Coal Generation (Hansard, 29 February 2000)

§ The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, the reform programme is well under way but not yet complete. The Director-General of Electricity Supply recently published for consultation a helpful summary of developments in competition in the electricity market. That summary indicates that significant progress has been made on several fronts. The director-general will report to the Department of Trade and Industry in the light of any comments which he receives.

§ Lord Dormand of Easington
My Lords, the Government said that the Utilities Bill, which is yet to be considered in your Lordships' House, will change the way in which the generation market operates. However, given that the German, French and Spanish coal industries receive an average subsidy of £47 per tonne and that the British production cost is £29 per tonne, will my noble friend, first, clarify in some detail how such a huge difference can be met by the Bill? Secondly, will my noble friend say whether there is any truth in the rumour that the moratorium on gas-fired stations is to be lifted soon?

§ Lord Sainsbury of Turville
My Lords, with regard to my noble friend's first question, the Utilities Bill will, of course, change the trading arrangements. One hopes that that will provide proper remuneration of flexible plant, which is important to the coal industry. Subsidies are paid to some European coal industries and to the Polish coal industry, and the Government have taken all possible action to encourage the Commission to take action on that. Of course, the situation is made much more difficult by the arrangements introduced in 1993 when the UK Government put forward a position of no subsidy to the UK industry, although proposals were made to subsidise other industries. That makes our position difficult. Of course, the major problem in Europe arises because South Africa, South America and Australia, which have supplies of open-cast coal from very wide and deep reserves, are able quite legitimately to export coal into Europe at approximately less than 30 per cent of our costs of coal production. That sets the tone of the market. At this point there are no proposals to change the position of the stricter consents policy for gas-fired stations.

§ Lord Elliott of Morpeth
My Lords, is the Minister aware that the last coalmine in the north-east of England is currently, sadly, threatened with closure? Is he further aware that, since privatisation, 400 miners 454 are producing the same tonnage as did 1,000 miners before it? Does he agree that in this case the reform of privatisation is in favour of future coal generation?

§ Lord Sainsbury of Turville
My Lords, the Government are well aware of the particular situation to which the noble Lord refers. Of course, greater productivity helps in such situations, but that must be set against the overall position of the coal market in Europe.

§ Lord Mason of Barnsley
My Lords, will my noble friend say what proposals have been received from the European Commission to help the British coal industry, and what has been our response so far?

§ Lord Sainsbury of Turville
My Lords, no proposals have been received so far from the Commission. The Commission has made it clear that it is for the UK Government, if they so wish, to bring forward any proposals to help the industry which meet the European Coal and Steel Community rules and, of course, plans to meet the costs of any such proposals.

§ Lord Ezra
My Lords—

§ Lord Bridges
My Lords—

§ Lord Williams of Mostyn
My Lords, I think we should hear first from the noble Lord, Lord Ezra, and then from the noble Lord on the Cross Benches.

§ Lord Ezra
My Lords, does the noble Lord accept that the coal industry has suffered extremely seriously from the high level of sterling which was the subject of the first Question on the Order Paper? As a result of that, British coal has been supplanted in our power stations. Will not the noble Lord give some consideration to the points raised in a recent debate on that subject; namely, giving temporary subvention to the coal industry so that it can maintain its position in the power stations pending the day when sterling is reduced to a more normal level? That subvention would be vastly lower than the amount being paid to other continental coal industries.

§ Lord Sainsbury of Turville
My Lords, it is an economic fact that the higher level of sterling will affect the cost of coal coming into this country. The Government have been approached by RJB Mining (UK) Limited in relation to aid for the industry. We are currently looking at all the possible options, although at this stage we have not found a way forward.

§ Lord Bridges
My Lords, have the Government considered the effect of the purchase of London Electricity by Electricité de France, a state-owned entity in that country? Does that introduce a further distortion into the market which needs examination and reference to the competition authorities?

§ Lord Sainsbury of Turville
My Lords, I do not believe that it does. On the supply side, the market has 455 been vastly increased and, therefore, a simple change of ownership does not affect the situation. But I shall look at the matter and if, on closer examination, an issue arises, I shall come back to the noble Lord.

§ Lord Jenkin of Roding
My Lords, what weight do the Government attach to the comparative emission costs of competing fuels? Has the Minister seen the recent report produced by the energy experts at Chatham House which has given the figures as regards costs in terms of pollution? For example, if those figures were translated into the costs of energy production, would it not show that the Government's policy of abandoning combined cycle gas-producing plants was extremely short-sighted?

§ Lord Sainsbury of Turville
My Lords, a basic axiom of any energy policy is that it has more than one objective. It has objectives which involve costs, environmental issues and security of supply. Clearly, we have taken the step of deferring some gas-fired power stations. On the other hand, we have permitted others because they involve extremely good quality combined heat and power. Therefore, the environmental aspect was a factor. One must always balance the two; one simply cannot consider one aspect alone.