Energy Update

Alan Whitehead Excerpts

Monday 5th September 2022 Commons Chamber

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

I thank the Minister for his statement and for the brief advance notice that we had.

I think that we can all agree that this is a statement of astonishing vagueness and complacency. I had, for example, anticipated that the Minister might have a bit more urgency on the consequences of Russia’s decision to cut off Nord Stream 1 today, and the effects that that will have on gas prices. I thought that he might have come to the House to tell us about that. We are closely tied to European markets. Does he accept that this announcement today puts an even greater sense of urgency on the need to protect the price of gas from outside the UK, both for businesses and for domestic customers, and what measures are the Government undertaking to make that happen?

For domestic customers, there is certainly an energy bill crisis in this country. We need urgent action now.

The Minister talked about funding for the last round of price cap increases, not the one we have now. I know that we have a new Government coming in, but we have heard nothing from the Minister or the Prime Minister about what the plans might be. In fact, all we have heard from the new Prime Minister is that there will be an announcement, but nothing about what the announcement might be. A clear and obvious announcement already exists, however: Labour’s fully funded plan to freeze energy bills this winter, paid for by a further windfall tax on the oil and gas giants making record profits on the back of the energy crisis.

The Minister has an opportunity today to put flesh on the bones of any announcement. He should tell us whether he thinks that the Government should freeze energy prices. Also, does he think that the Government should implement the further windfall tax on the oil and gas giants, and if not why not—and if not, does he want just to protect the profits of the oil and gas industry as a whole?

As well as short-term support for households, we need a long-term answer to this crisis. We on the Opposition side of the House are clear that the best way out of a fossil fuel crisis is to get off fossil fuels. That is why Labour has called for a national clean energy sprint for renewables and a national home insulation plan. The Minister mentioned home insulation and talked about the Government’s existing schemes, but he knows that, in relation to real need, they do not touch the sides. Does he recognise that we urgently need a national warm homes programme to insulate 19 million homes, and is he prepared to commit to that today at the Dispatch Box?

On future energy, the Government could fix many of the problems we face if they decoupled the price of electricity from that of gas. The Minister said in his statement that there is a very leisurely process of consultation and discussion, which I see from the discussion document “Review of Energy Market Arrangements” would not be enacted until 2025. Does he accept that that is a ridiculously long timescale for an urgent change we need now? Is he prepared to commit to decoupling the price of electricity from the price of gas now, particularly given the weight that renewables now have in the market? The Minister talked about offshore wind, but why has he not removed the Government’s ludicrous ban on onshore wind, and does he intend even at this late stage to decide it is time we actually did that?

Finally, the incoming Prime Minister is obviously a fan of fracking, but the Minister told the House on 15 March:

“We are clear that shale gas is not the solution to near-term issues. It would take years of exploration and development before commercial quantities of shale gas could be produced.”—[Official Report, 15 March 2022; Vol. 710, c. 761.]

Does he stand by that statement and will he be communicating this view to the new Prime Minister?

[Greg Hands]

I thank the hon. Gentleman for his engagement, as ever. Let me try to deal with each of his points in turn.

First, on the Russian decision to cut off—or, as they put it, repair—Nord Stream 1, it is worth reminding ourselves that we are not dependent on gas from Russia, as the hon. Gentleman knows. Last year less than 4% of our gas came from Russia, and this year there have been no deliveries of gas from Russia since March—50% of our gas is domestic, and 30% is from Norway. He is right that this has an impact on prices, however, and that is being discussed at the moment and I would expect to hear more from the new Prime Minister and her team in the coming days, as he well knows.

The hon. Gentleman asked about any future windfall tax. Again, I do not want to speculate on what might happen, but I will say what happened when Labour last proposed a windfall tax. The measure that we introduced—the energy profits levy—is projected to raise twice what Labour’s proposal for a similar move would have raised at the time, and it has led to greater support for the most vulnerable customers. Labour’s proposals would have raised about £600, but the Government’s proposals raised twice that amount—about £1,200 for the most vulnerable households—and, as I said in the statement, there will be more to come on this.

The hon. Gentleman asked a very reasonable question about decoupling the electricity price from the gas price. Of course, this is one of the measures being looked at in REMA, as he rightly pointed out, and it will also be something of active interest for the Government. He asked about onshore wind, and he will know that the local partnerships scheme announced in the British energy security strategy in April has exactly mapped out how we see the changes in the onshore wind regime in England. There is no change as yet in Government policy on fracking, but that will obviously be a matter for the soon-to-be new Prime Minister.

Overall, the Opposition seem to make three central points: the Government failed to invest in renewables; the Government failed to invest in nuclear; and the Government failed to invest in energy efficiency. They are wrong on all three. On renewables, under this Government we have quintupled the percentage of electricity generated from renewables, from 7% of our electricity mix when they were in power to 40% in 2021, which is a very strong achievement. On nuclear, the Labour party’s 1997 manifesto said there was

“no economic case for the building of any new nuclear power stations”

in Britain. Twenty-five years later, we have reversed that. We are building Hinkley Point C, and on Friday the Prime Minister was at Sizewell C announcing his support for that power station. On energy efficiency, we have actually increased the percentage of homes that reach the band C level of energy efficiency: we have trebled that from 14% of our homes in 2010 to a strong 46% today. When it comes to matters relating to energy—prices, taxation and energy security—this Government will take no lessons from the Opposition.

Draft Electricity and Gas (Energy Company Obligation) Order 2022

Alan Whitehead Excerpts

Monday 18th July 2022 General Committees

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

It is a pleasure to serve under your chairmanship, Mr Sharma. The first thing to say in response to the Minister’s excellent setting out of the provisions of ECO4 is that it is a good scheme. We welcome a number of elements of it, which expand and in many instances are different from ECO3. Above all, we welcome the fact that it is finally on the table today. I see that the order will apply from tomorrow, so it will finally be in place, and I will come back to that problem in a moment.

We certainly welcome the fact that ECO4 sets out increased collaboration with local authorities and other social housing providers, and the increased flex to 50%, which is a slow but sure move towards recognising that local authorities can play a central role in energy efficiency, retrofit and upgrade in properties. That will enable a lot more collaboration on the private sector between local authorities, social housing providers and ECO providers.

We certainly welcome the proposal to ensure that the most poorly rated homes—those in E, F and G—are now among the priorities for treatment, and we welcome the fact that putting them up two bands is on the table in ECO4. We welcome the increased budget from £640 million for ECO3 to £1 billion for ECO4. I have to say, however, that as welcome as that increase is, two aspects ought at least to give Members pause. The main one is that the budget increase will effectively be borne by bill payers, as we see clearly from the impact assessment. If I read it in its entirety, it sounds a bit strange. It says:

“The impacts of the policy shown above are not expected to be shared equally across society, with obligated suppliers expected to incur most of the costs presented in Error! Reference source not found.Error! Reference source not found.”

I do not know what that refers to. It goes on:

“ECO4 has a spend envelope of £1 billion per year, rising with inflation, until March 2026. Suppliers are in turn assumed to recoup the costs they incur from meeting their obligation from their gas and electricity customers.”

It is clear that the money for the increased budget will come from energy bill payers. What is not in the impact assessment, however, unlike some other impact assessments, is what that represents in terms of bills; my calculation is that it roughly represents a £4 increase on bills over the period. I would welcome the Minister’s view on whether I have that about right, or whether that is more or less than it should be. That fact is that it will go to bill payers. We ought to think about whether that is an appropriate way to do such things, particularly as we have such sky-high bills at the moment, and will have for probably the whole period during which ECO4 will exist.

Our view is that an ECO4 scheme should have been substantially better funded than even the £1 billion, given the work that is ahead of us, and also that the difference between what there was in ECO3 and what there will be in ECO4 ought to be taxpayer-funded, not funded by bill payers in general. We also ought to be clear that, welcome though a number of the measures are, they will in fact be only a pinprick on the overall problem in this country with energy efficiency, energy uprates and retrofitted properties. One example of that is the—albeit welcome—carved-out slice in ECO4; that is, the 10% set aside for solid-wall housing, with 90,000 treatments to be undertaken over the course of ECO4. In the country as a whole, we have 7.8 million solid-wall homes, virtually all of which need to be substantially uprated in terms of energy efficiency and as a priority, because they are, by and large, in the lowest energy efficiency categories in the country.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

I have many such properties in my constituency. It looks like beautiful Regency grandeur from the outside, but it is poor-quality housing on the inside, which is cold, damp and miserable for many of the tenants, who do not even have direct electricity or gas suppliers, but rather have secondary energy suppliers via their landlords. Does my hon. Friend agree that these measures are far too small in their application and that the Government need to adopt a street-by-street strategy, whereby they assess every house along every street, and develop an individual plan for energy efficiency for each of those houses? Without that, these measures will just deliver nice things and not the ambition that we need.

[Dr Whitehead]

My hon. Friend is absolutely right. Indeed, I was going to finish talking about what we would like to see by saying something along more or less precisely those lines. In the long term, we need to adopt a wholesale, locally organised and locally run, street-by-street and house-by-house arrangement, rather than what has happened with the ECO schemes in the past and still now, whereby individual houses are picked out by individual suppliers and are treated. That wholesale treatment, which my hon. Friend has rightly described, is still nowhere in view for these schemes.

My hon. Friend will know from his experience of solid-wall homes in his constituency that they are expensive to treat and need whole-house treatment. Indeed, that is reflected in the estimates for this ECO scheme. He will also be concerned to know that, in general terms, if the 90,000 treatments are discharged according to the calculations in the scheme, then we will reduce the number of homes that are outstanding for treatment by the huge proportion of 1.8%. That is to say that 97% of solid-wall homes across the country have not been treated, so 95% will still remain untreated at the end of the ECO4 period. This is a good scheme in its own lights, but it woefully falls short of what we need over the next period for serious retrofit in this country.

But my question, and what I take issue with, is this. Why are we sitting here on 18 July, passing into law—as I hope we will—the rules for a scheme that started on 1 April? Anybody with any experience of these sorts of things will know that it is a rather good idea to have the rules in place before a scheme starts. In this instance—despite what the Minister said about some of the “shutting the stable door” measures retrospectively undertaken in the interim, when ECO4 was not in place—suppliers and contractors have not known what they would be remunerated for, what they would not be remunerated for, or what risks their companies were taking in undertaking actions.

A lot of suppliers, particularly smaller contractors, have simply downed tools on measures to be carried out under ECO3 or ECO4, with an estimated 50,000 measures that could otherwise have been undertaken being lost over the period. For small contractors and suppliers, having to do all that work at their own risk, without knowing what the rules would be, or whether or when they would get their money back, was not something that they could stand.

That question was put to me by a number of suppliers some while ago, when ECO4 was still in development. As a result, I asked the Government a number of written questions about what would happen. Would there be a smooth transition and would the rules for the scheme be out in time? I must say, the answers I got were systematically evasive—and, as it turns out, systematically wrong. In answer to a question that I tabled on 25 November, the Government said:

“The current scheme ends in March 2022, followed by a successor scheme (ECO4). The publication of the government response to the ECO4 consultation is planned before the current scheme ends”.

That was wrong; it came out after the scheme ended.

I asked the Minister whether he would ensure that there was no gap between ECO3 and the start of ECO4 in April 2022. The Government’s response was that

“the Government consulted on extending the Energy Company Obligation…Scheme from 2022-26. The Government will issue a response in due course. ECO4 will commence once the Government has sought parliamentary approval. The Government will endeavour to ensure that there is a smooth transition between the end of ECO3 and the start of ECO4.”

Getting rather desperate, in May 2022—two months after the scheme was supposed to have started—I asked when the Government would lay the rules for the scheme to work. The answer was:

“The Government is working quickly to lay regulations.”

We now know that “quickly” means two months, because that is where we are now.

Of course, the Government were unfortunately rather clear with me about what would happen to suppliers who had undertaken work between the end of ECO3 and the start of ECO4 in the hope that they might get some sort of recompense for it. The answer was:

“The Government does not fund or reimburse suppliers to meet their obligations under the Energy Company Obligation. ECO is a supplier obligation, and it is up to suppliers how they dispense their obligation and recoup costs from energy bills.”

It is up to suppliers, when they do not even know the rules on whether they can get that recompense in the first place.

Finally, very late in the day, on 15 June, I asked why the Government had still not published the rules to implement the energy company obligation. The final answer was:

“The Government expects to lay regulations for ECO4 this month”,

meaning in June. Here we are, on 18 July, looking at those regulations.

Right down the line, the Government have got it wrong on what they said the progress on this was, and got it fundamentally wrong on the elementary task of ensuring that rules are in place before a scheme starts. That has made a real difference to retrofitting in this country, and it is a real difference that I fundamentally deplore.

It should have been within the competence of the Government to organise these rules in such a way that the scheme could progress reasonably fairly and seamlessly, and if they could not do so, it should have been within their competence to tell people why it was not happening and what the reasons were for it. None of those things has happened.

We have heard, I am afraid, a rather Panglossian version of these events from the Minister this afternoon, who says that, yes, people can get recompense now for work they have undertaken; it will score. However, they did not know that at the time because the rules were not there.

It has been a shambles. I hope the Minister will be able to say this afternoon that he is sorry for this shambles, and perhaps also explain—because I have been unable to get an explanation so far—why it has been such a shambles, why the rules are so late and why, as a result, the scheme was hampered in the way that it was. Finally, perhaps he could solemnly promise that this will never happen again in any schemes that he is involved with in future.

--- Later in debate ---

[Greg Hands]

The hon. Member raises an important point, but an energy consumer does not have to have an encyclopaedic knowledge of the available schemes. The important thing is that the Government provide that assistance, in some cases via energy suppliers, local authorities or social housing providers. If he wants to write to me to suggest which schemes he might seek to abolish in favour of putting it all in one scheme, I would happily receive such a representation.

The hon. Member for Southampton, Test said the solid wall insulation minimal requirement should be higher. ECO4 will focus on the least energy-efficient properties and, as I mentioned earlier, we have introduced a requirement for a minimum of 150,000 band E, F and G private tenure homes to be treated. Most of those will be solid-walled homes and we estimate that around 75% of total scheme spending will go towards improving them to band D or better. We believe the current solid wall minimum strikes the right balance between giving certainty to the supply chain and giving them the flexibility to treat homes in the most important way. The hon. Member for Brighton, Kemptown sought a street-by-street approach—an area-based scheme. We expect area-based schemes to happen as installers involved in ECO also deliver under the home upgrade grant, the social housing decarbonisation fund and the local authority delivery scheme. We already know of installers planning to work in that way.

The hon. Member for Southampton, Test asked why the scheme was delayed. It is worth stating that ECO4 is the most significant reform since the scheme began nine years ago. We have had to ensure that it is fit for purpose until March 2026—it is important to get that right. This has presented new challenges in policy design, modelling and legal drafting. As I have already mentioned, however, nearly 33,000 measures have been installed since 1 April and registered with TrustMark. We expect that number to rise by several thousand because, obviously, there is a time lag between installation and registration. That is not a bad rate. This is a scheme of 450,000 households over four years, so that is roughly 110,000 per annum, so the fact that in three months, 33,000 measures have been installed shows there has been no discernible impact on delivery from the change from ECO3 to ECO4.

The hon. Member read us a long chronology of parliamentary questions and the different points he has made. I will never forget in my first year in Parliament when I asked a point of order to the Speaker. I read out a long chronology relating to a then Labour Minister, who had failed to provide an answer. The then Speaker—the glorious late Michael Martin—replied to me with just one word, “Persevere.” That was all he said to me. I will not urge the hon. Member to persevere. I say to him that at the end of that long chronology, he was not actually able to demonstrate that there had been any deficiency, that anybody had been damaged or that any measures had not been delivered as a result of ECO4 coming in three months after the scheduled end of ECO3. We covered it due to the extension of ECO3 and the bringing forward of measures in ECO4. That has been solved, and the hon. Member should join us in celebrating those 33,000 measures that have been installed just in the last three months.

Moreover, by allowing suppliers to overdeliver against their ECO3 targets—referred to as carryover—at least 40,000 extra measures were delivered earlier than they otherwise would have been. We have engaged with energy suppliers, and the hon. Member for Kilmarnock and Loudoun asked about the supply chain.

[Dr Whitehead]

If the Minister thought all along that because of all the various issues and complexities of this particular scheme, it would take longer than originally anticipated and there would be a gap in schemes, why did he not say so at the time? Why did he give me a series of replies to my questions, which said anything but that being the case?

[Greg Hands]

Sometimes, when we are making a reform, it is not always obvious where that reform process will lead. Let us bear in mind that there was a big consultation and we wanted to hear from suppliers and consumer groups, so we obviously wanted to look closely at the responses to the consultation. I have already mentioned the consultation in response to the point of the hon. Member for Kilmarnock and Loudoun; we want a GB-wide scheme. It was right and proper to wait for the responses to the consultation before laying out our reform measures.

[Katherine Fletcher (South Ribble) (Con)]

I promise to be brief. Part of the technical consultation that the Minister has alluded to for solid walls is really important. Is there a major gain in preventing the latent heat of evaporation by putting a PVA coating on the outside of walls? Do we have to lose space from inside homes that may already be small to provide initial internal insulation? Does he agree that it was important to take time to ensure that the industry and different providers could work out how to get the most bang for their buck to move it forward?

[Dr Whitehead]

But we always knew that.

[Greg Hands]

I am not sure whether the hon. Gentleman is making an intervention on my hon. Friend’s intervention, but my hon. Friend makes a good point about the strong measures that we are taking on solid wall insulation, which are important to get right—the most important thing. I do not think that anybody could point to any damage that has been caused by this; we have continued to deliver a huge number of measures in those three months. We should look at the new scheme and welcome the additional measures that we are taking to help vulnerable households.

The hon. Member for Kilmarnock and Loudoun asked about the solar process; it is a matter for Ofgem to ensure that ECO is protected in that. Obligations are calculated annually and suppliers must fulfil their obligation. Any supplier that went bust would lose the obligation. So far, only very small—or relatively small—suppliers have gone bust. The larger suppliers have continued to fulfil their obligation under ECO3.

The hon. Gentleman also asked about discussions with the Treasury. As you will know, Mr Sharma, it is always difficult to disclose matters relating to a discussion with the Treasury, so I will pass on that.

The hon. Gentleman asked about the negative NPV of £3.8 million; I will have to write to him on the exact details of that. On the 1 million homes that would be left in bands E, F and G after these schemes, we recognise that this scheme will not improve every home in the country. To help with that effort, we have additional schemes in place that I have already mentioned. Of course, some homes will not be able to be upgraded to band C or above, or it would not be cost-efficient to do so, but hopefully that will be a very small number.

--- Later in debate ---

[Greg Hands]

The hon. Gentleman asks a reasonable question. Obviously, that will be a matter for the Bulb Energy administrators. I am happy to write to him with more detail on how they might look at that in terms of ECO4.

[Dr Whitehead]

There are two separate administrators.

[Greg Hands]

Of course, there are separate administrators for different parts of the company. I am happy to write to the hon. Member for Kilmarnock and Loudoun about how the administrators might approach that issue in relation to ECO4.

The hon. Gentleman asks about the back end and risk delivery, which has not happened before with ECO1, 2 and 3. Obviously, however, Ofgem monitors that closely to make sure that there is no risk of suppliers back-ending their obligations. To the best of my knowledge, we have not had that problem in the previous three schemes.

On a budget by nations, I think I am right in saying that Scotland, along with the north of England, has benefited the most of the nations or regions of the United Kingdom from the previous ECO1, 2 and 3 schemes. It has very much been, to date, a scheme where disproportionately Scotland and the north of England have benefited. I know that the hon. Member likes to create grievances here on behalf of Scotland. He is even having a pre-emptive grievance. The scheme has not even started and he is already ratcheting up the grievance policy. I have to say that from my experience of the previous ECO1, 2 and 3 schemes, Scotland has been very well served, as has the north of England. I think we should continue to celebrate that. The hon. Member asked about a biofuels exclusion. There is competition for biofuels, and they may be better used elsewhere, but we also do not want to maintain low-income homes on volatile fuels wherever possible.

The Government recognise that millions of households across the UK may need further support with the cost of living and the extraordinary increase in the cost of energy, which we have witnessed this year. That is why the Government have announced additional support this year worth over £37 billion, including targeted support for those on the lowest incomes. The Government remain committed to helping low-income, vulnerable households to reduce their fuel bills and heat their homes. Improving the energy efficiency of our homes is the best long-term solution to achieve this. Tackling fuel poverty is an essential for our transition to net zero. That is why we are spending £6.6 billion over the course of this Parliament and expanding the previous ECO3 system into a much larger ECO4 scheme, targeted particularly at the more vulnerable and those living in the least energy-efficient homes.

The Government have an excellent record in improving the energy efficiency of homes in this country—from 14%, the level we inherited from the last Government, to 46% today. That still means that 54% of homes in the United Kingdom are rated below band C for energy efficiency. That does not give any cause for complacency. I think we can see with the action taken by this Government that we have improved the energy efficiency of homes gradually and considerably over the last 12 years, and we will continue to do so with ECO4. Therefore, I commend this draft order to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the Draft Electricity and Gas (Energy Company Obligation) Order 2022.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 12th July 2022 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

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

The Minister knows that, at present, all retail electricity supplies—whether they derive from more expensive gas or cheaper renewables—are charged as though they had all come from gas. He also knows how to decouple prices coming into the retail market, so that domestic and business customers can enjoy considerable reductions in their energy bills by getting the direct benefit of renewable prices. Why is he not legislating to do so?

[Greg Hands]

The shadow Minister raises an interesting and good point about how the UK electricity market is structured. That is one reason why we have launched the REMA—review of electricity market arrangements—process and why we are taking action in the Energy Bill on aspects of the domestic energy system that will yield real gains for consumers, such as the onshore distribution and transmission network, so that there will be more competition in the network. There will be other measures in the Bill, which I very much hope that he and the other Opposition Front Benchers will support in due course.

Home Energy Efficiency: North of England

Alan Whitehead Excerpts

Wednesday 6th July 2022 Westminster Hall

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

We have had a good and important debate this afternoon. I congratulate the hon. Member for Darlington (Peter Gibson) on bringing forward the debate and on the exemplary way in which he put forward his case. I largely agree with what he said, particularly his emphasis on conditions in homes in the north of England and the work we need to do on retrofitting. He gave a number of instances of homes in the north of England and their circumstances, particularly the average age of properties, and the fact that it is rather colder up north than it is down south—I say that as the Member for Southampton, Test.

In the north of England, property stock is substantially older than the average for the UK and, as the hon. Member for Darlington mentioned, that older stock is substantially single-skinned properties, which need different forms of treatment from properties with cavity wall insulation. From energy efficiency surveys, it is interesting to see that pre-1930s properties have a median energy efficiency score of 56, according to the report I am looking at, whereas buildings built from 2012 onwards have a median energy efficiency score of over 80. So we have a huge block of properties in the north of England that have very low energy efficiency scores, and it is difficult to do anything about them other than provide whole-house treatment for the amelioration of their problems.

Bearing in mind that issue, we also have a huge gap between the emissions from new build properties and those from existing dwellings. Indeed, the north-east has one of the largest gaps between emissions from new and old properties. In the north-east, there are emissions of just over 1.5 tonnes of carbon dioxide per year from a new property, compared with over twice that amount—3.6 tonnes per year—for existing properties. So there is a huge job to be done, particularly in properties in the north of England, to help us get to our net zero targets and to retrofit properties throughout the country.

The call from the hon. Member for Darlington for much more work to be done on the energy retrofit of properties is important for climate change purposes and for future energy bills. It is estimated that £400 to £500 can be saved from energy bills in an uprated energy-efficient property. It is also important for the comfort and good living that we expect in any household in the country. The problem relating to damp and older properties is not just in his part of the world, but in the north generally. This debate is timely and important, and we must have the retrofit debate in the not too distant future.

I cannot be entirely non-political in this debate, as the hon. Member suggested we should be, although we all agree in this Chamber on what we want to do with retrofitted properties and on why it is important and relevant to climate change, fuel poverty and the welfare of citizens.

[Peter Gibson]

I am pleased to hear the tone of the hon. Gentleman’s speech up to this point. Although the debate is focused on the north and north-east, and on the types of housing stock in my constituency and other northern constituencies, I am sure that the type of housing stock in his own constituency—perhaps he will mention that—would benefit from some of the improvements, even though his constituency is on the south coast.

[Dr Whitehead]

I can assure the hon. Member that I am not approaching this debate as if all the retrofit problems are in the north of England and not in the south. It is a national scandal that homes across the UK have got some of the worst energy efficiency performances of any properties in Europe. On other occasions the Minister has said that it is not such a big problem because of the way in which energy efficiency has increased in our housing overall in the last few years.

However, if we look at all parts of the country, there is a big lag between the energy efficiency, albeit under slightly different circumstances, across the country and the energy efficiency of new properties, so the figures do not quite tell the truth as far as energy efficiency improvement is concerned. Most of that improvement is because newer housing, recently built properties, are so much more energy-efficient than older properties. In fact, as we can see from the collapse of energy efficiency retrofit arrangements after 2012, there has not been a great deal of movement in the energy efficiency of properties in all parts of the country. The north of England faces even worse problems in getting its property up to retrofit standards than other parts of the country.

[Peter Gibson]

All of us in this Chamber have alluded to the scale and size of the problem. Does the hon. Gentleman agree that this is also a really complex problem because of the types of ownership of some of our properties? We are not talking about just one type of ownership. There are private landlords, social housing providers, absentee landlords and private homeowners, which makes the problem particularly complex. As we have so much time remaining in the debate, I would be incredibly grateful to the hon. Gentleman if he could outline some of his suggestions and proposals to tackle the problem.

[Dr Whitehead]

The hon. Member invites me to make a lengthy speech about what my party has in mind for energy retrofit, but also about what my party has in mind for dealing with complex situations in different sectors of the housing market. He rightly says that the question of energy efficiency standards is very different in different tenures of property—social housing, private rented sector and owner-occupied housing—and the solutions that one needs to put forward have to be different for different kinds of tenure. Furthermore, as I am sure the hon. Member has noticed, those tenures are intermixed with each other in most areas, so there are very few parts of the country where there is just one kind of tenure.

In my constituency, one of the issues is that there is a very high level of houses in multiple occupation and properties that are rented out by private landlords. There is also a substantial student population in my city, so a number of the houses are rented out by private landlords on a quick turnover, and with very little regard for the energy efficiency of those properties in the long term. Although one might say that the general housing arrangements in my city are better for energy efficiency than in some other parts of the country, there are specific issues relating to how energy efficiency might be looked at. One issue is just how bad energy efficiency is in the private rented sector and what measures need to be undertaken to get those houses to a decent level of energy efficiency in order to make them marketable rental properties.

In the past, a specific part of the legislation was on minimum energy efficiency standards. We think that needs to go a lot further by addressing the marketability of homes and the requirement on landlords to get those properties up to a decent energy efficiency level in order to rent them out in the first place. As the hon. Member for Darlington will know, there is legislation in place that requires landlords to bring their properties up to the band E energy efficiency requirement, but that is grossly insufficient for the targets that we need to set on getting the private rented sector up to scratch with energy efficiency.

[Peter Gibson]

I am grateful for the hon. Gentleman’s indulgence in giving way a third time, and for him talking about putting the burden of meeting those property costs on some of our landlords. We have seen examples of landlords being forced to do some of the work that is required to bring their properties up to standard. As a result, they are exiting the market—some people might say that is a good thing—and then selling the properties, which is having a deflationary impact on the value of properties in specific localities. In turn, that compounds the problem of the ratio between the cost and value of the asset and the cost and value of the investment required, which can actually have the opposite effect to the one desired.

--- Later in debate ---

[Dr Whitehead]

The hon. Gentleman is admirably setting out a series of concerns about how we address the process of retrofitting, which we need to think about very carefully. One of the things that concerns me—here I get a bit political—is just how bad the Government’s overall retrofit programme has been over a long period. It is not just about the collapse of schemes from 2012 onwards. In the previous debate, somebody asked what happened in energy during the previous Labour Government. Well, a lot happened: the carbon emissions reduction target, the community energy saving programme and warm home grants.

There has been a real noticeable increase in standard assessment procedure ratings in properties over the years. From about 1990 to 1995-96, the schemes really started working, and they were publicly funded. What happened in 2012 is that the publicly funded schemes were removed, and after that the schemes were entirely market based. The green deal died a death. Recently, the green homes grant was sort of publicly funded, but it also rapidly died a death.

Significantly—I want to emphasise this point, in terms of how we treat retrofit—the only part of the green homes grant that was successful was the part that applied to local authorities. Local authorities were and are able to take some of that grant and do a lot of good work. The hon. Member for Sedgefield (Paul Howell) said that his local authority has done a lot of public work on that, yet the Government systematically set their face against the idea that local authorities can play a substantial leading role in retrofitting.

I suggest—the hon. Member for Darlington and I spoke about this a moment ago—that the case has overwhelmingly been made for retrofit funding. We are saying that there should be a 10-year programme to retrofit 19 million homes of all tenures through a combination of loans, grants and direct local authority schemes, with two million homes retrofitted immediately. That would be a comprehensive programme of retrofitting across the country, with the emphasis on area-based schemes so that local authorities can look at where their areas are worst and at what needs to be done in their particular circumstances, and concentrate resources accordingly on retrofitting with that knowledge and those concerns at the front of their minds. How much better would that be than the sorts of schemes we have had over the years? In this case, energy companies have been asked to go around and pick out individual properties to do up to a greater or lesser extent.

[Paul Howell]

I declare an interest: I am a private landlord. Does the hon. Gentleman agree that, in terms of segmenting the approach and trying to make sure it is right, we need a different approach when considering the economics of the north, for landlords and owners, in contrast to the high-value property areas of the country, to ensure that we focus on absentee landlords and people who are not doing the right thing? In parts of the north they almost walk away because the value of the property is so low. We need to ensure that does not result in the properties becoming derelict. Rather, they should either be resold or go back into the rental market properly.

[Dr Whitehead]

I agree with the hon. Member that we need to ensure that we tailor our programmes, not just to the particular areas of the country but to the particular resources that we will need in order to deal with the arrangements in different parts of the country. Labour’s programme would not only allow that to happen, but ensure that, right across the country, we were not applying a one-size-fits-all arrangement and we were allowing local authorities in particular to tailor their programmes. We can imagine the equivalent of the old housing improvement areas or general improvement areas being applied in the form of energy efficiency improvement areas in various local authority areas. They would be chosen by those local authorities, and would be able to concentrate on different tenures in the way that the hon. Gentleman outlined. The difference is like night and day between what Labour is proposing at the moment and what the Government—albeit they have spent some money on retrofitting—continue to try to do.

I just want to take a few more minutes, because I appreciate that we will in the end run out of time—even though we have more time than we thought—and I want to give the Minister ample time to reply to the debate. I would like him to address his thoughts to three particular questions.

One of the only schemes that is doing any serious work on retrofitting at the moment is ECO—the energy company obligation. The ECO scheme is now in its fourth iteration; ECO4 was supposed to come onstream in April this year, and the hon. Member for Darlington asked, “Where is ECO?” There is an answer in the press release for the Energy Security Bill that appeared on my desk today. That press release states:

“The current ECO4 scheme came into force in June 2022 and will run until March 2026.”

That is just not true. No ECO4 scheme is in operation at the moment, because the regulations have not yet been sorted out as far as this House is concerned; we still have to discuss them and put them into being. Today, I was at a lunch where an energy management and building company guy sitting next to me was bemoaning the fact that the people there could not just get on with ECO4 because they just do not know what is going to happen with the regulations.

Therefore my first question to the Minister is this. When will that happen so that we really can get under way with ECO4? Why has he put it in the Energy Security Bill that ECO4 has already started when it has not? Can he get it started as soon as possible so that the people I have been talking to recently can actually have some security about the future arrangements for retrofit? We obviously consider that the uprating for ECO4 that has already taken place, from £750 million to £1 billion, is welcome but not enough. Certainly we would want to see that programme substantially increased in size at a very early stage in order to get this retrofit programme going as quickly as possible.

The second question is this. Why is there nothing in the Energy Security Bill—as far as I can see—that takes us beyond the level of ECO4? Certain things in the Bill suggest some amendments to ECO4, but there is nothing to take us beyond that particular scheme in the way that has been described today in this Chamber. I do not know whether the Minister—because I suspect that the Energy Security Bill is a Bill in progress even as it is published—will want to bring forward amendments, during the passage of the Bill, that allow those further things to take place, but I will be interested to know this afternoon whether that is under serious consideration.

As I think every Member present this afternoon has said, this is a pressing problem that needs to be sorted out as quickly as possible, and on the widest scale that is compatible with our net zero commitment and the duty we have towards our citizens’ style of living, energy bills and expectations of what their housing will look like in future years. Pushing forward on that is something we in this Chamber are completely united on, and I look forward to hearing the Minister’s response to that unity of purpose.

--- Later in debate ---

[Greg Hands]

I fundamentally disagree. Solar has done incredibly well in this country. We have a big capacity in solar—I think around 14 GW. Our ambition is to grow that to 70 GW. Part of that is thanks to the VAT reduction that we saw this year. I do not remember the hon. Lady supporting that VAT reduction on solar panels. The Government are taking active measures to increase and support solar energy.

On energy efficiency, when we took office in 2010, just 14% of properties in England were rated “energy efficient”. That has risen to 46%, which in 12 years is an incredible increase. However, that shows that 54% of our properties are still not sufficiently energy efficient, so we still have work to do, but we can only do it by making investment. The last Labour Government said there was no money left. Perhaps if they spent a little more on energy efficiency in those 13 years, we would not have been in a position where only 10% of homes were rated A to C when we took power.

My hon. Friend the Member for Darlington asked when the new energy company obligation scheme will begin. I think the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), also raised that same point. A three-month interim delivery phase was introduced between 1 April to 30 June 2022 under the previous scheme rules to enable delivery to continue subject to some measure limitations. Obligated suppliers may choose to deliver under the new scheme rules backdated to April 2022, when the underpinning legislation was put in place. We are pleased to announce that we laid the draft Electricity and Gas (Energy Company Obligation) Order 2022 before Parliament on 22 June. We expect the regulations to be made and come into force in July.

My hon. Friend the Member for Darlington also asked about energy advice. Our simple energy advice service, launched in 2018 in response to the Government-commissioned “Each Home Counts” review, provides homeowners with impartial and tailored advice on how to cut their energy bills and make their homes greener. The service has been accessed by over a million users.

[Dr Whitehead]

rose—

[Greg Hands]

I will make some progress and respond to the points made in the debate. My hon. Friend the Member for Darlington and the hon. Member for Weaver Vale (Mike Amesbury) raised the really important point of skills. I chair the newly established green jobs delivery group with Michael Lewis, CEO of E.ON UK. In 2021 the Government invested £6 million in a BEIS skills training competition, resulting in 7,000 more training places for heat pumps and insulation. The hon. Member for Weaver Vale also commended an event about skills attended by Andy Burnham and Andy Street. It is good to see constructive cross-party work. I only wish that the Mayor of London would follow such a constructive approach to cross-party work, as the Mayors for Manchester and Birmingham often do.

The hon. Member for Stockport (Navendu Mishra) asked about using legitimate builders, not cowboys. All insulations under Government schemes, including ECO, the social housing decarbonisation fund, the home upgrade grant and the local authority delivery scheme, must be completed by TrustMark-registered businesses, adhering to the latest requisite standards. These requirements are based on the recommendation of the “Each House Counts” review, an independent review of consumer protections and standards.

Energy Security Strategy

Alan Whitehead Excerpts

Tuesday 5th July 2022 Westminster Hall

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

We have had a comprehensive, well-informed and thoughtful discussion this afternoon, instituted by my hon. Friend the Member for Birkenhead (Mick Whitley), whom I congratulate on securing the debate. It is particularly prescient to have the debate right now, because, as right hon. and hon. Members know, we are expecting the imminent arrival of the energy security Bill, which will have to legislate for all the changes we need to implement to make our system much more resilient, energy-efficient and, indeed, internationally secure. I look forward to seeing how many of the essential measures are in Bill. The Opposition intend to insert in the Bill as many of the things that are missing as possible, to make sure that we have a secure, forward-looking energy strategy for the future.

The content of the Bill will essentially be the recently published “British energy security strategy” paper. As I have said on previous occasions, I can describe it best by using the immortal words of Eric Morecambe, when he said he was

“playing all the right notes, but not necessarily in the right order.”

Members under the age of about 50 might not get that, but it is a very important indication of where the energy security strategy is.

I will discuss the notes that are being played and the order in which they are being played in a moment, but before I go any further, I would like to firmly shoot the canard that has been repeatedly raised by the right hon. Member for Wokingham (John Redwood), who has intervened in this debate and others to talk about our energy system as if it were vulnerable because of the fact that the renewables we produce are somehow intermittent, so we need something else to back them up and the something else clearly cannot be renewable. He suggests that the way we are going is therefore inappropriate for our energy security. In fact, at its absolute bottom line, our energy security is best served by moving completely to a series of renewable arrangements as quickly as we can, because that will give us complete security of energy supply, complete security of energy operation and, indeed, complete security of customer prices for the long-term future. At the moment, prices are going through the roof, particularly as a result of international gas prices and, as right hon. and hon. Members have said, the obscene invasion of Ukraine by Vladimir Putin. That ought to be our watchword as far as our energy security is concerned.

In addition, our energy security should be bolstered by energy that we do not use. We could have a much more secure energy system if we used much less energy than we do at the moment. As the hon. Members for Weston-super-Mare (John Penrose) and for Wantage (David Johnston) said, the key is a substantial programme of energy efficiency for homes and offices, which it is estimated could result in the use of 25% to 30% less energy. Imagine the improvements to our energy security that such a reduction in our long-term energy use would produce! That programme could be started in the very short term.

I refute the idea that to enhance our energy security, we must enhance our production of gas, oil and other things. As the hon. Member for Bath (Wera Hobhouse) said, our energy security is tied up with getting to net zero. Not succeeding in that would be a great source of energy insecurity. Whatever short-term improvements might be made in gas supply, the idea that we should turn on new oil and gas to enhance energy security does not stack up as part of our overall path.

So to the canard. It is untrue—simply untrue—that the intermittency of some of our renewables is fatal to our energy security because of the inability to run a lights-on system, which is what we absolutely need. It is untrue because of our increasingly smart energy systems. Because of the way our current energy systems work, they waste a lot of renewable energy by constraining it. The introduction of batteries, inter-seasonal storage and the use of other existing storage such as pumped storage, which we have in substantial amounts, will back up the systems where production is intermittent. In addition, not all renewables are intermittent. Biomass and bioenergy with carbon capture and storage, which the Climate Change Committee is considering, would not be intermittent; nuclear is not intermittent. Nuclear is so unintermittent, actually, that it is not easily able to cope with the sort of system that we will have in the future, in the quantities that the Government are indicating.

One of the most important newer renewable technologies, which is not completely reliable over 24 hours but is completely predictable in terms of a number for the energy system, is tidal—both tidal range and tidal stream. Tidal power is completely predictable—the tide comes in, the tide goes out, and we know when it will happen. It is different in different parts of the country, so we can add different tidal elements in different parts of the country. It goes into the grid on a wholly reliable basis. One major criticism of the energy security strategy is that it does not take tidal technology much into account, which is a grave omission.

There are at least three wrong notes in the strategy: tidal; energy efficiency, which is it clear the Government are doing nothing much about, even though it is an urgent national priority to get energy efficiency measures seriously under way; and the reform of electricity market arrangements to create an electricity market that is fit for the sort of changes that we will undergo, particularly with renewables, which the hon. Member for Weston-super-Mare mentioned. REMA should be an absolute priority right now, but it appears that the Government are not taking it very seriously. They have one line, I think, in the energy security strategy, saying that they are consulting on REMA at some stage.

The sort of changes we must make are an absolute priority now—not least, as the hon. Member said, getting us off the gas standard as far as our energy prices are concerned. That can be done pretty quickly and would make an enormous difference to our energy prices and indeed our energy security. I am sure the hon. Member and I have different notions of how that might best be done, but I look forward to debating that when the energy security Bill is brought forward. If that is not in the Bill, I will try to put it there. I will be interested to hear what the Government have to say in response.

Generally, the energy security strategy contains many of the right notes, but they are being played in the wrong order. As Members have mentioned, we are still not taking onshore wind seriously, with substantial planning obstacles remaining. Unless we have the infrastructure in place, delivering 50 GW of offshore wind will remain a wish rather than a reality. We certainly must deliver hydrogen as soon as possible, but we still have not properly resolved the debate between blue and green hydrogen or on delivering green hydrogen in the best way for the future. Of course, we are also still a long way from getting a serious carbon capture and storage programme in operation. The hon. Member for Midlothian (Owen Thompson) failed to mention this entirely, but moving the Acorn project down the pecking order of industrial clusters could deal a real body blow to carbon capture and storage.

There is range of things in the energy security strategy that could lead to an enormous increase in this country’s energy security, but the strategy will probably not deliver because of what is omitted from its contents and because of the rather lackadaisical way in which the Government are pursuing a number of these imperatives through the strategy. My message to the Government is that they should include the notes they got wrong and play the notes they got right in the right order. If they do that, I think they will have a much better energy strategy. I look forward to debating how we can do that when the energy Bill comes before the House. Hopefully, we will end up with a much better energy security strategy as a result of getting that Bill into a good shape.

[Geraint Davies (in the Chair)]

Talking of renewables and Eric Morecambe, I call on the Minister to “Bring Me Sunshine”.

Draft Contracts for Difference (Allocation) and Electricity Market Reform (General) (Amendment) Regulations 2022

Alan Whitehead Excerpts

Tuesday 28th June 2022 General Committees

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

The CfD proposals are essentially non-controversial and in the main pretty straightforward and minor amendments to the CfD regime. As the Minister said, those changes will be of particular relevance to the forthcoming changes in the allocation rounds, which will transfer to an annual basis. The arrangements for applicants who are applying for favour under those particular rounds will change from a year’s duration to nine months, which will have a positive effect in making sure that those allocation rounds are carried out sensibly and reasonably. I am particularly pleased to see that change. Indeed, the Government have said that the arrangements that applicants make can be carried over to subsequent applications without being rewritten. That means that those who do not succeed in one particular allocation round are not faced with an onerous new series of actions in the forthcoming round.

I am not quite so taken with the other part of the regulations, which relates to the conditions under which floating wind must undertake supply chain plans to be eligible for the allocation rounds. I am sure that the Minister is absolutely on top of the fact that floating wind is largely new technology, which is making serious and considerable innovations and differences to the circumstances under which wind is deployed. The fixture is anchored rather than attached to the seabed and its technology is therefore available for application in much deeper sea areas, because it is not subject to the jacket and base that essentially applies to shallow seabed areas—essentially the case in most of the North sea.

The floating wind generation that is being developed for England and Wales will be largely sited in the Celtic sea, a predominantly deep-water area between Ireland, Wales, Devon and Cornwall and the west of England. The location of that generation is such that supply chains are not well developed. The back-up infrastructure for those developments is not well advanced, for example, in terms of the availability of ports for the development of the necessary infrastructure, given that the platforms on which floating wind installations are fixed are not easily imported from many other places. Those platforms will have to fabricated at port, and there are various issues relating to the cables and the lack the necessary infrastructure.

It is clear that floating wind generation is developing under circumstances where the supply chain is not favourable to its support. When an offshore development applies for inclusion in an allocation round, a threshold of 300 MW of generating capacity must be exceeded and that application must have a supply chain plan attached to it. Supply chain plans are quite onerous in terms of the considerations that must be met, but given that almost all current offshore generation is above 300 MW, that criterion is regarded as a matter of course. The size of those offshore projects enables those plans to be developed and there is a well-established supply chain for North sea generation. That is not the case for floating wind generation, but somewhat perversely the Government have decided that the threshold for such generation’s supply chain plans should be nil. Any future floating wind project—the Minister is aware that virtually none are up and running in the UK, but there are an encouraging number in the pipeline, particularly in the Celtic sea—will be under 300 MW and will have to develop in difficult circumstances, but will be expected to provide a full supply chain proposal as though they were akin to a large offshore wind proposal in the North sea. Contrary to the view that that policy enables the Government to develop supply chains on the back of a floating wind installation, I suggest that the current thinking impedes that development. The onus is on the floating wind projects to get the supply chain plans in place, but right now the onus should be on the Government to get those supply chains up and running in the Celtic sea. I am sure that the Government will address that.

We need to be clear that floating wind generation still has a way to go to getting itself established in the line-up of offshore wind generation. The Government have great ambitions, as set out in the energy security paper, to expand the capacity of floating wind generation rapidly—an increase from 1 GW, as cited in the 10-point plan, to 5 GW by 2030. By the way, the Crown Estate only seems to have an ambition to establish the equivalent of 4 GW of floating wind allocated sites by 2030, so perhaps the Minister should have a word with the Crown Estate so that its ambitions are aligned with the Government’s.

Overall, the problem remains that the imposition of a supply chain plan for offshore floating wind based on zero capacity rather than 300 MW seems a little discriminatory against that generation in comparison with the requirements placed on standard offshore wind generation. The Minister said that of the 41 responses to the consultation, most were largely in favour of the proposal to include floating offshore wind projects that fall under the 300 MW in the supply chain process. I have spoken to representatives of the floating wind industry and they were not in favour of the proposals; perhaps others were in favour because they were not affected by it in any way. I suspect that is why only a minority of responses to the consultation said that the 300 MW threshold reduction to zero was not a good idea. I understand, however, that the Department for Business, Energy and Industrial Strategy has considered those comments and undertaken to propose

“a bespoke, lighter touch questionnaire for the relevant FOW projects”.

The key question is what that questionnaire will look like, and whether it will effectively give the floating wind developers a much better environment under which to bring their proposals forward to the allocation rounds. I would appreciate a response from the Minister about his intentions for that questionnaire, and whether he believes that it will largely overcome the problems that I have outlined regarding the apparent onus on floating wind generation to carry the supply chains on its back in contrast to the arrangements that attach for more established offshore generation.

I am sure that the Minister would not like to be party to holding back the development of offshore floating wind generation, because I think we both share a great enthusiasm for the strong role that it could play in our future renewable arrangements, particularly given how it could reach certain offshore assets that other wind generation would be unlikely to harvest. I am sure that he would agree that devices that would impede such development, or look like they might, are not to be welcomed. I will be interested to hear the Minister’s justification for removing the 300 MW threshold from offshore floating wind projects, and his comments about the bespoke lighter touch questionnaire, and how its findings might ameliorate the problem I have set out.

--- Later in debate ---

[Greg Hands]

I thank the hon. Members for Southampton, Test and for Kilmarnock and Loudoun for their good, detailed questions and contributions.

I welcome the broad support of the hon. Member for Southampton, Test. It is worth noting that arrangements for one CfD application can be rolled over, but that does not obligate a supply chain plan to be unamended. Most would probably evolve their supply chain over the period, which is valid for nine months and not 12, to reflect the move to annual auctions. That will ensure that applicants reflect changes in their commercial arrangements, and seek to innovate year on year, and not simply roll over supply chain plans. Industry acknowledged that and were supportive of the Government’s proposals.

The hon. Gentleman asked why floating offshore wind generation has been brought into the supply chain process. I think that is incredibly important. It is a relatively nascent industry, and ensuring that there is a good supply chain right from the beginning, and doing what the Government can do to steer it in that direction, is really important. Contrary to the hon. Gentleman’s suggestion that perhaps we should adopt a laissez-faire approach, I think there is a good reason for Government to be there right at the beginning to make sure that there is a strong supply chain for the UK to cement its place as a world leader in floating offshore wind, as we have been a world leader in fixed-bottom offshore wind, with Europe’s largest installed capacity.

[Dr Whitehead]

For the sake of clarity, I certainly do not wish to propose a laissez-faire regime for floating offshore wind generation. I am not arguing that there should not be a good regime, but how that regime is brought in as that nascent industry develops. I certainly think it should be subject to either a reduced threshold or it should conform with the 300 MW. I would entirely support that, because supporting the supply chains as the industry develops is clearly a positive and good idea—as the hon. Member for Kilmarnock and Loudoun said.

[Greg Hands]

I am glad that we are in alignment on the need for supply chain plans. It is key to note that in its first phases, floating offshore wind will typically consist of significantly smaller projects. Therefore setting a different limit at which the supply chain must be submitted makes perfect sense if we are to capture floating offshore wind projects and make sure that there is taxpayer value for money. That is in all of our interests, not just the Government’s. We must make sure that we able to develop and cement our advantage in the UK. We have a fantastic technological advantage when it comes to wind. To start with, we have a fantastic geographic advantage, and making sure that we can cement our world leader position will depend upon making sure that there are good supply chains for those projects, which are necessarily smaller than fixed-bottom offshore projects. That is the reason for the different threshold.

Floating offshore wind is a technology on the verge of significant commercialisation and deployment within the next five years. Being at a key juncture in terms of its deployment means that certain emerging technologies, like floating offshore wind, have the potential to play a really important role in helping us to meet net zero. Bringing those projects into the supply chain process will allow BEIS to support the development of the associated supply chain at the earliest stage, by encouraging the industry to invest in competitive supply chains and accelerate cost reduction.

The hon. Member for Southampton, Test asked about engagement with the Crown Estate. I engage with it all the time, probably on a weekly or almost a fortnightly basis. I am happy to consider his specific point about the Celtic sea. That sea will be very important for us. At the moment, offshore wind has been a huge success for this country, but it has been predominantly an east coast and Irish sea phenomenon. It is very strong in Scotland, the north-east of England, Yorkshire, Humberside, East Anglia, the Irish sea, and north Wales gets a piece of the action. But the developments in the Celtic sea enable us to bring extra places around the United Kingdom, most importantly south Wales and the west country of England, into the offshore wind industry. Our position as the world leader, and as Europe’s largest installed capacity for offshore wind, is one of this country’s really great success stories of the past 10 years. To bring the Celtic sea into that development will help to level up and make this an all-UK effort.

Low-carbon Off-gas Grid Heating

Alan Whitehead Excerpts

Thursday 16th June 2022 Westminster Hall

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

This has been a good debate about a very troubled subject. I congratulate the right hon. Member for Clwyd West (Mr Jones) on securing the debate and putting forward comprehensively just what trouble we are in as far as off-grid properties and decarbonisation are concerned. We heard very thoughtful contributions from the hon. Members for Ceredigion (Ben Lake), for Buckingham (Greg Smith) and for Strangford (Jim Shannon); the latter is something of a fixture in these debates but always has something relevant and useful to say, whatever the subject. We also heard a thoughtful contribution from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who was supposed to be summing up the thoughtful contributions of everyone else, but made one himself.

This is a really thorny subject, because the imperative of decarbonisation heavily hits off-grid housing and businesses. There are, as hon. Members have mentioned, a surprisingly high number of properties in England, Wales and Scotland that are off-grid. I think it is about 1.1 million houses in England, 230,000 in Wales and 550,000 in Scotland. Put together, that is a very large number of homes. Not only do they often have different characteristics from the mass of on-grid housing in urban areas, but they also have limited choices for decarbonisation.

I only have the figures for the split of fuel for properties in England, but we can see straightaway that people are at present heating their homes with arrangements that are as heavily carbonised as they could be: 78% in England are heating with oil, 13% with LPG—slightly less polluting, but still pretty high-carbon—and 9% still with coal. It is imperative that we get all those properties off high-carbon heating arrangements and on to low-carbon heating arrangements as soon as possible.

Far more off-grid homes are poorly insulated and of a lower standard assessment procedure rating than their urban comparators. They are generally larger and more free-standing than properties in urban areas. Therefore, in the solutions we put forward to decarbonise them, we must take account of those issues, particularly so that we can get the energy efficiency quality of those homes up to the standard where they can take those low-carbon arrangements.

Off-grid properties do not have the same range of longer-term choices available to them. We cannot decide that all the off-grid properties will go on to hydrogen, because we cannot get hydrogen to the off-grid properties. We cannot go for district heating solutions with off-grid properties, because they are generally in too sparse a layout to make district heating efficient or feasible. There is a narrow range of choices for off-grid homes.

I would not be in favour of taking a break in our plans to move to low carbon, as the right hon. Member for Clwyd West suggested this afternoon, to get our choices right. The replacement turnaround time for the types of heating in those off-grid properties—the boilers and other apparatus—is about 15 years. That is slightly longer than for boilers in urban properties, because oil-fired arrangements and so on are often set out differently. If we take that normal replacement turnaround time, and we pretty much start now with replacing those boilers with low-carbon alternatives as they come up for replacement, the cycle will have been completed by the early 2040s. That is within the 2050 target for low-carbon replacements. If we put our plans off, we simply would not replace the boilers as quickly as otherwise. That suggestion assumes that we are being very careful to undertake the replacements with the active will and participation of the people who live in those homes, as the right hon. Member for Clwyd West enjoined us to do—that we are not marching in and ripping boilers out, and demanding they do things on the spot, whether or not their arrangements are obsolete and whether or not they can afford the changes.

I have considerable sympathy for the Government’s problem of how to go about decarbonising the sector. The Government have chosen, in the first instance, to go for a heat-pump-first solution—to prioritise heat pumps as the replacement arrangements in those homes. As hon. Members have pointed out, heat pumps do not always work in those homes, and they certainly do not work unless the energy efficiency is substantially upgraded. Given the homes we have in that group, heat pumps might require a whole-house refit, including the gauge of pipes and various other things related to the central heating, in order to work as well as they should. The cost of the heat pump is therefore not the only cost for those off-grid homes. Quite a lot of other work is also required.

I think we can question whether heat-pump-first is the right way to go about this plan. It is not that they should not be a substantial part of the process but, as has been said, a number of other options are available that ought to and could be considered alongside heat pump installation. We might undertake a more horses-for-courses arrangement, because of the variety of off-grid homes that we need to decarbonise.

I am sorry to say that such an approach was not apparent in the consultation that closed just recently, “Phasing out of the installation of fossil fuel heating in homes off the gas grid”. I hope right hon. and hon. Members all got their submissions in; if they did not, it is a bit late now, but never mind—we are making up for it this afternoon.

The consultation missed out on providing a realistic appraisal of what alternatives to heat pumps there might be for off-grid homes. The consultation mentioned some, but merely said it would look at and appraise them and possibly consult at a later date. That is not the way to go about it—we our ducks in a row before we start consulting about what we will do on alternatives to high-carbon heating in homes.

As right hon. and hon. Members have mentioned, the alternatives are several. Some are very promising, some less so. Certainly, as the hon. Member for Buckingham mentioned, hybrid heat pumps—I have been to see a couple in operation in south Wales—do a very good job of arranging for the boiler to continue to operate, but as an auxiliary to other kinds of heating, which was an air source heat pump in this instance. The pumps do that in such a way that completely redoing the central heating, and so on, in the home is not required. The house can work very well with a combination of technologies working together effectively to decarbonise the heat in the home.

Biomass pellet boilers certainly can be considered in homes, as indeed can renewable LPG. As hon. Members have mentioned, LPG is a drop-in fuel that can be put straight into systems—more or less, but not quite—as they stand. The issue with renewable LPG is whether we can get enough of it to work well in systems if we use it on a widespread basis, because it is a particular by-product of other processes that are limited in total size.

The Government also ought to be considering, just as they should with hydrogen, the best uses for the alternative fuels. For example, what are the lowest-carbon uses for LPG or hydrogen? Do we put all our hydrogen into heating homes, transport and logistics, decarbonising heavy industry, or whatever? The Government must make that choice in terms of the priorities they put forward for those different forms of low-carbon fuels, and bioLPG is certainly one of them.

I would criticise the Government not on their timescale or their ambition to decarbonise the off-grid area, but on the fact that they have not looked properly at the options that could be available to decarbonise those off-grid properties in the most efficient way. The Government will have to work on rectifying that if they are to get public backing for that decarbonisation over the next period. That is essential in getting not only off-grid properties decarbonised efficiently but, in general, our homes heated in a low-carbon way. Certainly, if the wider debate ends up with people marching down the street protesting that the Government are ripping out their boilers in an assault on their liberties—because they do not have a decent option to decarbonise by consent —then we will not have achieved our objectives at all.

In the debate on energy prices, as hon. Members have mentioned, we ought to recognise that off-grid properties are suffering far worse than on-grid properties from the energy price crisis. First, the average bill for an off-grid property tends to be higher, but also the fuels used for off-grid properties are not subject to the price cap. Off-grid fuel price rises have far outstripped those for on-grid customers. That, I think, is something that the Government ought to take account of in their approach towards underwriting and assisting those properties with their energy costs in future.

The issue is not strictly the subject of today’s discussion but clearly comes into how we ensure that the public are properly behind the decarbonisation of their properties across the board, and particularly in off-grid areas. I do not envy the Minister the task of getting that right, and I know that it is a real knotty problem, but I am sure that he will be able to provide us with some good pointers to ensure that we decarbonise our off-grid properties in the most efficient way that we can, and with the most public support that we can get.

--- Later in debate ---

[Greg Hands]

Insulation is only one part of the picture when it comes to energy efficiency. I am delighted that the hon. Gentleman has recognised, and reminded us all, that energy is reserved to the UK Government. That is always refreshing to hear. I keep telling people in Scotland, “Thank God it is reserved, so that we don’t have to embark on the anti-nuclear policies of the SNP, or the anti-oil and gas sector policies,” even though the main emphasis of the oil and gas sector is indeed in Scotland.

On the regulator of the gas grid, as I have said, the CMA can intervene. Gas and electricity markets are considered natural monopolies when it comes to the grid. They are characterised by high fixed costs and start-up costs. For those reasons, these markets fall under the remit of Ofgem regulation. The heating oil market—

[Dr Whitehead]

On the subject of support for these measures, the Minister does not appear to have spent any time talking about what support there might be for heat pumps. I am sure that the right hon. Member for Clwyd West (Mr Jones) would be interested to know how the support that has been put forward so far— 90,000 heat pumps installed up to 2025 under the boiler upgrade scheme—relates to the turnover of boilers in off-grid properties. Replacing all of those with heat pumps would take up the entire support scheme for heat pumps in one go, when that support is supposed to be for the whole United Kingdom. By the way, the target of installing 600,000 heat pumps by 2028 will clearly fail miserably.

[Greg Hands]

The hon. Gentleman raises a good question. It is born out of a common misconception, particularly in the Labour party, of what the boiler upgrade scheme is all about. He is expecting—maybe because that is ingrained in the Labour party—that it is the role of the Government to come by and install a new heat pump for everybody across the country. That is not the role of the Government. The role of the Government here is to help stimulate the market and ensure that the private sector makes the adjustment and provides the heat pumps. That is what it is about—not dividing up a £450 million boiler upgrade scheme by the number of people in Britain and working out that it is not enough money for every person to get a new heat pump.

The idea is to provide enough stimulus to the market so that it responds, and also to go with the grain of human nature; the phase-out date is 2035, because people’s gas boilers will naturally come up for renewal in the course of the next 12 years, and during those 12 years, they will be incentivised to purchase a heat pump, rather than a replacement gas boiler. The idea is to stimulate the market. I remember the response of the market when we announced the heat and buildings strategy. I clearly remember Octopus Energy saying that the grant should quite soon enable the cost of a heat pump to be comparable to that of a gas boiler, and to become competitive over the lifetime of that installation.

[Dr Whitehead]

Will the Minister give way?

[Greg Hands]

I need to leave a few minutes for my right hon. Friend the Member for Clwyd West to respond, so I will not take a further intervention.

The basis behind the boiler upgrade scheme is not to provide everybody with a new heat pump. The idea is for the Government to prime the private sector to be able to do exactly that. The hon. Member for Southampton, Test says that heat pumps do not always work, but they frequently do. They are the only proven, scalable technology to decarbonise heating, although there might be hydrogen and other technology developments in the future. As I have said, Sweden and Norway have done this at scale. We will ensure that heat pumps can only be installed on suitable properties, and that there is a greater degree of choice for less suitable properties.

The hon. Member for Southampton, Test said that off-grid properties are suffering more from the current price rises. If he is saying that off-grid properties are facing a bigger increase in their energy costs than on-grid properties, I invite him to send me some firm evidence of that.

To conclude, I reiterate that decarbonising buildings off the gas grid will be key to delivering on Government priorities. It will protect rural consumers and businesses from high and volatile energy costs, and further strengthen our energy independence. We are taking action, and will continue to act to ensure the transition is smooth, fair and affordable for off-grid households, and rural customers and businesses.

Draft Warm Home Discount (England and Wales) Regulations 2022

Alan Whitehead Excerpts

Wednesday 15th June 2022 General Committees

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

It is a pleasure to serve under your chairmanship this afternoon, Mr Efford. I thank the Minister for his elucidation of the draft regulations before us. He is quite right that the warm home discount is a crucial support for people under the present circumstances, particularly people in fuel poverty, of which there has been a huge increase as a result of the sky-high energy prices we are suffering.

The warm home discount has been a very important scheme in the past; with this change, it remains an important scheme for the future. For that reason, we do not intend to push for a Division this afternoon, not least because we want this scheme to go ahead as soon as possible, so that we can get money out to people who need it the most.

I do not have any in-principle criticisms of the warm home discount to put to the Minister, but I do have a number of detailed points that I hope he will respond to. They relate to some of the details of how the new scheme is going to work. It is a substantially new scheme. Although it is a rollover of the warm home discount from 2011 onwards, there are a number of new features to this scheme that, as the Minister has set out, look to add a number of groups of individuals who previously would not have got the warm home discount. They will now receive it and, most importantly, will do so automatically, without having to apply for it.

The Opposition would have liked to see group 2 of the warm home discount expanded further. One could have a debate another day about exactly how far that expansion might go. I hope the Minister will keep the wider groups that could benefit from the warm home discount under review, but we are where we are as far as this particular piece of legislation is concerned, so that is what I will confine my remarks to this afternoon. Core group 2, to which the Minister referred, will replace the previous broader group who had to apply for the warm home discount. Crucial to this piece of legislation is the placing of the automatic award on the basis of understanding the circumstances being experienced by members of that group. There are, however, some concerns about how fair the arrangement for getting the automatic discount into people’s hands actually is.

The Government will decide what high energy usage—one of the criteria for core group 2—consists of, and they say they will look at the physical characteristics of houses and the correlation of those houses to low income. That will be core group 2, but a number of other people will most certainly still be in fuel poverty, particularly those in rented accommodation. They will be on low incomes and possibly have a disputed level of energy use—because that can be an inexact science on occasions—yet they will not be receiving the benefits that automatically give access to the award. More than 50% of fuel-poor households probably do not have such benefits, so the extent to which the provision will get hold of fuel-poor households for core group 2 is a matter of some question. Indeed, given how the legislation is set up, if a household is not selected as part of core group 2, but should have been, that will be difficult to contest. Does the Minister wish to comment on making it easier to get into that core group 2 for people who think they should be in it but are not?

[Kevin Brennan (Cardiff West) (Lab)]

On core group 2, the impact assessment suggests that, overall, the increase in the amount of money that will be spent on the policy will go up by about 6.7% over the period in question, but the amount allocated to core group 2 will be only 3.1%. That particular group’s allocation within the policy, over a period of time when we know that energy prices are rising sharply and inflation is high, is lower than the overall policy spend. Does that emphasise the point my hon. Friend is making?

[Dr Whitehead]

My hon. Friend’s intervention emphasises my point. It also emphasises the danger of the scheme itself being price capped, and of the criteria for high energy use and how they relate to the physical characteristics of the low-income home being tweaked to fit in with the ceiling figures that my hon. Friend mentioned. I am sure the Minister will want to assure us that that will not be the case for how core group 2 develops.

We have other concerns with the detail of this instrument. When there is an issue with an energy company that is supplying a household—if that energy company goes into administration or disappears off the face of the earth entirely—the supplier of last resort who takes over from that energy company should take on the full obligation of the failed supplier. The Department has still not put into place an actual obligation for it to do so in this iteration of warm home discount guarantees and in the legislation.

It may be that the Minister considers that so many smaller energy companies have gone bust already that there is no need to have that obligation, because there are not many more that can go bust. I think we ought to keep a close eye on whether energy companies are either refusing or dodging the consideration that they should take on the full obligation, exactly as it was in respect of the energy company that the person was with before the change to supplier of last resort took place.

I am happy that the draft regulations include a reduction in the threshold that obliges energy companies to be involved. The Minister will know that there were a number of occasions on which switching resulted in someone thinking they were getting a warm home discount but not getting one because of the size of the customer base of the company they were switching to. That will be substantially resolved by the reduction of the number in the obligation threshold. It is tapered over years, so it goes down toward zero. That does not itself solve the problem of the supplier of last resort and the obligations that come from it. I hope the Minister can have a look at that for the future.

An overall point I would like to make about the terrain within which this change is being made is that it really is not strictly correct to claim—I am afraid the Minister is prone to doing so—that the money spent on this scheme, both historically and now, is somehow money that has come from Government. It does not come from Government. There is an obligation on energy companies to provide warm home discounts and then retrieve the money they have spent on those discounts from other customers. This particular iteration of the warm home discount is no different in that respect. It expands the total envelope available to £475 million, with a four-year extension, and it increases the payment by £10 to £150 a year. That extension will be recovered by the energy companies from customers, and in some instances they will actually be taking money back from people who receive the warm home discount so that they can give the discount in the first place.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

Forgive me if I have misunderstood, but the hon. Gentleman seems to be making the point that the money for the warm home discount will be coming back from customers and not from Government. Surely if the Government were to give out that money directly, it would have also come from those customers through taxation?

[Dr Whitehead]

Yes, that is indeed an alternative. That money could come from general taxation, as it does in some of the Government’s recent schemes—the boiler upgrade scheme, for example, is Exchequer funded. The money would come out of general taxation, but that is a very different issue from customer bills at the moment. Arguably, it is much more equitable in terms of the effect it would have on customer bills.

I am concerned about the extent to which a lot of Government schemes, such as the green gas grant and so on, are effectively funded by levies. Those levies go on customer bills. In this instance, according to the impact assessment, the measures we are debating will likely pass on to customers an increase from the £14 under the previous warm home discount scheme to about £19 for a dual-fuel account. That is no mean increase.

In the impact assessment, the Government estimate the increase of £5 a year in the average energy bill and state:

“However, given other price protection in place, including the energy price cap, the Government believes this is appropriate for providing help to an additional 750,000 households in or at risk of fuel poverty.”

The Government think it is fine to do that. However, that £5, therefore, together with probably £90 to come from the socialisation of suppliers of last resort and with a number of levies from other people, will be included in the price cap. As the price cap goes up next year, it will take account of the fact that about £100 of the increase is now on socialisation of the expenses to be incurred by energy companies, which have been taken account of by Ofgem in order to bring the price cap into place. That will add substantially to bills at a time when the last thing we should be doing is adding anything more to customer bills in general, given the desperate circumstances we are in.

I would advocate placing the increase into the same regime as that for the boiler upgrade scheme, putting it in as Exchequer funding. That has to be paid for, but it will be by a different and wider group of people, not by individual customer accounts as they come through.

[Kevin Brennan]

An alternative would be to pay for a scheme of this kind through progressive taxation, spreading the burden more fairly towards those who can afford to pay. In the Government’s own assumptions in their impact assessment, is it not the case that the impact will be to reduce energy usage by many of the customers whose bills increase? Therefore, those who do not qualify for the warm home discount and are just above that level might also find themselves in difficulty when heating their homes and running their appliances.

[Dr Whitehead]

Indeed. It will be precisely the households that are in considerable difficulty and just outside the scope of this measure, expanded though it is. They will be coughing up to sort out the people who are within the band and, in so doing, ironically, might put themselves in fuel poverty as a result of contributing in that way.

The time is right for a review of not just the arrangements for energy initiatives, but whether the principle of levies to support such an arrangement ought to be put aside, at least for the time being. I note that in 2016 the Minister’s Government said that there would be no new levies until 2025. However, the Government have substantially moved away from that. I am not saying that we should not press ahead with the measures; I am saying that we should expand them if necessary, but that they should be funded by progressive general taxation, so that those who are able to afford them more contribute, and that those who are able to afford it less are protected from the consequences of the socialisation of the arrangements, as we have seen this afternoon.

I hope that my comments will be regarded as constructive in consideration of the legislation, but that the Minister will take good note of my questions and thoughts to guide the policy as it goes through, so that we will be able to reflect shortly that this is a fair, expanded policy that hits fuel poverty in the way that we hope it will.

--- Later in debate ---

[Greg Hands]

We may just disagree on rounding. It would not be the first time that 2.8 has been rounded up to being around 3. We can agree to differ. My point is that there are not 200,000 missing people; there are 600,000 extra people.

[Dr Whitehead]

Could we not say 3.2 million and round it down to 3 million?

[Greg Hands]

Again, I will return to my point. If the hon. Gentleman wants to make a proposal on behalf of the Labour party on how to restructure the warm home discount and how it should be paid for, I am all ears.

The extra number of households is actually leading, per constituency, to a much more considerable sum than the hon. Gentleman was suggesting. The amount of money going into the scheme means that our constituents are benefiting from a considerable increase in the amount of money coming into our constituencies—not a reduction, as he claimed. On the 3 million against the 2.8 million, I have just been reminded that it is not so much about rounding. The differences is about Scotland, because a different scheme will be announced for Scotland. The Scotland scheme will also reach around 200,000 households. That accounts for the difference.

While energy efficiency measures provide long-term assistance in reducing energy bills, there remains a clear need for direct financial support now. This scheme will ensure that 2.8 million households in England and Wales receive a rebate off their energy bill each winter until 2026 at least. The Government remain committed to helping low-income and vulnerable households to heat their homes over the winter. This is largest expansion of the scheme since it began in 2011. In 2021-22, the spending envelope was worth £354 million across Great Britain. In 2022-23, that is rising to £523 million. The expansion of the scheme will mean that around a third more households—not fewer, as the hon. Member for Cardiff West was claiming—will receive a rebate each year. These ambitious reforms to better target households in fuel poverty. The reforms enable the Government and energy suppliers to provide the support automatically and focus the support—the increased support—to those most in the need.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Warm Home Discount (England and Wales) Regulations 2022.

Future Hydrogen Economy

Alan Whitehead Excerpts

Tuesday 14th June 2022 Westminster Hall

[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.

[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.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 7th June 2022 Commons Chamber

[Mr Speaker]

I call the shadow Minister, Dr Alan Whitehead.

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

It would be really nice if the Secretary of State told us when the ECO4 legislation is coming, because ECO4 is not going to work unless that legislation comes forward.

The Secretary of State knows that the new price cap and the increase in customer bills will have a devastating impact on customers’ struggle with the cost of living, so why is his Department directly contributing to the sky-high price cap levels by putting into place new customer levies—such as the socialisation of the costs of failed energy companies, the green gas levy and the nuclear regulated asset base levy—that will add perhaps £100 to the upcoming and future price cap levels, and hence to customer bills? The Secretary of State talks of Government assistance to help customers to cope with their bills, but is it not very much about giving with one hand and taking back with the other? Should customers not be angry at this cynical policy?

[Kwasi Kwarteng]

There is no reason to be angry about the support, because the £37 billion of support is very real. On the supplier of last resort, the hon. Gentleman will know that 26 firms had to leave the market as a consequence of sky-high wholesale prices, and all the SOLR levy does is socialise those costs within the industry. It was a necessary device to make sure that customers can ease on to other providers without interruption.