Energy Bill [HL]

Debate between Baroness Sheehan and Lord Teverson

Report stage
Tuesday 28th March 2023 Lords Chamber

[Lord Teverson (LD)]

My Lords, the intention of my amendment is quite stark and seeks to take out those provisions which allow the so-called hydrogen village experiments to take place. Why? Primarily to save British taxpayers a huge amount of money on something which is clearly, as one would colloquially say, a white elephant. Even if we had the trials—which I suspect might not happen anyway for various reasons—the lessons from those would show us that this should not be rolled out.

In order to have clean hydrogen, it has to be produced by electrolysis. There are other ways of producing hydrogen, as we know, and there are all the different colours, but at the end of the day we have to use electrolysis in the long term to produce hydrogen that is seen as a renewable fuel. The cost of that hydrogen is estimated by scientists to be something like five times the cost of the electricity used to generate an equivalent amount of heat through an efficient heat pump—it is five times more expensive. Even if we talk about economies of scale, there is no way that that cost is going to come down; in fact, it would come down only in relation to the cost of renewable electricity itself, which is its source of energy.

I suggest that we scrap this plan because clearly science says that this is not the way to use hydrogen for heating. I am a great fan of hydrogen, as I am sure most people in this House are, and it needs to be used for certain applications for which it is very difficult to use other renewable resources. We know what those are: they include a number of industrial processes and heavy transport, and it may be used for trains in certain areas and for heavy goods vehicles for some while. It is important that we use hydrogen for those purposes. It can never ever be used as a grid gas as methane is at the present.

Let me give an example of what perhaps is an even better way of achieving what we are doing. Down in my own neck of the woods, in Cornwall, we have a scheme financed by the fag end of ERDF funding. A village called Stithians has put in ground source heat pumps as a street utility, much as you would with a gas grid. I suspect that this is far more economical, and it is also liked by the residents. There have been demands for other streets in the village to have the same application.

This is in contrast to the towns in these experimental areas. As I judge it—my postbag says this to some degree, although I hear it from others as well—there is a mounting resistance to these trials going ahead. There is no great trust in hydrogen as a domestic fuel because of its properties—its ability to escape and its high flammability. These amendments take out Clauses 111 and 112, so that we can stop these trials and use hydrogen far more effectively. The money saved can also be used more effectively for decarbonisation in other areas as well. There is consumer resistance.

Assuming that the Minister is not going to accept this amendment, I have tabled another amendment arising from conversations with people involved in these trials. Many people want to opt out of them, and I fully sympathise with that. In Committee, the Minister said that households could opt out. What would the compensation be in such a case? Will the Government ensure that households can keep gas or methane, as at present? Can they guarantee this? If not, will they provide other forms of heating appliances, either electrical or an alternative form of heat and energy? Can they guarantee that there will not be forced entry into homes to make sure that the conversion takes place? I will be interested to hear from the Minister the alternatives to participating in the trial, as will people in the trial villages.

I cannot see that these trials will go ahead. There is considerable consumer resistance, and all the science genuinely says that this cannot work on a larger scale. Even if the trials do go ahead, there is no way that hydrogen is going to replace methane in the national grid or in large local heating systems. This can be done in far better ways, and the Bill allows for that. Let us call a halt to this now, save money, ease local concern and concentrate hydrogen in the areas where it can contribute and is important for our transition to a net-zero economy. I beg to move.

[Baroness Sheehan (LD)]

My Lords, I realise that I am a little late arriving for this debate. Having been here from the start of this afternoon’s proceedings, I hope that the House will allow me to make my contribution.

I will speak to Amendments 53, 54 and 57, in the name of my noble friend Lord Teverson. I support Amendment 56 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I will not bore your Lordships’ House with the details of why my name appears on Amendment 56 in the Marshalled List with a line through it. Suffice it to say, I support the measures in it.

However, I support even more strongly Amendments 53, 54 and 57, which aim to get rid of the hydrogen trials altogether. Although hydrogen has a role in decarbonising our future in many sensible ways, domestic heating is categorically not one of them. I would recommend anyone who is not convinced by that statement to look at the work of the Hydrogen Science Coalition, a group of independent academics, scientists and engineers who give their time voluntarily and have no public or private vested interests. Its briefing is very clear on how it arrives at its conclusion that there is overwhelming evidence against the use of hydrogen for heating homes in the UK and in favour of using heat pumps and district heating networks. Equally, it makes a well-argued case against the provisions of Clause 111 that compel consumers to take part in hydrogen heating trials, not least because the introduction of hydrogen into UK homes will significantly increase the risk of serious explosions and fires, as well as increasing exposure to NOx emissions, which pose a significant public health risk.

To back up its own analysis, it cites the overwhelming techno-economic evidence against the use of hydrogen for heating buildings compared with other sources. There have been 37 independent studies on the use of hydrogen for heating since 2019, by organisations such as the IPCC, the IEA, McKinsey, Imperial College London, the Potsdam Institute, the University of Manchester, the Wuppertal Institute, Element Energy, the International Council on Clean Transportation, the Energy Transitions Commission, et cetera. Every one of these studies has ruled out hydrogen playing a major role in heating buildings because it will be too expensive and inefficient compared to other clean alternatives such as heat pumps and district heating. Too expensive is putting it mildly; it will be six times more expensive than going down the heating networks route.

Chris Skidmore, chair of the net zero review, said in a recent article in the Times that he

“did not think the UK should embrace the idea of repurposing gas networks to run hydrogen boilers, a proposal that is being trialled at a pilot project at homes in Ellesmere Port in Cheshire.”

The House of Lords Environment and Climate Change Committee recently said that hydrogen is

“not a realistic replacement for natural gas”

and is “not a serious option” for heating. A House of Commons Science and Technology Committee report in December 2022 said that hydrogen is likely to play only a limited role in home heating and is not a panacea. Lastly, in a report in January 2022, the International Renewable Energy Agency—IRENA—said that residential heating is the lowest-priority application for hydrogen

“because heat pump solutions and district heating options already exist.”

I apologise for labouring the point but it is important for the people in the trial villages of Ellesmere Port and Teesside. The provisions of the Energy Bill that give gas companies a new power of entry into homes to cut residents off the gas network without their consent are particularly worrying. The bottom line is that the Bill should not be promoting hydrogen heating trials that expose consumers to health and safety risks and excessively high energy costs.

Energy Bill [HL]

Debate between Baroness Sheehan and Lord Teverson

Report stage
Tuesday 28th March 2023 Lords Chamber

[Lord Teverson (LD)]

My Lords, I will speak to my Amendment 33, which is around the decommissioning costs of carbon capture and storage installations. First, I will read what is in Clause 85(1) about financing costs:

“The Secretary of State may by regulations make provision for requiring relevant persons to provide security for the performance of obligations relating to the future abandonment or decommissioning of carbon dioxide-related sites, pipelines or installations.”


It is not often that one is shocked in Grand Committee in the Moses Room. Normally it is a feeling of impotence when you are going through SIs, rather than some sort of greater emotion, but I was shocked when we discussed this. I asked the Minister how we protect the funds that are for decommissioning at some point way into the future. How are we sure that they are not like the dodgy builder who takes your deposit and then, when you ask him or her to decorate your house, the phone is no longer answered and the money has disappeared? How do we know, in this rather difficult area of energy, that those “relevant persons”, and more importantly their banks accounts, will still be there so that in some distant future, maybe decades ahead, this money is available?

If I am honest, when I had the answer from the Minister—which I cannot quote as I have not looked it up—I was shocked that there did not seem to be any provision for protection of the rather large sums that I expect to be there. That is why I have introduced this amendment. It is very simple and demands that when these payments are made they are effectively put into an escrow account, or at least a ring-fenced fund of some sort, so that they are there when these facilities need to be decommissioned. It is then up to the Secretary of State to agree when that money can be disbursed so that decommissioning can take place or disbursed because the funds are no longer needed.

It is as simple as that. It is about protecting that money that we as taxpayers and citizens of the UK are owed when that decommissioning happens and making sure that the money really is paid rather than having disappeared at the time. I see no guarantee within the three pages of other details about how these funds should work. I hope the Minister can come back to me and reassure me that, if he is not going to accept this amendment, the Government will ensure that this money is ring-fenced and is there for us and future generations when we reach that decommissioning point.

[Baroness Sheehan (LD)]

My Lords, I declare my interest in the register as a director of Peers for the Planet.

I shall speak to only one amendment in this group, Amendment 33, in the name of my noble friend Lord Teverson, to which I have added my name. It aims to ensure that decommissioning funds, as the noble Lord has explained, are available for decommissioning when the time comes. I support it not least because it complements Amendment 222A, which I tabled in Committee, on transparency of decommissioning, particularly with respect to future taxpayer liability for decommissioning relief deeds, which are agreements between the individual oil and gas companies and the Treasury. The National Audit Office and the Public Accounts Committee have both expressed concern about this public liability. I quote from the 2019 NAO report on decommissioning:

“With decommissioning activity increasing, the government is paying out more in tax reliefs for decommissioning at the same time as tax revenues have fallen due to a combination of lower production rates, a reduction in oil and gas prices and operators incurring high tax-deductible expenditure.”


That represents a triple whammy for UK taxpayers since, as the report says, for the first time ever, in 2016-17,

“the government paid out more to oil and gas operators in tax reliefs than it received from them.”

The scenario under which that public subsidy of oil and gas production took place in 2016-17—that is, the triple whammy of lower production rates, a reduction in oil and gas prices and operators incurring high tax-deductible expenditure—is the future outlook for the gas and oil sector as the world moves ever more rapidly towards decarbonisation. The USA’s inflation reduction Acts and the imminent EU response via the green deal industrial plan will turbocharge that transition, and rapid transformative change is very visible on the horizon.

While oil and gas expansion currently looks secure, it is only artificially so, given the very generous tax reliefs, subsidies and other support that the Government continue to provide, not least via decommissioning relief deeds. With over 100 new licences for exploration and production on offer, the risk of stranded assets is compounded hugely. Why do the Government persist in giving preferential treatment to fossil fuel producers? That is a question that I have put to the Minister before on several occasions, and I hope that this time there might be an answer.

It used to be that a ceiling of sorts was kept on the overall cost to the taxpayer by the fact that a firm could not claim back more in decommissioning tax relief than it had previously paid in tax. That makes sense but, since 2017, the Government have explicitly said that when firms default the partner firms that pick up the bill can claim back more in tax relief than they have ever paid. That certainly needs some digesting.

It cannot be right to put on life support an industry that has had its day—life support that is publicly funded. The amendment asks the Government to take precautions with the public purse, uphold the “polluter pays” principle and ensure that operators of new fields and buyers of existing ones accept that they cannot escape their responsibility to our planet, the one and only planet that we have.