Draft Green Gas Support Scheme Regulations 2021
(Limited Text - Ministerial Extracts only)
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The Chair
Before we begin, I encourage Members to wear a mask when they are not speaking, in line with the current Government guidance and that of the House of Commons Commission. Please give one another and members of staff space when seated and when entering and leaving the room. Members should send their speaking notes by email to hansardnotes@parliament.uk. Officials should communicate electronically with Ministers.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I beg to move,
That the Committee has considered the draft Green Gas Support Scheme Regulations 2021.
It is a pleasure to serve under your chairmanship, Mr Robertson. Since the draft statutory instrument was laid before Parliament on 9 September 2021, a minor correction has been made to the explanatory note, to highlight the fact that the scheme ends in March 2041, not as previously stated in March 2040.
The UK, as we know, is the first major economy in the world to set a legally binding target to achieve net zero greenhouse gas emissions by 2050. Between 1990 and 2019, our emissions decreased by 44%, the fastest reduction in the G7, and we continue to advance sustainability through the Prime Minister’s 10-point plan for a green industrial revolution, the net zero strategy and, most relevant to this policy, the heat and buildings strategy, which was released last month.
The heating of our homes, businesses and industry is responsible for 21% of the UK’s greenhouse gas emissions. Decarbonisation of heat is recognised as one of the biggest challenges in meeting our climate targets, requiring virtually all heat and buildings to be decarbonised. Increasing the proportion of green gas in the grid is a practical, established and cost-effective way of reducing carbon emissions and contributing to the UK’s net zero target, lowering carbon emissions from both domestic and industrial gas boiler use.
The green gas support scheme is a Great Britain-wide tariff-based scheme supporting new biomethane plants that inject biomethane produced by anaerobic digestion into the gas grid. It is expected to contribute 3.7 million tonnes of carbon dioxide equivalent of carbon savings over the fourth and fifth carbon budgets, and 8.2 million tonnes of CO2 equivalent of carbon savings over the lifetime of the scheme. That is equivalent to taking approximately 3.6 million cars off the road for a year.
The green gas support scheme is expected to help to support high-quality jobs in the renewable energy sector at a time when economic recovery is important to us all. It is anticipated that when taking into account both direct and indirect jobs, the green gas support scheme could support up to 1,600 jobs per annum during the construction phase of the plants and up to 1,000 jobs once plants are operational.
Our analysis suggests that more than two thirds of existing biomethane plants are located in rural areas, with 80% of all British plants located in areas with a lower-than-average gross value added—in other words, in more economically deprived parts of the country. We expect plants supported by the scheme to follow a similar trend, therefore contributing to the Government’s levelling-up agenda.
The Government believe it is appropriate for gas consumers to pay towards decarbonising the gas grid and have taken the decision to fund the green gas support scheme through a levy. The levy will be the sole funding source for the GGSS, and will be applied to all licenced fossil-fuel gas suppliers. The Government acknowledge the impact of rising gas prices on consumer energy bills at present. We are implementing stringent budget control measures to ensure that costs of the levy are as low as possible and cannot rise unexpectedly. The cost to an annual gas bill will be relatively low, starting at about £2.50 per annum and peaking at about £4.70 in 2028 on an average gas bill, assuming a transition to a volumetric levy.
During peak years of production, biomethane plants incentivised by the green gas support scheme will produce enough green gas to heat about 200,000 homes, which would otherwise have been heated by natural gas. While launching with a per meter point levy that provides a high certainty of costs to suppliers and consumers, the Government recognise the benefits of a volumetric levy that aligns costs more closely to gas consumption. We have committed to transition to a volumetric levy as soon as possible, subject to overcoming feasibility issues, including the impact on energy intensive industries and other important UK industries.
In conclusion, the scheme established by this draft statutory instrument will support ongoing investment in the biomethane industry and enable the development of new production plants for the injection of biomethane into the gas grid. In supporting this investment in new anaerobic digestion capacity, we expect to support more jobs, growth and innovation in the biomethane industry, while delivering important carbon savings, which are a vital part of meeting our net zero targets.
Greg Hands
First, I thank the hon. Member for Southampton, Test, speaking on behalf of the official Opposition, for his support for the measures before us today. That is very welcome. The measures will make a real difference in greening the gas grid. He asked a number of important and pertinent questions, which I will seek to answer briefly in my response. I think he said that the digestion plant he visited was in or near Poundbury. I must say I am looking forward to making a similar visit in due course to see it in action.
The hon. Gentleman had three broad areas of questions: first, about the levy itself; secondly, about off-grid properties; and thirdly, about the definition for what would be permissible in this scheme. Let me deal with the first one—the point about another levy. He is right, of course. There are a number of other levies at present, but that is why we are launching a fairness and affordability call for evidence on levies, on options for energy levies and obligations to help rebalance prices and to support green choices, with a view to taking decisions in 2022. I will say that this particular levy has been very well telegraphed in advance. We consulted on this levy in October 2020 and we published the Government response in March 2021, so this levy and its introduction have been well telegraphed, both to consumers and to the market, in advance. I remind the hon. Gentleman that the average bill starts at an increase of about £2.50, rising, we think, to approximately £4.70 by 2028, by which time we think a volumetric approach to the levy will have taken effect in any case.
The hon. Gentleman asked some questions about off-grid properties, and I will make three points on those. The objective of the green gas support scheme is to green the gas grid—let us not get too far away from the purpose of our discussions. Of course, if payments were made for off-grid solutions, bill payers would be paying for renewable gas from which they or the gas suppliers would never directly benefit, so there would be an equity issue for those on whom the levy is being placed.
We announced last month, alongside the heat and buildings strategy, two further consultations setting out proposals to phase out the installation of high-carbon fossil fuel systems off the gas grid—those that are not current on the gas grid—during the 2020s. Both consultations close in January 2022, so I urge the hon. Gentleman to look at the consultation documents on how we might approach properties that are off the gas grid.
My hon. Friend the Member for Broadland ably made the point about the practicalities for those who are partially on or near the gas grid but do not actually benefit. There will be benefit, in those consultations, in looking at cases such as those that he mentioned from his constituency.
On the definition of feedstocks for anaerobic digestion plants, using waste feedstocks can of course contribute to carbon savings and a circular economy. In the light of the uncertainty around food waste availability, a higher threshold could have negative impacts on plant deployment and encourage unintended competition within the anaerobic digestion industry. Importantly, however, we will undertake a mid-scheme review in 2023 to review the waste feedstock threshold. All the decisions that we have today on how the levy will work, and what is applicable and what qualifies, will be subject to that mid-scheme review.
I thank the hon. Member for Southampton, Test and my hon. Friend the Member for Broadland for their contributions, and other Members for being here to debate this important issue. To meet net zero, virtually all heat in buildings will need to be decarbonised. Moving away from burning fossil fuels for heating presents enormous opportunities for jobs, growth and levelling up.
The scheme will help to meet commitments made in the 2019 spring statement and the 2020 Budget to increase the proportion of green gas in the grid. It will promote a circular economy by encouraging the use of domestic and industrial food waste to heat our homes and businesses, and it will contribute to achieving short-term carbon budgets in our broader target of net zero emissions by 2050. Additionally, the scheme will support high-quality jobs in the renewable energy sector, as well the development of the diversification of the rural economy, in line with the Government’s overall agenda.
Question put and agreed to.