§ Mr. Arnold
asked the Secretary of State for Northern Ireland if he will make a statement on his plans for future capital investment in the electricity industry in Northern Ireland.
§ Mr. Hurd
Some 90 per cent. of the usable generating capacity in Northern Ireland is oil-fired. This heavy oil-dependence is the main reason for Northern Ireland's high electricity generating costs, and for the decision to provide a substantial Government subsidy to keep Northern Ireland electricity tariffs in close association with the highest area board in England and Wales. The cost of that subsidy—estimated to be more than £95 million in 1985–86—is 419W becoming an increasing burden on the Northern Ireland public expenditure block. The Government and the Northern Ireland Electricity Service have therefore been anxious to explore how best the oil-dependence of the Northern Ireland electricity system might be significantly reduced.
I have decided that the first step in reducing Northern Ireland's oil dependence should be the immediate conversion of the first phase of Kilroot power station to solid fuel-firing. In the first instance the station will be converted to coal-firing, although provision will be made in the design to retain the existing oil-fired capability, and to allow the future burning of a processed form of lignite at the station, should this prove to be technically feasible and economic. For this purpose I have made funds available within the Northern Ireland public expenditure block which will support the investment and enable the Northern Ireland Electricity Service to carry out the necessary works. The initial cost of the project is estimated at £94 million, at October 1984 prices, and the station is expected to be taken out of service in the years 1986 to 1988, and to recommissioned in 1989. After Kilroot is recommissioned as a coal-fired station, it is estimated that Northern Ireland Electricity Service fuel costs could be reduced by some £25 to £30 million per annum, which will represent a significant saving in public expenditure.
At the same time I am very conscious of the contribution which cheap local lignite might make to reducing Northern Ireland Electricity Service generating costs, and the fact that a substantial proportion of total existing NIES capacity—as much as 35 per cent.—will be progressively retired throughout the 1990s. We have therefore given considerable thought to how Northern Ireland's future generating capacity needs should be met, and the extent to which lignite might feature in these plans. Our current assessment is that the most economically effective use of lignite would be in a purpose-built mine-mouth power station, and that lignite-fired plant would offer the cheapest option when new generating capacity is required in the 1990s. As an initial step therefore I have authorised the Northern Ireland Electricity Service to enter into the preliminary planning stages of a new lignite-fired power station to be constructed at the mouth of the lignite mine, and work on such studies has now begun.
It should be realised, however, that the capital expenditure involved in the construction of a new power station will be substantial. Detailed assessments of the phasing of such capital expenditure and of its economic implications have to be carefully examined before a final decision on construction would be taken. In that context I am examining in depth the scope for private sector involvement in the development of lignite-fired electricity generation.