Monday 12th December 2022
(1 year, 4 months ago)
Grand CommitteeEnergy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Amendment Paper: HL Bill 39-IV Fourth marshalled list for Grand Committee - (12 Dec 2022)
Lord Callanan
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.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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.
Lord Teverson (LD)
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.
Lord Lennie (Lab)
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.
Lord Callanan (Con)
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.
Lord Callanan
Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 75, line 30.
Lord Callanan
Member's explanatory statement
See the amendment in the name of Lord Callanan at page 76, line 1.
Lord Callanan
“(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.
Lord Callanan
Member's explanatory statement
See amendment in the name of Lord Callanan at page 76, line 1.
Lord Teverson (LD)
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.
Lord Callanan (Con)
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.
Lord Callanan (Con)
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.
Lord Lennie (Lab)
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.
Baroness Sheehan (LD)
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.
Lord Callanan (Con)
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.
Lord Teverson (LD)
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?
Lord Callanan (Con)
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.
Baroness Worthington (CB)
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.
Lord Callanan
“(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.
Baroness Randerson (LD)
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.
Lord Callanan (Con)
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.
Baroness Randerson (LD)
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.
Lord Callanan (Con)
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.
Lord Callanan (Con)
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.
Lord Lennie (Lab)
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?
Lord Callanan (Con)
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.
Lord Teverson (LD)
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?
Lord Callanan (Con)
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.
Baroness Worthington (CB)
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.
Lord Callanan (Con)
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.
Baroness Worthington (CB)
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.
Lord Callanan (Con)
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.
Baroness Jones of Moulsecoomb (GP)
The Minister mentioned having meetings. Has he actually met scientists, who know more about this than do people involved in financing the scheme?
Lord Callanan (Con)
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.
Baroness Worthington (CB)
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.
Baroness Sheehan (LD)
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?
Lord Callanan (Con)
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.
Lord Teverson (LD)
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.
Lord Callanan (Con)
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.