Electricity Supply (Hansard, 8 October 2003)

§ Lord Davies of Oldham
My Lords, maintaining the reliability of energy supplies is a key goal set out in the Government's energy White Paper. It is not the Government's role to second-guess the electricity market. Through competitive markets, participants have incentives to maintain reliable supplies of electricity. These incentives are backed by licence conditions and statutory obligations enforced by Ofgem.
The Government have a role to provide information to the market. A major component of this is our work with Ofgem, through the Joint Energy Security of Supply Working Group, to monitor energy security.

§ Lord Peyton of Yeovil
My Lords, is the noble Lord aware that the lack of any underlying anxiety in his Answer causes one to regret even more the Government's decision to entomb the whole of this important subject in the mausoleum of the DTI? The noble Lord finds that very funny—unfortunately, it is not. I think that events are likely to wipe the smile off his face eventually.
289 Have the Government stirred themselves yet to think about the possibly unpopular subject of the nuclear alternative, which has the immense advantage of being free of pollution, and their own neglect of the accompanying research?

§ Lord Davies of Oldham
Well, my Lords, I apologise if the noble Lord took offence at my smiling at his reference to the DTI as a mausoleum. I was in that entombment this morning and have emerged unscathed. I therefore feel that perhaps he was dramatising the point.
Let me make the obvious point that we are not complacent about electricity supplies—that is why we have acted with promptness over the past few months. We are concerned to hit that margin of spare capacity of between 15 and 20 per cent which the industry experts recognise as necessary. We were running at 16 per cent before the summer. I am pleased to announce that with the arrival back on scheme of part of the Grain power station, that margin goes up to 17.5 per cent for the winter. So without being complacent, I am merely indicating that the industry is hitting its targets.

§ Lord Tombs
My Lords, may I suggest to the Minister that he distinguishes between capacity margin and available capacity margin? There is a paper figure and there is a real figure, and they are quite different.
May I suggest to the Minister that the answer to the questions of the noble Lord, Lord Peyton, are, first, that it is almost certain that there will not be sufficient capacity over the next five years to meet central estimates? Secondly, whatever action is proposed, with one exception, it is unlikely to be effective over the next five years. That exception is peak lopping by industrial consumers. The outcome of that initiative is very difficult to see. If it is successful, it will involve some start-up costs passing to other consumers.

§ Lord Davies of Oldham
My Lords, of course I acknowledge the noble Lord's expertise in this area. I was feeling that I might be able to express gratitude to him for responding to the noble Lord, Lord Peyton, but I cannot agree entirely with his comments. As he will recognise from the White Paper, the Government have in place a proper concern for the security of energy supplies. We are therefore pursuing strategies to guarantee those supplies with regard to various forms of production. I can only state that the Government, while not being complacent, are confident that the strategies are in place.

§ Lord Ezra
My Lords, in addition to the problems of possible difficulties with the production of electricity, as referred to in the Question of the noble Lord, Lord Peyton, is there not also a possible problem with the transmission of electricity, as evidenced by grid failures in America and Europe in recent times? In 290 order to limit the risks and the losses involved in long-distance grid transmission of electricity, will the Government place more emphasis on the promotion of local production of electricity, including CHP and micro-CHP—in which I declare an interest—and to which positive reference was made in the energy White Paper?

§ Lord Davies of Oldham
My Lords, I am quite sure that the power failures in the United States, Canada and Italy caused a shudder to run through all advanced countries in terms of the guarantee of supplies. The noble Lord is right that it is important that we effectively scrutinise the transmission of electricity.
I might just add that the supply failure in London, which was short-lived but nevertheless massively inconvenienced large numbers of people, was not to do with generation. It was to do with a really quite minor technical failure in the system, and we have asked for a full report to make sure that it does not happen again.
I agree with the noble Lord that we have to consider more local generation of electricity in order that we are not dependent on these long supply lines which have caused such difficulties in other circumstances.

§ Lord Dubs
My Lords, will my noble friend confirm that the safety margin to which he referred will increasingly have to be filled with imported gas from politically unstable countries? Is not that the basis of concern about the future of supply?

§ Lord Davies of Oldham
My Lords, my noble friend is right that we will begin to be a net importer of gas, as North Sea stocks decline. I might say that that puts us into the same category as the vast majority of industrialised nations. He will recognise that we have consumed a substantial amount of gas supply from overseas for a long period. Of course, we are addressing ourselves to the issue that with certain purchases as regards gas we will need to guarantee the security of provision.

§ Baroness O'Cathain
My Lords, how confident is the Minister that the forecasts for demand are correct? The reality is that forecasts have always been incorrect in the past. Given the record in forecasting demand for electricity, is he absolutely convinced that those forecasts are likely to be correct?

§ Lord Davies of Oldham
My Lords, in energy as in many other fields, forecasting always has an element of uncertainty about it, otherwise it would be the definition of certainty rather than a forecast. Nevertheless, that is the basis on which energy supplies have been provided for the country in the past. We had an acute problem during the storms of 2002 and there have been other occasions when problems have occurred. However, all I can state is that our generating capacity is in line with forecasts of demand, with that substantial margin that all experts attest is sufficient.