Monday 12 December 2022
Arrangement of Business
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Energy Bill [HL]
Committee (3rd Day)
Clause 84: Application of Part 4 of Petroleum Act 1998 in relation to carbon storage installations
90: Clause 84, page 75, line 30, leave out “and legacy”
Member’s explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 75, line 31 are consequential on the amendment in the name of Lord Callanan at page 71, line 34.
My Lords, it is a great pleasure to be back in Committee once again, debating the Energy Bill. I thank noble Lords for their patience during the interregnum. Noble Lords will recall that the Bill was necessarily paused following the death of Her Majesty the Queen. However, we have always been clear that the Bill represents a landmark piece of legislation to provide for a cleaner, more affordable and more secure energy system that is fit for the future, so I am very happy to be debating it again.
Clause 84 makes changes to Section 30 of the Energy Act 2008, which in turn enables modifications to Part IV of the Petroleum Act 1998. Amendments 90 and 91 make consequential changes to definitions in Clause 84 in response to government Amendment 70.
The next set of amendments relate to Clause 85. Amendments 92, 93, 101 and 102 update the heading, labels and definitions in Section 30A of the Energy Act 2008, as amended by this Bill, to avoid inconsistencies with existing definitions in the 2008 Act. Amendment 103 makes a consequential change due to the changes in definitions.
Moving to Amendments 94 and 95, the existing Section 30A of the Energy Act 2008 includes a carve-out in subsections (2) and (3). This prevents the Secretary of State designating an installation as eligible for change of use relief if it is to be used as part of a CCUS project that is in Scotland or is licensed by Scottish Ministers. However, the Scottish Parliament is also unable to legislate to confer such a designation power on Scottish Ministers because oil and gas is a reserved matter. It is important that change of use relief is available to oil and gas assets in Scottish territorial waters to create a consistent application of this policy. Amendment 94 removes this carve-out from Section 30A of the Energy Act 2008. Amendment 95 then updates a cross reference as a result of the proposed Amendment 94.
The process for issuing change of use relief first requires that an asset is designated as eligible. Only after this can the asset then qualify for that relief. Amendment 97 makes clear what conditions must be satisfied for an installation already designated as eligible for change of use relief by the Secretary of State actually to qualify for that relief. The first condition is that the Secretary of State has issued a carbon capture and storage-related abandonment notice under Section 29 of the Petroleum Act 1998 on a person for that installation. The second is that the trigger event has been satisfied.
Amendment 98 describes the trigger event that must occur for the relief to take effect. The trigger event requires that, first, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. This amendment would also give the Secretary of State power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, to qualify for change of use relief.
The Secretary of State must also approve that the amount paid into the fund is sufficient. Amendment 96 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient. Amendment 104 makes consequential changes to defined terms in Clause 85 as a result of Amendment 97.
I now turn to the other amendments tabled by noble Lords in this group. Amendments 99 and 100, tabled by the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, seek to enable the Secretary of State to accept financial security from the previous owner, rather than requiring the amount to be paid in cash into the decommissioning fund. The Government acknowledge the point made by noble Lords regarding the value-for-money considerations when requesting funds to be set aside for decommissioning. The costs of decommissioning a repurposed asset are likely to be incurred at the end of the carbon storage asset’s life, which may be many years after the establishment of the decommissioning fund. However, the purpose of this trigger event for the issuance of change of use relief is to help protect the taxpayer from the decommissioning liability by having funds available to decommission repurposed assets. The requirement for a cash deposit looks to ensure that funds are available should the carbon storage asset close early and decommissioning of the existing infrastructure is required. This reduces the risk that the burden of decommissioning is left completely to the taxpayer. It is also intended that decommissioning funds will be invested to allow the fund to retain its value over time until decommissioning is required. This is another reason why it is important for the previous oil and gas owner to contribute money into the decommissioning fund.
More generally, the policy intent of change of use relief is to provide previous oil and gas owners with greater certainty over their liabilities, to incentivise the repurposing of assets. In return, however, the taxpayer should equally expect assurance that the oil and gas owners’ liability will be met, in accordance with the obligations that the owners agreed to undertake on commencement of their oil and gas activities. The Government judge that this can be provided only through a cash deposit, and not through a promise of funding, potentially decades into the future. This is the principle on which the policy was proposed in the Government’s consultation in August 2021 and with which, at the time, respondents broadly agreed. Therefore, I beg to move the amendment in my name and ask the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, not to move their amendments.
My Lords, I welcome the Bill’s return to Committee; I am very pleased that that is the case. I have no comments to make on the amendments, but I note that during that interregnum, as the Minister described it, the Government gave planning permission for a coal mine. Although we are not going to debate it here today, that is a hugely retrograde decision which flies in the face of the Bill and the general way in which it looks forward. However, I have no comments on the amendments that the Minister has tabled.
My Lords, I am also delighted to be debating the Energy Bill again. I am delighted that the noble Lord is still the Minister so that we at least have continuity on the Bill; it remains much the same as it was before we left it some three months ago.
As the Minister said, the amendments refer to Clauses 84 and 85 of Chapter 2 of Part 2 on “Decommissioning of carbon storage installations”. This gives the Secretary of State a power to make regulations regarding the financing and provision of security for decommissioning and legacy costs associated with carbon capture utilisation and storage. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is modified by Section 30 of the Energy Act 2008, which modified Part 4 of the Petroleum Act. Clause 84 enables further modifications to the modified Part 4 in relation to the definition of carbon storage installation, and the establishment of decommissioning funds and legacy costs as set out in Clause 82, “Financing of costs of decommissioning etc”.
Clause 85 relates to Sections 30A and 30B of the Energy Act 2008, which make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects—as defined by Energy Act 2010. This relief removes the ability for the Secretary of State, in some circumstances, to take steps under the modified Part 4. This clause makes amendments to Section 30A of the Energy Act 2008 by broadening the scope of change of use relief so that it applies to eligible carbon storage installations more generally, amending the trigger point to qualify for such relief.
Amendments 99 and 100, which the Minister referred to, were tabled by my noble friend Lady Liddell, who unfortunately cannot be here and therefore will not be able to move them. They reflect value-for-money considerations in the decision-making process, meaning that the Secretary of State could accept provision of security in respect of amounts to be contributed on account of decommissioning costs—costs likely to be incurred, as the Minister said, many years after the establishment of the fund—rather than requiring such amounts to be paid simply in cash.
I thank the noble Lord, Lord Teverson, and the noble Lord, Lord Lennie, for their comments, but I do not think there were any points for me to address, so I will leave it there.
Amendment 90 agreed.
91: Clause 84, page 75, line 31, leave out “82(5)” and insert “82(4)”
Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 75, line 30.
Amendment 91 agreed.
Clause 84, as amended, agreed.
Clause 85: Change of use relief: installations
Amendments 92 to 97
92: Clause 85, page 75, line 36, leave out “carbon storage” and insert “certain”
Member's explanatory statement
See the amendment in the name of Lord Callanan at page 76, line 1.
93: Clause 85, page 76, line 1, leave out subsection (3)
Member's explanatory statement
This amendment and amendments in the name of Lord Callanan at page 75, line 36, page 76, line 33, and page 77, line 9, revert to the label “eligible CCS installation” for certain installations that are eligible for change of use relief.
94: Clause 85, page 76, line 4, leave out subsections (5) and (6) and insert—
“(5) Omit subsections (2) and (3).”Member's explanatory statement
This amendment removes a restriction on change of use relief relating to certain installations whose licence was granted by the Scottish Ministers etc.
95: Clause 85, page 76, line 7, leave out “After subsection (3)” and insert “Before subsection (4)”
Member's explanatory statement
This amendment is consequential on amendment in the name of Lord Callanan at page 76, line 4.
96: Clause 85, page 76, line 9, at end insert—
“(b) whether to make a certification under subsection (5)(b).””Member's explanatory statement
This amendment requires the Secretary of State to consult with the Oil and Gas Authority before making a certification of the kind mentioned in amendment in the name of Lord Callanan at page 76, line 33.
97: Clause 85, page 76, line 10, leave out subsections (8) and (9) and insert—
“(8) For subsection (4) substitute—“(4) An eligible CCS installation qualifies for change of use relief if—(a) the Secretary of State has given a CCS-related abandonment programme notice to a person in relation to the abandonment of the installation, and(b) the trigger event has occurred in relation to the installation.(4A) In subsection (4) “CCS-related abandonment programme notice” means an abandonment programme notice given under section 29 of the 1998 Act in that section’s application in relation to carbon storage installations (by virtue of section 30 of this Act).””Member's explanatory statement
This amendment changes the conditions for change of use relief under section 30A of the Energy Act 2008.
Amendments 92 to 97 agreed.
My Lords, I must inform the Committee that if Amendment 98 is agreed to, I will be unable to call Amendments 99 or 100 by reason of pre-emption.
98: Clause 85, page 76, line 33, leave out from beginning to end of line 7 on page 77 and insert—
“(5) The trigger event occurs in relation to an eligible CCS installation when—(a) a decommissioning fund (as defined in section 82(6)) has been established for providing security for the discharge of liabilities in respect of decommissioning costs in relation to the installation, and(b) the Secretary of State certifies by notice in writing (an “approval notice”) that one or more relevant persons have paid into the fund an amount or amounts the total of which is not less than the required amount.(5A) In subsection (5)—(a) “relevant person” means a person of a description specified in regulations made by the Secretary of State;(b) “the required amount” means an amount determined by the Secretary of State in accordance with regulations made by the Secretary of State.”Member's explanatory statement
This amendment amends the conditions for qualifying for change of use relief under section 30A of the Energy Act 2008.
Amendment 98 agreed.
Amendments 99 and 100 not moved.
Amendments 101 to 104
101: Clause 85, page 77, line 9, leave out “carbon storage” and insert “CCS”
Member's explanatory statement
See amendment in the name of Lord Callanan at page 76, line 1.
102: Clause 85, page 77, leave out lines 27 and 28
Member's explanatory statement
This amendment leaves out an unnecessary definition.
103: Clause 85, page 77, line 29, leave out “and legacy”
Member's explanatory statement
This amendment is consequential on amendment in the name of Lord Callanan at page 71, line 34.
104: Clause 85, page 77, leave out lines 31 to 35
Member's explanatory statement
This amendment omits definitions in consequence of the amendment in the name of Lord Callanan at page 76, line 10.
Amendments 101 to 104 agreed.
Clause 85, as amended, agreed.
Clause 86: Change of use relief: carbon storage network pipelines
105: Clause 86, page 78, line 12, at end insert—
“(b) whether to make a certification under subsection (3)(b).”Member's explanatory statement
This amendment requires the Secretary of State to consult with the Oil and Gas Authority before making a certification of the kind mentioned in Lord Callanan’s amendment at line 78, line 37.
My Lords, Amendments 105 to 109 amend Clause 86 on the availability of change of use relief for pipelines. Clause 86 mirrors Clause 85, the principal difference being that its application is to pipelines rather than to installations. As such, these amendments also mirror those covered in the previous group.
As was the case for Amendment 97, Amendment 106 makes clear what conditions must be satisfied for a pipeline that has already been designated as eligible for change of use relief by the Secretary of State to qualify for change of use relief. To recap, the first is that the Secretary of State has issued a carbon capture and storage-related abandonment notice, under Section 29 of the Petroleum Act 1998, on a person for that pipeline. The second is that the trigger event has been satisfied.
Amendment 107 describes the trigger event that must occur for the relief to take effect, in the same way as Amendment 98 did for Clause 85. First, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. The amendment would also give the Secretary of State a power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, in order to qualify for change of use relief.
As was the case for Clause 85, the Secretary of State must also approve that the amount being paid into the fund in relation to pipelines is sufficient. In the same way as Amendment 96 does, Amendment 105 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient.
Amendments 108 and 109 make consequential changes to definitions and cross-references in response to previously proposed amendments.
Amendments 110 and 111 make changes to Clause 87. Amendment 110 updates the heading to reflect better the content of that section. Amendment 111 proposes to omit a subsection of Section 105 of the Energy Act 2008. This subsection is no longer necessary as a result of the simplified mechanism proposed in this Bill for designating an asset as eligible for change of use relief.
The repurposing of pipelines, alongside installations, has the potential to deliver great benefits in the deployment of carbon capture, usage and storage. These can be environmental through greater resource efficiency and the reduction in disturbing sea beds. There are also economic benefits in reducing capital expenditure and potentially speeding up the deployment of CCUS.
The oil and gas sector has made clear that change of use relief is critical to incentivising the repurposing of assets. CCUS is a new sector, and there are increased uncertainties relating to the decommissioning of these networks compared with oil and gas projects. However, the taxpayer should not be disadvantaged through this policy. The conditionality set out in the issuance of the relief ensures that oil and gas owners fulfil their obligations and that CCUS is not used as means of avoiding existing liabilities. As set out in the Government’s 2021 consultation, this ensures that the polluter pays principle is met and the right balance is struck between industry’s desire for certainty and mitigation of risk to the taxpayer.
I beg to move these amendments tabled in the name of my noble friend Lord Callanan.
My Lords, I really have just one question for the Minister, and it is on decommissioning funds. It is not clear to me—that may be because I have not gone through the absolute intricacies of all these lines—who actually holds the funds for the decommissioning fund. Are they banked, are they in the Treasury, or are they in the Oil and Gas Authority? What guarantee do we have that they are there when needed and that they are not just used by the Treasury but are part of offsetting the public sector borrowing requirement? I am very keen to understand whether that is similar to the nuclear decommissioning sector, and where that happens.
I turn to the amendments from the noble Lord, Lord Lennie. He has not spoken to them yet. I suspect that the Government might accept—
They are all government amendments.
Forgive me. I am looking at a slightly out-of-date document. Anyway, that is the area that I would be interested to understand from the Minister. We will come to other amendments another time.
I too welcome the return of the Bill. It is quite interesting to reflect back to the first and second days in Committee, when we were recording the hottest temperatures that we had ever experienced in this country and were making full use of that experience. We were also in the midst of the leadership contest and questioning the commitment of the candidates; we had no way of knowing, of course, that both of them would take their turn in No. 10 and have the ability to demonstrate their commitment.
We are really pleased to see the return of the Bill. We were concerned that there would be changes and, as we said on the first two days in Committee, there are some measures in this Bill that are urgent and that we need to get a move on with in order to address the challenges that we face in this space.
I do not have an enormous amount to add to the Minister’s very full comments. I just seek clarification. When I see an amendment on consultation, I am always slightly concerned to know who exactly would come into the sphere of consultation and make sure that it is as full as it could be. The issues around making sure that the fund remains sufficient are very practical and necessary. With that plea for clarification on consultation, I am happy to leave it there.
I thank the noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, for their remarks. I will start with the noble Baroness’s final question. As set out in the Government’s response to that consultation, it is expected that the owners of the asset will submit their assessment of the decommissioning liability to the Offshore Petroleum Regulator for Environment and Decommissioning for verification. This verification will include consultation with the North Sea Transition Authority, which will be able to compare the assessment against its extensive benchmarking data. OPRED will also be able to engage third parties to provide its own assessment if necessary. Once OPRED is satisfied that the assessment is accurate, it will advise the Secretary of State on approving the amount. That is the advice route that the Secretary of State would take.
In response to the question from the noble Lord, Lord Teverson, transport and storage companies will hold the decommissioning funds, but will be overseen by the economic and operational regulators. Funds to cover decommissioning costs will be included in the allowed revenue paid to the transport and storage company. The proportion of revenue to be paid into the decommissioning fund will be determined by the economic regulator once the decommissioning liability has been calculated. I hope that that deals with that satisfactorily—clearly not.
I thank the Minister for that very useful answer. Let me get that correct: the funds are being held by the commercial companies that are putting this money aside. Is that ring-fenced? If they go bankrupt, is that lost? How does it work?
It could be a commercial company. It depends who gets the contract for the funds. Then they will be invested.
Are the funds held in escrow so that they cannot be used for anything else, or can they be used as part of the normal purposes?
I do not think we have a detailed enough answer, so perhaps we should follow up in writing.
I have a concern about this area and I think it is important that this is clarified.
We will clarify that point in writing before the next stage.
Amendment 105 agreed.
Amendments 106 to 109
106: Clause 86, page 78, line 13, leave out subsections (6) and (7) and insert—
“(6) For subsection (2) substitute—“(2) An eligible carbon storage network pipeline qualifies for change of use relief if—(a) the Secretary of State has given a CCS-related abandonment programme notice to a person in relation to the abandonment of the pipeline, and(b) the trigger event has occurred in relation to the pipeline.(2A) In subsection (2) “CCS-related abandonment programme notice” means an abandonment programme notice under section 29 of the 1998 Act given at a time when the pipeline is used, or is to be used wholly or mainly—(a) for the purpose of disposing of carbon dioxide by way of geological storage, or(b) as a licensable means of transportation.””Member's explanatory statement
This amendment changes the conditions for change of use relief under section 30B of the Energy Act 2008.
107: Clause 86, page 78, line 37, leave out from beginning to end of line 12 on page 79 and insert—
“(3) The trigger event occurs in relation to an eligible carbon storage network pipeline when—(a) a decommissioning fund (as defined in section 82(6)) has been established for providing security for the discharge of liabilities in respect of decommissioning costs in relation to the pipeline, and(b) the Secretary of State certifies by notice in writing (an “approval notice”) that one or more relevant persons have paid into the fund an amount or amounts the total of which is not less than the required amount.(3A) In subsection (3)—(a) “relevant person” means a person of a description specified in regulations made by the Secretary of State;(b) “the required amount” means an amount determined by the Secretary of State in accordance with regulations made by the Secretary of State.”Member's explanatory statement
This amendment revises the definition of “trigger event” for the purposes of relief under section 30B of the Energy Act 2008.
108: Clause 86, page 79, line 32, leave out “and legacy”
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 34.
109: Clause 86, page 79, line 33, leave out “82(5)” and insert “82”
Member's explanatory statement
This amendment is consequential on Lord Callanan’s amendment at page 73, line 23.
Amendments 106 to 109 agreed.
Clause 86, as amended, agreed.
Clause 87: Change of use relief: provision of information and advice
Amendments 110 and 111
110: Clause 87, page 80, line 3, leave out “information” and insert “supplementary”
Member's explanatory statement
This amendment is consequential on Lord Callanan’s amendment of Clause 87 at page 80, line 30.
111: Clause 87, page 80, line 30, at end insert—
“(2) In section 105 of the Energy Act 2008 (Parliamentary control of subordinate legislation), in subsection (2) omit paragraph (aa).”Member's explanatory statement
This amendment is consequential on the amendments in the name of Lord Callanan of clauses 85 and 86.
Amendments 110 and 111 agreed.
Clause 87, as amended, agreed.
Clause 88: Designation of strategy and policy statement
Amendment 112 not moved.
Clause 88 agreed.
Clause 89: Duties with regard to considerations in the statement
Clause 89 agreed.
Clause 90: Review
113: Clause 90, page 83, line 25, at end insert—
“(aa) the Official Opposition;”Member's explanatory statement
Under the Bill, the Secretary of State has to produce a CCUS strategy and it has to be reviewed after 5 years. However, they have the power to review it before the end of this 5-year term if certain circumstances have taken place (including a general election) but must consult certain people if it is outside the 5-year period. This amendment seeks to include His Majesty’s opposition in that consultation.
My Lords, these amendments refer to Clauses 90 and 91. They concern consultation over the CCUS strategy and its periodic review. I am grateful to Drax for providing definitions. Carbon capture and storage traps and removes carbon dioxide from large sources and most of that CO2 is not released into the atmosphere. That can be either pre or post combustion. If it is post combustion, the storage usually takes place underground in large silos, the largest of which is in Texas and which is currently processing 5 million tonnes of CO2 a year. As an advert for Drax, it reckons that it would be able to process 20 million tonnes in North Yorkshire by 2030 or thereabouts.
Amendment 113 is about the requirement to include His Majesty’s Opposition in the list of organisations that must be included in stakeholder consultation. These reviews must happen either every five years or more frequently if certain circumstances take place, including a general election or if there is a material change of policy on CCUS. These reviews are to ensure a stable and predictable regulatory landscape for investors. I would have thought that the amendment to include the Opposition in the consultees’ list would be quite attractive to the Government, given the current state of the political landscape in the UK—but there you go. This new requirement would clearly be of overall benefit to the development strategy by involving a wider parliamentary group beyond just the Secretary of State when a review is required. If the Secretary of State seeks to amend the statement, they will have to follow the requirements in Clause 91, which include the requirement for the statement to have been approved by a resolution of each House of Parliament before the Secretary of State can designate it as a strategy and policy statement.
The amendment tabled by the noble Baroness, Lady Liddell, in this group would ensure a requirement for consultation on the CCUS strategy and policy statement, if the Government should seek to amend it. It sets out the process that would have to be followed, and the Opposition support this amendment. I beg to move.
My Lords, I was getting ahead of myself on the last group, and I apologise to the Grand Committee for that. I would have thought that the Government would like to accept this amendment, as they are likely to be in opposition in five years’ time. I wait to hear from the Minister.
I thank the noble Lords, Lord Lennie and Lord Teverson, for their concern about whoever might be the Official Opposition at the time. I suppose we will see. I am surprised that the noble Lord, Lord Teverson, did not want to ask for the fourth-placed political party in Parliament to be a statutory consultee as well.
These amendments seek to clarify those who must be consulted as part of the process of designating a CCUS strategy and policy statement. Amendment 113 was tabled by the noble Lord, Lord Lennie, the noble Baroness, Lady Blake, and the noble Baroness, Lady Bennett—who, sadly for us all, is unable to be with us. This amendment seeks to require the Official Opposition to be consulted as part of the strategy process. I reassure noble Lords that parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement, which must be approved by a resolution of each House of Parliament before it can be designated, as is provided for by Clause 91(10). So, of course, whoever is the Official Opposition at the time, and whoever is the fourth-placed political party at the time, will have a full opportunity to contribute to the debate on this matter.
As the Bill sets out, any CCUS strategy and policy statement that has been designated will be required to be reviewed every five years, although, in the specified circumstances set out in the Bill, a review could take place sooner than five years. When the outcome of a review is that the Secretary of State considers that the statement should be amended, the Bill provides for a statutory consultation process, including consultation with the economic regulator and relevant Ministers in the devolved Administrations. An amended statement would also be required to be approved by a resolution of each House, and would therefore be subject to parliamentary scrutiny and approval before it could be designated.
The process for designating the CCUS strategy and policy statement mirrors the process set out in the Energy Act 2013 for an energy strategy and policy statement. When the outcome of a review is that the Secretary of State considers that the statement does not require amendment, or should be withdrawn, this also requires consultation with the economic regulator and Ministers in the devolved Administrations. This is to ensure that any impact that this decision would have on the conduct of the regulator’s functions, or in relation to the important matter of devolved policy, is taken into account in the decision-making process. It is also the case, of course, that the Secretary of State can update Parliament on the plans for, and outcome of, any review, as part of the normal process of parliamentary business.
On Amendment 114, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, Clause 91 provides for the Secretary of State to consult whomever he or she considers appropriate, in addition to certain specified persons, in the process of developing a strategy and policy statement. This formulation enables the Secretary of State to consult ahead of laying a statement before Parliament. As I have set out, it is for Parliament to consider and approve any new or amended statement.
Although I thank noble Lords for their concern about whoever ends up being the Official Opposition at the time, and for their interest in this topic, I hope that the reassurances I have been able to provide on these points mean that they will not press their amendments.
May I come back to the Minister on Amendment 114? It seems very restrictive to consult as the Secretary of State decides. I cannot pinpoint this, but in many other pieces of legislation the wording is much closer to that in Amendment 114. I do not understand why the Government would not accept that very modest amendment to those “affected” by a revision of the strategy. Surely this is far more restrictive than most government legislation in this area.
I do not think that is the case. As a Minister, I have issued many consultations. In my experience there is never a problem with anybody contributing who wishes to, even if they are not statutorily listed in the legislation. They are normally public consultations in any case, with a large number of stakeholders. The advice from officials and others is always to extend the scope of consultation to be as wide as possible because you then minimise any potential legal challenges as a result. I understand the noble Lord’s concern but I do not think it is warranted on this issue.
My Lords, the amendment that seeks to include the Opposition as part of the formal consultation would avoid what we get in Parliament, which is the “ayes and noes” and the “take it or leave it” approaches to policy development. This is an area where we have pretty much a common interest. It seems a sensible approach to throw open the consultation at least to the Opposition—who knows, maybe even to the fourth party—but to make it as wide as possible to avoid that prospect of Parliament rejecting or accepting in total whatever is put before it. It is about buy-in. As the Minister said, there are plenty of examples where buy-in has been part of the Government’s approach to consultation. It seems strange that this is not one of them. With that, I beg leave to withdraw the amendment.
Amendment 113 withdrawn.
Clause 90 agreed.
Clause 91: Procedural requirements
Amendment 114 not moved.
Clause 91 agreed.
Clause 92 agreed.
Schedule 5 agreed.
Clauses 93 to 96 agreed.
Clause 97: Financial assistance
Amendments 115 and 116 not moved.
Clause 97 agreed.
Clause 98: Low-carbon heat schemes
117: Clause 98, page 90, line 32, leave out “may by regulations” and insert “must by regulations, within 12 months of this Act being passed,”
Member’s explanatory statement
This amendment requires the Secretary of State to make regulations establishing a low-carbon heat scheme within 12 months of the Bill receiving Royal Assent.
My Lords, I too am glad to be back debating energy. As has been noted, we find ourselves in a completely different sent of extreme weather events today, but I am glad that we have all been able to make it here to resume this important discussion.
Since we last met, emergency legislation has gone through on some of the issues that we raised in Committee and at Second Reading on the need for a short-term response to the energy crisis bearing down upon us. The Bill is very much about long-term measures, so it is right and proper that the Government supplemented that legislation with faster-paced legislation. However, there were many provisions in that rather hurried legislation, which I know has caused concerns in the market, so the Government have to work hard to deliver the right signals to investors and to businesses around the country that the transition will be orderly and consistent and can encourage investment across the piece. I am sure we will come back to debating the net effect of all the Government’s measures on energy in later clauses.
Amendment 117 relates to the setting up of a low-carbon heat scheme. Specifically, the amendment would change the provision that the Secretary of State “may” by regulations make provision for the scheme to “must” and apply urgency to the challenge of bringing forward those regulations by requiring that they are passed within 12 months of the Bill being enacted.
The reasons are self-evident. If we are to solve the problem of our reliance on volatile fossil fuels, which are also contributing to air-quality problems and climate change, we need to get on with the electrification of heat. The scheme would move us along in that direction and give investors confidence that there is a market that they can plan for and invest in. We therefore urge the Minister to reassure us that the regulations will be passed with all due haste and brought in in good time, and I look forward to hearing from him on the timetable within which we might see the regulations.
Amendment 118 seeks to add to the Bill statutory requirements for and deadlines by which we will stop selling the gas-based boilers currently going into properties. I support that in principle, although I imagine that there will be concerns about the specificity going into primary legislation. However, it is essential that we give clarity to the manufacturers of existing boilers that the Government are serious about ending their current dominance.
I receive, as I am sure everyone does, a lot of correspondence about hydrogen-ready boilers. That needs to be unpacked. I do not know what can be done to prevent the mis-selling of that concept, but it is borderline mis-selling because it is very unclear whether hydrogen-ready boilers are even possible. I therefore think it has more to do with the manufacturers preserving the status quo than with their genuinely seeking to be involved in the transition. Lots of technical advisers tell me that simply saying that something is hydrogen-ready is not sufficient and that it is very difficult and complex to achieve, so I have some sympathy with Amendment 118.
Amendment 121 seeks to except hydrogen if it is compliant with the low-carbon hydrogen standard. In previous debates I have made it clear that I do not deem the low-carbon hydrogen standard sufficient. It is a number that has been put out there, but I do not think it takes into account all the effects of hydrogen on the climate specifically. Hydrogen is a greenhouse gas, as we have talked about previously. The global warming potential of hydrogen needs to be taken sufficiently into account when we consider a low-carbon hydrogen standard, and I do not think it has been, so I am a little nervous about us putting the provision in as it stands because I do not consider that standard tight enough.
The Government’s amendments on opening up the opportunity for the regulations to apply to manufacturers seem entirely sensible. We have to decide the right point at which regulation would be most efficient to drive this. The manufacturers may well be the right place for this, or they may not, but having that option seems correct to me.
In Amendment 122, the Opposition Benches seek to include specificity in relation to the heat pump market. Again, I can see the logic of that. I am sure it is probing amendment, more than anything else, to get clarity on the scale of the market that we expect. I doubt that it could survive in primary legislation, but I am sure it is there to try to elicit positive statements so that the heat pump sector can move in this regard.
Amendment 119 concerns cases where it is not possible to fit heat pumps. It is a difficult amendment to legislate on. Very few of the properties where a large enough heat pump or geothermal source can be installed cannot electrify heat. Therefore, I believe that the amendment is not necessary.
I very much look forward to hearing the response to the group. As I have said, it is of primary importance to get moving, and to get investors moving, so that we can start to have a manufacturing sector that is enabled by those regulations as quickly as possible. I beg to move.
My Lords, 95% of UK homes are centrally heated and most CO2 emissions come from burning fossil fuels, contributing to about 30% of the UK’s total greenhouse emissions, about half of which is from heating our domestic properties. Will gas boilers be banned in 2025? As part of the future homes standard, new homes will be able to install only energy-efficient heating systems and will produce 31% lower emissions compared to the current levels. The standard will come into effect in 2025. The International Energy Agency has also stressed that no new gas boilers should be sold after 2025. The UK’s official climate advisers recommend that all gas boilers should be banned by 2033 to end the UK’s further contribution to climate change. That is the background to the amendments being moved.
We support Amendment 117 tabled by the noble Baroness, Lady Worthington, which adds a bit of the oomph by replacing “may” with “must” in relation to the low-carbon heat scheme. Amendment 119, in my name, would ensure that the Secretary of State, in making a low-carbon heat scheme, must
“provide a plan for low-carbon heating in homes where it is uneconomic or unfeasible to have a heat pump (large, rural, off-grid homes etc.).”
Amendment 121 seeks to allow
“heating appliances that use hydrogen produced to the Low Carbon Hydrogen Standard (blue hydrogen) to be included in low-carbon heat schemes.”
I note what the noble Baroness, Lady Worthington, said about hydrogen in general, but if we are going to have hydrogen, let us have blue hydrogen at this stage.
Amendment 122 states:
“Sub-paragraph (i) seeks to include the Government’s own figures for heat pumps in the Bill. Sub-paragraph (ii) seeks to include the number of heat pumps in the latest figures on recommendations from the CCC. And sub-paragraph (iii) seeks to oblige manufacturers producing gas boilers to turn to minimum 25% production of heat pumps by 2028 to facilitate the clean heat transition.”
Government Amendment 123
“makes it clear that a low-carbon heat target set by virtue of clause 100(1)(c) or (d) may be set, in the case of a manufacturer, by reference to heating appliances of the manufacturer that are supplied or installed, whether by the manufacturer or someone else.”
Government Amendment 124 simply corrects a drafting error.
Amendments 117, 119 and 121 relate to Clause 98 in Chapter 1, on low-carbon heat schemes, of Part 3, on new technology. Clause 98 provides the Secretary of State with powers to set up a regulatory scheme through secondary legislation to encourage the sale and installation of low-carbon heating technologies, such as electric heat pumps. Clause 98(3)(b) allows for this to include, for instance, hybrid heat pump systems that involve both a heat pump and a fossil fuel boiler. This is welcome, but our primary concerns are when and how the powers will be used. Amendment 117, tabled by the noble Baroness, Lady Worthington, requires the scheme to be set up within 12 months of the Bill becoming law, and we agree with that.
Amendment 119 seeks to ensure that the Government are aware that there are a number of homes where heat pumps are not the solution, and to address filling this large gap. There is one fundamental flaw with this clause that Amendment 121 seeks to address: it effectively prohibits the deployment of either hydrogen-ready boilers or boilers that use blue hydrogen under low-carbon heat schemes.
The clause is directly in opposition to the Government’s wider policy. Ministers have committed to consulting on the potential mandating of hydrogen-ready boilers and to making a decision in 2026 on the technological routes to decarbonising home heating. Blue hydrogen, which is derived from natural gas in combination with carbon capture, utilisation and storage, is low carbon by definition. Hydrogen can immediately reduce emissions by being blended into the gas grid, followed potentially by full conversion. But blue hydrogen will likely be an important bridging fuel until green, pink and yellow hydrogen can be generated at scale. If the clause remains unamended, it will choke off investment in hydrogen-ready boilers and hydrogen production with carbon capture, utilisation and storage, which removes up to 99% of emissions.
The clause is strongly opposed by trade unions, including the GMB, which represents gas workers. It believes that continued research and investment in hydrogen are essential if the UK is to make the most of the skills and expertise of the gas workforce. Will the Minister agree to look at this again ahead of Report, and will the Government agree to meet a delegation of unions to discuss their concerns?
Amendment 122 is to ensure that the powers contained in the Bill are used with purpose and in a timely manner. I have asked for officials to meet members of the hydrogen industry, particularly those conducting real-world trials of hydrogen in the gas grid, as well as the unions, to talk through the impact of the amendment. It is our understanding that no engagement on this clause has taken place with industry or the unions. I beg to move.
On Amendment 121, the Minister knows as well as I do that extensive work is being done on a 20% hydrogen/natural gas trial to provide central heating, et cetera, in homes. If that is the situation, either this amendment should be accepted or perhaps the Minister could explain how it will be possible for that work to continue.
I rise in support of Amendments 117, 118 and 122. If we are to move towards cleaning up heat, we really need to get on with it and put sensible deadlines in place rather than leaving it open-ended, as it currently stands in the Bill.
Amendment 118 tightens up what needs to happen by when and makes some very sensible suggestions on timeframes for
“the banning of the installation of unabated gas boilers in new properties from March 2025 … the banning of the sale and installation of unabated gas boilers in all properties after March 2035.”
We need to get on with this. I support the amendment wholeheartedly.
Likewise, Amendment 122 would introduce a deadline
“to include the number of heat pumps in the latest figures on recommendations from the CCC.”
On Amendment 121, like the noble Baroness, Lady Worthington, I add my note of caution about reliance on hydrogen. It is an unproven technology. There are ample studies and research that point to there being substantial barriers before it can be delivered at a low enough cost. Not least, there are technical difficulties: we know that the existing pipelines will not be suitable. So it will not be a straightforward case of replacing a natural gas boiler with a hydrogen or blend boiler. There are far greater changes that need to be made to the whole infrastructure before deployment.
My Lords, I will start with my Amendments 123 and 124. Amendment 123 seeks to provide additional clarity to Clause 100. Clause 100(1) provides examples of how targets for a low-carbon heat scheme may be set. The amendment’s addition of proposed new subsection (2A) clarifies that an average appliance efficiency or emissions intensity target could apply to all of a given manufacturer’s heating appliances sold in the UK, whether or not they were sold or installed by the manufacturer itself. This had been explicit in one of the examples in the list in subsection (1) but not in others. The Government believe that it is prudent to make this explicit and it provides additional clarity.
The Government have tabled Amendment 124 purely to correct a minor drafting error in Clause 100(4), replacing “activity” with “appliance” so that the subsection has its intended meaning.
Moving on to the amendments tabled by other noble Lords, I will start with Amendment 117 from the noble Baroness, Lady Worthington. The Government have always been clear that they intend to introduce the low-carbon heat scheme provided for by this chapter in very short order; namely, from 2024. However, it is the Government’s view that it would not be appropriate to incorporate a timeline into the Bill. If the noble Baroness will take my word for it, we intend to get on with this fairly quickly. It is important that the legislation retains the opportunity, if necessary, to respond to any unforeseen changes in market conditions, et cetera, and to ensure that the necessary administrative and enforcement systems are established. We are indeed looking at the appropriate enforcement mechanism at the moment.
I turn to Amendment 118, the first of four in this group in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I also thank the noble Baroness, Lady Sheehan, for her contribution. This amendment would require there to be a link between the introduction of a low-carbon heat scheme and a ban on the installation of gas boilers in new-build and existing properties respectively.
Noble Lords will be aware that the Government will introduce a future homes standard in 2025, which will effectively require that new properties are equipped with low-carbon heating and high energy efficiency, avoiding the need for future retrofitting. New properties would be taken care of in that respect. It would be premature to decide exactly what policy approaches will be best suited to implement the phase-out of natural gas boilers in existing properties.
I do not believe that it is helpful to create a dependency between the ability to launch a scheme on the one hand and a particular, separate measure such as an appliance ban, as the amendment proposes, on the other. That would risk delaying the introduction of such a scheme altogether.
On Amendment 119, the Government have been clear that a range of low-carbon technologies are likely to play a role in decarbonising heating. District heat networks have an important role to play in all future heating scenarios, as do electric heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting gas networks to supply 100% hydrogen for heating. As the noble Baroness, Lady Sheehan, said, it is indeed a considerable challenge, but we need to do the studies to work out whether it is feasible. Of course, other technologies may also play a supporting role.
To establish whether or not it is a feasible technology, the Government have an extensive programme of work already under way to develop the strategic and policy options for all these technologies and for different building segments. Another plan, seeking restrictively to prescribe the right solution for all properties now and out to 2050, is not particularly necessary or helpful.
I thank my noble friend Lord Naseby for his contribution on Amendment 121. This amendment would expand the potential set of low-carbon heating appliances that could be supported by a scheme established under the power in this chapter. However, I emphasise that the set of potential relevant low-carbon heating appliances established in this clause is solely for the purposes of a scheme under this power. It does not in any way serve as a comprehensive statement of all potential low-carbon heating appliances, and it has no wider bearing on what could be considered low-carbon heating appliances in any other policies, schemes or legislation.
The Government recognise that low-carbon hydrogen could be one of a few key options for decarbonising heat in buildings. To that end, the Government are working to enable strategic decisions in 2026 on the role of hydrogen in heat decarbonisation; I note the scepticism of a number of noble Members about this. The Government will bring forward the necessary policies and schemes to support the deployment of hydrogen heating, depending on the outcome of these decisions. We will also shortly consult on the option of requiring that all domestic gas boilers are hydrogen-ready from 2026. Since the scheme provided for by this measure would not be suitable or necessary to support the rollout of hydrogen-using or hydrogen-ready heating appliances, it would not be helpful to expand the scope of the power in this way.
Finally, Amendment 122 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, would require that three specific targets be incorporated into regulations for a low-carbon heat scheme. Again, the Government believe that targets are best set and adjusted in the scheme regulations, based on an assessment of the market conditions at the time, rather than in the enabling legislation in advance.
I turn to the specific targets that the noble Lord proposed. I have said a number of times that the Government’s ambition is to develop the market towards 600,000 heat pump installations per year in 2028. That is what we assess to be a scale necessary for and compatible with all strategic scenarios for decarbonising heating by 2050. Although the Government have clear plans to support industry to build a thriving manufacturing sector for heat pumps in the UK, we do not believe that a production quota is an appropriate way to achieve this.
In the light of what I have been able to say, particularly on the consultation, I hope that the noble Baroness, Lady Worthington, will agree to withdraw her amendment.
My Lords, I wanted to give the Minister the opportunity to introduce his amendments, but I will say a couple of things about this because low-carbon heating is a key issue. As he will know, 40% of UK emissions, more or less, are from heating. One of the big gaps in the Bill is part of the solution to that: home efficiency, which does not really appear in the Bill at all but should have.
I would like to ask the Minister specifically about energy from waste. Clause 98(4) has a list of fossil fuels, but energy from waste is not there. It is sort of a hybrid of being one and not. Over the last decade or so, one of the issues has been that when we have had energy-from-waste plants there has been a big emphasis on them being compatible with using the excess heat for commercial or domestic heating purposes, but hardly any of them do that. They get the planning permission but hardly anything happens. There are one or two in south London where it works, but generally it is not the case. Where do energy from waste and the high carbon emissions from disposing waste fit into this? Do the Government have any appetite—I do not really see it in this section of the Bill—to repair that past omission and make sure that excess heat from those facilities is used far more effectively, and perhaps compulsorily, in future?
The noble Lord makes a good point. Before he corrected himself, I was about to contradict him and say that a number of energy-from-waste plants are already supplying district heating networks—as he said, there is a particularly big one in south London, which I have visited. It is doing so, because the Government supported it. It received grant money to enable it to do that. There are a number of others around the country, so we already have existing powers and support funds to support heat networks.
We are very supportive of energy-from-waste plants using the waste heat to connect into district heating networks. However, it is a difficult area, because it depends on a number of factors. You have to have the energy-from-waste plant in the first place, and office blocks, apartments, et cetera have to be available to take the waste heat. The noble Lord will know that later in the Bill we will discuss the zoning power for heat networks that local authorities will have, which hopefully will enable them to utilise those powers and take heat networks forward; there are a number that are very keen to do so. I would certainly envisage that a number of energy-from-waste plants—those in inner cities, in particular—will be able to take part in those initiatives.
I thank the Minister for his response. I am somewhat reassured by the timetable that these regulations will be pursued against. I would like to mention that it is not unusual for government to announce things and for there to then be quite a long delay. Energy-efficiency standards reaching EPC C by 2035 was first announced in 2017, but we still have not seen that make it through. If we had, we would be in a far better position now as we face this winter, where we have shortages of gas, and we should have more efficient homes. There is a reason why we are pressing on this timescale.
I support the Government’s amendments as introduced and the Minister’s statement that it is not helpful to expand this particular scheme at the moment any further than it is already defined. It is important to have clarity. The nearest corollary to this legislation is the ZEV mandate, which we will probably discuss in relation to the amendment tabled by the noble Baroness, Lady Randerson. It is better to have clarity of purpose that gives manufacturers and industry time to adapt and build an industry. It is clear in my mind that electrification of heat is probably 90% of the answer, if not the full answer. Therefore, getting it right, keeping it tight and giving confidence for investment would be the fastest way for us to get off volatile, expensive and unhealthy fossil fuels. However, I beg leave to withdraw the amendment.
Amendment 117 withdrawn.
Amendments 118 to 121 not moved.
Clause 98 agreed.
Clause 99: Application of scheme
Clause 99 agreed.
Clause 100: Setting of targets etc
Amendment 122 not moved.
Amendments 123 and 124
123: Clause 100, page 92, line 26, at end insert—
“(2A) In the case of a low-carbon heat target that is imposed by virtue of subsection (1)(c) or (d) on a scheme participant who manufactures heating appliances, the target may be set by reference to heating appliances that are supplied or installed (whether or not by the scheme participant).”Member's explanatory statement
This amendment makes it clear that a low-carbon heat target set by virtue of Clause 100(1)(c) or (d) may be set, in the case of a manufacturer, by reference to heating appliances of the manufacturer that are supplied or installed, whether by the manufacturer or someone else.
124: Clause 100, page 92, line 31, leave out “activity” and insert “appliance”
Member's explanatory statement
This amendment corrects a minor drafting error in subsection (4) of Clause 100.
Amendments 123 and 124 agreed.
Clause 100, as amended, agreed.
Clauses 101 to 107 agreed.
124A: After Clause 107, insert the following new Clause—
“Low-carbon transport schemes(1) The Secretary of State must by regulations make provision for the establishment and operation of one or more low-carbon transport schemes.(2) A low-carbon transport scheme for the purposes of subsection (1) must include, but is not limited to, the use of hydrogen as fuel to power vehicles.(3) Regulations may include—(a) the setting of low-carbon transport targets,(b) encouraging and incentivising the provision of networks of refuelling stations supplying hydrogen for vehicles, and(c) encouraging and incentivising businesses which run fleets of vehicles to convert to hydrogen fuel.(4) Regulations must specify that, where low-carbon transport schemes include the use of hydrogen, the hydrogen must meet the UK Low Carbon Hydrogen Standard. (5) Vehicles covered by low-carbon transport schemes may include e-bicycles and e-motorbicycles.(6) Hydrogen to power vehicles may be used in a fuel cell or burned in a combustion engine.”Member's explanatory statement
This amendment would require the Secretary of State to encourage and incentivise the use of low-carbon transport schemes, similar to the low-carbon heat schemes in the Bill, particularly the use of hydrogen to power vehicles.
I decided to table this amendment, because I felt that it was important to draw attention to what I and many in the transport sector see as the lack of leadership from the Government on this issue. It is important to bear in mind that the Government have seemingly very good targets on decarbonising the transport sector, but there is no detail on how we are going to get there. The path ahead is very vague.
Transport is the largest carbon-emitting sector in the UK. It is responsible for a quarter of CO2 emissions globally. In the UK, the sector has reduced its emissions by only 3% since 1990. That stands in contrast with other sectors. There is a desperate need for leadership, because we are falling behind. The evidence is that we have to be halfway there by 2030 to reach the goals for 2050, but we do not have the plans, the policy or the path set out for us, and it is now a matter of great urgency.
One reason why emissions have not reduced is that although the technology has improved, the number of vehicles on the road has increased, as has the size of cars. Although they are more efficient kilo for kilo, if I can put it that way, they weigh more now and have a greater impact and emit greater amounts of carbon. I want to say briefly that we are talking about this in relation to carbon emissions, but it is, of course, a matter of health. It has a huge impact on our breathing and things like heart attacks, and so on. It is a matter of considerable importance in health.
A great deal is made about the move to electric vehicles, but only 2% of the vehicles on the roads so far are EVs. We are a very long way behind the leaders—countries such as Norway, where up to half of vehicles sold are EVs. My amendment refers specifically to hydrogen, and hydrogen is controversial. Of course, it must be green hydrogen. Even then, green hydrogen has disadvantages, but the advantage of hydrogen is that it provides an early answer to the difficult-to-decarbonise sectors of the transport world—that is, heavy goods vehicles, heavy vehicles generally and, of course, shipping, which is particularly difficult to decarbonise. That is one reason why there is the reference to hydrogen.
The other reason why there is a reference to hydrogen is that, unlike with electricity for vehicles, hydrogen cannot really be installed on a commercial basis unless the Government put in place a set of carrots and sticks to encourage it commercially to be installed. It costs over £1 million to install a hydrogen-fuelling point. It is not the answer for ordinary domestic cars. It could be the answer for fleets of vehicles such as vans, but it is not going to be, unless the Government provide leadership.
I have been raising this issue for the past six years at least, and the Government have said that the market will solve the problem of electric vehicle charging points. To a certain extent, the market has stepped in. Of course, there are huge gaps, but the market has stepped in. The reason it has been able to is that all around us there is electricity—but we do not have hydrogen all around us. I deliberately mention hydrogen in the amendment because the Government need to consider how they are going to lead on this issue.
I finish by saying that the point of the amendment is to open up the matter for discussion and to give the Government the opportunity to consider—and, I hope, to think again about—the urgent need for leadership in setting out a set of steps, a policy or plan. These exist in other countries without Governments taking a huge commercial risk, but simply by providing the incentives to encourage people to choose more environmentally friendly ways of fuelling their vehicles and ensuring that, having chosen a more environmentally friendly vehicle, they can run it efficiently and effectively.
Noble Lords will be well aware that every time we talk about electric vehicles, there is immediately a discussion of the latest crisis that someone has faced in being unable to charge their EV—despite the fact that they are probably running short of electricity outside a house or fuel station that is blazing in electricity. Let us just think about how much more complex the matter is if we are talking about hydrogen.
This is about discussing the difficult issues and encouraging the Government to look ahead and plan—urgently—for what must be achieved. The average life of vehicles on the roads now is 16 years, I believe, and that will probably get longer because we are facing a period of difficulty, austerity and rising prices. This is therefore important, because those decisions made this year about what vehicle to buy—whether you are an individual or as a company—will be with us for decades to come. The Government must lead in the way only Governments can. I beg to move.
My Lords, I shall speak to Amendment 124A, as presented by the noble Baroness, Lady Randerson. I must say that it is seldom that we disagree, because we both share the objectives of a rapid response to the growing climate risk, rapid decarbonisation and increasing the efficiency of our energy systems. I welcome this chance to have a debate about the intersectionality between transport and energy. In fact, and not to pre-empt it, I have an Oral Question later this week about how departments connect on these issues. It is hugely important that the DfT, in particular, teams up with BEIS on planning for our future decarbonised energy systems.
That said, I do not think it will come as any surprise that I am absolutely opposed to the idea of bringing in this set of amendments as currently drafted. My belief is that hydrogen will have a very limited role, for three reasons. First, it is itself a climate change gas and it is very slippery; it is the smallest molecule on the periodic table and it escapes everywhere. I do not wish to have hydrogen all around me—quite the opposite. I want hydrogen in very controlled places, being looked after by industrial chemists; I do not want it in my home or in my vehicle. We just have to look at the explosion of the hydrogen fuelling station in Norway. It is often forgotten but this is a hugely explosive gas. Norway managed to blow one of its fuelling stations and, if Norway can blow things up, anyone can.
I am therefore very sceptical that hydrogen will have a role in distributed energy systems. It will have a role, however, in industrial applications, specifically the production of ammonia for fertiliser. Where we use hydrogen already, it comes from gas and is hugely expensive. We should shift our agricultural subsidies to make green hydrogen into fertilisers. That should be a priority and I am certain that it will play a crucial role.
There is a second place where hydrogen might play a role, which is in shipping. If I have some sympathy with the amendment, it is that it is trying to get the Government to focus on what we are doing with our shipping sector. We are an island nation; we have ferries and ships. We could do so much more with our maritime sector. I hope we will have an overabundance of clean energy in future. It might well be that shipping—certainly long-distance shipping—will be a viable market.
As I said, hydrogen will be in the hands of a few players and will be highly regulated in those instances. It should not be distributed across the country because of the safety issue, but it is also a pollutant in the traditional sense, not just the greenhouse gas sense. It is often forgotten that when you combust hydrogen in the atmosphere you get NOx emissions. That is why it has no place in the home: if you use a hydrogen boiler it will have a higher impact on your health than if you use a natural gas boiler. That is well documented; quite frankly, I do not even know why we are still debating it. The same will happen in transport: if we use hydrogen widely, we will get elevated NOx emissions. For those reasons, I very much doubt that it will play any role in those distributed numbers of vehicles, but it has a place in industry.
I encourage the Minister and his department to come forward with a much more targeted approach to hydrogen. Let us abandon any misguided thoughts that it will be in everyone’s home or vehicle. That would be dangerous on many levels and a setback. We want targeted policies that bring about rapid electrification. Although I am very grateful for the opportunity to have this debate, as noble Lords can see, I feel passionately that we should stick to our guns. “Electrification of everything” is more or less the catchword that we need to adopt, but let us have this debate and bring forward some policies for industrial applications, shipping and fertiliser production, because we are not on track and we could be doing more.
My Lords, I support the thrust of these amendments but I also have huge qualms about hydrogen and electric vehicles. Quite honestly, electric vehicles still clog the roads and their drivers still run over and kill people. If we are thinking about low carbon, we should go for public transport.
I also want to quibble with the noble Baroness, Lady Randerson, when she said that there was a lack of government leadership on this issue. The fact is that the Government are not giving us leadership on any issues. They are running around like a pack of confused ferrets. We are incredibly lucky that the whole of Britain is somehow hanging together and not having any disasters.
Returning to the amendments, something Greens are always very concerned about is marketisation and financial engineering around environmental issues. The UK has a long and dangerous track record of mismanaging this. In the same way that financial engineering around mortgages caused the 2008 financial crisis, there are risks that bankers will abuse the climate crisis as an opportunity to get filthy rich while destroying the very systems we are working to protect. It has been done before.
That is why we are concerned about concepts such as natural capital, which risks being a double-edged sword. If it helps policymakers to recognise the immense value of our natural capital and our natural world, it might be helpful, but if it simply creates new opportunities for bankers to get filthy rich, it is deeply dangerous.
For this reason, it is essential that carbon removals are genuine physical processes that remove carbon dioxide from the atmosphere and lock it up. There cannot be any ambiguity or scope for financial markets to exploit for profit, or for our Government to claim success when no real carbon dioxide has been removed from the atmosphere.
I was at a round table last week; there were about 16 of us, and we were fairly evenly divided between scientists and parliamentarians. All the parliamentarians were from the Commons, apart from me. The scientists all agreed with each other and kept saying the same thing: that we must stop burning fossil fuels. However, all the parliamentarians, apart from me, said, “Oh, that’s quite difficult—I cannot ask my constituents not to fly”, and things like that. My concern is for the Government to be deeply behind the science. Even the UN is now saying that we must act urgently. You cannot, even now, talk about low carbon and net zero; we are past the point where they will have the impact that we need. Instead, we should be talking about carbon-negative measures. If the Government do not wake up to that very soon, I hope that we can replace them.
My Lords, much has been said already. I agree with the main thrust of the amendment tabled by the noble Baroness, Lady Randerson, which urges the Government to set out a very clear case for the decarbonisation of the various transport sectors. I do not think that we are there yet, and I do not think that the industry feels that we are there yet. It is important, for the reasons that the noble Baroness has just spelled out, that the transport sector knows which way it is going.
I must partially apologise to and reassure the Committee, because some of my speech was intended for the previous group of amendments. As noble Lords were making such commendable progress this afternoon, I did not get here in time to intervene on the amendment on home heating—an issue where, again, some clarity of decision is needed. Home owners and landlords are now faced with decisions on how to replace their gas boilers: they know they need to get rid of their gas boilers, but quite what they are going to get to replace them with is unclear. Of course, people replace their cars, and even their lorries and buses, rather more frequently than their houses and boilers. It is important, therefore, for the transport industry that there is some clarity on the general direction of government policy for the different sectors of transport.
On this topic, we immediately run up against the issue of hydrogen. I am not quite as sceptical as some of my colleagues, but I am sceptical, because hydrogen has been seen as a “get out of jail” card for almost every sector on their decarbonisation trails. That is not only for heavy industry, to replace the very heavily carbon-fuelled industries such as steel, glass and so forth, with its knock-on effect on the construction industry, et cetera, but for parts of the transport sector and for home heating. It has been seen by some as the solution to the decarbonisation of heavy vehicles, shipping, the train system and even aviation. However, hydrogen is not capable of doing that without safety dangers; and, in any case, it is not capable of doing that because we do not yet have the technology for producing green hydrogen at scale. Therefore, it will come in, if at all, only much further down the line. However, waiting for hydrogen—whether in the form of hydrogen blend for home heating or hydrogen-based vehicles or batteries for the transport sector—is seen as an excuse for not taking other technologies more seriously and urgently than we have done.
The amendment tabled by the noble Baroness, Lady Randerson, would require the Government to do that job for the transport sector. I think that they need to do that for other sectors as well, and that they should not exaggerate either the degree to which hydrogen is the solution or, in particular, the closeness of technological breakthroughs to provide genuinely green hydrogen. It is not going to happen in the kind of timescale that we are talking about. Therefore, the amendment has implications beyond transport, but transport itself needs a clear plan. I hope that the Minister will take up with his transport colleagues the need to work urgently, as the noble Baroness’s amendment urges, to ensure that the transport sector knows where it is going, even if nobody else does.
My Lords, I am sorry to speak a second time—I am not sure whether I am allowed—but may I speak to Amendments 130A and 130B? In my excitement I forgot to speak to them. Those amendments in my name seek to address the carbon removals questions in the Bill.
Amendment 130A is to try to interrogate the Government’s amendments to the definitions of carbon removals, as stated in the Climate Change Act. My amendment would reinstate reference to forestry and other physical activities in the UK. I think this amendment is necessary because we do not want to see definitions used in the Climate Change Act, which are foundational to our understanding of what we need to do to tackle climate change domestically, to somehow allow vague processes such as the purchasing of offsets or some other financial instrument to be eligible for the net-zero accounting. I seek reassurances on that. I also seek reassurances that we acknowledge that forestry and land use need to be referenced alongside mechanical sinks to keep the system holistic and inclusive. So I am probing on those two questions: forestry and land use, and making sure we are talking about physical activity and not financial chicanery or accounting trickery.
I feel quite passionate about Amendment 130B. I am sure the UK will emerge as a world leader in this regard. If we are to become the centre of a market or set of policies that are economy-wide in decarbonising our system, we will have to get to grips with the MRV—the monitoring, reporting and verification of carbon removals—to get to a net-zero position. It is hugely important. When you burn a tonne of fossil fuel the impacts are certain and very low in error bars, but when it comes to the biospheric removal of carbon in particular, there are huge uncertainties and an absolute paucity of data. It really has not been looked at comprehensively enough, especially now that large sums of money may be resting on this approach to reaching net zero.
I urge the Minister and the department to really assess what the UK could do to set some gold-standard regulations regarding carbon removals. Let us start the debate with this Bill, pursue it and continue with it. Given that we are at the forefront of reaching these challenging carbon budgets that we have set ourselves, I have no doubt that carbon removals will have a role to play. But let us do it in a world-class way and not use it as a weasel-word excuse for allowing fossil fuels to continue, without the certainty that those removals are genuine, additional and permanent and can offset the almost permanent damage that we know occurs from the release of fossil fuels. It is hugely important that we do this. I tabled this as an opportunity to spark a debate, and I hope we will come back and consider it in more detail. The UK has a great potential role to play in this area.
My Lords, as a member of the House of Lords Science and Technology Committee, I took part in the report we produced on batteries. The genie is out of the bottle on domestic EVs. That is going to happen; I think we are well on the road to better and better battery technology.
When the committee examined transport, we heard that batteries are heavy—a battery to power a bus would be very heavy—so there is a role for hydrogen in public transport for return-to-base vehicles where hydrogen does not have to be moved too far. Where there is a limited number of filling stations, that is a model that could work. Shipping and heavy industry, such as cement, are other applications for hydrogen.
My noble friend Lady Randerson mentioned fuel cells. We found in our report that for some reason the Government are not backing research on fuel cells to the extent that they could. Fuel cells would be another potentially sensible source of power for heavy transport vehicles, so I support the basic thrust of my noble friend’s amendment.
Amendments 130A and 130B, tabled by the noble Baroness, Lady Worthington, are really crucial. We are going to have to look at carbon removals, as the noble Baroness, Lady Jones, said earlier. We need to do it in a way that gives confidence against greenwashing, of which there is far too much. The only way to do that is if accounting for carbon is rigorous.
My Lords, I support the noble Baroness, Lady Worthington, in her two Amendments 130A and 130B and stress that the measurement, monitoring and verification of UK removals is vital. I declare an interest as chairman of the Woodland Trust. I have just been involved in the bowels of the woodland carbon code. It is quite staggering to think that many of these verified units of removal will not achieve full verification for 20, 30, 40 or 50 years and are then required to persist for 100 years. We have to find a way of inventing a system that will keep an eye on a plethora of landowners and land interests who are planting trees to sequester carbon and have that effective supervision, light-touch as it may be, for 100 years.
This will be quite a challenge. It is something I would appreciate the Minister responding to. We are now in the middle of implementing the peat carbon code, which will have similar difficulties, but perhaps the most important one has not yet been developed: the soils carbon code. That is of far more potential than either the peatland or woodland carbon codes in sequestering carbon. It will be a very widespread code because soils exist everywhere, though not all of them will be potentially good at sequestering carbon. I urge the Minister to accept these two amendments and give us a feel, as it were, of those 100 years and how the complexity of the carbon codes can be relied upon.
Before I finish, I make a similar apology to that of my noble friend Lord Whitty, as I was not here to speak to my Amendment 119. I did not miscalculate the pace at which the Bill would go; I was miscalculating the pace at which a snowed-in train would move. Since the Minister is appearing before the Environment and Climate Change Committee on Wednesday, I can ask him the question then anyway.
This has become a very rich debate. I thank the noble Baroness, Lady Randerson, for putting her amendments forward to enable us to have these broader discussions. We have said from the start that the difficulty with this Bill is the things that are not in it; this is one area we can all learn from and hopefully move forward on.
I also thank the noble Baroness, Lady Worthington, for the explanation of her Amendments 130A and 130B. I am sure that we would all welcome more clarity in these areas, and indeed a strategy so that we can bring confidence and certainty to the sector in the way that she described.
I will focus most on Amendment 124A in the name of the noble Baroness, Lady Randerson, in my comments and, in particular, the notion of adding local carbon transport schemes to the section on low-carbon heat schemes—indeed, to run alongside them.
As many will know, this was last looked at under the last Labour Government, with the 2009 report Low Carbon Transport: A Greener Future, which, interestingly, was published by the DfT. It made recommendations on supporting a shift to new technologies and fuels, promoting lower-carbon choices, and using market mechanisms to encourage a shift to lower-carbon transport. Of course we have moved on in many ways, but these principles should not be overlooked and we should continue to put in our full effort.
Specifically on hydrogen vehicles, we believe there is merit in looking at potential in the HGV sector. The discussions about shipping were interesting as well, but we feel that so much more focus needs to be put on alternatives, certainly in the short-term. Electric is obviously being looked at.
It is important to debate this at this point because, with the global situation regarding gas supplies, we are focusing our attention on domestic energy in particular, for obvious reasons—the cost of living crisis, security issues and all that goes with it—but we have to bear in mind that transport is one of the biggest sources of carbon emissions in the UK. In 2019, it accounted for 34% of the UK’s total carbon emissions. Its emissions have remained largely unchanged since the 1990s, which we cannot say about the energy supply generally. We have to ask why transport is such a poor performer.
We need to be concerned about where we get the electricity from if we continue with our ambition. If we are to reach our target of net-zero emissions by 2050, the decision to ban new petrol and diesel cars from 2030 will help, but there are so many other areas that we should focus on: alternative modes of transport, cycling and walking, and shared travel options. From my point of view, we have this enormous disconnect between transport policy and the policy we are discussing. We need to pick it up and take it seriously.
I speak with my experience of being a member of Transport for the North. All the schemes we tried to bring in through the integrated rail plan to deliver not only for the travelling public but for the impact on the climate seem to have been left behind. We have discussed this before. We have had Questions in the Chamber about the lack of joined-up thinking from the Government, which needs seriously to be addressed. The noble Baroness, Lady Randerson, referred to it as a lack of leadership and vagueness in the plan, but why are we not cross-referencing within the Bill to the work that needs to be done?
Speaking with my local government hat on, on building new homes, why can we not look at the schemes in Scandinavia in particular, where every new home has solar panels and the excess electricity generated is taken off and fed into personal electric charging points for vehicles? There are so many examples that we should look at.
The amendment has generated an opportunity to discuss this. I look forward to the Minister’s response to the amendments from the noble Baroness, Lady Worthington, but in particular to her explanation as to why there is such a lack of joined-up thinking in these areas, where the potential could be enormous.
My Lords, I thank all noble Lords who participated in the debate, particularly those who tabled amendments.
I will speak first to Amendment 124A, tabled by the noble Baroness, Lady Randerson, but I must start by taking issue with the idea that the Government are not showing leadership. I believe that they are showing leadership with low-carbon transport solutions. For example, this year alone we have announced £200 million for the zero-emission road freight demonstrator programme, which includes hydrogen and electrification for HGVs; another £200 million for zero-emission buses, again including both hydrogen and pure electric; £30 million for a fleet of 124 buses in the West Midlands; £206 million for the UK Shipping Office for Reducing Emissions—or UK SHORE—to decarbonise maritime, which includes a mix of different technologies; and up to £12 million until August 2023 and up to £60 million until March 2025 for the second and third rounds of the clean maritime demonstration competition, funding feasibility studies and pre-deployment trials in zero-emission shipping hydrogen technologies for maritime applications. As the noble Baroness will be aware, there is also £20 million for phase 2 of the Tees Valley hydrogen transport hub, with an additional £300,000 put forward to support local skills.
On aviation, the SR21 funding for hydrogen-related aviation activity has not yet been announced but is forthcoming. We have also announced £165 million for the advanced fuels fund to kick-start a sustainable aviation fuel industry in the UK.
All this goes to demonstrate that we are doing a lot of work to show leadership in this area, putting money into research to help us solve some of the problems raised in this debate. Work is already under way in the Department for Transport in close collaboration with BEIS; it is really helpful that the former Secretary of State for Transport is now the Secretary of State for BEIS, so he will be very well versed in some of these issues. I can reassure noble Lords of the continual conversation that happens between the two departments in this regard. In close collaboration with BEIS, as set out in the Government’s transport decarbonisation plan, the Department for Transport is delivering on its comprehensive plan for decarbonising transport, which includes supporting a greater role for hydrogen through schemes such as those I have mentioned.
As we have seen, there is a significant role for hydrogen in heavier transport applications or where things such as refuelling times and infrastructure constraints make it the best choice. However, we do not consider that a new statutory, regulatory regime would add anything new to the work already being done. It is always necessary to consider whether the benefit outweighs the regulatory burden. I hope that the noble Baroness is reassured by the Government’s commitment to this cause, and I ask her to withdraw her amendment.
Amendment 130A seeks to limit the definition of “UK removals” in Section 29 of the Climate Change Act, excluding mechanisms such as financial instruments that do not relate to the physical removal of greenhouse gases in the UK. I reassure the noble Baroness, Lady Worthington, that Clause 111 does not expand the definition of “UK removals” to non-physical processes, but instead to greenhouse gas removals achieved by engineered methods, such as bioenergy with carbon capture and storage. This is to align the definition with current international best practice, including guidelines set out by the United Nations Framework Convention on Climate Change.
I equally reassure the noble Baroness, Lady Jones, that it is the Government’s priority to reduce emissions of greenhouse gases from human activities and to adapt to those climate change impacts that are unavoidable. We are clear that the purpose of greenhouse gas removals is to balance the residual emissions from sectors that are unlikely to achieve full decarbonisation by 2050. It is not a substitute for decisive action across the economy to reduce emissions. Nature-based methods, such as afforestation and habitat restoration, will be essential in removing and storing carbon dioxide at scale while delivering a range of additional environmental benefits, such as biodiversity gain, air quality and soil health.
The Climate Change Act 2008 allows the Government to purchase off-sets or other traded instruments to set towards our emission reduction targets. The Government do not currently intend to purchase off-sets to set towards our carbon budgets, although they have retained the option to do so in future, if appropriate. I can see that I shall never manage to reassure the noble Baroness, Lady Jones.
Amendment 130B is also in the name of the noble Baroness, Lady Worthington. The Government have already taken action on carbon removals to help to provide certainty to investors. In the net zero strategy, the Government set out an ambition to deploy at least 5 megatonnes of carbon dioxide equivalent emissions per year of engineered greenhouse gas removal methods by 2030. In July, we launched a consultation on potential business models to unlock private investment and enable greenhouse gas removal technologies to deploy at scale over the next decade. This consultation explored options for business models with the aim of addressing the absence of a predictable revenue stream for negative emissions, which has been identified as one of the key barriers to investment. The consultation also sets out our proposed approach and next steps relating to the monitoring, reporting and verification of greenhouse gas removals. The consultation closed on 27 September and we intend to provide a response in due course.
I hope that the noble Baroness and others are reassured by the action that the Government are taking. I therefore ask her to withdraw her amendment.
Could I just point out that it is easier not to send loads of CO2 out into the atmosphere in the first place? It is great to hear about all the millions that the Government are spending on these measures, but it would be cheaper not to pollute in the first place. Things such as carbon capture and storage are all incredibly theoretical ideas, so you cannot actually say that it is going to happen, because it may not.
My Lords, I thank all those who have taken part in this short debate. I knew that I would provoke a debate by specifically mentioning hydrogen—and that was my intention. I wanted to tease out the Government’s views. I thank the Minister for her response, but it was light on detail as, I fear, the whole of the Government’s policy is.
I agree with the noble Baroness, Lady Jones, on her view of the Government. I fear that the Government have been so self-obsessed for the past two or three years that there is a policy vacuum in all sorts of places, and transport is one of them. I also agree with her that we need to rely very much more on public transport but, of course, the vast majority of public transport is provided by buses, which are heavy vehicles. Electricity is fine in towns and cities but it is not yet the answer for long distances in rural areas or for long-distance buses. Of course, not enough of our electricity is green and comes from renewable resources. Despite the ingenious plans for the national grid, we have a crisis of capacity, which will face us very soon if we all rely on electric vehicles.
The noble Lord, Lord Whitty, referred to aviation. I remind noble Lords about the Government’s jet zero strategy, which is a triumph of optimism over reality.
My noble friend Lady Sheehan made a very important point about batteries. It is important to emphasise that we are well behind in the international race for developing gigafactory capacity. Very soon, rules of origin will be a problem for those wishing to export.
I do not know what the noble Baroness is doing; she is supposed to be deciding whether she will withdraw her amendment, not responding to a debate. This is not a debate on general activity relating to hydrogen. She should say whether she wants to withdraw her amendment—that is the question.
My Lords, in Grand Committee it is normal to allow people the courtesy to respond to well-made points from noble Lords. I want to make it absolutely clear that the intention of my amendment was to provoke debate. I am disappointed that the Government’s response has been so limited. The amounts of money announced by the Minister are attractive and worth while, but they need to be multiplied by at least 10 to have any impact at all.
I will withdraw the amendment, of course, but I remind noble Lords of the words of the United Nations Secretary-General:
“We are in the fight of our lives, and we are losing”—
we need a sense of urgency. I withdraw my amendment.
Amendment 124A withdrawn.
Clause 108: Modifications of the gas code
Debate on whether Clause 108 should stand part of the Bill.
Member’s explanatory statement
This would remove provision for hydrogen grid conversion trials for domestic heating and cooking.
We have discussed the issue of hydrogen, so I will delight your Lordships by saving my voice. I do not intend to speak on whether Clause 108 should stand part of the Bill.
My Lords, I added my name to the Clause 108 and Clause 109 stand part notices and to Amendment 125 in the name of the noble Lord, Lord Teverson.
We have had wide-ranging debates but, when it comes down to the content of the Bill, the most egregious elements are possibly these two clauses. It seems absolutely incredible that we should require people to enter into a trial for something on which multiple studies have been undertaken already. We are essentially legislating to force people to take part in something we already know the answer to. We know the answer because 32 independent studies of the use of hydrogen in heating—since 2019, so they are relatively recent—by organisations including the IPCC, the IEA, Imperial College, the Potsdam Institute, the University of Manchester, the Wuppertal Institut, Element Energy and the International Council on Clean Transportation, have all found that hydrogen should not play a role in heating buildings. Hydrogen will be hugely inefficient, compared with other clean alternatives and gas, in terms of pure energy efficiency, damaging to health and dangerous. That should be enough evidence for the Government to rule out this unnecessary trial.
I honestly believe that this is a consequence of a huge amount of lobbying coming from the incumbents in the industry, including those who today manufacture gas boilers, produce gas and move gas around in the networks. What they fail to mention is that it is not as simple as just switching over to hydrogen: you have to replace virtually everything to be able to burn hydrogen at high levels. Yes, of course, you can burn very low levels, but who wants low levels? We are talking about a net-zero strategy in the next 25 years; you cannot afford to go through increments of 20% hydrogen and 30% hydrogen—it is simply not credible. It will do exactly what we saw in the co-firing of biomass in coal-fired power stations; it keeps the incumbents going for longer, keeps their investors and shareholders happy, and gives them an answer to the question, “How are you going to make your business compatible with climate change?”. It is a glib answer. It is not a full answer—in fact, it is false—but it is an answer none the less. That is why we are being forced into considering this, even though the evidence is absolutely clear that this is not the answer.
If I were a resident living in one of these poor villages—the villages of the damned, as I like to call them—I would be absolutely up in arms at the prospect of being forced into this egregious position in which I am asked to take this technology, which will be more expensive, less beneficial for my health and more damaging to the climate compared with other alternatives. I fully support the withdrawal of the two clauses; the Bill would be vastly better if we got rid of them. I am very grateful to the noble Baroness for tabling this.
My Lords, I particularly support the proposal to take out Clauses 108 and 109. I did not put my name to that, but it seems the obvious solution. As the noble Baroness, Lady Worthington, said, we have all been on the receiving end of massive lobbying by the hydrogen lobby. I will not go into hydrogen extensively, but clearly there are areas where hydrogen will need to work. It will be important in some energy-intensive industries and some long-term transport solutions, but we seem to have overreached in terms of those applications.
For heating, it just cannot make sense to use green hydrogen, which would have to be produced by renewable electricity, as electricity could be used anyway. Scientifically and in terms of the laws of physics and efficiency, it does not make sense. Heating is an important area—as we said, it represents some 40% of UK emissions—so surely it must be electrification directly, geothermal technologies or air source heat pumps, as we have discussed before. That is why I think these clauses not standing part is the best solution. If that is not agreed, I thank the noble Baroness for supporting my amendment; the noble Lord, Lord Lennie, has a similar one. This should not be compulsory and those consumers should be very aware of all the other repercussions.
My second amendment, Amendment 126, is less important. As with previous amendments, it just makes sure that only people who really benefit from these trials should have to pay for them and that those who do not should not. I do not understand how BEIS and the Government have become the victims of the lobbying that takes place.
Finally, perhaps I can cite a gentleman whose work I have been reading, Jan Rosenow. He takes his statistics from BEIS’s Hydrogen Production Costs 2021 and Ofgem’s wholesale market indicators. He is very clear that, depending on how you look at the timescale between now and 2050, hydrogen will cost three to 11 times more than fossil fuel gas at its present levels. Clearly, this is not an acceptable solution or route for decarbonisation.
My Lords, these amendments relate to Clauses 108 and 109—Chapter 2 in Part 3—on hydrogen grid conversion trials, covering modifications of the gas code and regulations for the protection of consumers. The background to this is that in 2021 the Government launched a consultation on facilitating a grid conversion hydrogen heating trial. The Government’s Ten Point Plan for a Green Industrial Revolution sets out the ambition to support the industry to deliver hydrogen neighbourhood and hydrogen village trials by 2025. This consultation sought views on proposals to legislate to allow gas distribution network operators to carry out activities needed to deliver a grid conversion.
It would be unfair to say that the Government did not alert people to the complexity of the trial, because the consultation document announced that it involved replacing gas supplies with hydrogen in consumers’ premises. It also said:
“Existing in-home appliances and devices such as boilers and meters will need to be replaced with hydrogen-compatible equivalents. Pipework may need to be replaced if it is not already suitable for hydrogen. Additional internal work may also be required to make the property ‘hydrogen-ready’.”
On the face of it, the Government understood the complexity. They also said that the trials would be carried out by the gas distribution network operators in partnership with local authorities, and that, in the trial of hydrogen, safety
“will be of paramount importance”—
that is good news—with the Health and Safety Executive being consulted and involved in any measures of conversion.
The Government responded to the consultation in April 2022, saying that the majority of the responses were “broadly supportive” of their proposals and that, following the consultation and a review of the relevant legislation, they intended to proceed with the proposed legislation, which we now have before us.
Unlike those who are against the clauses standing part, we are not entirely against the trials. We believe that the complete overhaul of the gas system required for hydrogen grid conversion is not the best option for most homes. As the noble Baroness, Lady Worthington, said, you can blend up to 20% hydrogen with gas in our current system without having to change all the pipes and boilers, but with any more than 20% you have to rip out everything and basically start again, which is probably what these trials would require.
For most households, the low-carbon heat scheme, and primarily heat pumps, would be a far preferable option. Our Amendment 127 would therefore ensure that no household would be forced to take part in the trial. Instead, households would be given an alternative heating solution by the gas transporter, the DNO. This approach also fits in with our Amendment 119, which would require the Secretary of State to provide a plan for low-carbon heating in homes where it is uneconomic or unfeasible to have a heat pump. These are homes where we would support hydrogen grid conversion. Therefore, we do not stand against the trials entirely.
I will start with Amendments 125 to 127; I thank the noble Lords, Lord Teverson and Lord Lennie, and the noble Baroness, Lady Blake, for their contributions and for promoting them. The amendments relate to Clause 109, which, alongside Clause 108, will ensure the safe and effective delivery of a village-scale hydrogen heating trial. This trial will gather evidence to enable the Government to make strategic decisions on the role of hydrogen in heat decarbonisation. I know that there are very strongly held opinions on whether hydrogen is the correct solution, but we will never know unless we do the appropriate research and trials.
That is not true.
Let me finish, then the noble Baroness, Lady Worthington, will be able to come back.
I will start with Amendments 125 and 126. With Amendment 125, the noble Lord, Lord Teverson, calls for an adequate level of information to be provided to consumers in the trial area concerning safety, long-run bill impacts and opting out of the trial. I agree that these are important issues. Support from local people will be crucial to the success of the trial, and gas transporters are already working closely with communities in the potential trial locations. In fact, the relevant Members of Parliament have already been in touch with me, and I already have meetings in my diary to talk with them and residents from the local areas about this.
Steps have already been taken to ensure that people have all the information required to make an informed choice about whether they wish to participate. Both gas transporters have opened demonstration centres in the two shortlisted local communities to raise awareness of what the trial would involve.
Clause 109 provides the Secretary of State with the power to require the gas transporter running the trial to take specific steps to make sure that consumers are properly informed about the trial. In meeting their responsibilities to inform consumers, we fully expect gas transporters to provide clear information about each of the important topics listed in the noble Lord’s amendment.
I turn to Amendment 126. The Government have been very clear that no consumer in the trial location should be financially disadvantaged due to taking part in the trial. Last year, the Government published a framework of consumer protections that will underpin the trial. Consumers in the trial location will not be expected to pay more for their heating than they would if they had remained on natural gas or to pay for the installation and maintenance of hydrogen-capable appliances.
The village trial will be paid for through a combination of government and Ofgem funding and contributions from the private sector. All gas consumers pay a very small amount towards Ofgem’s net-zero funding for network companies, which supports projects to decarbonise the energy sector; that includes this trial. All gas consumers will benefit from well-informed strategic decisions on how to decarbonise the way we heat our homes.
I hope that I have been able to reassure the noble Lord that the important issues he has raised, about which I agree with him, are already effectively addressed by the Bill, and therefore that he feels able not to press his amendments.
I move on to Amendment 127 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. As I have said, local support will be crucial to the success of the trial. Gas transporters are already working closely with communities in the potential trial locations to develop an attractive offer for people who want to convert to hydrogen. However, we understand that not everyone will want or be able to connect to hydrogen, and the Government are clear that nobody will be forced to do so. The gas transporter running the trial will have to provide alternative heating solutions and appliances for people who do not take part in the trial. In May 2022, this requirement was clearly set out in a joint letter from BEIS and Ofgem to the gas transporters, alongside the other requirements that must be met before any funding is provided for the next stages of the trial. The gas transporters will need to demonstrate that they have a viable plan for providing alternatives to hydrogen. There is already an effective way to ensure that they provide alternatives to hydrogen, through the Government’s funding requirements.
We therefore do not believe that this amendment is necessary. I fully appreciate the noble Lord’s intention—which I share—to ensure that the trial is conducted properly, with alternative heating systems offered to people who do not take part. With that information, I hope he feels reassured that there are already steps in place to ensure this and will therefore feel able not to move the amendment.
I will say a few words about the stand part notices on Clauses 108 and 109. I know that the noble Baronesses, Lady Jones and Lady Worthington, and my noble friend Lord Moylan, who is not here now, have registered their intention to vote against these clauses. I have already established that the overall intent of these clauses is to support a safe and effective trial for hydrogen heating.
Clause 108 allows the Secretary of State to designate a hydrogen grid conversion trial, ensuring that both this clause and Clause 109 are narrow in scope and would apply only for the purposes of such a trial. Importantly, the clause expands the duty to participants of the gas transporter running the trial to undertake the required work without charge. It also makes certain modifications to the Gas Act 1986 to build on existing provisions concerning powers of entry. This will ensure that the gas transporter running the trial has clear grounds to enter private properties to: carry out any essential works, including replacing appliances and installing and testing safety valves; undertake inspections and tests for the trial, such as safety checks; and safely disconnect the gas supply in a property.
It is important to emphasise that gas transporters already have powers of entry into properties through the Gas Act. We are merely extending these powers in a very limited way to conduct the necessary work to set up and deliver the trial. Gas transporters will only ever use these extended powers as a very last resort once all other attempts to contact property owners and reach an agreement are exhausted. The existing rules on powers of entry requiring a gas transporter to obtain a warrant from a magistrates’ court will continue to apply, of course. I reiterate once again that nobody will be forced to use hydrogen. I have already covered the plans for alternative arrangements in my comments on the amendment earlier.
Finally, I draw noble Lords’ attention to the fact that the majority of responses to the public consultation the department ran last year on facilitating a hydrogen village trial were broadly supportive of our proposals to change legislation in this way. I therefore urge that Clause 108 stands part of the Bill.
Clause 109 provides the Government with the powers to establish consumer protections for people taking part in this world-leading hydrogen village trial. It will do this by giving the Secretary of State two delegated powers to make regulations which require the gas transporter running the trial to follow specific processes to engage and inform consumers about the trial, and ensure that consumers are protected before, during and after the trial.
The department is of course working closely with the gas transporters as they develop their plans for consumer engagement and protection. It is worth saying that there is quite a bit of support in these communities for the trial. The council leaders in the areas concerned have expressed their support and one MP in particular is actively campaigning for their area to take part in the trial. Opinion is obviously mixed in both communities, but we want to make sure that it has the maximum level of support required. I have already highlighted the importance of consumer engagement and support in my earlier comments. Regulations made under this clause will ensure that people will have all the information required to make an informed choice about whether they wish to participate.
The second power in this clause, to introduce regulations for consumer protections, will work alongside existing protections such as the Consumer Rights Act 2015 and the Gas (Standards of Performance) Regulations 2005. This recognises that it is a first-of-its-kind trial and will allow the Government to introduce additional protections for consumers in the trial area. These might include regulations to ensure that consumers are not financially disadvantaged by taking part in the trial.
I am sure that all noble Lords will agree that these provisions, which—as I said, again—were well received by stakeholders when we consulted on them last year, are crucial to ensure the fair treatment and protection of people in the selected trial area.
The Minister said that no one would be forced to take part in the trial. I appreciate that but, first, it seems like the place for that statement to be made is within the Energy Bill. Secondly, will they be given an alternative low-carbon solution?
The answer to both of those questions is yes. No one will be forced to take part in the trial. If they do not take part in the trial, they will of course be given an alternative low-carbon solution.
Can the Minister clarify what areas are being looked at? I have seen Redcar, Whitby and Fife being looked at as potential areas. Are those agreed? Is the number roughly three and when are those locations likely to be confirmed?
There is already a small-scale trial in Fife in Scotland. There are two shortlisted villages, Redcar and Whitby—on the west coast, not Whitby on the east coast. They have been shortlisted for the trial and we will make a decision on the basis of submissions from both communities in the new year.
My Lords, I respond on behalf of the noble Baroness, Lady Jones, on the stand part notice that we have both signed. I thank the Minister for his response. To be honest, because I am so clear that this should not form part of the Bill, I have not gone through all the detailed provisions in these two clauses. The Minister seems to be saying that there is an absolute right of refusal, but my reading of both clauses is that the emphasis is that required information must be provided. There might be protections from financial penalties—that is implied when it talks about protecting consumers—but I cannot see it written down anywhere that the regulations will enshrine the consumers’ right of refusal.
I would be grateful if the Minister would undertake to write to us on this because this seems like a scheme where the fox is being put in charge of the henhouse. The gas transporters are the interlocuters between the poor people living in these villages who are going to be told that this is the great answer to their climate change concerns. Will they provide adequate information about safety? You are at least four times more likely to have an accident with hydrogen; it has been verified.
I take issue with the Minister’s characterisation of this as being a matter of opinion where “some people think this” and “some people think that”. It is not true. This is clear physics and chemistry. It is more likely. You may get slightly more frequent accidents at a lower explosion rate, but that does not reassure me in the slightest. Peer-reviewed scientific studies have taken place and we do not live isolated from the rest of the world. Other countries have tried this. There have been countless trials and there have even been studies in this country. This is not a safe way of proceeding. It needs to be made categorically clear that independent advice should be given to these villages, not advice given by the gas transporters which, of course, have a huge, vested interest in this going ahead.
I am afraid that I am in no way assured by the responses I have received. I certainly would not want to be living in one of these villages. I would not want hydrogen anywhere near my home. I will continue to advocate on that basis. I will not press my objection to this clause at this stage, but I am sure that we will return to this on Report. This is going to get—and needs—a lot more scrutiny. A lot more independence needs putting into the process, and it needs a rethink.
Let me just respond to the noble Baroness’s point and reiterate once again that nobody will be forced to take part in these trials. There is extensive information available. As I said, there are campaigns in some communities which want to take part in the trials. At least one MP in one of the areas is campaigning for it, and both council leaders have been contacted by officials and are supportive of it. Obviously, people want reassurance and more information; that will happen.
The noble Baroness’s other point about health and safety is crucial. I actually agree with her that, potentially, hydrogen is dangerous. Natural gas is also potentially dangerous, but we have mitigated the safety concerns of that. We will want to make sure that the HSE is involved in studies as well, and we will not do anything to put anybody at risk or do anything that will prejudice their safety. That goes without saying, and there are extensive studies taking place.
I also have some scepticism about the potential use of hydrogen for home heating, but I believe that we should do the trials to assure ourselves one way or the other where the truth lies, and whether the existing network can be repurposed easily, simply and cheaply for hydrogen. We do not actually know the answers to those questions until we do the studies, and that involves doing a trial to find that out.
With those reassurances, once again, let me reassure noble Lords that nobody will be forced to take part in these trials. Everybody will be provided with the appropriate information, and nobody will suffer any financial loss because of it, but I believe that it is worth pushing ahead with these trials.
Would the Minister point to where in the Bill it states that there is a right to refusal and consumers can object? It should be stated up front in the legislation so that the regulations are clear.
I am giving the noble Baroness that assurance now, and it will be in the regulations. I am happy to put it in writing, if she wishes. It is not in the Bill, because that is not the place for secondary regulations. The Bill provides the principles and the powers for the Secretary of State. Of course, when we make the regulations, there will be further potential for that to be discussed both in this House and in the House of Commons, and I am sure that it will be.
The Minister mentioned having meetings. Has he actually met scientists, who know more about this than do people involved in financing the scheme?
I have met a lot of people to discuss these schemes.
I know that the noble Baroness, Lady Jones, has her very passionate views, but there are lots of alternative views out there as well. We are saying that it needs to be properly looked at and studied on the basis of evidence—I know that the Greens are sometimes not big on evidence, but we believe that policy should be properly evidenced and studied. That is why we think that it is important that we should do these trials.
With a Bill of this magnitude, if we are saying that it is a principle that there is a right to refuse, that principle should be in the primary legislation. That is where you put principles—and then the details can be worked out. Nothing in the Bill says that consumers have the right to refuse. I am sure that we are going to revisit this, as it is fundamentally important that principles are enshrined in primary legislation.
Can I briefly support that? The place to put it is under protection of consumers in the Bill. There is a clause entitled “Regulations for protection of consumers”, and the right not to take part in the trial would be one of those protections.
I completely agree with the noble Lord, Lord Lennie, and the noble Baroness, Lady Worthington, on this—but could I ask the Minister a separate point about how the trials will be carried out? The Minister said they were going to provide evidence. I want to ask how long the trials will last. One of the issues with hydrogen, if I understand it, is its impact on the pipes that carry the gas to the boilers, et cetera. Those pipes perish in time, because the hydrogen makes them brittle in a way that natural gas does not. Of course, that will lead to cracks and leakages. Will the trial take place over a long enough period to see whether that is indeed the case and what the jeopardy from those pipes might be?
Let me reiterate once again. Noble Lords are getting involved in the detail of what these trials will comprise—timescales, consumer protections, et cetera. This Bill is about giving the Secretary of State the powers to make the regulations, which will then come back this House, when I am sure that we will have a massively long and involved discussion about all these precise and important details—but this Bill is not the place.
In defence of my noble friend, I think it is reasonable to ask the Minister to come back and give us an indication of the length of the trials. He must know that, and that would be a very useful bit of information.
The initial intention is for them to last two years, but we will want to come back and look at all these details on the basis of proper scientific evidence.
Clause 108 agreed.
Clause 109: Regulations for protection of consumers
Amendments 125 to 128 not moved.
Clause 109 agreed.
Committee adjourned at 6.06 pm.