I wish to raise the subject of the future arrangements for research and development in the electricity industry. I am pleased to see that this Adjournment debate is being attended by more than twice the customary number of hon. Members.
I particularly welcome the presence of my hon. Friends the Members for Stroud (Mr. Knapman) and for Bristol, North-West (Mr. Stern), both of whom have constituency interests in the subject and who hope to catch your eye. Mr. Speaker, later in the debate. I understand that my hon. Friend the Minister of State, Department of Energy, who will be replying to the debate, is happy for them to intervene and is no doubt looking forward to what they have to say.
Incidentally, I am very pleased to see the Minister of State on the Front Bench this evening to reply to this debate, first, because we do not see very much of him at the Dispatch Box, and, secondly, because the Under-Secretary of State for Energy, ray hon. Friend the Member for Worcestershire, South (Mr. Spicer), whose job it would normally be to reply to this debate, is in the United States of America looking at the electricity industry, which I hope will give him some good ideas as to what he might do about privatisation, and particularly research and development.
The recent debate on the White Paper outlining the Government's proposals for privatisation of the electricity supply industry in England and Wales left one in no doubt that it should not be seen as the final blueprint. Ministers have made it quite clear that they are still prepared to listen and possibly respond to constructive suggestions between now and the next Session of Parliament, when we expect to see the Bill. One good reason for that flexibility is that the White Paper is far from comprehensive. There are gaps, and to prove the point I want to raise this evening the question of one key element in this vital industry which hardly gets a mention in the White Paper. I am referring to the research and development activities of the electricity industry, and in particular the Central Electricity Generating Board.
Apart from comments by my hon. Friend the Member for Rochford (Dr. Clark) on the area boards' research activities, R and D scarcely got a mention in the debate on the White Paper that took place in the House on Monday 7 March. The White Paper, in paragraph 9, attributes research and development to the Electricity Council. In point of fact, that is hardly correct. The responsibility is, in the main, delegated to the CEGB, which undertakes research on a wide range of matters concerning generation and transmission schemes. Such research is vital in gaining technological improvement in existing areas of operation, and also for future development.
R and D is part of the CEGB which, in 1986–87, turned over a total of £162 million in its three research laboratories, which employ over 2,000 people, in the five laboratories which provide direct scientific and technical support to CEGB power stations, and through R and D contracts placed with other organisations, such as manufacturers, the United Kingdom Atomic Energy Authority and the universities.
The CEGB's research and development programme is managed through its technology, planning and research division, under the executive control of a CEGB member, Mr. D. A. Davis, based at its London headquarters.
The main aims of the research and development programme are to reduce costs and increase the effectiveness and efficiency of the CEGB. It does that by looking at new opportunities to improve the reliability, safety and economic performance of existing plant and by giving expert technical assistance during the introduction and commissioning of new plant. It provides technical expertise to the CEGB so that it can be a well-informed and critical buyer of plant, equipment and fuel. It looks to the future by studying and assessing longer-term developments in the generation and transmission of electricity. Lastly, it ensures that CEGB operations have the minimum effect on the natural environment.
The main research and development programme is centred on three large laboratory complexes. First, there is the Berkeley Nuclear Laboratories — BNL — on the Severn estuary in the constituency of my hon. Friend the Member for Stroud. It is the CEGB's main centre for nuclear and radiation research. It is the only laboratory complex within the board with a nuclear site licence, and it employs about 720 people.
There is also the Central Electricity Research Laboratories—CERL—at Leatherhead in Surrey, which employ about 750 staff. It is the major centre for environmental studies in the CEGB and a major centre for research on transmission, power system control and electrical plant.
There is also the Marchwood Engineering Laboratories—MEL—in my constituency on the west bank of the Solent. It is the major centre for research on heavy engineering projects. MEL specialises in the development of inspection and repair techniques for nuclear plant, testing of mechanical components such as valves or fuel assemblies, and research into the combustion and heat transfer processes in oil and coal-fired power station boilers. The laboratories employ about 430 people.
There are also five operational engineering division laboratories, which provide direct operational support on generation and transmission.
In Scotland, the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board both undertake research, although most of it is contracted out. The SSEB employs about 50 research staff at East Kilbride. The hydro-electric board has its own small research facility which looks into the specific practical problems of fish behaviour in rivers, hydraulics, and low-cost remote control systems.
Lastly, the Electricity Council runs the Capenhurst research centre, which has a turnover of about £10 million per year, and employs 350 staff working on finding better ways of distributing and utilising electricity.
It is important to understand the research and development modus operandi of the three principal research division laboratories. They have very close contact with each other and with all branches of the CEGB, as well as a wide range of arrangements with manufacturers—both large and small—which can be collaborative, contracting or commercial.
There is thus a significant number of unique major research facilities on which the industry is dependent. They are occasionally available for external commercial work, but are normally fully utilised on work within the CEGB. However, the relative independence of the CEGB, as currently perceived by our manufacturers, allows the laboratories to have productive relationships with those companies, and often to act as a sort of "honest broker" when co-operation between rivals is in everybody's mutual interest.
It appears that under the proposals in the White Paper there are three options for the privatisation of the technology, planning and research division and its facilities. The first is to include it in what the White Paper describes as "big G", but that could starve the other generating companies of R and D and should, therefore, be rejected.
The second is to fragment the division, but that begs the question, "Who goes where?" Berkeley might fit into "big G" because of its predominantly nuclear work, but as Marchwood does 60 per cent. nuclear and 40 per cent. fossil fuel research it would not fit happily into either "big G" or "little G". Fragmentation would lead to costly duplication, which is something which has almost been eliminated under the present organisation and which it would be wasteful and unwise to resurrect.
The third alternative is for the division to be sold off separately either as a plc with shares owned, perhaps pro-rata to turnover, by the generating and transmission companies, or as a research and development institute perhaps with charitable status, which might be based on the Electricity Council, but does not have to be, or maybe some combination of both—funded perhaps by levies on the generating and transmission companies, and supported by special interest groups and manufacturers. There might even be a Government shareholding.
I think that the third option is the one for the Government to use as the basis for their solution, because it gives the greatest chance of maintaining really long-term work, such as renewable energy research, although I accept that commercial confidentiality might be difficult to maintain.
The three laboratories already work as cost centres, so it would not be too difficult to turn them into profit centres. When I discussed privatisation with the management and workers at Marchwood recently, I found support for the third option, as it would preserve the integrity of the present division and would enable it to relate more effectively to the supply side of the industry, if privatised in the way proposed in the Government's White Paper.
It is worth noting that, when the CEGB gave evidence to the Select Committee on Energy earlier this year, officials conceded that some of their work was
difficult to justify in operational terms.
Future shareholders may look askance at any expenditure which does not appear to have an immediate pay-off. That is why it is important to suggest an organisation for the future which can continue long-term research and does not look permanently at the results and the profit and loss account for the current year.
Perhaps a British equivalent of the United States Electric Power Research Institute would be the answer. It has been responsible for a co-operative research effort costing almost $3 billion since it was set up in 1973 and has acted as a focus for electricity and environmental research and development and long-term strategic thinking.
In conclusion, I suggest to my hon. Friend that, in deciding the right structure for research and development in the privatised electricity industry, the Government must bear in mind the quality of the professional graduates and skilled artisans in research and development, and the importance of maintaining a dynamic career structure to help recruitment and retention of personnel.
I would like to see a consultative document outlining the Department of Energy's thinking on this important subject, for discussion with and comment by all interested parties in research and development, well before the privatisation Bill is published.
At Marchwood, I was left in no doubt about the electricity workers' dedication to the needs of electricity consumers. They are pledged to keep the lights on, but, if the consumer is to be the real beneficiary of privatisation, that guarantee must still be given and honoured. Proper arrangements for the continuance of research and development are an important factor in honouring that pledge.
I am grateful to you, Madam Deputy Speaker, and to my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) for allowing me to contribute briefly to the debate. As my hon. Friend said, I have a constituency interest in this matter. My constituents work at the technical engineering division at Bedminster Down, at the generation, development and construction division at Barnwood, just outside Gloucester, and at the Berkeley Nuclear Laboratories.
I commend my hon. Friend the Member for Romsey and Waterside on initiating a debate on this important matter of the future of the industry. I wish to consider further the third option that he has mentioned. Like him, I believe that the technical expertise and research initiative that already exist within the electricity industry can be allowed to flourish as a result of privatisation.
In many ways, I suspect that my hon. Friend has been too timid in his view of the future of that section of the industry. Although I agree with him that we should consider closely the possibility of this section of the industry being treated separately, he underestimates the commercial value of the expertise in that sector.
I would like my hon. Friend the Minister to consider my hon. Friend's third option, but with the possibility of creating in this country a centre of excellence in terms of engineering construction and development and research into the future of electricity generation and transmission. CEGB engineers are capable of doing that and could provide a service not just to "big G", "little G" or the private generators envisaged under privatisation, but worldwide. We have the expertise and the initiative, and I hope that privatisation will give the industry an opportunity to exploit them.
I, too, am obliged to my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) for giving me the opportunity to contribute briefly to the debate. I agree with what he says.
I appreciate that the White Paper is a consultation document but the research and development part of the industry hardly rates a mention, despite, as my hon. Friend has pointed out, the fact that it employs over 2,000 people and has a turnover of some £162 million per annum — considerably greater than Land Rover whose progress, or perhaps lack of it, seems to dominate the headlines week after week. Yet somehow this side of the industry has had precious little mention to date.
I take a particular interest tonight because within the Stroud constituency are the Berkeley Nuclear Laboratories, which employs some 700 people, and, in the neighbouring Gloucester constituency, many more at Barnwood, some of whom also live in my constituency.
In reply to a written question the other day on the future of those employees, I received the reply that that was a matter for consultation within the industry. I appreciate that, but I hope that tonight my hon. Friend will be able to lift a little of the uncertainty for the benefit of my constituents.
I am most grateful to my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) for raising this important matter on the Adjournment. As he rightly pointed out, it gives me an opportunity to come to the Dispatch Box, at which my appearance has been somewhat rare recently. It is 21 or 22 months since I was last here. I did take some time away before the general election, but my particular area of responsibility does not seem to be a matter of great contention in the House.
I am also grateful to my hon. Friends the Members for Bristol, North-West (Mr. Stern) and for Stroud (Mr. Knapman) for their contributions, knowing the research and development facilities as well as they do, as they pointed out.
I assure my hon. Friend the Member for Romsey and Waterside that of course Ministers listen. My hon. Friend the Under-Secretary of State, who has particular responsibility for this area, but who, sadly for the House and for himself, is unable to be here this evening, will be reading carefully the report of the debate and will certainly pay attention to everything that is said.
As my hon. Friend pointed out, my hon. Friend the Under-Secretary has been committed to a visit to the United States for some time and he was unable to cancel it, but during the course of his visit he will be looking at research and development in the electricity industry which will no doubt be for the benefit of the House and the future deliberations on this aspect of privatisation.
However, my hon. Friend's visit gives me the chance to respond to the debate in the knowledge that research and development in the electricity supply industry is very important indeed. Wearing my hat as the Minister of State, Department of Energy, may I say that I am the chairman of the Offshore Energy Technology Board. The important input that research and development has made to the amazing success story of the North sea is very much part of my life. Therefore, I wholly appreciate the remarks that have been made about research and development in the important area of electricity as well.
Research and development is important and, amongst the utilities across the world, its reputation in the electricity supply industry is good and strong.
I agree that the record of research and development in the industry must be maintained as we look to the future. I would go even further than that and say that it needs to be improved, if that is possible.
The essence of research is, I believe, that ideas must be allowed to flourish, and new methods must continue to be tested, and new techniques must be introduced. The proposals in the White Paper "Privatising Electricity" are familiar by now to the whole House. They will also secure greater efficiency and a more economic supply, as was undoubtedly proved during the debate on the White Paper, for the simple reason that we are building on what is best in the industry, and ending what is wrong.
My hon. Friend the Member for Romsey and Waterside said that there are gaps in the White Paper, but it is in fact concerned with setting out a framework. During the weeks and months ahead there will be ample time for consultations. That is why I welcome the chance to have this debate and to discuss the ideas put forward on the future of research and development.
My own strongly held belief is that privatisation will benefit research and development in the electricity industry and will indeed open up greater opportunities. My hon. Friend gave a clear description of the current arrangements for research and development in the electricity supply industry. I will take a moment or two in the time left to elaborate on the research and development that is done by area boards, which he mentioned but did not go into in detail.
I will deal particularly with a centre that I know well, for reasons that are apparent, Capenhurst. It is close to my constituency — and my hon. Friends have mentioned centres close to their own constituencies. As the House knows, research into area board technological problems is undertaken both by the boards and the Electricity Council on their behalf. The council's programme is largely carried out at the Electricity Council Research Centre at Capenhurst.
About 75 per cent. of Capenhurst's efforts is devoted to what is called "utilisation research". The aim of this work is to develop new and improved products or processes which use electricity effectively. This provides the industry with a strong and competitive technology in the industrial, commercial and domestic sectors, against other energy industries. The remaining 25 per cent. of the effort is aimed at improving the distribution network of the industry. Recent advances have been made in the control of power supplies in rural networks to improve reliability for consumers.
But it is only fair to ask how the centre and the area boards respond to the opportunities in privatisation in the vital area of research and development. What will be the future arrangements? At this stage, I can give only a partial answer to these questions. As the House appreciates, the Electricity Council will cease to exist, but the 12 area boards have already, in their different ways, developed strong reputations for innovation.
For example, the board that I know best, MANWEB, has measured up to severe problems of electricity theft in inner city areas by experimenting with existing metering technology to develop an almost impregnable meter. The board is now a world leader in this equipment, and other distributors, both here and overseas, are following its lead.
In privatising the 12 area boards, we recognise that their contributions to their local regions will bring new opportunities in research and development, as well as in their mainstream commercial activities. The decisions concerning the organisational arrangements will be for the area boards.
I appreciate what my hon. Friends have said about research and development in generation—that the lion's share is being spent on this area. My hon. Friends have highlighted the records of Leatherhead, Berkeley, Marchwood and Barnwood, so I shall not detain the House by going into them.
I agree that the two generating companies formed from the CEGB will certainly continue to need to call for both research and engineering support for their existing power stations and for new stations for which they successfully tender. We will be looking to the industry to make proposals. We certainly expect there to be work which generators will take forward jointly; equally, there will be areas which generation companies will wish to take forward individually. It will depend ultimately on their own judgments. We believe that privatisation will throw open a whole range of opportunities for generation technologies. And, as the House knows, the distribution companies will be taking the lead in the restructured industry; they have already indicated that they will look to different forms of generation technologies, particularly for local generation and for managing peak demand.
The obligation on the distribution companies to contract for a fixed proportion of non-fossil fuelled capacity will also help foster a broader R and D base. Also, new generation technologies will come to the fore because substantial sums of investment will be needed over the coming years to meet growing demand and replace old plant.
My hon. Friend the Member for Romsey and Waterside said that the main aims of research and development programmes are to reduce costs and improve the effectiveness and efficiency of the industry. I entirely agree with him. One of the great benefits of privatisation will be that the companies will become even more conscious of the need to orientate their research programmes towards the customers. I believe we are already seeing the first signs of that.
However, to embark on a formal consultation process through issuing a consultative paper could well have quite a contrary effect. We would run the risk of bureaucracy halting this exciting process of change. It was, I think, Chairman Mao who referred to letting a hundred flowers blossom. I might share little else of his philosophy, but that seems to me similar to what we are trying to achieve.
This is not to say that the Government do not welcome the views of those involved in the industry, those handling research programmes and those in plant manufacturing. This is a good time to let us have their views. I know that the Department's advisory committee on research and development is to discuss electricity R and D at its May meeting. But do let us avoid endless bureaucracy—it can dampen the enthusiasm for change.
Finally, I stress that we recognise the industry's excellent record and reputation in R and D. We intend to ensure that the industry continues fully to utilise its existing expertise and that new opportunities arise to build and expand on this record. In this way, we will end up with a fitter industry, offering a better service and giving the customer a better deal.
I am grateful for my hon. Friend's reply. Although he will not produce a consultative document, I recognise that he is casting himself in the role of the listening Minister. Therefore, he can now expect to be bombarded with a host of suggestions from the people who are the seedcorn for the industry's future and without whom its future prosperity would he in doubt.
Question put and agreed to.
Adjourned accordingly at seventeen minutes to Eleven o'clock.