HL Deb 28 January 2003 vol 643 cc1006-8

2.58 p.m.

Lord Ezra

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as chairman of Micropower, which promotes the small-scale generation of electricity.

The Question was as follows:

To ask Her Majesty's Government what steps are being taken to reduce losses in the transmission of electricity, estimated at £600 million a year.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, on 17th January Ofgem announced that it had approved a modification to the Balancing and Settlement Code to implement zonal transmission losses on an average and ex ante basis throughout England and Wales by April 2004. The authority believes that short-term benefits would accrue of approximately £200,000 to £1.5 million on annual transmission losses of £90.8 million, by incentivising companies into making more efficient decisions on the siting of demand and generation in the future. My honourable colleague the Minister for Energy and Construction announced last Thursday that the DTI would be undertaking a consultation on the applicability of zonal transmission losses on a GB basis.

Lord Ezra

My Lords, I am pleased to hear of those initiatives. Is the noble Lord aware that transmission losses at the present level add £12 to the average electricity bill and account for 5 million tonnes of carbon emissions? The Government's target is a reduction in emissions of 30 million tonnes, but those losses contribute substantially to the problem.

Will the noble Lord accept that, in addition to improvements in the distribution networks, more effort should be made to site generating plant near consumers, including siting on consumers' premises, which would eliminate transmission losses?

Lord Sainsbury of Turville

My Lords, the question of transmission losses is a difficult one. The figure of £90 million, to which I referred, is the figure for transmission losses on the main transmission system. Obviously, there are additional losses on the local distribution system, but it is difficult to do anything about those by resiting generators.

There are some gains to be made, although they do not look so great, due to the resiting of generators. The figures that I gave—from £200,000 to £1.5 million, with an upside figure of £5 million—are, in one sense, quite large. However, compared to the £60 billion cost of electricity, they are not a major issue.

Although the proposal is of benefit to embedded generators because it saves the transmission, we must also take into account the fact that it could be unfavourable to the location of renewable sources of energy, particularly offshore wind, or the generation of energy in distant places. There are benefits in both directions.

Lord Bridges

My Lords, does not the Minister's reply suggest that the time has come to review the workings of the new electricity trading arrangements, the principal effect of which seems to have been to make previously profitable undertakings unprofitable and vice versa? Does the Minister understand that the loss of power to individuals and regions would subject the citizens of this country to serious problems that would be unwelcome to Her Majesty's Government at this time?

Lord Sainsbury of Turville

My Lords, NETA has removed the distortions of the old pool and prices problem. It has led not to chaos but to a fall in prices. That is appropriate in circumstances in which there is too much capacity. We propose to bring in the British electricity trading and transmission arrangements for the whole of GB, and we hope that that will also lead to a fall in prices in Scotland.

Lord Campbell of Croy

My Lords, are the proposals for reducing expenditure that the Minister has just referred to based on improvements to transformer systems or on more use of overhead lines, although there must be restrictions on the siting of pylons?

Lord Sainsbury of Turville

My Lords, the answer is "Neither". It is a supposition that the generators will either resite the generating plants in clue course or will realign them so that there is less loss on existing lines between the point at which the electricity comes on the line and the point at which it goes off to the supplier.