much more between the Generating Boards and industry than between the Boards and the Authority, and although some changes have been made I doubt whether this situation is even yet satisfactory.

The Central Electricity Generating Board has built up its own team of scientists and engineers with prime experience of the graphite gas-cooled system, and this has, not unnaturally, created a tendency to multiply the requirements, the specifications and the paraphernalia of tendering, which imposes an almost intolerable burden on those concerned with the designing of nuclear power stations. The curious thing is—and I stand open to correction on this—that the Generating Board seem prepared to take on trust from foreign suppliers what they are not prepared to take on trust from British suppliers. This means that the foreign tender costs less to make, and there is a built-in temptation for United Kingdom firms to take the easy way out and accept the foreign designs. This state of affairs is discouraging both to the industry as far as overseas orders are concerned and to the foreign purchaser in regard to his confidence in the British product.

LORD STONHAM

My Lords, may I interrupt the noble Lord? Can he give any evidence of the C.E.G.B. being less rigorous in their requirements in respect of foreign reactors than those of our own production?

LORD SHERFIELD

Since the C.E.G.B. has intimate experience of the graphite gas-cooled reactor system, they know much more about it and therefore are much more particular, whereas so far as foreign systems are concerned, since they have not been involved in the research and development they are more inclined—and I am not saying it is not quite natural—to take what is offered on trust; and this appears to produce a situation of some inequality, which I think is regrettable.

I know of no way of moderating the power of a large public monopoly otherwise than by governmental influence. I suggest that the present situation is having a harmful effect on the chances of our industry competing with foreign suppliers or maybe even of staying in business and that there is a prima facie case for Government intervention; and I was glad to hear from the noble Lord, Lord Stonham, that this situation is under review. I think the least the Government ought to do is satisfy themselves, in assessing the different systems of nuclear power generation, that the conditions and assumptions made are precisely the same in the case of the domestic and of the foreign systems in comparison.

Too often in the recent past we have led the world in early research and development of a new invention or process, and then at a later stage of the development have allowed the ball to be taken from our hands and carried off by our American or other competitors. This may sometimes have been due to lack of resources, sometimes to faulty or wasteful organisation, but perhaps also to a certain failure of will and resolution. Are we going to allow this to happen also in the civil applications of atomic energy?

Important decisions lie before the Government here, and they will need to be taken in the next few months. There are the decisions about the nuclear power programme to which I have referred. There is a decision on the construction of a prototype fast reactor power station, in the design and development of which we are, thanks to the experimental facility at Dounreay, still, I believe, ahead of the rest of the world. There is a decision about the future of the diffusion plant at Capenhurst. The Government have proclaimed their strong interest in the technological advance of this country. Here is a field in which we are in all respects already in the forefront, and in some respects still, though perhaps not for much longer, ahead of other countries. The moment of decision is near, and the issue is whether to push the machine over a dead centre and go forward, or allow it to fall back and watch our competitors reap the benefit of all the effort which has been put into equipping ourselves with the capital works and the scientific and engineering know-how for the production of nuclear power and the other benefits of the nuclear age. I hope that we shall have the courage and the confidence to back our own horses.

THE EARL OF BESSBOROUGH

My Lords, before the noble Lord sits down, I wonder whether I could ask him one question. He made a most interesting suggestion about the conversion of Capenhurst. Can he give us a rough estimate of what this will cost for the purposes he has in mind?

LORD SHERFIELD

My Lords, I would prefer not to do that, because I am a little out of date as regards some of these calculations.

4.53 p.m.

LORD FERRIER

My Lords, I propose to confine the few remarks I have to make to a much more pedestrian subject than that with which the noble Lord has dealt in such an interesting way, and to confine myself to electricity supply in general terms and within the four corners of the Motion of the noble Lord, Lord Hawke, in respect of future investments and in drawing attention to the Annual Reports of the Electricity Council, et cetera.

As has been clear to your Lordships from what has been said in the debate, electricity is no longer a matter which can be dealt with in isolation when one is considering the power requirements of the nation. But it is a highly efficient section of our nationalised industry. I am sure I am speaking with your Lordships' sympathy when I say how pleasant it is to see with us to-day the noble Lord, Lord Citrine, who presided during the difficult years of the formation of this nationalised industry, which is most efficiently run, although, of course, it is well to remember that another method of employing and harnessing the electricity power of the nation might be found to operate more easily, and more economically in the long run.

But I want to draw particular attention to a paragraph in the Report of the Electricity Council where, in referring to the announcement in January last that there will be further upward charges in the bulk tariffs, it says: This was to enable the Board to meet the higher costs associated with the expansion of their capital programmes and with the increased use of the older and less efficient power stations due to the shortage of plant. This seems to me to call into question a matter of principle. If it means that existing tariffs are not high enough to cover depreciation and amortisation of existing plant, then certainly the tariffs are too low. If that is the case, they must be raised. Perhaps in that measure the increased tariffs may stem from inflation, as other noble Lords have said to-day; but that again is another matter. In my view, it is not correct to contemplate the raising of tariffs to enable the Board to meet the higher costs associated with the expansion of their capital programmes.

We have had some glimpse, not only in the speech of the noble Lord, Lord Sherfield, of the enormous figures which are involved when we come to generation by atomic power. It is fair to bear in mind that to increase tariffs to-day in order to meet increased capital costs in the future can well be interpreted as charging existing consumers higher rates so that future consumers can benefit. As the noble Lord, Lord Stonham, made plain at the end of his speech, we must remember that power tariffs are the life blood of the economy of this country, and increased rates now may well mean increased costs for industry now, and such might have long-term effects, including the restriction of industrial expansion. Another effect of reduction of industrial expansion is a curtailment of future Lord requirements in relation to electricity supply.

One matter, which perhaps the noble Lord who is to reply might deal with in his speech, and which has confused me and may well confuse other noble Lords, is that on the one hand we have a statement that increased costs must be met by higher tariffs, and yet it is perfectly plain—the noble Lord, Lord Hawke, made this point in his speech—that as atomic power develops in efficiency, and as thermal stations develop in efficiency, so the cost per kilowatt goes down. My mind is not clear on where that affects an approach to electricity tariffs in respect to this intimation that they may have to be raised in order to meet increased costs.

On my next point, which to my mind is not of the same weight but is of general principle, I think it is easier to turn to Scotland and to the problems of the Hydro-Electric Boards. I think that perhaps the best thing to do is to turn to the Mackenzie Report where, at page 9, it says that the Committee envisaged that the Board would co-operate in schemes for the regeneration of the Highlands. To my mind, and in my own personal experience, there is here a big problem in regard to how much of the cost of general social benefits, rural benefits—call them what you will—is fairly chargeable to the cost of electricity. Here I believe that a great deal of careful thinking may still be required.

Other noble Lords have indicated that there is going to be plenty of thinking ahead for those who are going to plan our power development. The point I wish to make is that in their thinking let it be borne in mind (and I am not belittling the achievements of the Hydro-Electric Boards or anything like that) that the cost of any amenity other than what is specifically related to the production of electricity could well be said to be chargeable to the State and not to the consumer, which is where it ends up, if it is included in the cost of the production of power.

I should like to turn to what has been mentioned about off-peak generation and pumped storage. No mention has been made to-day—and I do not recall having seen anything about it in the Board's report—of the fact that the gas turbine can produce a "peaking" unit which is very rapidly capable of being placed on load, but pumped storage equipment provides for the consumption of off-peak power. The price which hydro stations can supply for peaking at the present rate is, I know, equal to or below that at which the thermal stations would have to supply into the system if old plant were to be used. But is this particular approach low enough? Should it not be the case, if, as I suggest, there is an element of social cost in the price output of hydro power, that the lower cost at which they can supply should be the measure at which a hydro station could feed into the system at peak hours? On the subject of pumped storage the Cruachan plant is of wonderful construction, and had the advantage of being completed a month or so ahead of time. One additional advantage, which it is well to bear in mind, is that it has a catchment area which of itself provides many kilowatts of power.

As for off-peak load, suggestions have been made of various outlets for this power. I, personally, feel that not enough attention has been given to the possibility of pumping water, both for water supply and for the de-watering of mines and the like, on off-peak tariff. There must be a stage at which off-peak tariffs can reach a rate at which double or triple shift working may be possible with electric power in various industries, though not all of them. Has that stage been reached in any of our industries? Are our off-peak tariffs really attractive enough to bring on Lord all the industries and all the apparatus that might be brought on load?

I feel that it is worth turning to the matter of thermal storage heating, which has been referred to in various reports. There has been a remarkable growth in 1963-64, amounting to a 70 per cent. increase in the use of unit plant storage heaters for space heating in domestic establishments. This is a remarkable growth, and it is well to remember the fact that the domestic storage type heater was made available to domestic users stemming from a Question and Answer in this House. But an increase of that measure cannot be expected year by year, because this related to a time when domestic storage type heaters were not available.

I may have spoken in a very theoretical and perhaps rather pedestrian way, but I have spoken on these matters of basic principle which, within their limits of practicability, remain principles. I urge the Government in their thinking to keep these matters of principle in mind. Listening to your Lordships to-day has certainly given me the feeling that the thinking which needs to be done—and which in the light of what the noble Lord, Lord Sherfield, has said must be done—will be a fascinating adventure. Certainly more time is needed to study the matter. The point which I wish to make is the relationship between finance for the future and tariff formulation to-day and in the years to come. This is of paramount importance.

5.5 p.m.

THE EARL OF DUDLEY

My Lords, I should like to congratulate most heartily the noble Lord, Lord Hawke, on the admirable way in which he presented his important Motion. I should also like to congratulate the noble Lord, Lord Stonham (I am sorry to see he is not in his place), for the very satisfactory reply which he made to many of the questions raised by Lord Hawke. It has been a most interesting debate; it has covered a very wide field, but it has clarified a great many problems which we all want to know something about.

In my younger days, before the nationalisation of the coal and gas industries, I was closely in touch in many directions with the gas industry. I still follow its progress through the Institute of Gas Engineers, of which I was for quite a long time President. I had not intended to take up too much of your Lordships' time to-day, but I should like to ask four questions of the Minister—three of which have already been raised by Lord Hawke and have been dealt with by Lord Stonham, which is rather frustrating for me. However, if I repeat them again it is only to try to elicit from the noble Lord who is to reply to the debate something more in regard to £s. d.

Of the three sources of energy which have been referred to to-day, namely, electricity, gas and atomic energy, gas is the most economical and we hope that it will become cheaper still. It is, however, important to remember where gas comes from. At present we are dependent largely on the old-fashioned method of producing gas, by the carbonisation of small-sized British coal. This is a costly process and, by the time the local gasometer has been filled, I would say, at a guess—and it is a pure guess, for it varies up and down the country—that on average it costs something in the region of 1s. to 1s. 1d. a therm. This process which we use to-day is rapidly being superseded by new methods of producing gas from petroleum or by natural gas.

We have heard from the noble Lord, Lord Hawke, about the frozen natural gas which is already being transported from Algeria. It comes from the Sahara, it is transported by pipe-line to the Algerian coast, and is brought to the Thames in two specially constructed insulated gas containers. The United States-British-French combine has just opened a 64 million dollar plant at Arzew for this purpose. The noble Lord, Lord Stonham, replied to that. But I should like to know whether it is proposed to increase that method of production and transportation, if we can get the gas, and how much more economic the price is going to be compared with production by carbonisation. I am under the impression that it costs about 7½ d. a therm, delivered to the Thames. I wonder whether the noble Lord who is to answer this debate can clarify that, and say how much more of the gas we are likely to get if we require it.

The new field in the Netherlands has already been referred to by the noble Lord, Lord Hawke, and the noble Lord, Lord Stonham, and I am very glad to hear that progress is being made with N.A.N. who are the Dutch group handling it. I read somewhere recently, that a pipe-line from the Netherlands to the British coast would not pay unless the gas could be delivered to this country at about 5½ d. to 6d. a therm, which seems to be a very low figure. I wonder whether any estimate has been made of what the gas would cost to come from the Netherlands if a pipe-line were built.

Also, we have heard about the fact that twenty of the great oil companies, as well as the Gas Council, have already commenced operations with a view to proving petroleum deposits close to the British coast, thus providing natural gas or petroleum oil from below the North Sea. I wonder whether the noble Lord can give us any idea what the gas is likely to cost per therm, if it is proved. Fourthly, certain other processes have been developed under which light petroleum distillates from our British refineries can be easily and cheaply converted into gas. I am told that the cost of that is about 7d. or 8d. a therm. Is that the right figure; and how much more gas are we likely to get from that means of production?

All these petroleum-based fuels are efficient and cheap to produce, and I believe that the British Gas Council has quite properly concentrated its attention on all four of these possibilities. It follows, of course, that coal gas will inevitably be displaced by petroleum or natural gases as their production, which is already well advanced, proceeds further. In that case, as the production of coal gas is reduced so the production of coke will likewise be reduced, and we may have to face a shortage of solid smokeless fuels for our new smokeless zones. That matter was also referred to by the noble Lord, Lord Stonham, but my hearing is a little imperfect and I could not quite hear whether or not there would be sufficient coke for that purpose. Obviously, difficulties would arise at this stage if a further strain were put on electricity and gas in the smokeless zones.

LORD STONHAM

My Lords, it is not anticipated that there will be any shortage.

THE EARL OF DUDLEY

My Lords, coke ovens in steelworks are also gradually being superseded by other methods, and it seems that the production of coke will eventually almost disappear, with a permanent adverse effect on our coal industry, owing to the loss of a large and long-established market for coal. But that point, again, has been referred to by the noble Lord.

Finally, there is the question of what might happen if this country were again to be engaged in a continental war, and we were relying on gas piped from abroad or brought here in a frozen state. But I suppose that, in any case, the questions that I have raised this afternoon would form only a very small part of a very large problem in a petroleum-starved country such as we are.

5.15 p.m.

LORD CITRINE

My Lords, my first words must be to congratulate very sincerely the noble Lord, Lord Hawke, upon introducing this subject this afternoon. His remarks were fair and temperate, and quite well informed. But the impression, which I have had almost from the time I first came into this House, is confirmed, about how careful one should be to avoid generalities, because it is almost certain that in some part of the House there will be an expert, or a series of experts, who will demolish the premises upon which a speaker has raised his case.

I cannot claim to be an expert, but I am one who has been associated with two of the three industries mentioned in the Motion. Both of them I found were efficient, and there was a degree of enthusiasm which was inherited by nationalisation. It was not evolved with nationalisation, but I hope that it was improved and stimulated, and it seemed to permeate the officials. The engineers and the commercial people believed in the service they were performing, and that made my ten years of chairmanship of the British Electricity Authority and its successor, the Central Electricity Authority, a very happy time indeed. Then I had five years as a part-time member of the Atomic Energy Authority. I found the engineers and scientists and members of the board with a progressive outlook, always wanting to embark upon some experiments or some new phase of work, but always restrained by the indirect but none the less effective shadow of the Treasury.

With gas I have nothing to do. I am a small consumer, and I try to be as small a consumer as is consistent with my household requirements. But I have long been an admirer of the ingenuity exercised by those who belong to that industry in fighting what I have long believed to be a losing battle—though I do not feel quite so confident of that to-day, in the light of recent developments which seem to have given the Gas Council, and the industry generally, a new lease of life. They are embarking upon a new era, the outcome of which I sincerely hope will prove successful; and I hope that it will provide an additional stimulus to the electricity industry further to increase its efficiency and so retain what is, I think, its well-deserved lead.

The noble Lord, Lord Hawke, performed a service in a direction which I think is particularly useful. I often writhed, when I was Chairman of the Electricity Council, at the perfunctory way in which the Reports of my own Board, and those with which I was associated, were dealt with in Parliament, not because of lack of interest but because of lack of opportunity fully and properly to investigate and examine the detailed matter set out in the Reports. The Annual Reports of all these bodies are literally packed with information. Indeed, I would say that the summaries of the Tables, particularly the Financial Tables, would repay study even by an expert accountant.

Infinitely fuller evidence of the activities of these Boards is given in those Annual Reports than is ever given by private companies in their reports. And in saying that I am not unmindful of the fact that a number of the larger companies produce admirable reports, usually well illustrated and quite expensive and attractive in their "get-up", which describe to a much greater extent to-day than was the case, say, 20 or 30 years ago the activities in which they are engaged, and the results of those activities. Those private companies have not the ordeal of periodical scrutiny by a Select Committee of another place. I think many of them would view with horror the prospect of anything of the kind, and would, to some extent regard it as a handicap. I say that because what is not realised is that when one is conscious that a periodical review will come along, or that some ad hoc committee may be appointed, a considerable number of people are looking over their shoulders and preparing data for when that time arrives. The freedom which one hoped for the public corporations has, in my opinion, been gradually whittled away over the years since nationalisation was introduced in 1947.

What should not be lost sight of is that, so far as gas and electricity are concerned, and to a lesser extent atomic energy, these industries are fiercely competitive. That is a curious thing to say about monopolies, but it is the fact that all of these industries are, in some sense or other, meeting fin the case of atomic energy, only at marginal points with the Central Electricity Board, but wholly in the case of the gas and electricity industries) open, keen and constant competition. I know more about electricity supply, of course, than I know about the other two; but, as this Motion is calling the attention of the House to the Reports, it may not be out of place to remind noble Lords who have looked at the Reports of the Electricity Council of some of the achievements.

There are now 16¾ million consumers of electricity in England and Wales; and, if we add the South of Scotland (which, when I was Chairman, up to 1925, at least, was served by the British Electricity Authority), there are over 18 million consumers of electricity to-day. That figure, of course, excludes the North of Scotland. The revenue for the industry last year was £912 million, and there was what I would call a surplus (and it was so called during my period), though it is now euphemistically described as a "balance of revenue", of some £70 million, after meeting huge sums for depreciation and interest.

An instruction was given by Parliamentary Resolution to the Electricity Boards to speed up the development of electricity on the farms and rural premises generally. A promise was given that 85 per cent. would be connected by 1963. But that promise was exceeded, and to-day some 92 per cent. of all the farms which are in any way eligible—some are too far away from the system to make it, by any sort of imagination, economic to serve them—are connected up. I should like your Lordships to think for a second of what that means. In pre-war days, some 3,000 farms a year were being connected to the public supply, either by private companies or by municipalities which had sufficiently large boundaries. That total was raised during my chairmanship—though not due to any effort of mine—to 15, 000 a year; and the price of electricity to the farmers and the farming communities is exactly the same as the Board's charge to their consumers in the various cities and towns and other urban areas.

The policy which was pursued by the electricity authorities in my day was to keep prices down. We believed that prices were rising too rapidly altogether throughout our community, and we thought we had some small contribution to make, as an Electricity Authority, by producing electricity as cheaply as we could and by selling it as cheaply as we could. We had a huge capital programme, and the stage was reached when the Government came along and said, "You must raise more of the capital you require from your revenues". In other words, we were required to engage in self-financing to a much greater extent than was traditional in the industry. We eventually agreed to about half of the total capital being raised from our revenues, and that policy has been continued since by all the Boards.

Noble Lords may remember the White Paper published by the Government which required the Boards to earn something like 12½ per cent. on their net assets. That position was reached last year, so that half the total investment comes from the Board's own resources. The remainder comes from borrowing from the Government, on which they have to pay the current rate of interest, which has been as high as 6¼ per cent., and, I rather think, at a particular period, 6¾ per cent., though I am not sure of the latter figure.

Reference has been made this afternoon by the noble Lord, Lord Stonham, to the capital cost of the power stations. Construction costs are going up, as they must go up in response to the various calls upon manufacturers. They went up by 44 per cent. over the ten-year period from 1954 to 1964: but the cost per kilowatt of the plant went down by 36 per cent. This, I think, is a remarkable achievement, and is the result of initiative and of a good deal of courage and boldness in installing untried generating sets—boilers out of all comparison, in size and capacity, with those that had been utilised before—and, by that means, getting the cost down.

The thermal efficiency of the industry, too, has been raised enormously. When I became Chairman it had been, I think, 2019 per cent., or, something of that kind; that is to say, of the heat extracted from the fuel, only some 20 per cent. was being turned into useful energy. Last year, according to this Annual Report of the Electricity Council, the average thermal efficiency was 27-67 per cent. Those of your Lordships who have looked over the Report may have said that this is not much of an increase because the previous year it was 27-44 per cent. These figures can conceal some very dramatic results. In my day on the Electricity Authority a saving of one-tenth of 1 per cent. on our then coal consumption meant a saving of 180, 000 tons of coal a year. With the greatly increased consumption of to-day it means far more than that. In the later days of my association with the industry I heard a chairman use the expression that there were no foreseeable limits to the development of electricity. I know that that sentiment was not shared by the officials of the Treasury who exhibited a pessimism that has long since been falsified.

My Lords, to turn to atomic energy, the noble Lord, Lord Sherfield, has given your Lordships various principles and a great deal of the details as to how the Authority is carrying on. I should like to remind your Lordships that the 1955 programme, which was published as a White Paper and debated in Parliament, was based on the premise that by the end of 1965 there would be insufficient coal available from the National Coal Board to provide our power stations with their requirements. Subsequently that estimate was very much revised. But the programme was based on the assumption of an impending coal shortage; and some day or other that shortage must arrive. That was the basis on which it was decided to go ahead with the 1955 programme. And I personally was in favour of that programme, although it could not, as it were, produce any economic results better than those we were then obtaining, or indeed anything like as good as those we were obtaining, from our conventional plant.

LORD SHERFIELD

My Lords, if the noble Lord will allow me to interrupt, I was not so much criticising the size of the programme, or referring to the size of the programme, as referring to the dispersion of effort between different types.

LORD CITRINE

Yes, my Lords, but I am not on that point, although I think I could put another side of the case. The point I was on was this. The first programme was a small one, 1,500 to 2,000 megawatts; that was the 1955 programme. It was received by the general Press almost like a fairy tale. Here was a new fuel coming along just at the time when we needed it, a fuel that was going to resolve all our problems. I knew that in many quarters suggestions were made that in five years' time or thereabouts no more conventional stations should be built; that all should be atomic energy stations. The enlarged programme that came along, it should be remembered, was propounded by the Conservative Government. It was not the programme of the British Electricity Authority or of its successor, the Central Electricity Generating Board. We knew very well that there was an element of risk in any programme of this size—technical risks and also financial risks. But we were told by the Government of the day, a Conservative Government, that they were most anxious for the enlarged pro- gramme, that the Cabinet themselves wanted us to go up to 5,000 or 6,000 megawatts; whereas our estimate of the maximum that we could safely produce from the economic viewpoint was some 3,500 megawatts.

I am not giving away any secrets, because all this was stated in the Report of the Select Committee which two years ago, I think, went into the electricity supply industry. The programme, of course, was slowed down subsequently and, as stated by my noble friend Lord Stonham, the target is not expected to be achieved until 1969. I want to say this about the Atomic Energy Authority. They have always loaded the dice against themselves; their estimates have always been on a very conservative basis—and that should please noble Lords opposite. Their expectations were always toned down and, from a promotional point of view, the worst possible case was put forward. A life of twenty years for the station! Neither Sir Roger—when one has sat at a table for five years calling a man "Sir Roger" it is difficult to remember that he is now the noble Lord, Lord Sherfield, and I apologise for that slip—nor anybody can say whether the life of the stations will be twenty years, thirty years or forty years. I have seen estimates of that kind from very reliable sources.

A Lord factor of 75 per cent. has been given for the calculations. Yet your Lordships have heard this afternoon that there are stations doing 87 per cent.—Chapel Cross station and Calder Hall station. Some have for a period of three months been up to 92 per cent. A high rate of interest has always been included in the estimate, higher than was available at the time the estimates were made. And the life of the fuel used, uranium, has always been underestimated. And very wisely so, because in dealing with experimental fuels it was wise to take very careful estimates of the results. But the 3,000-megawatt days which figured the estimates and on which these Magnox stations have been built has already proved to be well below what can be achieved. The Atomic Energy Authority and its officials have no doubt whatever as to the future. They believe—and they have solid evidence for this—that their advanced gas reactor is probably as efficient as any in any part of the world. I hardly like to risk quoting from memory the capital cost of that station, but I believe it was in the neighbourhood of £82 10s. a kilowatt. But they are confident that an enlarged station can be built which would be able to generate electricity at 0-4d. per unit.

Then there is the Dounreay fast reactor, now up to its full heat output. I do not think the world will ever realise what ingenuity has gone into the building of that plant. It was a most difficult job. Yet the predictions of the scientists and engineers have been fulfilled. Then they have two other types of reactors. They have the steam generating heavy water reactor which I believe will be a winner. I saw the plans of it, I heard discussions on it and I saw the estimates, and I am very much in favour of it, as I was of the 100 megawatt prototype. Your Lordships have heard from the noble Lord, Lord Sherfield, about the essential character of research. But it is a terrible thing for scientists who have embarked upon some plan for the future, perhaps for several years ahead, perhaps for a decade ahead, to find those plans frustrated by reason of a Government policy which feeds them only from year to year with the capital they desire. You cannot run an industry on that sort of basis successfully. So I hope it will be possible to give in extended measure the capital necessary to carry on an extended research by the Atomic Energy Authority.

So, my Lords, I reach my conclusion. These industries are, all of them, confident and efficient. They are vigorous and they are alert; they are viligant, they are enterprising and they are in competition—that competition which is so dear to the hearts of noble Lords opposite. They have an enthusiastic: belief in the commodity and the service they are rendering to the community. Speaking for myself, the happiest years of my life—and I have had many in other services—were those spent in public service in the nationalised industries.

5.41 p.m.

EARL FERRERS

My Lords, we are greatly indebted to my noble friend Lord Hawke for putting this Motion down and enabling the House to discuss this important, highly technical and complex subject. I am particularly glad that the noble Lord, Lord Citrine, took part in this debate. He says that he is not an expert; but when I know that he was Chairman of the British Electricity Authority for ten years and a member of the Atomic Energy Authority for five years, it makes a mere novice, such as I am, wish to regain his seat with quite unprecedented rapidity.

When I first saw the Motion which my noble friend put down, I was surprised at the scope and enormity of the debate which it depicted, because each of the industries which he mentions could well occupy your Lordships' attention for all of one afternoon and evening on its own. But it is right that in discussing the policy for the production of energy as a whole, we should discuss these methods together. I agree with the noble Lord, Lord Stonham, that this question is the basis of all our existence. We talk gaily about increasing productivity and about building new roads, new houses and new factories, and take for granted that the power to light, heat and energise these places will be there for the asking. It is right that it should be there for the asking but it requires careful thought and long-range planning, and we have constantly to be prepared to alter our plans and our predictions if in any way they are shown to be inadequate.

It is necessary to know exactly what we are aiming for in a power policy and exactly what our principles should be. I suggest that, first, we must ensure that there is enough fuel of all kinds to meet the needs of British industry and the domestic consumer as a whole; secondly, that the price of the fuel must be such as not to put our industrialists out of line with their competitors; thirdly, that the supply must be secure, and fourthly, that there should be sufficient supplies to allow the consumer to choose the form in which he wants to take his energy, whether it is coal, gas, electricity or oil. To achieve these principles requires well-founded fuel industries which are modern and up to date in their technique and which are not subject to erratic and sudden changes of policy.

The first thing I would do is to impress upon Her Majesty's Government that, in developing our fuel policy, we should expand on a broad front and encourage every facet of these industries. We may well find that it is dangerous to develop excessively one form of power production at the expense of others, by spending too much of our national resources on the production of what looks like, at any one time, the cheapest form of fuel. If one type of fuel or, indeed, one type of production of a fuel were to be unduly cheapened, an excessive demand for this would be stimulated and we should find that much of our national resources was being spent on developing a particular branch of the fuel industry at the expense of the others. This does not mean that every effort should not be made to encourage the cheap production of fuel. But, when we consider the investment to be placed in industry as a whole, we should keep a balance, I would suggest, between the various methods of production and types of fuel, expanding where possible and encouraging new methods, but not necessarily at the expense of the more conventional, and equally not discarding too quickly an industry or method of production within an industry which appears at the moment to be not so economically successful as some of its rivals. At the same time, we must not tolerate out-of-date methods.

Of all the power industries, the electricity industry takes by far the largest proportion of capital investment—some £650 million, of which the taxpayer provides about half. So Her Majesty's Government have a big and loaded interest in the electricity industry. But this enormous amount of capital expenditure is in order to ensure that our electricity supplies are adequate for the future. As the noble Lord, Lord Stonham, pointed out, our capacity is only just within the bounds of the demand—in fact, it is not quite within the bounds. Everyone has the right to expect in cold weather and in hard winter to be able to call for more fuel. Bearing in mind that electricity demand increases by some 10 per cent. a year and that it takes some seven years for a new power station to become operative after the decision to build it has been taken, long-term planning must be accurate and must not fall down.

We have heard a great deal from the Chancellor of the Exchequer of how he is going to review Government expenditure in order to counteract the state of affairs which at the moment exists in the economic sphere. There are a num- ber of questions I would ask the noble Lord, Lord Hobson. Do Her Majesty's Government intend to cut the investment programme of the electricity industry? If not, will the noble Lord give an assurance that this will not be cut? What, in fact, are Her Majesty's Government's proposals for the future building of power stations? How many stations are going to be built, when are they going to be built, and where? By what methods are these to be powered? Are we going to see more use of nuclear energy or are we going to continue to see them powered by steam? And, if by steam, how is that to be generated: by oil, by coal or by pulverised fuel?

I was interested to hear the noble Lord, Lord Stonham, say that for future nuclear stations it had not been decided whether to use the British advanced gas-cooled reactor or the American water moderated reactor. And I was delighted to hear the noble Lord, Lord Sherfield, put so clearly the advantages of nuclear energy and of the British system. I should like to endorse very much his remarks when he said that the Central Electricity Generating Board has the duty of providing electricity at the cheapest possible rate, but that this should not be the sole criterion in deciding what type of reactor should be used. If, indeed, the Government decide in the end that the American water-moderated system should be used, I hope that they will bear in mind the possible bridling of research that that decision might make inevitable on those who are already engaged in the designing and perfecting of the advanced gas-cooled reactors.

LORD STONHAM

My Lords, may I interrupt the noble Earl? Nothing that I said should be interpreted in any way as suggesting that the American reactor was going to be selected. Indeed, I indicated the exact terms on which tenders have been invited.

EARL FERRERS

I did not think that for one moment, and I was not aware that I gave that impression. If I did, I apologise. I accept entirely the fact that the noble Lord said that this decision has not been arrived at. The point I am trying to make is that when the Government come to make that decision they should have regard to the fact that production of the cheapest form of electricity is not necessarily the sole criterion on which the decision should be taken.

It is expected that nuclear power stations should be able by the early 'seventies to compete in cost with conventional power stations for the production of electricity. As noble Lords have already pointed out, the capital cost of erecting nuclear power stations is far in excess of that of erecting conventional power stations, although the running cost is considerably lower. We have seen in the last five years, since the construction of the Berkeley Station, that the capital cost per kw. of capacity has dropped from something like £177 to £106 at the Sizewell plant. What I should like to know (I do not know whether the noble Lord, Lord Hobson, can answer this) is whether it is anticipated that the capital cost of building nuclear power stations in the future is still likely to decrease on anything like the scale which it has in the past, and whether, when we have arrived at the point where nuclear power stations can compete with conventional power stations for the production of electricity, it is anticipated that the nuclear-powered system will become cheaper, or whether it will remain merely competitive.

In all industries the larger the unit of manufacture the cheaper tends to be the end product. This is so with electricity. There are the vast 500 mw. generating sets to which the noble Lord, Lord Citrine, referred; and, of course, they produce electricity more cheaply than the smaller sets. That is a substantial argument in favour of having them. But when one of these monsters breaks down, the chaos that results is considerably greater than if the set were of a smaller dimension. Therefore I wonder whether the noble Lord can throw any light on what might be expected in the future. Are we likely to see more of these large sets, or are they likely to be smaller—or bigger?

Continuity in supply is vastly important in the electricity industry, as in any fuel industry, and will become more so in the future as industry depends more on electricity and as the consequences of breakdowns become ever greater. One of the greatest causes of failure in the electricity industry is the process of reducing the electricity from high voltage to low voltage. This is of a technical nature. When this happens, frequently the fuses tend to blow one after the other—what is technically and rather graphically described as "cascading". This is a problem of some magnitude and is a great cause of the breakdown in electricity supplies. I wonder whether it is possible for more to be spent on research into this particular aspect, so that the continuity of supplies can be more readily available. What I should like to know, also, is what are the Government's plans—if, indeed, they have any—to deal with the situation caused by the fact that many of the underground cables in our big cities, and particularly in the West End of London, are rapidly becoming too small, in view of the vastly increased demand put upon them by consumers requiring more electricity. Is it intended that these should be replaced with bigger cables of adequate size, or is it intended that they should continue to be overloaded, with all the trouble that this causes?

My Lords, these are real problems which the electricity industry has to face, and problems which become the more acute when electricity is compared with any other form of fuel, and particularly with gas. In this connection, I wish to touch upon one very real disadvantage to electricity when compared with gas, and it is one that is best illustrated by two advertisements that one frequently sees, particularly in agricultural papers. One is by the Central Electricity Generating Board which depicts a person placing a pylon in a field or on the landscape and which says at the bottom: "Where would you put it?" The other is issued by the Gas Council, and depicts a field of barley growing quite beautifully, and underneath it says: "Last year a gas main was laid under here". I do not want to labour the point, because it was discussed some three weeks ago, but this is a problem; and I feel that much more money should be spent on research to see whether it is not possible to lay underground cables more cheaply and more effectively. It is done in other countries, and it should be done in this country, if our ever-depleted countryside is not going to become bogged down with a mass of wires. I suppose one cynical observation might be that all praise should be given to the Gas Council for not inflicting upon us a mass of monster black pipes, travelling over our heads about 100 feet high all over the country. I hope the Government will do all they can to see that more research is put into laying cables underground.

One of the disadvantages which electricity has is the fact that the capital cost of making gas in the new oil-reforming plants is only 25 per cent. of the capital cost of making electricity. The gas industry, of course, has revolutionised itself from being an almost defunct relic of the Victorian era into a modern, highly efficient, high competitive, highly productive industry, all in a matter of seven to eight years. There is in operation, as has been mentioned already, the very ambitious scheme of bringing Algerian methane to this country; and there are many other possibilities, such as methane from Holland, and the drilling for gas in the North Sea, not to mention the cheapest method of gas production, which is that from oil. At the moment, only about 6 per cent. of our energy requirements in this country comes from gas, whereas in the United States the amount is 30 per cent. So obviously, whilst one does not want to draw too close an analogy, there are vast possibilities for gas to fulfil a large part, and an increasing part, of our energy requirement over the next decade or so. But if gas is to be used on a greatly increased scale, one of the problems that is bound to arise is the question of storage. I hope that the noble Lord, Lord Hobson, will be able to tell us precisely what are the Government's views about underground storage. Will they permit it? Indeed, will they encourage it; and, if so, what will be the scale of the investment?

In all these considerations over the gas industry one must remember one significant fact, and that is that the gas industry has no built-in monopoly of any kind. There is nothing that can be done by gas that cannot be done by some other fuel. This means that it is essential, if the fullest use is to be made of all the potentials open to the gas industry, that the greatest freedom of choice must be allowed in the methods of gas making and in the use of raw materials.

The answer, I should have thought, is that each of these industries, whether gas or electricity should be given a great deal of rein so that they can develop whatever technique suits them best. We hear a great deal about planning, particularly from noble Lords opposite. Overall planning is certainly necessary. We must plan what our energy requirements will be for the future. We must plan the investment. But replacing enterprise with planning could well be a disaster, and I cannot help recalling the words in the Labour Party's pamphlet which I thought was rather offensively entitled as Twelve Wasted Years. It said: In spite of representation from the coal industry, the gas industry is being allowed to go ahead with the production of gas from oil. These are the complications resulting from making two public authorities compete, when a positive programme of co-operation (for example, siting Lurgi plants on coalfields and distributing the high pressure gas by pipe-line) could satisfy both the nation's fuel requirements and the stability of the industries concerned. My Lords, I wonder whether that is really the view of the Labour Party now that they have had a few weeks' experience of government. I wonder whether they really believe that it is wrong for the Gas Council to make gas from oil, even though it is cheaper, just because they might be damaging the coal industry by not using the other alternative of coal. I wonder, indeed, whether the new Minister of Technology would not prefer to make a meal of those words, and admit that it is by being competitive that these new processes have been evolved for the benefit of the gas industry and the country as a whole. We cannot afford to have doctrinaire views about essential industries. The main thought should be so to set the conditions that each industry can make the best possible use of the resources at its disposal and give of its best to the nation.

If we are entering a new era where modern technology is to be released to play a full part, I ask the noble Lord, Lord Hobson, to explain what are the Government's views about the production of gas. Are they going to insist that the Gas Council should make its gas from coal, even though gas can be produced at two-thirds the cost from methane, and at less than half the cost from oil? Or are they going to sanction and bless an increased investment in the gas industry to make the best use of the most up-to-date and modern forms of production? These are real problems and I, for one, would be the first to say that they are by no means easy of solution. But they are problems on which we in this House wish to have the Government's views, and I hope the noble Lord will not be content to brush your Lordships off with the answer that these matters are under review. The Government must have an opinion, and I invite the noble Lord, Lord Hobson, to give us that opinion.

We want to know what is the Government's intention with regard to capital investment in these basic industries. In this regard I hope that the noble Lord, Lord Hobson, will give a clear and concise indication on one other point of great importance. In April, 1961, the Government published a White Paper entitled, The Financial and Economic Obligations of the Nationalised Industries, in which clear objectives were stated with regard to the finances of the nationalised industries—for instance, that surpluses should be at least sufficient to cover deficits over a five-year period, and that allowance should be made in the accounts of the industries for interest and depreciation on capital. Do Her Majesty's Government adhere to the principles as laid down in this White Paper?

I am not asking these questions of the noble Lord to score a few debating points, but because I genuinely want to find out what the Government propose to do. We have had a change in Government—mistakenly in my view—and we have had new minds put into the top positions: not necessarily be;: ter minds, not necessarily worse minds; but fresh minds. What we want to know is what view these minds have taken, and whether the views are the same as they were when they were in Opposition; for if they are, we are in for some surprises. But it may be that they have been mellowed after a period, even a slight one, of responsibility. But whatever decisions may be taken, we must remember that the results of these decisions will not be made effective over the next year, or the next two years: one may not see them for the next five, six or seven years. Therefore the important thing is that these decisions should be as near right as we can get them.

6.7 p.m.

LORD HOBSON

My Lords, I think we shall all agree that we have had a most interesting and informative debate, and we are grateful to the noble Lord. Lord Hawke, for raising this very important question of a fuel policy, which is of paramount importance to the economy of the nation and the wellbeing of all of us. In your Lordships' House we are exceedingly fortunate in having among our Members noble Lords who have had a lifetime of service either in the gas or electricity supply industry. One has only to look back this afternoon at the contributions that have been made by the noble Lord, Lord Wolverton, the noble Earl, Lord Dudley (who has associations with the gas industry), the noble Lord, Lord Sherfield (who was a prominent Chairman of the Atomic Energy Authority) and the noble Lord, Lord Citrine, who was probably the founder of the Central Electricity Board, over which he presided so successfully for ten successive years.

It will be my object this evening, in the time at my disposal, to endeavour to answer seriatim the questions that have been raised—and they are many. There may be sins of omission and commission, but in that event I will write to the noble Lords, and give them, I trust, not an evasive reply but the answer which, though they may not like it, they perhaps require. When we are dealing with fuel and power (and I do not make a political point here) one cannot help remembering that these industries, coal, gas and electricity are very successful nationalised industries; and not even the present Opposition had any intention, while in power, of denationalising any of them. One of the advantages of these nationalised fuel industries, as has been pointed out by several noble Lords this afternoon, is that they are competitive one against the other; and that is one of the reasons why we have such successful fuel industries.

The noble Lord, Lord Hawke, in so far as he dealt with the coal industry, dealt with something—and I am not making a debating point here—which was outside the terms of this Motion. The noble Lord raised certain specific questions on this aspect, and I have been successful, I trust, in getting the required information. But the whole gravamen of his speech was that he was asking for a national fuel policy. It is precisely the intention of the present Government to supply one. But this cannot come about overnight. I think that anyone who is devoid of any political aims would agree that prima facie this is something that is absolutely essential and vital to the economy of our country. We shall endeavour to achieve this national fuel policy, but, as I said, it cannot be done overnight. I am very pleased to know that we shall have the support of the noble Lord, Lord Hawke on this policy.

The noble Lord, Lord Hawke, raised one specific query: was the oil position secure? With respect, I think he answered his own question. Apart from the resources that are now known and are operated, there are, of course, vast deposits of oil in another part of the Commonwealth which are largely untapped. We know that they are there, and I think we can say with firmness that the oil position is secure.

The noble Lord was also concerned with over-capacity of power-generating plants. Of course, it depends on what is meant by over-capacity. There must always be adequate spare plant, but engineers may differ as to what it is necessary to regard as spare plant. But with the whole development of the Grid, and the development now of the Super-Grid, the amount of spare capacity which is required is less than heretofore. Certainly, I think it is safe to say that at the present moment there is not spare capacity, because in certain winter conditions we should need every kilowatt we can generate. But the aim, as my noble friend Lord Stonham has pointed out, is that eventually we should have spare capacity which is considered by the engineers to be adequate.

The noble Lord, Lord Hawke, also raised the question of off-peak loading and the question of tariffs. This is a very complicated question, but I shall deal with it. I assure noble Lords that I am not dodging this question, which was also raised particularly by the noble Lord, Lord Ferrier. But I can say straight away to the noble Lord, Lord Hawke, that the question of off-peak tariffs is a matter which is always being considered both by the Central Electricity Generating Board and by the Area Boards.

My Lords, at the outset of his speech, the noble Lord, Lord Hawke, raised the question of coal output. Coal output was 195 million tons for the year ending March, 1964. Future prospects of the coal industry in relation to the co-ordinated policy for fuel are being reviewed by the Minister of Power in collaboration with the noble Lord, Lord Robens, and his colleagues. Until the new review is completed it would be unwise to make any predictions about the level of coal output in future years, certainly not as far ahead as 1975, the year mentioned by the noble Lord, Lord Hawke.

I come back to electricity. The noble Lord, Lord Hawke, raised the question of the cost per unit in conventional power stations and the cost at Wylfa. I do not think this figure has been given. I am taking the Wylfa atomic power station, because this is the largest and, we trust, the most modern. The cost per unit at conventional stations is 0-54d. per unit and the cost per unit at Wylfa is 0-68d. It is interesting to note, and I think I ought to give this information here, that the output of Wylfa station will be of the order of 1,180 mw.

LORD HAWKE

Before the noble Lord leaves that point, will he confirm that these figures for Wylfa are, as I believe, based on what is termed the conservative basis of a 20-year life and 75 per cent. availability?

LORD HOBSON

That is perfectly true. I think the noble Lord, Lord Citrine, answered that point. I think we all agree.

LORD HAWKE

I was merely seeking information.

LORD HOBSON

At present, on what is known as ground assessments, it is on the basis of a 20 to 25-year life. They may last thirty years like the conventional station. Quite frankly, the answer to this is that we just do not know. We are in the field of a modern and new science. Let us take pride that it is the British who have developed it. I just cannot categorically answer that specific question and, frankly, I do not think anybody, even the experts, the engineers and the physicists can give a direct answer to it.

LORD HAWKE

The noble Lord has got me mixed up. Nobody is asking the noble Lord to say what the life of these stations is. We are only asking him to say on what life these particular figures are based; that is all; and the noble Lord has answered twenty years.

LORD HOBSON

These things are based on a 20 to 25-year life.

LORD HAWKE

There is a big difference between 20 and 25 years.

LORD HOBSON

I cannot be adamant about this. I am not prepared to be committed, but the noble Lord can take it as twenty years.

I now come to the question that has been raised by the noble Lord, Lord Wolverton, about the types of reactor and, in particular, about the boiling water reactor. The fact of the matter is that at the present moment there is no British made boiling water reactor. On the other hand, the noble Lord, Lord Wolverton, is entirely wrong in saying that the Central Electricity Generating Board have been given permission to import an American reactor. That is not so. The type of reactor that we are to have in the future has not yet been decided. Indeed, the policy of Her Majesty's Government at the present moment is precisely the same policy as was enunciated in April, 1964. I believe it was debated in your Lordships' House in July, 1964, just before the Summer Recess. It is made perfectly clear in paragraph 6 of the White Paper.

What the Central Electricity Generating Board have done—and I paraphrase their words—is to ask for tenders for an advanced gas-cooled reactor and also for a boiling water type reactor. The question of choice has got to be made. Obviously Sir Christopher Hinton, who was then the Chairman of the Central Electricity Generating Board, wanted to be absolutely sure which was going to be the most economic, because it was part of his statutory duty to provide a reliable source of energy to Britain at the lowest possible price. This is a question ultimately of prudence, and this is precisely what is going to take place. Tenders are being called for and a decision will have to be made. As the noble Lord, Lord Sherfield, mentioned, that decision will have to be made in conjunction with the Central Electricity Generating Board and the Atomic Energy Authority, who together will make the reappraisal. But the final decision will be with Her Majesty's Government, and, of course, we shall await the outcome of those deliberations.

LORD WOLVERTON

My Lords, may I interrupt the noble Lord for a moment? I quite understood, because I myself took part in that debate which the noble Lord mentioned, that the boiling water reactor is not made in this country, but I thought that the Generating Board were anxious to try one out, and therefore would ask the British manufacturers to give a quotation for it, which, as I understood it, they would have had to do under licence from American firms. If they had given a quotation for that against the advanced gas-cooled reactor it would, of course, be under licence from America. Is that not right?

LORD HOBSON

That is perfectly true because, as I said a few seconds ago, we do not make a pressurised water reactor. Therefore, we should only hope—and I am sure it would be the policy of Her Majesty's Government—that it would be made here in Britain under licence. I only hope that a time will rapidly approach when we ourselves have a successful pressurised water reactor.

EARL FERRERS

My Lords, before the noble Lord leaves that point—which is rather important—as he said the final decision would be taken by Her Majesty's Government, can he give an assurance that the cheapness of the production of electricity will not be the sole criterion by which the final judgment will be made?

LORD HOBSON

In matters like this, the Government will obviously have to take into consideration every factor regarding the reactor; its cost, whether it is made in Britain, and the expected ultimate price per unit. I think those are the main points that were raised by the noble Lord, Lord Wolverton.

I now come to the questions raised by the noble Lord, Lord Sherfield. He is, of course, a very eminent ex-Chairman of the Atomic Energy Authority, and he certainly made a very authoritative statement. In looking at The Second Nuclear Power Programme the Government will obviously take into account every consideration which he has raised, particularly the questions of safety. We must, I think, pay a tribute here to the work of the Atomic Energy Authority, in conjunction with the Central Electricity Generating Board, in regard to the safety of modern atomic power stations; touch wood! we have had no major trouble whatever, and this is a very fine record.

As to what the programme will be, the White Paper has stressed that The Second Nuclear Power Programme will have to be flexible. Obviously, we cannot go ahead with new nuclear power stations until such time as we have assessed which is the most suitable reactor, whether advanced gas-cooled or pressurised-water. The noble Lord mentioned the question of the relations between the Boards. I know there was a great deal of talk in the Press about alleged trouble between the Atomic Energy Authority and the Central Electricity Generating Board. Frankly, I do not think that many people believed this; but of course it made a good story. When these questions are being discussed in an atmosphere such as that, I always feel like saying that there is complete harmony only in the graveyard, and there is not much life there. Here very important technical questions had to be discussed. But relations between the Central Electricity Generating Board and the Atomic Energy Authority at the present moment are most amicable. I do not think paragraph 6 of The Second Nuclear Power Programme can be said to be a compromise settlement; it was nothing of the sort. It was a settlement which was agreed as the noble Lord, Lord Derwent (I think on July 20), made abundantly clear when we addressed your Lordships' House.

The noble Lord, Lord Sherfield, made a very important point about using Capenhurst for enriching uranium. I think that is something which will have to be borne in mind. I am sure Her Majesty's Government will pay particular attention to that point. If there is to be a run down of fissionable material for war purposes, and if we can use the plant for enriching uranium for use in more advanced reactors, that is of considerable advantage indeed.

I come now to the points raised by the noble Lord, Lord Ferrier. He referred to paragraph 64 of the last Report of the Electricity Council, which dealt with the effect of bulk supply tariff and the high cost associated with the expansion of their capital programmes. This arises from the policy of the previous Government when they set financial objectives for the nationalised industries in the 1961 White Paper on Financial and Economic Obligations of the Nationalised Industries. This was issued in the form of a Command Paper, No. 1337. The nationalised fuel and power industries, for which the Minister of Power is responsible, will continue to work for financial objectives agreed from time to time between the Government and the Board.

Then the noble Lord raised the question of what was being done in case we had a very severe winter. For example, should we have auxiliary generating stations? I am very pleased to inform him that the Central Electricity Generating Board are at the present moment well ahead with the programme for gas turbines to cover these emergencies. It will be essential for these difficult periods should we get a very severe winter. I think that answer will satisfy the noble Lord. It is a very important point and it is one on which action has already been taken; this is not a question of hope deferred.

I now pass to the question of rural electrification. My noble friend Lord Citrine saved me a lot of work, because I think he answered the noble Lord. It is running now at 92 per cent., which is a marvellous achievement, and even in the most difficult areas of Merseyside and North Wales a figure of about 89 per cent. has been reached. This is a wonderful achievement of which the C.E.G.B. can be very proud indeed. I think we ought to pay a special tribute to the Area Boards who deal with this as a matter of top priority. There are going to be very few areas without electrical power within the next year.

LORD FERRIER

My Lords, I agree that the record is very remarkable and excellent. I think that some parts of Scotland have the most extensive rural electrification in the world. What I was worrying about was the cost to the consumer, now that saturation has nearly been reached. Is proper attention paid to the social side of this matter, and the last few connections to be made, which are the most difficult?

LORD HOBSON

Unquestionably. I can categorically answer that such considerations are continually being looked at. The noble Lord dealt with the question of tariffs, and raised the matter again by way of interjection. At the beginning of his speech he really put in a plea for higher tariffs, because he was questioning the wisdom of having non-base Lord stations to come in at peak periods. He was arguing whether they were really necessary and what effect they had on the cost. That is as I understood the noble Lord, and I took a full note. Obviously, we want the most equitable tariff as between industrial and domestic consumers. One cannot be dogmatic about this question—conditions vary from region to region because of geographical positions—but with the transmission of electricity of high voltage it has become of less and less importance. I can assure noble Lords on both sides that the question of tariffs for electricity—particularly for off-peak periods, and that is when we want people to consume eleotricity—and the question of space heating storage is continually being looked at.

It is not an easy problem. It was a problem in my early days in municipal electricity. I am sure the noble Lord, Lord Wolventon, is perfectly well aware of this. It is not dodging the issue and ducking for cover when I assure noble Lords of that, and I am prepared at any time to face a debate on electricity tariffs. I must stress the fact that this is a most difficult problem indeed, because of the nature of the industry where it has to meet this heavy demand at peak periods only. If it is coupled with high domestic demand, the cost really is increased. It is a question of alternating the Lord factor. If we can get more people to go in for space heating storage and so reduce the peak load, the question of tariffs will always be to their advantage.

LORD FERRIER

My Lords, the noble Lord misunderstood something I said, but we need not worry now; we can talk about it on some other occasion.

LORD HOBSON

We shall have a nice, pleasant chat about the whole problem.

Now I come to the question raised by the noble Earl, Lord Dudley, on priorities in regard to nationalisation and the question of gas. He said that gas was the most economical form of power. It is, in certain places, but not all the time. So far as the future of the gas industry is concerned, I think that the previous Government, and certainly the Gas Council, seeing that these nationalised boards are free from political interference in day-to-day management, have done a valuable job. There has been the construction of the two tankers to import methane, the purification plants at Canvey Island, and to-night we can probably look forward to burning gas from Algiers.

So far as the question of importing natural gas from Holland is concerned, I must ask noble Lords not to be too pressing on this matter, because negotiations are at the present moment taking place. Obviously, if the Gas Council can get Dutch gas at a price which is worth looking at, they will. They are progressive. Their sales since 1950 have gone up considerably. It is a dynamic industry, and any source of supply of natural gas that we can use, we shall use. Of course, we cross our fingers and hope that the explorations that are now taking place in the North Sea will show that there is a continuation of the natural gas field from Groningen in Holland.

I now come to the speech of my noble friend Lord Citrine. I should like to pay tribute to his speech. He gave us a short but comprehensive history of the industry. It is one that he may look back on with great pride. It has certainly been a success story, and in his retirement he must, I think, feel proud. It is an industry that has done well for the nation. It is a progressive industry. So far as conventional and atomic stations are concerned, I think we can say that we are just in front of any other country. I do not think that any other country has the edge on us, and this is largely due to the drive of the original Chairman of the Board, Lord Citrine.

I now come to the specific questions—they were almost frightening—of the noble Earl, Lord Ferrers, who wound up on behalf of the Opposition. I shall be able to answer some of them, but not all. I can give him a categorical assurance that we are keeping the same investment programme—namely, £673 million for electricity and £100 million for gas. As to what the future will be for next year, considerable deliberations are taking place at the present moment. It is quite early in the lifetime of even this dynamic Government to say precisely what the figure of vast sums of capital expenditure are going to be in the industries. No doubt there are ways and means open to the noble Earl from which he can ascertain as time goes by if he thinks we have been rather slow in coming forward. Noble Lords will no doubt take the usual Parliamentary steps to find out. My intervention here is to give the noble Earl a categorical assurance that it is the status quo ante that prevails at the moment. That is not to say that it will continue as such, because obviously we have certain hopes.

He dealt with the methods of power. There are no prejudices in these matters. I cannot tell him what the conventional stations are going to do—whether they are going to burn oil, pulverised fuel or coal. That really is a question of day-to-day management for the Central Electricity Generating Board. It may be that at certain stations in the North or in Scotland it is more advantageous to burn coal. There may be certain other stations where oil is preferred. This is entirely a question of day-to-day management, and I certainly cannot give the noble Earl an assurance of that kind, any more than I could with regard to the future atomic programme, other than what I have stated.

He said that he hoped that there would be a decrease of cost for atomic power stations. That is already being brought about. The capital cost per kilowatt of Wylfa will be less than that of the existing atomic power stations. The lower we can get the capital costs the more competitive will they become with the conventional stations. But I must enter a caveat here. It is not fair to say, or to give the impression, that only the atomic engineers are making headway. The development that has taken place in steam pressures and the temperatures of superheat in my time has been tremendous; and we might even, to use a phrase which I detest using, get a break-through from the conventional engineers. Those are all things for which, in a progressive industry, we have always to be on our guard.

Then the noble Earl dealt with the question of breakdowns and having all the eggs in one basket. The fact of the matter is that with the super and high Super-Grid there is less chance of getting a flatout if the 500-megawatt set goes down. Judging from what happened in the past, from one's own experience, the tendency is bound to be for sets to get larger. It is not so many years ago that Battersea was the show-place of Europe on 100, 000 kilowatt sets—and somebody told me they had chromium plated rails there because there were so many visitors coming to see it. I think one can safely say that the tendency will be that we shall have to keep to 500, 000 kilowatts for a little while, but that, progress being what it is, output will get larger.

The noble Earl dealt with the difficult question of cascading. That is a problem which occurs quite frequently in times of bad weather, where short-circuits occur on the switch gear, the switches drop and certain sections are put out; and of course, the higher the voltage stepped down to 240 volts domestic supply, the more difficult it becomes to ascertain which one has crept out. But this is a matter which the engineers are studying. So far as strengthening the distributing network is concerned, this is going on all the time. We know that there are certain black spots in the Metropolis, but the London Electricity Board is doing what it can, allowing for the capital resources at its disposal, to strengthen the distributing network. This arises from the terrific demand for electricity which is continually taking place.

I have endeavoured to answer most of the points that have been raised. If I have not succeeded, certainly my right honourable friend or myself will write to any noble Lord on any point that we may find, having read the Official Report to-morrow, we have omitted to deal with. I want to conclude by saying a word on the future of atomic stations. This is an interesting subject. It is something to which (one almost hesitates to use the words) fashionable attention is paid to-day. Point one is that tenders are due in February. Point two is the type of reactor, whether advanced gas-cooled or boiling-water type, that will be decided. An assessment will be made by the Central Electricity Generating Board and the Atomic Energy Authority and the Government's decision will be final.

I think the whole House was pleased to have the assurance that should there be an interim period, so far as the work of the consortia is concerned this question is being actively considered. On the other hand, all consortia are hopeful. I fail to see why they should not secure contracts from abroad, because our atomic power stations, which have been proven, are first-class. The difficulties are certainly not those of design; they are certainly not due to the failure of the skill of our engineers or technicians; and if we can export atomic power stations abroad nobody will be more pleased than the consortia, on the one hand, and Her Majesty's Government, on the other.

I will conclude by congratulating the noble Lord, Lord Hawke, for initiating this most interesting and informative debate. I am sure that even those noble Lords who know the industry from A to Z cannot have helped but glean some information from listening to the debate to-day.

6.40 p.m.

LORD HAWKE

My Lords, I should like to thank "the usual channels" for their permission to bring forward this debate at this time, and noble Lords for taking part. We have heard a major speech from the noble Lord, Lord Sherfield, which I hope will be studied at home and abroad where there are chances of export orders for atomic energy plant. With those few words, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.