§ Dr. McDonaldasked the Secretary of State for Energy if he will publish in the Official Report the cut-off payback time for industrial energy conservation demonstration projects initiated by his Department; and 28W how this compares with the expected pay-back time for investment by the supply industries for which he is responsible.
§ Mr. John MooreThere is no such cut-off time. Payback times for demonstration projects vary between industrial sectors, but a typical pay-back time could be two or three years.
Investment appraisal of individual projects is in the first place a matter for the nationalised fuel industries themselves. But appraisal in terms of pay-back periods is generally inappropriate and discounted cash flow techniques are normally used to calculate a project's expected rate of return. The required rate of return (RRR) for the industries' new investment as a whole is set at 5 per cent, in real terms.