HL Deb 21 October 2003 vol 653 cc1500-3

3.5 p.m.

Lord Ezra

asked Her Majesty's Government:

Whether they agree with the view recently expressed by the National Grid that it would like a bigger electricity safety cushion to manage exceptional circumstances.

Lord Davies of Oldham

My Lords, in its report on winter operations published last week, National Grid Transco said that it would like a bigger "safety cushion" if the most onerous conditions occur together. Since the report was published, the "safety cushion" has grown as generators have returned mothballed plant and are making plans to return more. Ofgem is now working with NGT on measures to improve still further the way the market can best deliver security of supply.

Lord Ezra

My Lords, is it not a fact that even with the mothballed plant that has been returned to service there is still a lower reserve of electricity generating capacity than in recent years? Does that not support the view of the National Grid that in exceptional circumstances there could be difficulties? In those circumstances, does the noble Lord agree that special measures should be introduced to stimulate the generating companies to hold a greater reserve than they otherwise might do under normal commercial considerations?

Lord Davies of Oldham

My Lords, the target has been between 15 and 20 per cent. As a result of decisions taken by companies in the past few months, the figure has already moved up to 18 per cent. If, as announced on 15th October, the PowerGen 650 megawatt unit at Grain comes on stream the margin would exceed 19 per cent. That is within the range of security.

Lord Jenkin of Roding

My Lords, does the noble Lord recollect that on 8th October he gave those figures in answer to a question from my noble friend Lord Peyton? The noble Lord, Lord Tombs, then asked the noble Lord to distinguish between capacity margin and available capacity margin. The noble Lord, Lord Davies, did not respond to that question by stating which margin the Government are using— what is actually available or some kind of hypothetical figure.

Lord Davies of Oldham

My Lords, the margin we have been identifying is the one common to all in terms of the figure of between 15 per cent and 20 per cent capacity. That margin has been moving up quite steadily as a result of the increase in prices available to the companies and the indication that extra resources need to be made available. We are moving towards the upper end of the target of security. When the NGT announced that it would like a more secure cushion, it was predicating that against the most extreme conditions that could obtain in the winter. That would require three distinct factors to come together before the system came under undue strain.

Lord Peyton of Yeovil

My Lords, the noble Lord has done his best with the material provided for him by the—I shall not repeat what I said about it the other day—Department of Trade and Industry. I wonder whether the noble Lord could stir the department into a burgeoning suspicion of whether it has got things wrong and is being a little complacent. I am not accusing the noble Lord of that. I am thinking that it is a habit of mind of the Department of Trade and Industry.

Lord Davies of Oldham

My Lords, I do not believe that that charge holds water. As soon as difficulties have occurred with transmission on the grid, the department has moved quickly into action with a full investigation into what has gone wrong. For example, the recent incident which caused considerable misery to people in the Birmingham area as regards New Street and parts of the city turned out to be a problem which involved a fraction of a second during transmission. As yet, we do not know the reasons for it. It has nothing to do with under-investment or the adequacy of supply. It was a technical fault which needs to be examined. I and my officials are not in a position to give precise answers as to why that incident occurred until the full inquiry has been carried out.

Lord Howell of Guildford

My Lords, does the capacity to which the Minister referred include the Norwick pump storage system, which can deliver 2,000 megawatts in 12 minutes, if it is still working? Is it still going to be valid in 10 years' time or so when the nuclear programme is allowed to run down and when we seem to be relying on the Government's policy on wind farms to fill the gap? Will they really be able to do that?

Lord Davies of Oldham

My Lords, it is not the case that the Government are relying on wind farms to fill the gap created by the nuclear programme in 2010. As regards wind farms and all renewables, the target is only 10 per cent. It is clear that we shall need to generate and purchase electricity from other sources. That is why quite significant contracts have been entered into for overseas supply of electricity to this country.

Lord Stoddart of Swindon

My Lords, I hope that the noble Lord is not being complacent. I speak as someone who has worked in a power station. The 18 per cent margin is the very lowest there should be. Is the noble Lord aware that, since we have not had any very hard winters, maximum demand has not been tested? Therefore, will the noble Lord look further at the figures he has been given? If there is an abnormal winter and abnormal plant outage, I fear that we shall have very severe power cuts in parts of the country.

Lord Davies of Oldham

My Lords, I recognise the fact that the noble Lord has the advantage of having worked in the industry, albeit a little while back and things have changed quite significantly. I believe that the noble Lord would claim at best old Labour and probably further back than that. As regards the question, the noble Lord is right in that we have been fortunate in having had relatively mild winters in recent years. But I assure him that the capacity can easily and readily cope with the problems of a colder winter. It would require a number of quite significant factors to come into play before the available margin would cause any real anxiety. The noble Lord said that it was at the lower end of the range, but it is not. The published position was to aim for a target between 15 per cent and 20 per cent. As I have emphasised to the House today, we are moving towards the upper range of capacity.

Lord Campbell of Alloway

My Lords, will the noble Lord accept that he has not answered the question put by my noble friend Lord Jenkin? It went to the heart of the problem. Will the noble Lord leave a letter in the Library, at his convenience, so that we may have the answer?

Lord Davies of Oldham

My Lords, I am happy to do that, although it is a confession of failure on my part if it is thought a letter is necessary to clarify the answers which have been given. The noble Lord has made his point. The noble Lord, Lord Jenkin, was fairly emphatic on the matter. A letter will be deposited in the Library.

The Lord Bishop of Chester

My Lords, if the underlying anxiety that exists on this issue is a result of the fact that we are increasingly having to rely on sources of supply which are less secure such as imported gas, which unlike oil and coal, cannot be stored, and 10 per cent wind power, what happens if there is a large anticyclone over the country and there is no wind? There are also ageing nuclear plants, which are more likely to break down. When they do, we have discovered that, over the years, that tends to be for longer. Is that not a reason why the historic target of 15 per cent to 20 per cent may need to be made even higher?

Lord Davies of Oldham

My Lords, the right reverend Prelate has a point in that we are having to change the basis of the supply of electricity generation. It is the case that we shall import more in future. We hold that situation in common with the rest of Europe, where there is no self-sufficiency in any of the advanced economies. If it is indicated that we are not entirely self-sufficient in energy supply, largely because of the running down of the natural gas fields and so forth, it is a situation we share with others. It is an aspect which we have to take into account with the rest of Europe.

Lord Brooke of Alverthorpe

My Lords, is it not a fact that we can store gas? There is ample space under the North Sea. All that is needed is the will to do it.

Lord Davies of Oldham

My Lords, it is true that the technical problems are being overcome and that it can be done. We will need to do it. I am grateful to my noble friend for putting forward a more optimistic perspective on the country's future with regard to energy than that put forward in several of the contributions today.