Future Hydrogen Economy

Tuesday 14th June 2022 Westminster Hall

16:41

[Jacob Young (Redcar) (Con)]

I beg to move,

That this House has considered the future hydrogen economy.

It is a pleasure to serve under your chairmanship, Sir Edward. Hydrogen is the most abundant element on Earth. The word “hydrogen” derives from “hydro”, meaning water, and “gene”, meaning producing, which is apt, as the product of burning hydrogen in oxygen is pure water. As I will go on to explain, in an era when we are ever more conscious of our carbon emissions and greenhouse gases, hydrogen provides a solution.

The purpose of this debate is, first, to take us on a journey back to the future—we do not need a DeLorean unless it is hydrogen powered—because just as hydrogen is a fuel of the past, it will be a fuel of the future, too. The three primary areas that I want to touch on today are hydrogen for heating our homes, in transportation and freight, and its use in the decarbonisation of industry. This is where I make a link from past to future. For decades, we heated our homes with town gas, containing more than 50% hydrogen; hydrogen was used to power engines throughout the 19th and 20th centuries; and hydrogen, as a by-product in many industrial processes, has been used as a fuel in furnaces since the beginning of the industrial revolution. In recent times, we have turned our gaze to what were once thought to be cleaner and safer fuels, such as methane, and to fuels that have always been easier, such as petrol and diesel, but we know that we cannot go on like this.

The global challenges that we face in relation to climate change and tackling carbon emissions are well worn arguments that I do not intend to go over today. To achieve net zero, we have to realise the hydrogen economy, and even the Government’s own analysis sees 20% to 35% of UK energy consumption being hydrogen based by 2050. To get to that point, a range of vital steps need to be taken to recognise the potential of hydrogen as an innovative solution to our problems, as it was in the past, while realising that technological improvement, increased safety, innovation and popular support make this element even more beneficial than it was before.

An easy first step to take is to ensure that we have the right regulatory regime to support a future hydrogen economy. We must make changes to the gas safety management regulations to allow hydrogen to be blended within the gas network up to 20%. That has already been proven to be safe through programmes such as HyDeploy and the ongoing blend at Winlaton in Gateshead. By blending in 20% hydrogen within the gas network, we can immediately begin decarbonising our gas network, with no impact on consumers and minimal impact on the network, but with a high impact on our emission savings—an estimated 6% saving in heat alone.

That brings me to my next ask of the Government, which is to mandate the roll-out of hydrogen-ready boilers as early as possible. The roll-out of hydrogen-ready boilers, much like that of high-definition-ready TVs, will allow us to install millions of boilers in people’s homes in the coming years, so that we are already ahead of the game when the time comes to decide whether to use 100% hydrogen in the gas network. Some 1.7 million boilers are changed in the UK every year, so if we were to mandate the use of hydrogen-ready boilers today, half of all homes in the UK that are currently connected to the gas network would be ready for the hydrogen switch by 2030, with no additional cost to the taxpayer. This is a no-lose scenario, because even if the Government decide not to go ahead with 100% hydrogen in the gas network, the boilers will continue to function as normal on natural gas.

That brings me to my next ask of the Government, who are rightly seeking evidence through a hydrogen village trial. As the Minister knows, Redcar was successful in receiving Ofgem’s approval for the next stage, alongside Ellesmere Port in the north-west. Over the next year, both Redcar and Ellesmere Port will be putting together their business cases for why their projects should get the go-ahead. Subject to any business case, the Minister should consider greenlighting both proposals. As I said in a debate in this Chamber a few weeks ago, we do not want a hydrogen village; we want a hydrogen UK, and having as much evidence as possible from the trials in Ellesmere Port and Redcar will allow us to progress.

I want to quickly turn to hydrogen in transport, which I believe is vital. Although the Minister is not directly responsible for this area, I would love to see him working alongside the fantastic Under-Secretary of State for Transport, my hon. Friend the Member for Copeland (Trudy Harrison), on amending the renewable transport fuel obligation to include all types of low-carbon hydrogen. Hydrogen has the ability to transform both freight and passenger travel, but it is locked in the same chicken-and-egg situation that we faced with electric cars. Were it not for the roll-out of charging points up and down the country, I do not think we would have seen the electric vehicle take-up that we have.

Today, there are more than 40,000 publicly available electric charging points across Great Britain, compared with a measly 14 hydrogen refuelling stations. Clearly, a key component of expanding the use of hydrogen in both freight and passenger vehicles requires the scaling up of refuelling stations, and I am pleased that decision makers are beginning to recognise this opportunity. In Teesside, we have the UK’s first hydrogen transport hub, which includes an expansion in hydrogen refuelling stations, with one already based at Teesside airport and plans for the UK’s first hydrogen trains to run on the Saltburn-to-Darlington local line.

The final key point that I would like to address is the role that hydrogen can play in decarbonising industry if we provide the storage and distribution networks required to meet its ambitions. I was so pleased to see the Government double their hydrogen targets to 10 gigawatts by 2030, and we in Teesside stand ready to produce a significant portion of that through investments from BP, Kellas Midstream and EDF. There is no use in producing all that hydrogen if it has nowhere to go, however, which is why Project Union—National Grid’s endeavour to create a hydrogen backbone that spans the UK, hopefully starting in Teesside and linking to Humberside—is so important.

As well as distribution, we have to consider storage by looking at underground salt caverns, like those of SSE, and Centrica’s proposal to turn the Rough reservoir—once the nation’s main gas storage—into our future hydrogen store. To do that, however, we need to look at the regulation in this area, and a decision needs to be made this year to avoid having to decommission Rough in line with the North Sea Transition Authority requirements. In my view, the Department for Business, Energy and Industrial Strategy should consider extending Rough’s role in methane storage in the short to medium term, thereby preventing decommissioning, but Rough will be key as the UK’s undersea hydrogen storage in the long term.

I hope I have given the Minister some food for thought. Hydrogen is not a groundbreaking fuel of the past; it offers revolutionary potential for the future. In 1874, Jules Verne wrote:

“Yes, my friends, I believe that water will one day be employed as fuel, that hydrogen and oxygen which constitute it, used singly or together, will furnish an inexhaustible source of heat and light, of an intensity of which coal is not capable.”

We can realise his vision through nurturing innovative and pioneering partnerships between Government and industry to help us to harness the fuel of the future, achieve net zero and build a future hydrogen economy.

16:50

[Christian Matheson (City of Chester) (Lab)]

What a great pleasure it is to serve under your chairmanship, Sir Edward. I congratulate the hon. Member for Redcar (Jacob Young) on securing this debate and on an excellent opening, which really set the scene. It reminded me that the last time I took part in a debate on hydrogen in this Chamber—I think the hon. Member for Warrington South (Andy Carter) was in his place then as well—the Government had not yet decided where they were going to place their favour. The current Secretary of State, who was then the Minister for business, energy and clean growth, responded to that debate. I urged him not to make it into a beauty contest, but to spread the investment around. To be fair to the Government, they have done that, and I welcome the support that they have given.

I find the debate on hydrogen somewhat depressing. Many people in what we might term the green lobby, with whom I share a lot of aims and values, look on the hydrogen project in my area with disdain because it is the wrong type of hydrogen; it is blue hydrogen, not green. I wish people would get behind the programme for all the reasons that the hon. Member for Redcar has just set out, but also because of the basic fact that we are not where we want to be. We are not going to get there yet, but the current proposals—whether for the cluster in the north-east or in my area, with the Mersey Dee Alliance on the Cheshire coastline—will be a stepping stone on the way to those aims.

There is clearly a gap in energy at the moment. Offshore wind provides only 2% of our electricity. I have to say to the Government and Conservative Members that I would increase onshore wind as well to help with the production of hydrogen. However, for all the reasons the hon. Member for Redcar mentioned, I still think that hydrogen is the way forward, particularly in my area, where are there are lots of energy intensive users. It is well known that in the small area of coastline that stretches from Eastham through Ellesmere Port—just north of Chester, I hasten to add—and around through Runcorn and Widnes, 5% of the nation’s entire electricity is consumed in about 14 miles. That is why my area is such an important place for hydrogen investment.

The HyNet North West scheme, which I support, has been demand-driven by big industry in our region. Incidentally, one reason for that is that it differentiates companies for their customers. I have heard about one manufacturer, whose customers are looking to ensure that their supply chain is greened and becomes net zero, taking us forward in that aim. Anything that can reduce the industry’s carbon footprint—even a step towards that aim—should be welcomed.

I agree with the hon. Member for Redcar that we need to double the 2030 aspirations. Production of 10 GW is good, but at the moment we might not have more than 1 GW available on either coast. There is real demand, particularly from industrial users, to go faster, to increase pace and ambition and to improve storage and distribution capacity; the hon. Gentleman made that point perfectly. It is great making all this hydrogen, but if we have nowhere to put it and nothing to do with it, it is, frankly, a waste.

I have talked about industrial users, but I make a plea for commercial and passenger vehicle usage. I wrote an article not long ago with the hon. Member for North Antrim (Ian Paisley), in whose constituency Wrightbus is based, about potentially having a Government scrappage scheme for older passenger buses and passenger coaches to help to convert them to hydrogen more quickly.

I was very fortunate to go on a delegation to the United States a couple of weeks ago, through the British-American Parliamentary Group, to look at electric and autonomous vehicles. They are absolutely seeing hydrogen as a complementary technology that will play its part, next to fully electric vehicles, particularly, again, for long-distance distribution—lorries, essentially—and for buses. They are well ahead of us.

I will finish by making a plea, and a plug, to the Minister. My area, which is a cross-border area—Cheshire, Merseyside and north Wales—operates the Mersey Dee Alliance. We try to break down the barriers that exist politically and administratively, but do not exist for businesses, to get the most strategic approach. Energy has been one of our big areas of interest and investment.

The Mersey Dee Alliance, which runs that cross-border area, is seeking £150,000 to undertake a feasibility study into the establishment of a UK hydrogen demonstration skill centre, to be located in the University of Chester’s Thornton science park, in the constituency of my neighbour, the hon. Member for Ellesmere Port and Neston (Justin Madders). The proposal has been made in partnership with the University of Chester, HyNet, the Mersey Dee Alliance, our local authorities and the Welsh Government.

The proposed hydrogen demonstration centre has its origin in the Mersey Dee Alliance’s strategic partnership with HyNet, the proximity of the University of Chester’s Thornton science park to the plentiful hydrogen supply at the Essar refinery in Stanlow, and the pressing need to switch the fuel of our local economy’s industrial base from carbon-based sources to blue hydrogen, with carbon capture and storage, of course.

The intention of the proposed centre is to support the transition of the UK economy from using carbon-based fuels—

[Sir Edward Leigh (in the Chair)]

Chris, I need to get others in, so if you could just—

[Christian Matheson]

My apologies, Sir Edward—a very gentle nudge. Let me just put in a plug for that proposal, and ask the Minister that, when it comes across his desk—it is currently at official level—he looks on it kindly.

[Several hon. Members rose—]

[Sir Edward Leigh (in the Chair)]

I do not want to impose a time limit, but I want to let everybody speak, so please keep your remarks down to five minutes—have a look at the clock. I call Peter Aldous.

16:57

[Peter Aldous (Waveney) (Con)]

Thank you, Sir Edward; I will do what I can on that. It is a pleasure to serve with you in the Chair. I congratulate my hon. Friend the Member for Redcar (Jacob Young) on securing this debate.

The Government have adopted a cluster approach to the promotion of the hydrogen economy. I fully understand the rationale for doing so, but the regulatory framework must be sufficiently flexible, so that more decentralised areas, such as the east of England, are able to realise their full potential. That way, we can not only more readily realise our decarbonisation goals but create new and exciting jobs.

In East Anglia we have a real opportunity to be a major producer, user and exporter of hydrogen. We have an abundance of resources, infrastructure—both on land and at sea—that can be readily retrofitted, and developers keen to step up to the plate, provided that the right policies are in place. Hydrogen East, last month, produced its proposal and proposed next steps for developing a clean hydrogen cluster in the east of England, which I shall forward to my right hon. Friend the Minister for his bedside reading.

I shall briefly highlight the projects that have already been initiated and outline those bigger opportunities that are at the design stage, which can have a national—and quite likely an international—impact. There are some exciting projects, as I said, that are already in the pipeline that highlight the role that hydrogen can play across the East Anglian region. Those include the Freeport East project centred on Felixstowe and Harwich, which could see the early adoption of hydrogen for portside related operation and other local uses.

In Lowestoft, in my constituency, there is the Lowestoft PowerPark project, which can lead to hydrogen being used to power municipal buses and the refuse fleet, as well as the development of flexible generation, or flexgen. There is also the Bacton energy hub project, using the infrastructure laid down over 60 years to serve the oil and gas industry in the southern North sea. In addition, work is ongoing on the switchover of agricultural and other off-road vehicles, especially in remote rural areas.

Those schemes are very much paving the way and laying the foundations for larger projects, including the development of electrolysis capacity in conjunction with nuclear energy and heat to support the proposed development at Sizewell C, which will be the first ever major construction project to use hydrogen vehicles at scale.

Cadent and National Grid’s new project, Capital Hydrogen, which is due to be launched in the autumn, will produce hydrogen in East Anglia not only to serve homes and businesses in the area, but to power London. Cadent has also identified five points in the east of England where hydrogen could be injected almost immediately to kick-start the move towards the 20% hydrogen blend that can be used in the existing gas network, with no need to change appliances or adjust the network. That project will help to stimulate rapid growth in the amount of low-carbon hydrogen produced in the region, but to make it happen, the Government need to change the regulations and allow hydrogen into the network.

In conclusion, East Anglia does not want a hydrogen economy in which we adopt second-generation or third-generation technologies and assets from other areas. What we want is to maximise our own potential and build our very own bespoke network; what we need is a framework that incentivises small-scale projects to be developed, in the knowledge that they can be scaled up in due course. I hope that in his summing up, my right hon. Friend the Minister will confirm that he is up for that challenge.

17:01

[Mick Whitley (Birkenhead) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward, and I am grateful to the hon. Member for Redcar (Jacob Young) for securing this important debate.

There was much to criticise in the Government’s energy security strategy, from its wholly unrealistic targets on new nuclear to its refusal to stand up to the nimbyism of Tory Back Benchers by making the reforms to planning law that are needed to unleash the full potential of onshore wind. At least, though, there are signs of genuine progress when it comes to hydrogen, with the UK’s hydrogen production target more than doubling to at least 10 GW by 2030. The Government’s stated commitment to a hydrogen-powered economy will no doubt come as welcome news to people living across the north-west of England and in north Wales. We are proudly home to the HyNet low-carbon industrial cluster, which by 2030 will be leading the way in carbon capture and storage technology and the production of low-carbon hydrogen. The extraordinary potential of that world-leading project was recognised last year, when it was successful in its efforts to become one of the first two carbon capture and storage clusters in the UK.

However, while the success of HyNet in our region hints at what is possible when we invest in the future of hydrogen, Ministers are yet to prove convincingly that they are capable of delivering on the promise of a hydrogen revolution, and we should not play down just how big a challenge we face. Low-carbon hydrogen remains in its infancy. If we are serious about making the UK a world leader in low-carbon hydrogen production, we must be prepared to use every resource at our disposal, including the extraordinary expertise and innovation that can be found today in businesses in every corner of the country.

That is why I am so concerned that the UK Government continue to make the regions and nations of the UK compete against one another to secure vital investment. I know that the hon. Member for Redcar took as much pride in the success of the east coast cluster last year as I did in HyNet’s, but our Scottish colleagues have every right to bemoan the lack of success of the Acorn development in north-east Scotland. Surely the time has come for the Government to accept that these projects deserve to be allowed to progress at their natural pace, rather than being held back by Ministers’ continued insistence on using a failed and entirely arbitrary sequencing process. All those projects will be essential to realising the potential of a hydrogen-powered economy, and they all deserve our support.

We also need to seriously consider whether enough is being done to support the development of green hydrogen. While it is undeniable that investing in blue hydrogen is necessary in the short to medium term, I am sure we all agree that the ultimate goal is to see our country powered by clean, green hydrogen produced from wholly renewable sources. However, I am afraid the Government are responsible for a serious lack of ambition in that space. While our neighbours in Europe invest heavily in green hydrogen production, the Government are aiming for just half of their 10 GW hydrogen power target to be produced through electrolysis. Even then, there is little evidence that sufficient progress is being made to make that target a reality.

In fact, the case for investing in green hydrogen has become all the more inarguable since the Russian invasion of Ukraine earlier this year. Putin’s appalling onslaught on that country has provided the west with important lessons on the necessity of ending our reliance on foreign energy supplies and has sent gas prices soaring, leading industry experts to conclude that it is now more affordable in Europe to produce green hydrogen than it is blue.

I urge the Minister to look at what more the Government could be doing to support green hydrogen, including considering whether grants would be a more appropriate funding mechanism for green hydrogen than the contracts for difference scheme. Too often before, we have seen the Prime Minister make grand pronouncements about the green transition but failed miserably to follow up with meaningful action. That must not be allowed to happen again. It is time for the Government to prove that they are able to make the promise of a hydrogen-powered economy a reality.

17:05

[Darren Henry (Broxtowe) (Con)]

Thank you for calling me, Sir Edward. It is a pleasure to serve under your chairmanship. I thank my hon. Friend the Member for Redcar (Jacob Young) for calling this important debate. As I am both a Member of Parliament from the midlands and co-chair of the all-party parliamentary group on the midlands engine, I want to focus my remarks on the midlands region.

In February 2022, the midlands engine set out its hydrogen technologies strategy, which draws on the exceptional manufacturing capabilities in the midlands and the immense potential to expand renewable energy production within the region. Expanding the hydrogen economy of the midlands will act as a catalyst for driving economic growth and new job markets in the region. The midlands has always led on manufacturing and has the infrastructure in place to be a world leader in hydrogen production. It is essential that that potential is not wasted.

The potential benefits on offer include the opportunity to create 85,000 jobs through production, supply and storage of hydrogen, more than 60,000 jobs through the decarbonisation of heavy goods vehicles and refuelling infrastructure and almost 2,000 jobs supporting the use of hydrogen as an alternative aviation fuel, all with the potential to contribute £10 billion gross value added to the midlands economy. The midlands plan for hydrogen goes as far as to set out industries in which there is potential to create more job and apprenticeship opportunities, such as domestic and commercial heating, low-carbon energy generation, public transport, freight, logistics and construction equipment.

There are already some fantastic businesses in the midlands, working to put the UK on the map for hydrogen production. One such business is GeoPura in the east midlands, which I have been lucky enough to visit in my capacity as co-chair of the all-party parliamentary group. GeoPura uses renewable energy, usually solar PV or wind, to create hydrogen and, in turn, hydrogen-based zero-emission fuels. That is then transported to areas where a local generator converts it into electrical power. From start to finish, the process is completely clean and carbon-free and the only by-product from the process is water. GeoPura energy is currently being used in transport, construction, film and television, as well as outdoor events such as festivals. Businesses such as that in the midlands have the potential to ensure that the UK leads in hydrogen technology and production.

I will conclude today by saying that the Government have made it clear that in order to achieve net zero by 2050, we must ensure that we are leading on the low-carbon hydrogen technologies front. Industrial heartlands such as the midlands are ready to be at the forefront of the hydrogen economy and ensure that the UK continues to take a global lead on the green industrial revolution that we hope for.

17:09

[Jim Shannon (Strangford) (DUP)]

Thank you for calling me, Sir Edward. It is a pleasure to serve under your chairmanship for the second time today; thank you very much for calling me.

[Sir Edward Leigh (in the Chair)]

It is the second time, Jim, but I always love your speeches.

[Jim Shannon]

It is always a pleasure to speak in Westminster Hall, no matter what. I congratulate the hon. Member for Redcar (Jacob Young) on setting the scene so very well and giving us all the opportunity to participate by doing that. The thrust of my contribution will be to insist—in a gentle, nice way—that Northern Ireland should be very much a part of the planned future hydrogen strategy. I am ever mindful of the Government’s legally binding targets under the Climate Change Act 2008, and the fact that the Climate Change Committee’s 2018 report, “Hydrogen in a low-carbon economy”, found hydrogen to be a credible option. The Government have committed themselves very much to the net zero target and to ensuring that hydrogen is an energy opportunity that we can all take advantage of.

A hydrogen economy has the potential to create or safeguard a massive 167,000 jobs—we cannot ignore that, and we look forward to some of those jobs coming to Northern Ireland—to provide £10 billion in gross value added to the UK economy, as mentioned by the hon. Member for Broxtowe (Darren Henry), and to reduce CO₂ emissions in the region by 29%. These are helpful targets, and they show that the Government are totally committed to this project. I look forward to the Minister’s response; he always speaks with knowledge in responding to our questions.

Recent work to drive the hydrogen agenda has seen progress move beyond the midlands, with plans to link key transport hubs: Immingham, the UK’s largest port by tonnage and the biggest deep-water port on the Humber; East Midlands airport, the UK’s busiest pure cargo airport; and the Tees valley, where plans are already in motion to develop a multi-modal hydrogen transport hub. Northern Ireland has also launched an ambitious new energy strategy, which includes plans for hydrogen as a key energy source for the future. I am keen to reiterate that and to push for that to happen.

The hydrogen strategy set out a number of things that should happen to expand domestic hydrogen production. They include setting aside £240 million for the net zero hydrogen fund, the significant development and scale-up of hydrogen network and storage infra-structure, with a £68 million commitment, and scaling up the use of low-carbon hydrogen, with heating buildings and transport trials and pilot projects planned—the hon. Member for Redcar (Jacob Young) referred to that. The strategy also talks about a market framework for hydrogen and a “supportive regulatory framework”. Northern Ireland wants to be part of that hydrogen plan, Minister. I know from the answers that he has given to me in the past, and also to my hon. Friend the Member for North Antrim (Ian Paisley), that he is committed to that, but it would be nice to have it in Hansard.

The hon. Member for Redcar referred to the village-scale trial that his constituency hopes to be part of. I do not care where it is, as long as it happens, although I would love to know the time scale for whenever the Minister thinks it would be completed and, then, how the plan would be developed for the rest of the United Kingdom.

My hon. Friend the Member for North Antrim has previously referred in questions to building hydrogen products that the public will ultimately use, such as buses, trains and heavy goods vehicles. The Minister replied to that in a very positive fashion—I think he referred to Glasgow City Council’s commitment—but I would like to see what is actually meant by

“further engagement with the Northern Ireland Executive”.—[Official Report, 22 February 2022; Vol. 709, c. 160.]

My hon. Friend also previously referred in a question to the “golden thread”, which I thought was quite a good saying—the golden thread that keeps together all this great United Kingdom of Great Britain and Northern Ireland, where all of us, in all the regions, can benefit. The Minister without Portfolio, the right hon. Member for Selby and Ainsty (Nigel Adams), referred to

“£100 million of new funding for the net zero innovation portfolio”.—[Official Report, 13 January 2022; Vol. 706, c. 630.]

I very much want Northern Ireland to be a part of that.

To conclude, “The Path to Net Zero Energy”, published in December, has set long-term sustainability targets for the region’s energy sector, including plans to fully decarbonise by 2050. Cost is also a key focus in the plan, in order to increase the affordability of low-carbon forms of energy. Other targets include the delivery of energy savings of 25% from buildings and industry by 2030, as well as doubling the size of Northern Ireland’s low-carbon and renewable energy economy.

[Sir Edward Leigh (in the Chair)]

Order. Can you wind up now, Jim?

[Jim Shannon]

Again, I look to the Minister to make a commitment to Northern Ireland.

17:14

[Andy Carter (Warrington South) (Con)]

It is a pleasure to take part in this debate. I thank my hon. Friend the Member for Redcar (Jacob Young) for securing it. It is always a pleasure to follow the hon. Member for Strangford (Jim Shannon) and to speak in the same debate as my hon. Friend the Member for City of Chester (Christian Matheson). I always worry when I speak after him that he may well have said everything I want to say. I will talk specifically about HyNet and will expand on some of the points that he has already raised.

HyNet was a momentous moment for the region. Securing track 1 status was a very strong signal for businesses in Warrington and the wider Cheshire/Mersey/Dee network area that we are serious about levelling up, serious about creating and securing well-paid jobs and about making our environment a greener place to live and work. The Minister knows that, because he came to Warrington when we launched the HyNet project and saw the transition work at the UK’s largest can recycling plant at Novelis in Latchford, which is going to transfer over to hydrogen fuel.

For the past two years, I have been pressing his colleagues and the Secretary of State to proceed with the plans so that we can get maximum benefit to the region and the country. HyNet will give a massive boost to the supply chain and will work with younger people and apprentices to upskill and make the energy sector a more attractive industry to work in. In fact, one of my local colleges that I visited yesterday spoke to me about the opportunity to create more T-levels in the green sector. The Department for Business, Energy and Industrial Strategy and the Department for Education should work together on that to join up skills for the future.

As the Minister will know, we are now in phase two of the process, focusing on the individual projects that will realise the ambitions of both the Government and HyNet. In order for the ambitious targets to be met, careful consideration of the correct level of allocations is required.

Our net zero target and the private sector’s environmental commitment have led to significant demand from industry to invest in green transition. That is really good news, but the current caps on the support contracts under the industrial decarbonisation and hydrogen revenue support scheme fall substantially short of the level of demand from industry and below that required to achieve net zero. Without a significant increase in those caps, there is a danger that hydrogen deployment will not deliver the initial scale required to gain the momentum that this fledging sector needs, potentially losing the global lead we have already made in the UK in the hydrogen economy.

The current target of about 6 million tonnes per annum for industrial carbon capture by 2030 is part of the overall target of 20 million to 30 million tonnes per annum. However, it is narrowed down to about 3 million tonnes per annum for the initial allocation under the industrial decarbonisation scheme, and that is an inadequate target to kick-start a new industry. If we split that evenly between HyNet and the East Coast Cluster, it would potentially only allow for one or two of HyNet’s flagship projects to be delivered, resulting in organisations being unable to decarbonise their industrial processes. We need to go bigger.

If the Government are to achieve their stated target, they should be proceeding with about 6 million tonnes per annum in total industrial capture in the first clusters by 2027. That is the lowest cost approach to achieving the 20 million to 30 million tonnes per annum target by 2030. At the same time, the Government should be looking towards a road map for future allocations to give confidence to other projects to proceed into further development.

In addition, to get a functioning hydrogen market, with hydrogen producers connected to hydrogen users, we need business models that are consistent with hydrogen production targets. That means that 2025 will be too late for these business models to be put in place, resulting in the 10 GW target that the hon. Member for City of Chester mentioned being missed.

The message to the Government is really clear: the private sector that is investing in this area wants to proceed and is keen to expand the operation, but it would like Government support to do that. Will the Minister confirm that his Department has done a proper assessment of the impact that the current plans may have on companies reliant on HyNet hydrogen production and infrastructure to decarbonise? Does it leave them facing increased risks and uncertainty from the impact of carbon cost and market share?

I recognise the importance of moving towards decarbonisation and I know that the Government are committed to ensuring that we have the tools in place to achieve net zero by 2050, but it is ambitious projects such as HyNet, bringing together businesses, creating jobs and bringing investment, that pave the way for achieving our target. It is critical that we listen to the needs of those working in the sector to make sure we get this right. I urge the Minister to take heed of the challenges HyNet is currently facing and to seek to resolve them as soon as possible.

[Sir Edward Leigh (in the Chair)]

We have time for five minutes for the SNP spokesman, five minutes for the Opposition spokesman and 10 minutes for the Minister. I call Stephen Flynn.

17:19

[Stephen Flynn (Aberdeen South) (SNP)]

Thank you very much, Sir Edward. There has been a great deal of impassioned debate around the room, and lots of important points have been made about using hydrogen for heating, refuelling stations and buses.

Of course, people do not need to go to America to see or hear about hydrogen buses; they need only come to Aberdeen, where we have not just one but multiple hydrogen buses. And as well as hydrogen buses, we have hydrogen refuelling stations, road sweepers and bin lorries, and a hydrogen hub is about to be set up. SGN is looking at the potential for blending hydrogen into the grid directly from St Fergus into Aberdeen itself. A great deal of hydrogen activity is already going on in Aberdeen, the wonderful city that I represent, as well as across Scotland. Glasgow has the green hydrogen for Glasgow scheme, and Fife has the H100 scheme, which is looking at ensuring that homes are powered purely by hydrogen. A lot of important and powerful work is under way.

That all fits in with the Scottish Government’s target of 5 GW of hydrogen by 2030, and 25 GW by 2045. There is a great deal of potential in that technology, and that is important for someone like me. Scotland’s economy has for a long time been reliant on the oil and gas sector, which is still, and will continue to be, incredibly important. We need to consider what comes next, and hydrogen, of course, has a role to play.

A key question that has perhaps not been touched on in enough detail in the debate is that of blue or green hydrogen. The hon. Member for Birkenhead (Mick Whitley) made the excellent point about CCUS—or the lack of it—in the north-east of Scotland. He is absolutely right: the Government’s completely illogical decision not to progress with the Acorn project causes us a great deal of consternation, given the potential of CCUS. Key to the Acorn project is the production of blue hydrogen, but as we move forward, that discussion changes. Will it still be possible to have a blue hydrogen economy in the same way when the green hydrogen economy is building up at such a pace? In Scotland, the capacity for 25 GW of offshore wind is being built, so the potential for green hydrogen is enormous.

It is incredibly important that we have a clear picture of what we want to deliver and how we can deliver it. I have absolute confidence that my colleagues in the Scottish Government will be on top of that, and I have hopeful confidence that the Minister will be, too. Irrespective of our constitutional future, there will be integration between Scotland, England, Wales and Northern Ireland when it comes to hydrogen, because we will all ultimately rely heavily on the energy resource that comes from Scotland.

There are still many hydrogen sceptics. I have spoken with them—as, I am sure, have many hon. Members present—and they say, “Why do you not just use the electricity that produces green hydrogen its own natural form?” They are missing the point about heating made by the hon. Member for Redcar (Jacob Young), as well as the export potential for hydrogen compared with electricity. When we weigh up those two, it is clear for us all to see—in this room and among the public—that hydrogen, and certainly green hydrogen, is the route forward to a buoyant energy industry and, I hope, a buoyant Scottish economy.

17:24

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I congratulate the hon. Member for Redcar (Jacob Young) on securing this important debate. We are at a juncture with regard to the future of hydrogen. We have pretty much got over the debate on whether hydrogen will play an important role in future low-carbon energy. We have had that debate in all sorts of ways over recent years, and I think that it has been resolved. Hydrogen will play a really important and central part in our low-carbon energy structures of the future. We are now charged with ensuring that we get it right as far as the distribution, development and production of hydrogen are concerned, and that it is used in the right places and for the right things. As the hon. Member for Aberdeen South (Stephen Flynn) intimated, this is a question of using hydrogen to get to the places where electricity cannot be used.

The hon. Member for Redcar mentioned trains and HGVs. It is improbable that HGVs on batteries will be ploughing up and down our roads for 300 or 400 miles with a little bit of freight on top. It will be hydrogen; it has to be hydrogen. We have to get the infrastructure in place to get that right, and we have to get the production of hydrogen right to fuel that new network of long-distance logistics.

The hon. Member mentioned heat, which I would put third in the hierarchy of uses for hydrogen. We certainly have an early win of putting hydrogen into the system up to 20%, but it is unlikely that we will run the whole of our heat on hydrogen, not least because if we put blue hydrogen in to replace the 80% of boilers that run on gas, we would increase our gas imports by about 10%. We would increase gas coming into the country rather than decrease it, which is what we want.

That brings me to the green-blue debate. It is not that we should have no blue and only green. As my hon. Friend the Member for City of Chester (Christian Matheson) said, in the industrial clusters there are some first-rate projects that integrate carbon capture and the use of hydrogen in the right place, which will, in the first instance, need blue hydrogen to get going. We must be clear that the longer-term future is green hydrogen and it should be in our planning from the start, not least because since the Government made their calculations about the relative cost of blue and green hydrogen in the hydrogen strategy, the cost of blue hydrogen has increased by 36%. It is now generally recognised that, by 2025, assuming that gas prices continue at their present level, if we look at future gas prices, as I am sure the Minister has, we will see that blue hydrogen will be something like £85 per MWh and green hydrogen £58 per MWh, and that is before the conclusion of the debates about the roll-out of green hydrogen.

It really has to be green, not because one is against blue but because of the way in which the gas debate is going and the fact that we need to get electrolysis in place to get green hydrogen in the volumes required for the future. That means, as the hon. Member for Redcar has said, that we will need a lot of storage. We know that SSE is already producing salt caverns for the East Coast Cluster. The Rough field will, we hope, come into commission for hydrogen in the future, but we are going to need a lot more storage than that and it will have to be strategically located around the country. We will also need the networks mentioned by the hon. Member to get hydrogen to where it is needed. There is a lot of work to be done to get hydrogen properly in the place where it is needed for the future low-carbon economy. There is a lot of thinking to be done about the relative priorities that we give to different uses of hydrogen in the economy, to ensure that it has the best effects.

If I can pay a slight compliment to the Government, they have begun to do a lot of thinking about the hydrogen strategy, but a lot more needs to be done to get us in the right place and, most importantly, to get the right instruments to encourage hydrogen development and to ensure that we get hydrogen production properly aligned with how we are going to use it. We do not want to look back in 10 years’ time and say, “If only we had done this, this and this, we could have got so much more going with our hydrogen.” That should be the Government’s priority and what they need to concentrate on over the next period, so that the hydrogen economy takes off.

17:29

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate my hon. Friend the Member for Redcar (Jacob Young) on securing this important debate, on his incredible work and passionate advocacy for hydrogen ever since he arrived in the House, and on his chairing of the APPG on hydrogen.

This Government recognise that now, more than ever, we must focus on generating cheaper, cleaner power in Britain to support our long-term energy security and to achieve net zero by 2050. Hydrogen has the potential to help decarbonise vital UK industry sectors and to provide flexible energy across power, transport and, potentially, heat. Our drive for renewables makes hydrogen especially valuable. Excess renewable electricity can be used to produce hydrogen, which can be stored over time and used to generate electricity when there is less sun or wind to power the grid.

That is why in the British energy security strategy, published this April, we committed to doubling our ambition, as my hon. Friend the Member for Redcar and others have pointed out, to up to 10 GW of low-carbon hydrogen production capacity by 2030. As the hon. Member for Southampton, Test (Dr Whitehead) mentioned, at least half of that will come from green hydrogen, or electrolytic hydrogen, drawing on the scale of the UK’s offshore wind ambitions.

The energy security Bill announced in the Queen’s Speech will deliver on the commitment to build a sustainable homegrown energy system that is more secure, clean and affordable, and will include measures to facilitate the delivery of the hydrogen business model, driving investment across the UK.

The enormous potential of hydrogen for our economy is plain to see. In the UK alone, the sector could support 12,000 jobs by 2030 and unlock over £9 billion in private investment in the UK. By 2050—net zero date—the UK’s hydrogen economy could be worth up to £13 billion and support up to 100,000 jobs, many of which will be in our industrial heartlands.

I will address the specific points made by my hon. Friend the Member for Redcar, which were delivered with passionate advocacy in his excellent speech. On blending, we are on track to make a policy decision in 2023 and we are exploring whether to enable blending of up to 20% of hydrogen into GB gas networks.

We have invested £25 million in the BEIS Hy4Heat programme to develop hydrogen-ready boilers. We have to have certainty around the safety and efficiency of these systems, and assurances that consumers will not face a premium from the introduction of these boilers, but that remains an area of active work.

My hon. Friend the Member for Redcar passionately advocated for bringing the hydrogen village trial to Redcar. We expect the final location to be selected in 2023 and for it to become operational by 2025. We expect the trial to last a minimum of two years.

I heard directly from National Grid about Project Union a few weeks ago. It is a fascinating project that we will continue to study. My hon. Friend’s plea to extend the gas storage at Rough is a live conversation with Centrica, and it would not be appropriate for me to comment on that today.

[Dr Whitehead]

Will the Minister give way?

[Greg Hands]

I want to try to respond to the different contributions, but I will give way to the hon. Member for Southampton, Test.

[Dr Whitehead]

This is a very friendly intervention. For the record, will the Minister state the importance of the role hydrogen will play in industrial decarbonisation, particularly in industries such as steel, ceramics and cement? I am sure he will want to put that into the mix, as it were, as far as the deployment of hydrogen is concerned.

[Greg Hands]

The hon. Gentleman is absolutely right about the importance of industrial decarbonisation. That is one reason why we are following the cluster approach, to make sure that those hard to decarbonise industry sectors are close to those clusters.

I will group my response to the two contributions from the HyNet group—the hon. Member for City of Chester (Christian Matheson) and my hon. Friend the Member for Warrington South (Andy Carter)—if I may call them that. The hon. Member for City of Chester also mentioned powered aircraft and maritime, which are very much in the mix for using hydrogen for transport. I had an excellent visit to the constituency of my hon. Friend the Member for Warrington South towards the end of last year, when I saw the potential for the Novelis canning factory to use hydrogen and other means. I have just come from meeting my co-chair of the green jobs delivery group to make sure that the skills are there. On the caps and the impact on companies in the HyNet process, my Department is in regular contact with major cluster projects, including HyNet, about how the Government and the industry can work together to realise our 10 GW ambition as part of the CCUS cluster sequencing process. I am happy to write to my hon. Friend with further details about the companies in HyNet.

My hon. Friend the Member for Waveney (Peter Aldous), who is a passionate supporter of green energy right the way across the board, told us about the clean hydrogen cluster in East Anglia and the Lowestoft power plant project using hydrogen for municipal buses and the refuse fleet, which was also mentioned by the hon. Member for Aberdeen South (Stephen Flynn). On one of my many visits to Scotland, I was really excited to see the Whitelee wind farm just south of Glasgow, which is the second largest onshore wind farm anywhere in Europe. Last autumn, we launched a £9.4 million project with Scottish Power to take the excess onshore wind power generated at Whitelee and turn it into hydrogen for Glasgow’s buses and refuse carts—similar to the scheme mentioned by the hon. Member. By the way, I am looking forward to being in Aberdeen again this week for the fourth time in my nine months as Energy Minister.

The hon. Member for Birkenhead (Mick Whitley) made some good points about hydrogen. I think he also managed to squeeze in a quick swipe at the nuclear industry, so I urge him to think again. I am a bit surprised that he took a swipe at the nuclear industry, as I know that he is sponsored by Unite and other unions. The unions are among the biggest supporters of nuclear in this country, so I urge him to listen a bit more closely to his union sponsors’ support for the nuclear industry. I also note that he is on the Liverpool city region freeport management board, so he is clearly able to embrace new Government policies and take advantage of them bringing things to his district. I urge him to think again on nuclear.

My hon. Friend the Member for Broxtowe (Darren Henry), who is co-chair of the midlands engine APPG, is absolutely right to say that we need to lead on low-carbon hydrogen technology. The technology side of this issue is incredibly important.

As it happens, today I have talked about renewable and low-carbon energy with Gordon Lyons, the Northern Ireland Economy Minister and a party colleague of the hon. Member for Strangford (Jim Shannon), who is absolutely right to say that Northern Ireland will play a key role in the production and export of hydrogen.

In the brief time available, I will outline the next steps. We recently published a hydrogen investment package, which set out the key policy detail that industry has been waiting for, and paved the way for the launch of two significant funding mechanisms: the net zero hydrogen fund, and our hydrogen business model. The net zero hydrogen fund will be coming this summer, and we aim to run annual allocation rounds for electrolytic hydrogen as soon as legislation and market conditions allow, moving to price-competitive allocation by 2025. In July, we will announce the blue hydrogen projects that we will negotiate with the CCUS cluster sequencing process.

We have developed an investor road map to give more clarity on what we have done, what we are doing and what we are committed to doing in developing the UK hydrogen opportunity. We have already mentioned hydrogen transport storage infrastructure, and we have committed to design new business models for that by 2025. We have published a UK low-carbon hydrogen standard, because it is really important that we have a standard for what defines low-carbon hydrogen, and we have also published a hydrogen sector development action plan on supporting the UK supply chain for hydrogen.

I hope that my hon. Friend the Member for Redcar agrees that the Government have provided a clear long-term signal that we are committed to building a world-leading UK hydrogen economy. I thank him again for securing this timely and informative debate, and for allowing us to explore the role of hydrogen in our clean and affordable UK energy system.

My final point is that I was in Berlin in January and met my German opposite number, whose name is Stefan Kaufmann. I found out in advance that his expertise in hydrogen is so extensive that he is called Mr Hydrogen. I said to him, “Stefan, one day I want to be called Mr Hydrogen,” but then I thought that, actually, the person who really deserves the title of Mr Hydrogen in this country is my hon. Friend the Member for Redcar.

17:39

[Jacob Young]

I have not found many points of disagreement during the course of the debate, so I am grateful to everyone who has contributed. I want to put a final challenge to the Minister. He touched on hydrogen boilers and whether we can promise that there will be no cost to the consumer. I say to him that there is no cost to the consumer, because we can make this decision and get ahead with the roll-out. As I said in my speech, it is a no-lose situation, because we do not have to go down the 100% hydrogen route in 2026.

Question put and agreed to.

Resolved,

That this House has considered future hydrogen economy.

17:40

Sitting adjourned.