Combined Heat and Power (Marshall Report) (Hansard, 2 April 1980)

§ Mr. John Moore

The report on combined heat and power (CHP) by a group chaired by Dr. Walter Marshall was published on 26 July 1979. On the same day the Under-Secretary of State for Energy announced—[Vol. 971, c. 356–7]—that the report raised wide issues of Government policy which would need further detailed examination. It has long been recognised that CHP can save energy whether linked with district heating schemes (CHP/DH) or with industrial processes. But the realisation that energy scarcity and consequent increasing prices are with us for the foreseeable future strengthens the economic case for CHP. In Scandinavia, Germany and France in particular numerous CHP/DH systems have existed for some years in a context in which natural gas has not been an important competitor and where freedom of choice for the consumer has been limited; moreover energy supply on the continent is often controlled locally and this favours community-based CHP/DH. The Continental experience is therefore not directly analogous to this country. The scope for further development of CHP in the United Kingdom has to be considered in the light of our own circumstances.

The Government welcome the report, which has made an important contribution towards answering the questions whether CHP saves energy economically and whether there are technological, institutional, planning, legal or other obstacles to its economic development in this country. The report—energy paper number 35—concluded that CHP/DH could be a viable economic option for heating buildings in areas of high density heating loads, particularly in the longer term, and recommended that in order to establish a timely option for its development in the future one or more lead city schemes should be started as soon as 208W practicable. The majority of the members of the group recommended the setting up of a national heat board to oversee this work. In addition, support was called for in the area of industrial CHP.

At the upper end of the scale of energy savings given in the report, those from CHP/DH would be about 30 million tonnes of coal equivalent—mtce—per annum, that is to say, between 5 per cent. and 10 per cent. of probable United Kingdom primary energy demand beyond the year 2000, or equal to the savings considered technically possible for the whole of United Kingdom industry. Whether this could be achieved in practice would depend greatly on the level of market penetration, on rational use of heat by consumers and on future improvement in other heating and conservation technologies.

The Government have carefully studied the issues raised in the report. We have taken into account in particular our energy policy objectives—to ensure adequate and secure supplies, to use energy efficiently and to maintain as much flexibility as possible about other energy options. We have also taken evidence from other sources and are particularly grateful to the District Heating Association for its advice.

On several counts CHP/DH schemes could fit well with our energy policy criteria. They would improve markedly the overall efficiency of producing energy locally, effectively increase energy supplies and offer further flexibility in adopting other options. But the crucial test is whether they could do so economically and without causing undue disturbance to daily life.

We have noted that the report's analysis of CHP/DH is subject to considerable uncertainty and that it was confined to generic studies. It is not yet possible to give an adequate estimate of the costs involved for a specific location nor to judge the extent of problems that might arise such as disturbance to people, dwellings and traffic, while conversion proceeded over an extended period. It is also necessary to determine whether financial assistance might be necessary to enable CHP to penetrate the market in 209W competition with other fuels in the shorter term. We believe that the acceptability and viability of CHP can be decided only by detailed examination of particular locations. The Government consider that on the grounds of energy policy CHP/DH is an option that must be kept open and that, as recommended by Dr. Marshall's group, the next step is to test the feasibility of CHP/DH in specific locations. As the report indicates. CHP/ DH schemes should be developed gradually, enabling those involved to learn by experience as they proceed. Inevitably, therefore, long lead times will be involved.

We therefore propose immediately to set in hand a programme of work on the feasibility of CHP/DH in particular locations. The first stage will comprise the identification of possible locations for CHP/DH. My right hon. Friends the Secretaries of State for the Environment and for Scotland will be consulting local authority associations about areas where CHP/DH might be an economic proposition and where local authorities wish to examine the prospects. The co-operation of the electricity supply industry in all such areas is equally important. The second stage will comprise a full examination of one or two of these locations, with a view to using them for lead city schemes. Only this information will enable judgments to be made on the desirability of providing funds and on the scale of involvement by central and local government and other bodies. The Government will meet the costs of the employment of consultants for this work, but would not cover other costs of establishing feasibility incurred by local authorities, the electricity supply industry or other bodies. All such costs would need to be found from within existing public expenditure limits, and at each stage the programme will be subject to review.

After the completion of the second stage, a crucial decision will be necessary on whether to proceed to detailed design work for the construction of a major scheme. There are no easy or cheap options. For instance, even the refurbishing of old power stations in city locations, which is occasionally mooted as an appropriate basis for a CHP/DH scheme, will not necessarily be the optimum solution for that area, and in any case is unlikely ever to be cheap.

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The Government have carefully considered the majority proposal in the report that a national heat board be established to co-ordinate CHP/DH development in the United Kingdom. However, we consider that such a board is unnecessary, at least at present, since in the early stages of any development programme the work will fall mainly on consultants, local government and local interests. A clearer view on the form of organisation that might eventually be necessary will emerge from our envisaged work programme.

In the industrial field where CHP is already established we accept the report's recommendation that the Government should encourage the development of worthwhile CHP schemes. We believe that the main impetus will come from industry for the implementation of economically attractive schemes. We are, however, encouraging the fuel supply industries to give sympathetic consideration to worthwhile schemes. The electricity supply industry has assured the Government that it will do all it can to encourage the development of worthwhile CHP schemes. We have accepted the report's recommendation to make further advice available to industrialists and have already announced the expansion of the extended energy survey scheme whereby a grant can be given towards the costs of employing a consultant to provide a full assessment of the possibility of installing CHP.