Net Zero Strategy and Heat and Buildings Strategy
(Limited Text - Ministerial Extracts only)
Read Full debate
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank the noble Lords, Lord Grantchester and Lord Oates, for their comments, even though the screen indicated the noble Lord, Lord Oates, had been renamed Lord Fox for most of his contribution. I am pleased to say he has been reincarnated in a different guise.
I was pleased to have the initial support of the noble Lord, Lord Grantchester. It deteriorated slightly from there, but never mind. On funding commitments, since the 10-point plan was announced, and including the commitments yesterday, that makes a total of £26 billion worth of public investment. More importantly, that has leveraged £90 billion of private sector investment into this sector as well. I can confirm the figure of £950 million for the home upgrade grant, which will particularly benefit the homes of low-income families in off-gas areas.
Both the noble Lords, Lord Oates and Lord Grantchester, mentioned the boiler upgrade scheme, which I can confirm will have £450 million over three years: £5,000 for air-sourced heat pumps, £6,000 for ground-sourced heat pumps. What most noble Lords missed, and a number of commentators as well, is that this is not the totality of our support for heat pumps. We are also installing a considerable number under the social housing decarbonisation fund, the public sector decarbonisation scheme and, of course, from 2025 when the new housebuilding strategy comes into force, there will be, pretty much, no alternative option for new builds than to install low carbon heating, so that will see a further acceleration. We are currently installing about 30,000 heat pumps a year: roughly 10,000 as a result of subsidy schemes and 20,000 in new builds. This is a massive ramping up.
If the green homes grant taught us anything, it is that we cannot just inject a large amount of funds and expect the industry to change overnight. There is a huge amount of transformational change taking place. To the credit of many private sector companies, they are coming forward with ambitious plans themselves. If I may mention but one: I visited Octopus yesterday morning. It has a fantastic new training centre in Slough and is proposing to employ and retrain hundreds, if not thousands, of currently qualified gas engineers to enable them to install heat pumps in the new revolution. The chief executive told me that by April next year, including this new grant system, they hope to be offering heat pumps for costs roughly comparable to existing gas boilers. I know that many other private sector companies have similar plans.
Clearly, heat pumps are expensive at the moment, but this is all about government funding, pump-priming the market, helping the private sector to innovate and bring the costs down. I am sure noble Lords will accept, that it is a strategy that was extremely successful in the offshore wind market. Costs for offshore wind were initially very expensive and are now comparable to, or possibly even cheaper—we will find out in the contracts for difference round—than existing fossil fuels.
I was surprised to hear that both the Labour Party and the Liberal Democrats now seem to be in favour of banning boilers. Our position is that it is certainly our aim and ambition that by 2035 we will be able to move away from installing gas boilers. Crucially, before we do that, we need to make sure there are viable alternatives in place. We certainly hope—given the figures that I gave for heat pumps—that by 2030 there would be comparable offers on the market, and alternatives in place. Maybe the hydrogen offer will be comparable by then. We will certainly consult on the possibility of making all boilers hydrogen-compatible, to enable that transition to take place, but as of yet the jury is very much out on whether there will be the ability, at reasonable cost, to produce the enormous quantities of hydrogen that would be required if we were to get anywhere close to it replacing natural gas. I am on the record as saying it is more likely that we will end up using it for industrial processes—trains, HGVs et cetera—rather than the large-scale replacement of gas for domestic heating. Although already, of course, there are trials taking place of hydrogen being injected into the gas main. Injecting up to 20%, it is still possible to work with existing appliances.
The noble Lord, Lord Grantchester, also raised the issue of electric vehicles, and I can tell him that a further £620 million of funding for zero emission vehicle grants and EV infrastructure was announced. We allocated a further £350 million of the up to £1 billion automotive transformation fund, to support the electrification of UK vehicles and, importantly, their supply chain, as well, of course, as a £3 billion integrated bus network, and £2 billion to enable towns and cities to be cycled or walked.
The noble Lord, Lord Grantchester, ended by talking about a pick-and-mix approach. I fundamentally disagree —this is a comprehensive strategy, looking at every individual sector of the economy in turn and outlining a comprehensive strategy of how they all need to do their bit to contribute towards the legally binding net-zero target.
I am grateful that the noble Lord, Lord Oates, started on a positive note before things descended. He asked me for details of the funding under the heat and building strategy. We have talked about the boiler upgrade scheme, and the social housing decarbonisation fund that is bubbling away in the background. They are extremely successful schemes, and I recommend that noble Lords visit some of the excellent schemes we are already installing. That is a further £950 million and £800 million respectively over 2022-23 and 2024-25. A further £1.4 billion over 2022-23 to 2024-25 is being invested in the public sector decarbonisation scheme, with the aim of reducing emissions from public sector buildings. There is £338 million for the heat network transformation programme and £270 million for the green heat network fund, sector regulation and new heat network zones by 2025.
I understand why noble Lords will always call on us to do more, but I think this does represent a comprehensive strategy tackling all parts of the economy and shows how they can all do their bit to contribute towards our decarbonisation goals. It was even recognised by the BBC’s environmental analyst Roger Harrabin. This is an extremely ambitious programme and is world leading.
Baroness Bennett of Manor Castle (GP)
My Lords, reports suggest that a companion document to the net-zero strategy entitled Net Zero: Principles for Successful Behaviour Change Initiatives was published and then withdrawn a few hours later. The report suggests that this government document raised concerns over the expansion of airports contained in government policy and tax exemptions for the aviation sector. It said that the Government needed to do more to make behavioural changes easy and affordable, and align commercial interests with net-zero outcomes. It proposed carbon taxes, a financial levy on food with a high-emission footprint, and forcing the markets to be more transparent to enable consumers to choose more sustainable options. Will the Minister confirm if these reports are true? Will he tell me why this report was withdrawn and what its status is now?
Lord Callanan (Con)
I believe there were some documents that were published in error, but they have been withdrawn. Fundamentally, we do not believe in telling people what to eat or how to live their lives. Our focus is on helping people, incentivising them to make green choices, and to make those choices easier and cheaper. As we transition to net zero, we will be tech- led using British technology and innovation, just as we did in the last innovation revolution. I appreciate that the Greens want to lecture people and instruct them; I believe that carrots are much better than sticks.
Lord Liddle (Lab)
My Lords, I welcome this Statement. I have not had the opportunity, as yet, to read all the documents. I fear the criticism that I made in the debate on levelling up on Thursday is relevant. There is a clarity of destination about the Government’s policies, but no viable plan to get there. The thing that stuck in my mind is that when we are looking at the necessary move away from gas central heating, the incentives being offered for heat pumps—the £450 million over three years—is clearly inadequate, in comparison with the huge scale of the challenge.
I have always understood the noble Lord, Lord Callanan, to be a Conservative who believes in the use of market mechanisms—they are what Conservatives normally support. Can he tell me the Government’s estimate of the rise in gas prices that would be necessary to persuade the public, under market mechanisms, to install heat pumps?
Lord Callanan (Con)
The noble Lord will be pleased to know that I do believe in market mechanisms. His question is impossible to answer, and let me explain why. Heat pumps are three to four times more thermodynamically efficient than existing gas boilers. At the moment, because of the costs of various policies on the production of electricity to successfully decarbonised the electricity sector, there is an imbalance in pricing. The Treasury and the Government have accepted that we need to do something about rebalancing gas and electricity prices. Now is clearly not the time to do this, when we are experiencing record gas prices. In the longer term, and bearing in mind that this is a 15-year strategy, we need to change the balance of these costs. We are committed to do so. There are other market mechanisms of which I could speak in favour. We will consult on a market mechanism for gas boiler manufacturers to have a certain proportion of their sales be in heat pumps. I repeat what I have said before: the boiler upgrade scheme is not the only support mechanism we offer for installing heat pumps.
The Lord Bishop of Durham
The Minister and I live in the same region, where masses of new building is going up. I have had only a quick read of the document —we have not had time for anything other than that—and there is a lot about retrofitting in it. Given that we have all the technology and knowledge now, can the Minister explain why new builds are not being built to a net-zero target from this year or perhaps next? Everything is in place to be able to do this. We are delaying too long.
Lord Callanan (Con)
The decision was made by what was then the Ministry of Housing, Communities and Local Government that the future homes standard would kick in in 2025. There is a long process of consultation to go through with industry to ensure that the standard is applicable, that the supply chain is there, and so on. The right reverend Prelate will be pleased to know that we are changing what is called Part L of the building regulations next year. This will also produce substantial carbon savings in advance of the future homes standard coming in in 2025.
Lord Whitty (Lab)
My Lords, I thank the Minister for answering a question I asked a few weeks ago, to which he did not then really reply. I asked when the owners and landlords of buildings and housing will know whether hydrogen is to be the basis for what is currently the gas network. In one place, the document says that it will be “in” 2026, and in another it says “by” 2026. Either way, building owners have five years during which they will not know whether or not their heating systems can be transferred to hydrogen. The Minister is tonight deeply sceptical about whether we would have enough hydrogen, given its other uses, as earmarked in this document, and the need for an increased production in hydrogen for transport and industry. Can the Minister go further and indicate whether any buildings or housing will be convertible from natural gas to hydrogen, or whether some buildings in areas of industrial hydrogen use could be transferred to it? There are three scenarios, varying from nil hydrogen for home heating to it being used for something like a third of home heating by 2050. Will this mix now take place? Do we have to wait till 2026 for any sort of answer to this question?
Lord Callanan (Con)
I would like to give the noble Lord a direct answer: it is genuinely impossible to say, at the moment. Let me explain why. It is clear that hydrogen will play a major role in our economy. It will probably contribute to some heating, but I have given my view based on current technology. It is perfectly possible to use hydrogen for heating and gas boilers; the technology exists now—I have seen it. Two houses have been built our area—for the benefit of the right reverend Prelate—of Gateshead—which are entirely hydrogen-fuelled. They have hydrogen boilers, hydrogen hobs and hydrogen gas fires. They work perfectly well — I have cooked an egg on a hydrogen hob.
The question is where we get the hydrogen from. There are two ways of producing it: either from natural gas through carbon capture storage for blue hydrogen, or through electrolysis to produce green hydrogen. You then have to ask yourself the question: does it make sense to use green electricity to generate hydrogen to heat homes, or is it more sensible just to use electricity in the first place to heat the home through a heat pump? That is a question about thermodynamics and conversion and there will be different solutions in different places.
We can say with certainty that the future of home heating will almost certainly be taken over by three technologies: electrification through heat pumps; a greater use of heat networks, for which we have allocated funding; and a certain percentage from hydrogen. The reason we have announced our hydrogen strategy, are funding lots of research programmes and are consulting on a market mechanism to generate large amounts of hydrogen is to try to kick-start the market—to get it going and to bring in private sector investment and ingenuity. This will help to generate large amounts of hydrogen—cheaply, we hope. But we do not yet know to what extent the technology will develop, how much we will be able to produce at reasonable cost, and whether it will be suitable for use in home heating or whether it will be more sensible to use it in industrial processes. We have a multi-pronged strategy. As soon as we have more information, I will be sure to update the noble Lord.
Baroness Randerson (LD)
The Government have announced that new-build housing will have charging points for electric vehicles. But the Minister will know that many houses and much other accommodation do not have access to driveways or sufficient space for such points. People will rely increasingly on electric vehicle charging points in public places. Their rollout has been very slow, and those that exist are in a very unreliable condition. More than two years ago, legislation came to this House and was passed which gave the Government considerable powers to improve their availability by making public charging points easier to use and easier to pay for and to ensure that they were better maintained. That legislation has not been implemented. Why not?
Lord Callanan (Con)
I believe that it has been implemented. As I said earlier, we have allocated £620 million for vehicle grants and for further funding for local EV infrastructure. This is being rolled out across the whole country. Many local authorities are installing EV charging points in lamp posts, in publicly accessible areas. Grants are available for the installation of electric charge points in the home. Many are being rolled out in service stations and petrol stations. The infrastructure is being rolled out. I understand that the noble Baroness is impatient for it to be done faster, but it is happening.
Baroness Bennett of Manor Castle (GP)
My Lords, given that I cannot see anyone else rising, perhaps I may return to a point raised by both Front-Bench spokespeople about the ending of the sale of gas boilers by 2035. The Government’s document seems to say that this is a confirmed ambition. Can the Minister explain what a “confirmed ambition” means? Given that the Climate Change Committee recommends that these should be ended for residential properties by 2033 and for commercial properties as early as 2030, and given that the International Energy Agency says that there should be a global international ban by 2025, why is this so late?
Lord Callanan (Con)
I understood that I had explained that earlier in my answer to the noble Lords, Lord Grantchester and Lord Oates, but I am happy to do it again for the benefit of the noble Baroness. It is an aim—an ambition—that by 2035 we will be able to move away from the installation of gas boilers, but we want to make sure that cheap, easily available and affordable alternatives which cost no more to buy or run than a gas boiler are in place. We are fairly certain that the technology will be available. That is why we are supporting so many of our insulation schemes and the heat pumps that we spoke about earlier, but we want to make sure that the technology is available. This also chimes in with the question asked by the noble Lord, Lord Whitty—hydrogen will play a role, but we do not know to what extent at this stage. I understand the impatience of noble Lords, but this is a strategy to be rolled out over many years.
Baroness Bennett of Manor Castle (GP)
My Lords, given that there are 19 million homes in the country marked on the bottom rung for energy efficiency—D or below—and that the Heat and Buildings Strategy stresses in its introduction the need for a fabric-first approach, can the Minister tell me why there are no firm proposals to replace the scrapped green homes grant or funding for improving the fabric of our homes?
Lord Callanan (Con)
The noble Baroness has obviously not been paying attention to what I have said, but let me repeat the figures yet again. She might want to go and look at some of the fantastically successful delivery we were doing for low-income families under the local authority delivery scheme. We spent hundreds of millions of pounds on that; we have already rolled out the first phase of the social housing decarbonisation fund, and we are investing £950 million and £800 million respectively over the next two years. I referred earlier to the home upgrade grants. All these are paying for home insulation measures for the most vulnerable in society and for people on low incomes. I am sorry if the Greens are not aware of that or do not support it, but we are investing these very large sums of money to upgrade the fabric of people’s homes and install low-carbon heating systems in them. I have been out and viewed many of these schemes.
Lord Grantchester (Lab)
If I may also take advantage of being able to jump up again on the Minister, I would mention one aspect of the spread of areas to be covered with new developments: nuclear. There was no mention of nuclear in the Statement. Are any updates to the small modular reactors policy being brought forward by the Government?
Lord Callanan (Con)
I am happy to tell the noble Lord that there was mention of nuclear in the Statement, and we announced £120 million for a nuclear innovations fund. I can also tell him that we will have more to say on our nuclear ambitions shortly.
The Lord Bishop of Durham
It is obviously the evening to get a second go. Yesterday, the Transition Pathway Initiative launched the Global Climate Transition Centre, which will be a key part of the COP 26 financial infrastructure, to assess 10,000 companies on their alignment with the net-zero pathway and support accountability and action on this very important issue. Understandably, that is not in the paperwork, because it was announced yesterday. Is the Minister aware of the Transition Pathway Initiative—which has been around for a while now—and the Global Climate Transition Centre, and what actions will the Government take to support these initiatives?
Lord Callanan (Con)
Yes is the answer to the right reverend Prelate’s question. They are excellent initiatives, and they are indicative of some of the leadership of many of our leading companies and how they are committing to net zero. Many of them are going to be displaying at COP, and it is great to see some of the biggest businesses in our land also helping us on the pathway to net zero.