Long-duration Energy Storage (Science and Technology Committee Report)

Baroness Gustafsson Excerpts

Thursday 9th January 2025 Lords Chamber

[The Minister of State, Department for Business and Trade and Treasury (Baroness Gustafsson) (Lab) (Maiden Speech)]

My Lords, I am very grateful to the noble Baroness, Lady Brown, for initiating this debate, and I thank both her and the members of the Science and Technology Committee for their work. It is a privilege to respond on behalf of the Government in my maiden speech to the House. Before I address the points raised, allow me a few moments to introduce myself and share the passion that drives me in this role, along with the profound sense of responsibility that I feel in undertaking it. Noble Lords can watch me as I tackle the butterflies that the noble Baroness, Lady Lane-Fox, referred to earlier.

I come to this Chamber via a route that probably differs from that of a typical Government Minister—and I am not just talking about the fact that I keep getting lost in the long winding corridors of this very beautiful building. My career to date has been spent at the sharp end of innovation, which, as I have learned, is both a gift and a challenge. It is a duality that is particularly clear in the world of cybersecurity, where attackers and defenders are fighting for dominance in ever-shifting digital landscapes.

I began my career as a mathematician, drawn to the precision and clarity of numbers. Mathematics offers a comforting world of absolutes: zeroes and ones, truths and proofs, which are the binary building blocks of certainty. But life is rarely so straightforward. Just as mathematics moves from neat formulas to complex algorithms, life reveals shades and uncertainties. My path led me from the abstract elegance of equations through training in accountancy and working in venture capital to the dynamic and unpredictable world of technology. As the co-founder and former CEO of Darktrace, I had the privilege of witnessing first hand the daily progress that technology can make.

Working in innovation is exhilarating and, at times, exhausting. It is a constant project—innovate, or be out-innovated. It is like running along a beautiful mountain path: around the next corner could be the most beautiful view that takes your breath away, but the next runner could be right behind you. Stop for even a moment, and you might just find yourself caught. It is ambition and a quiet confidence that keep us running and protect us from complacency.

This Government are not short of ambition. The UK’s goal to become a green energy superpower by 2030 is what drew me to this role, and there is no better place to build an ambitious company than the United Kingdom. We have the lowest corporation tax in the G7; some of the most competitive R&D tax incentives in the world; world-class universities; and forward-thinking policies. We must celebrate what we do well. The UK is a global leader in technology and innovation, with a tech ecosystem worth over $1 trillion. We are rightly proud of the companies that have been built here and of the talent that continues to drive our success.

As I turn my focus to energy, I am inspired by that same sense of ambition. Energy is the lifeblood of progress, and the challenges that we face—achieving net zero, securing supply and driving innovation—demand bold thinking and confidence in our ability to lead, innovate and turn challenges into opportunities. Just as innovation must balance opportunity with risk, so too must our energy policies balance sustainability with security, and ambition with pragmatism. I look forward to contributing to these debates with the same spirit that has defined my career: one of ambition, collaboration and an unshakeable belief in the potential of this country.

I extend my thanks to colleagues across the House who have welcomed me so warmly and shared their thoughts and insights into parliamentary and ministerial life, particularly to my two supporters, the noble Lord, Lord Vallance, and the noble Baroness, Lady Lane-Fox, and to my two predecessors as Minister for Investment, the noble Lords, Lord Grimstone and Lord Johnson. I also thank the staff of the House, Black Rod and her staff, the doorkeepers and clerks, and those who have kindly pointed me in the right direction when I have been going the wrong way down those winding corridors. I thank noble Lords for this opportunity to serve, and I look forward to working with them to achieve great things.

Today, noble Lords have offered their thoughts on this and the report from the Science and Technology Committee. I want to reflect on these contributions now and respond to as many of the points as I can. First, on progress made on hydrogen, the noble Baroness, Lady Brown, and the noble Viscount, Lord Stansgate, asked what progress the UK has made on long-duration storage since the publication of the report by the Science and Technology Committee back in May. The answer is: a great deal. In the Government’s procurement of hydrogen infrastructure, we have published an early market engagement notice. What does that mean? Well, it allows developers to register their interest early and start planning ahead. We recognise that these projects will be vital, and we are going to need colossal amounts of hydrogen storage. That is why we have already started engaging with a range of potential suppliers in the hydrogen storage market, which is the right approach to take. In addition, government recognises the value of strategic energy reserves as a source of energy resilience and security of supply, balancing system flexibility, particularly during periods of energy supply shortage—Dunkelflaute periods, as the noble Baroness and other noble Lords have noted. Government will continue to explore options around the role that storage can play, including providing strategic energy reserves in supporting future energy system resilience in a changing energy landscape.

I move on to progress made on electricity, which the noble Lords, Lord Lilley and Lord Moynihan, asked about. Of course, in the committee’s report and today’s debate, we have seen a lot of discussion about long-duration electricity storage specifically. Here again, I believe the Government are making real progress. In October last year, we announced the long-duration electricity storage support scheme, which will be delivered by Ofgem. The next steps are as follows: a technical decision document will be published next month with the final design details of the scheme. Applications will then open in the second quarter of this year. After that, we expect the first agreements under the cap and floor scheme to be agreed early next year.

It is important to stress that this scheme is tech neutral. What does that mean? It means, basically, that any technology that meets the definition of long-duration storage with electricity in and electricity out can be part of an application. These applications have to show that the technology would not be built without the cap and floor scheme, which is the additionality principle. For example, longer-duration lithium-ion batteries and closed-loop hydrogen-to-power systems may be eligible, as would traditional technology such as pumped storage hydro, liquid and compressed air, and flow batteries, but to get approved, all applications need to prove that they represent the best deal for consumers.

Some noble Lords raised the subject of costs to consumers. This scheme works on an insurance-type model, unlocking investment in these assets without upfront subsidy. A very similar approach has been used for electricity interconnectors; these have delivered about 10 gigawatts of capacity without a single penny of taxpayer subsidy. That is enough to power about 750,000 homes, and revenue was actually returned to consumers via the cap, so this really can be a model for success. However, I am keen to stress to noble Lords that neither the Government nor industry are waiting for the cap and floor scheme to be rolled out before making headway in this area. There is already significant development under way in anticipation of the cap and floor scheme. SSE, for example, has completed its exploratory tunnelling on the Coire Glas pumped storage hydro project in northern Scotland, ensuring that it is ready to seize the potential for future growth. Meanwhile, Highview Power has reached a £300 million final investment decision on a brand new liquid air energy storage site near Carrington; it is a major step forward in both the company’s and our country’s journey to net zero.

To specifically address curtailment costs, raised by the noble Baroness, Lady Brown, beyond storage, a key priority for the Government is to accelerate the building of electricity network infrastructure to increase capacity on the network and reduce constraints. This will also ensure new sources of low-cost, homegrown and clean generation that can connect to the grid. We are working with Ofgem, the National Energy System Operator and the transmission owners to break down the barriers to this. The work includes reforms to the planning system, unlocking supply chains and mobilising the investment required via the upcoming transmission price controls.

A number of noble Lords, particularly the noble Baronesses, Lady Neville-Jones and Lady Lane-Fox, and the noble Lords, Lord Drayson and Lord Wei, spoke about electrolyser supply chains and wider support for green energy. We are building on the momentum we have already generated, ensuring that the right financial tools and support are there for those businesses that are leading the UK’s charge towards becoming a clean energy superpower. Our new national wealth fund and the creation of Great British Energy ensure that tens of billions of pounds of investment are there to support clean energy supply chains. This builds on the achievements we have already seen in the industry.

Take green hydrogen equipment suppliers: they doubled the number of electrolysers produced in 2023 compared with 2022, which is extraordinary growth in this part of the market. ITM Power’s gigafactory in Sheffield boasts one of the largest electrolyser factories in the world, with massive levels of capacity, and certainly enough to produce low-carbon hydrogen for use across the economy. It is fair to say that UK hydrogen companies have some of the best fuel cell, hydrogen production and material technologies going. I want them to retain that competitive advantage.

As noble Lords know, we have identified clean energy as one of the key growth-driving sectors in our industrial strategy. We want to channel investment into these sectors so that the UK remains ahead of the pack when it comes to the development and deployment of green energy. We have already taken action to inject some much-needed agility into our planning system. Our planning and infrastructure Bill is set to speed up the process for the delivery of major infrastructure projects. At the same time, the Department for Energy Security and Net Zero is running a pilot hydrogen planning unit programme. It has been charged with upskilling planners working in councils on hydrogen. We want them to feel confident in taking decisions on hydrogen planning applications, and, with support from central government, they will be.

DESNZ is also in the process of drafting planning guidance for industry to support projects going through the planning process. That is because we know that clear regulatory guidance will be a game-changer in helping get novel hydrogen projects off the ground. It will help build even more confidence and investment into UK hydrogen development.

Let me turn my attention to progress with the National Energy System Operator and the strategic spatial energy plan, which my noble friend Lady Young, among others, asked about. One of the report’s recommendations, which we have already discussed today, is the establishment of the National Energy System Operator. As noble Lords will know, this was formerly known as the future system operator. The Government’s position is this: we believe that the National Energy System Operator is perfectly placed to help different parts of our energy system work in harmony. It can act as that whole energy system planner.

We formally launched NESO in October last year. Working alongside the Scottish and Welsh Governments, we commissioned it to develop a strategic spatial energy plan. This is really exciting. It is the first ever spatial energy plan for Great Britain. It means a hands-on, planned approach to energy infrastructure across land and sea. It builds on the independent advice provided by NESO on how to deliver clean power by 2030. This plan will cover energy and hydrogen. It will identify super cost-effective locations for hydrogen production, transport and storage, working in tandem with electricity network development. The committee’s LDES report called for more details on how the National Energy System Operator will produce this plan. We are now consulting on the methodology and will provide further details shortly.

My friends, the noble Baroness, Lady Brown, and the noble Lord, Lord Whitty, asked about government ambitions for hydrogen energy storage development and what the future holds. The point raised by noble Lords in this debate was about the Government’s long-term commitment to hydrogen transport and storage, alongside the setting of capacity targets. Our position is clear: we will design business models for hydrogen transport and storage. We are delivering on that commitment, ensuring that the support is there for both, while maintaining a rigorous and fair assessment process.

As noble Lords will be aware, we want to see this next generation of infrastructure being delivered by 2030. As further evidence on hydrogen production and demand emerges, we will have more details about how our needs for infrastructure will guide business models in the future.

The noble Baroness, Lady Neuberger, and the noble Viscount, Lord Stansgate, raised questions about the public perception of the health and safety of some of these ideas. I want to touch on another issue that the Science and Technology Committee has acknowledged, which is the public perception. Although there is no evidence that hydrogen is unsafe, I am aware that the committee has challenged the Government to up our game in building public support for the technology. Here we are taking a common-sense approach. Safety obviously has to be our number one priority. We have a proud record on the safe production, transportation, storage and use of hydrogen. Projects developed by UK firms such as Bramble Energy, Ceres Power and ITM Power have helped establish us at the forefront of the global shift to hydrogen.

We want to maintain that reputation, and we recognise that health and safety regulation will be key to that. On this point, the Department for Energy Security and Net Zero is working in tandem with the Health and Safety Executive. The HSE in turn is making sure that the right regulations are there to help, rather than hinder, the safe adoption of net-zero technologies, including hydrogen. It is taking into account all the potential risks for those who build, operate and maintain hydrogen facilities.

Allow me to comment further on carbon capture and storage. The noble Baroness, Lady Neuberger, in particular, addressed this. This relates to some of the points also made by the noble Baroness, Lady Brown, on ensuring that we have sufficient transport and storage infrastructure for carbon capture, usage and storage, and our planned use of gas post 2030. Last year the Government reached commercial agreement with the private sector and announced up to £21.7 billion of available funding over 25 years to launch the UK’s new carbon capture, usage and storage industry.

In December, contracts were signed with Net Zero Teesside, the world’s first at-scale gas power plant with carbon capture, supplying up to 1 million homes with low-carbon secure power from 2028. Combined with the Northern Endurance Partnership, the supporting CO₂ transport and storage project, the East Coast Cluster will capture and store carbon emissions from the region.

In addition to the East Coast Cluster and the HyNet cluster, the UK has an exciting pipeline of further CCUS clusters at a mature stage of development. These include Acorn in north-east Scotland and Viking in the Humber, which contain power CCUS projects at the heart of their plans. The gas system will continue to play an important role as we decarbonise, but the amount of gas that we use must decline, and the way we use gas must change in order to reduce our reliance on fossil fuels and achieve clean power by 2030, accelerating to net zero by 2050. As we do so, we are working across government and industry to better understand the future of the gas system through various credible scenarios, identifying key challenges and opportunities along the way.

I am conscious that there are some points I have not yet addressed, particularly those raised by the noble Viscount, Lord Stansgate, and I will make sure we write to him in detail on all the points raised. I will endeavour to include the word “Dunkelflaute”, which is clearly the word of the debate.

Let me turn to the phrase of the debate—“Get on with it”—and, in that spirit, allow me quickly to conclude. A huge amount of work has been under way to support long-term energy storage, whether that is investment, skills, health and safety, or the cap and floor scheme that we generated with Ofgem. The continued support and scrutiny of the Science and Technology Committee are vital in holding the Government’s feet to the fire for the scale and pace of our delivery. But the Government are not doing it alone. We are working with industry across the clean energy sector to ensure that the UK remains a world leader in this space. We are taking action to push forward long-duration energy storage in the UK as part of our pursuit of net zero and our ambition to become a clean energy superpower by 2030.

The Government are looking forward to working with noble Lords in delivering on that pledge, and I am looking forward to working with them too. Together, we will realise a cleaner, greener future.