UK Hydrogen Economy

Debate between Lord Spellar and Alexander Stafford

Thursday 17th December 2020 Westminster Hall

[Alexander Stafford (Rother Valley) (Con)]

I beg to move,

That this House has considered the UK hydrogen economy.

I refer the House to my entry in the Register of Members’ Financial Interests. Members will be aware that only three weeks ago, I sponsored the UK Parliament’s very first stand-alone debate on hydrogen, which was about hydrogen transport. I believe that it was a great success and I welcome the Minister’s proactive and helpful response. It is incredibly exciting that straight off the back of that debate, I have the opportunity to broaden the scope of the conversation today to encompass the UK’s hydrogen economy. It is right that I should touch on hydrogen transport, but I am keen to emphasise hydrogen’s important role in home heating, the gas network and industry, and its wider economic benefits for the UK.

I have been clear that we need a multifaceted approach to decarbonising our economy and meeting our net zero goal. One technology alone will simply not be enough. Instead, we must move to a model where we use the best renewable fuel or technology for the job at hand. By advocating for our hydrogen future, I am in no way detracting from electric vehicles, biofuels or carbon capture and storage, among other central aspects of the matter. I believe that those must be used in conjunction with hydrogen to ensure that we do not have any gaps or holes in our decarbonisation efforts. Hydrogen, however, presents a unique opportunity for us to corner the market and become a world leader in hydrogen use and production, in a way that we simply do not with electric vehicle batteries or in the wind farm supply chain.

The UK is the perfect place to be a hydrogen power, because of expertise, home-grown companies, North sea assets and our developed infrastructure. Our wind farms provide clean renewable energy to produce hydrogen, and underwater pipelines can in theory ferry that hydrogen to and from the continent. I have reiterated time and again that a strong UK hydrogen industry will create thousands of jobs across the country, cut our carbon emissions dramatically and boost our post-covid and post-Brexit economy.

In my speech on hydrogen transport a few weeks ago, I spoke at length about the flexibility and freedom offered by hydrogen fuel cell electric vehicles, which are practically free of CO₂ emissions. Energy is stored as compressed hydrogen fuel in hydrogen vehicles, which means that they can drive up to 700 km without refuelling, and just like a conventional car they take only a few minutes to refuel. The deployment of hydrogen is likely in vehicles that travel long distances or that have high utilisation, such as buses and heavy goods vehicles: those are less suited to electrification, and the consumers demand rapid refuelling.

I am particularly impressed by Wrightbus, which is building 3,000 hydrogen buses in the UK for use across the country by 2024—the equivalent of taking 107,000 cars off the road. I have highlighted that if the 4,000 zero-emission buses announced in February had been hydrogen buses, the economies of scale would have revolutionised the transport sector, helping to achieve cost parity between hydrogen and diesel buses. We need that to happen as soon as possible.

A major step in achieving cost parity would be the reform of the renewable transport fuel obligation. I have written to the Government this week to stress the need to reform the RTFO so that electricity from any renewable resource can be considered eligible. I intend that that increased hydrogen production will encourage more councils to buy hydrogen buses and boost UK manufacturing, and that the resulting stable hydrogen supply will speed up the process of cutting carbon from heavy transport sectors.

[John Spellar (Warley) (Lab)]

The hon. Gentleman rightly indicates that we should encourage the purchase of British vehicles. Should not the Department for Transport now, particularly as it will be free of supposed EU regulations after 1 January, prescribe that the moneys it provides for more environmentally-friendly vehicles ensure they are built in the UK, and not in China or elsewhere?

[Alexander Stafford]

I agree that we should always buy British and build British where we can. That is why I am excited about hydrogen. It presents so many opportunities for seats such as mine to create jobs and upskill our manufacturing sector.

[John Spellar]

Will the hon. Gentleman give way?

[Alexander Stafford]

Very briefly.

[John Spellar]

We have a long while. Quite simply, should there not be real pressure, and a commitment from the Minister, that that is what the Department for Transport must—not should—do? It must commit to doing that.

[Alexander Stafford]

I welcome that follow-up. I always say that we should, where we can, buy British and buy the best, but one of the benefits of leaving the European Union is that we can have our pick and choice of the world. I want the best to be built in Britain.

Let us turn back to the RTFO, which I know the Minister is terribly interested to hear about. A reformed RTFO will prevent taxpayers’ money from going to battery manufacturers in the People’s Republic of China. Such a simple amendment could ensure that we incentivise the manufacture of hydrogen buses by British firms, and establish ourselves as a major player in the sector. I am sure that that allays some of the concerns of the right hon. Member for Warley (John Spellar).

Hydrogen holds much promise beyond buses and HGVs, with important developments in the rail, shipping and aviation sectors. Only this week, I met virtually with the team at Hybrid Air Vehicles, a wonderful British company that is looking to revolutionise short-haul regional air travel, direct city-to-city connectivity and air tourism by way of building a practical and economical hydrogen plane. They have a working prototype and, if all goes well, will be the first to be issued Civil Aviation Authority approval post-Brexit.

Hybrid Air Vehicles is not the only British-based company in this space. ZeroAvia, a UK-US enterprise, has secured £12.3 million of UK Government funding for a certifiable 19-seat market-ready aeroplane capable of flying passengers to the UK from 2023, with letters of intent in place already with operators. That HyFlyer project is a great leap in realising the Government’s jet zero ambitions. Only last Saturday, British Airways announced that it was partnering with ZeroAvia to explore how hydrogen can power the future of its fleets. Elsewhere, Aeristech boasts market-leading hydrogen fuel cell compressors, with its 25 kW fuel compressor making it possible to deliver the power output needed for even the heaviest industry vehicles, including in aerospace.

Across the transport sector, the UK is at the forefront of innovation, from large companies to small enterprises. At one end, there is the diminutive but mighty Riversimple Movement, a hydrogen car manufacturer based in Wales, which has ambitions to build up to five small factories around the UK, creating thousands of jobs. We move up to the scale of Johnson Matthey, a British firm that is a global leader in fuel cell development, with its technology ending up in roughly a third of fuel cells globally. If the UK can maintain that advantage, we can steal a march on hydrogen, as China did on batteries.

I have been very active in discussing the hydrogen transport sector, but I am also greatly enthused by hydrogen’s potential across the UK economy. Home heating currently accounts for around 23% of national emissions, with the UK well known for having the oldest and least energy efficient homes in Europe. It has become clear to industry, and to parliamentarians, that decarbonising our gas grid is of the utmost importance if we are to meet our net zero target. Hydrogen in the gas grid will play a key role in reducing the cost of the decarbonisation of heat. Its high energy density enables it to be stored cost-effectively at scale, providing system resilience. Furthermore, hydrogen heating can be implemented at minimal disruption to the consumer, and the UK holds world-class advantages in hydrogen production, distribution and application.

Hydrogen behaves in much the same way as natural gas, and is therefore ideally placed to be utilised in existing gas pipe infrastructure. The UK is different from most European countries in terms of the number of properties connected to the gas grid and the readiness of our distribution network. In fact, 85% of homes in the UK are connected to the gas grid. Therefore, repurposing the gas grid to run off green gases has to be a vital part of the solution as we decarbonise our existing buildings.

[John Spellar]

Will the hon. Member give way?

[Alexander Stafford]

I will give way very briefly. I know that the right hon. Gentleman is speaking later.

[John Spellar]

Is there not a problem at the moment that needs to be resolved, which is that hydrogen makes the metal parts of the gas grid more brittle more rapidly? Also, it is easier for hydrogen to escape from them, which is a constraint that we need to address.

[Alexander Stafford]

Of course, we need to restrain all sorts of leaks in our systems, whether from our gas pipes or our water pipes. I know that there are water pipe leaks as well, and I agree that we will need to upgrade certain elements of pipe. If we want to push at the very start, hydrogen will work very quickly, but of course with all technologies we need to maintain the infrastructure, which I know the Government will do very well.

In the boiler sector, Worcester Bosch and Baxi are leading the way in producing the world’s first hydrogen-ready boilers, which can run off either pure hydrogen gas or natural gas, including natural gas blended with up to 20% hydrogen—a mixture that all boilers can utilise, so we are ready to go with that mix. Hydrogen boilers have a distinct advantage over heat pumps, which are another solution, in that they are many thousands of pounds cheaper, costing about the same as a gas boiler. It is estimated that a hydrogen boiler will cost £2,500, whereas a heat pump for a house will cost between £6,000 and £18,000. That is important in terms of fuel poverty, as the cost of heat pumps is potentially unaffordable for some families.

Furthermore, a hydrogen boiler does not take up much space and takes a matter of hours to install. In contrast, an average of three days is needed to fit a large and unwieldy heat pump. It is also worth bearing in mind that the electricity grid has five times less capacity than gas, and relies on gas in the winter to prop it up, making the gas network the obvious choice for resilience purposes.

If there are subsidies for heat pumps, why are there not considerable subsidies for the production of hydrogen? There should be, as that would also help to bolster more jobs. Earlier today, my hon. Friend the Member for Sedgefield (Paul Howell) raised with me the need to train up more boiler installers so that we have those skills. The Government should be supporting that.

I am pleased to note that the Government have helped initiate a number of projects that have demonstrated the technical and economic viability of hydrogen as a pathway to decarbonising the gas grid. I have been privileged to learn about many of them since my election, although hon. Members will agree that the preference for similar-sounding names is quite the tongue twister. They include the Hy4Heat programme, the HyDeploy project run by ITM Power, Cadent and the Northern Gas Networks, the H21 project led by the Northern Gas Networks, National Grid’s HyNTS Hy Street experiment, and SGN’s H100 Fife project.

The Net Zero Teesside and HyNet large-scale projects are crucial to stimulate the mass production of hydrogen so that we can move from theory to reality when it comes to home heating. Those projects are a firm demonstration of the Government’s interest in and commitment to hydrogen as a technology to help us achieve net zero. They have also provided evidence of the technical and economic viability of hydrogen as a pathway to low-carbon heat, and have helped us address some of the inherent challenges of rolling out technology. In addition, the geographical spread of the projects across the United Kingdom—many are in left-behind areas—shows that hydrogen can play an important part in the Government’s levelling-up agenda.

The success of those projects shows that the distribution, transmission and production of hydrogen must be a priority for the UK. However, the UK is at risk of being overtaken by other countries that have more aggressive and developed approaches to hydrogen. For example, Germany has earmarked €9 billion for the expansion of hydrogen capacity, targeting 5 GW by 2030 and a further 5 GW by 2040. Japan established its hydrogen strategy in 2017, which has given industry the confidence to invest.

To date, the UK has lacked the clear policy framework that exists in Japan, and Government investment has been lower than in countries such as Germany. That is precisely why the Prime Minister’s 10-point plan was so welcome, and why the forthcoming hydrogen strategy must be ambitious, wide-reaching and published as soon as possible.

Having addressed hydrogen transport and home heating, I now turn to hydrogen’s potential for use in industry. That is of great importance to constituencies in the former red wall such as mine, Rother Valley. Traditionally, my area has relied on energy-intensive industrial processes. Sheffield is, of course, famous for steel making. It is vital that we decarbonise our industry and provide our factories with renewable energy that is powerful, in ready supply and affordable. Rother Valley bore the brunt of British coal’s lost competitiveness compared with cheaper foreign imports, and the high cost of energy and the struggling industry has been the narrative ever since. We now have a chance to ensure energy sustainability for generations. In doing so, we will turbocharge our national industries in the post-Brexit world.

In the light of that, I warmly welcome National Grid’s ambitions to build a hydrogen transmission backbone consisting of pipelines connecting major industrial hubs across the UK. Such hubs exist in Humberside, Teesside, south Wales, Grangemouth in Scotland, Merseyside and the Isle of Grain in Kent. The concept is that significant volumes of hydrogen will enable the build-out of 100% hydrogen pipelines to decarbonise early adopters in industry and transport. Cadent is planning a similar idea of piping 100% hydrogen by Pilkington’s glassworks in Ellesmere Port so that the factory can reduce its costs and stay open to save jobs.

Members will know that I am always keen to focus on my region of Yorkshire and the Humber in this House, which is why Zero Carbon Humber is of such relevance to me and to industry in and around my constituency. Humberside is currently the UK’s largest carbon emitting industrial area, but Zero Carbon Humber aims to make it the world’s first net zero carbon industrial cluster. It is a wonderful example of the Government working hand in hand with the private sector to fund an ambitious endeavour. It is a staggering statistic that H2H Saltend in Zero Carbon Humber can produce more than half the Government’s planned 1 GW of hydrogen by 2025, and is one of the few places in the world where hydrogen, carbon capture and offshore wind congregate to create a “super place”. The towns and villages around Zero Carbon Humber offer opportunities for hydrogen neighbourhood heating trials, essential for decarbonising the heat networks I spoke about earlier.

Around my constituency, steelmaking is a huge carbon emitter, but it is also a huge employer, as it is across the UK. On Humberside, hydrogen can be injected into blast furnaces in the steelmaking process, displacing fossil gasses and producing steam as a by-product rather than carbon dioxide, although any CO₂ is captured and stored. We need that technology in Rother Valley and South Yorkshire to protect our plants and factories and to give British steel the boost it so badly deserves.

I envisage the Zero Carbon Humber project being recreated in Rother Valley, tying in with my plans for a hydrogen valley in my constituency. My hydrogen valley will create high-skilled jobs for my constituents, attract investment and new industries to the area, and decarbonise the towns and cities of South Yorkshire.

ITM has already acted, building the world’s largest electrolyser factory on the border of my constituency and expressing its desire to build large hydrogen refuelling stations across our nation. In that vein, the Government must encourage the development of net zero industrial clusters across the UK. That is a crucial way to revitalise left-behind areas, protect and create jobs, decarbonise polluting industry and help our manufacturers adapt, to ensure that they not only avoid closure but thrive in our green future.

I have so far addressed the UK’s hydrogen economy by sector, demonstrating that we can use hydrogen to decarbonise transport, the gas network and industry. What are the benefits to the British economy of such a hydrogen economy? The Hydrogen Taskforce believes that hydrogen can add up to £18 billion in gross value added by 2035 and support 75,000 additional jobs in every part of the United Kingdom, many of them in the north of England.

Industry, offshore wind and CO₂ storage assets are currently concentrated in the north, meaning that investment in hydrogen production is likely to create and protect more jobs in areas that have been hit hardest by the covid-19 crisis. The existing pipeline of hydrogen production projects has a strong regional spread and will support the Government’s levelling-up agenda. More immediately, the business community has told the Treasury that is has £3 billion of shovel-ready private investment hydrogen projects and is merely awaiting the right policy framework and commitment from the Government.

As the UK looks to bounce back from the covid-19 crisis, investors in hydrogen offer sustainable economic growth opportunities that will kick-start the green recovery. Speeding up hydrogen solutions will allow the UK to build on existing areas of expertise and global leadership. With a value chain that spans production, storage, transmission and distribution, along with downstream appliances, this growing global market can support thousands of jobs in the UK for decades to come.

With the benefits of the UK’s hydrogen economy ringing loudly in their ears, the Government must act decisively and boldly, to steal a march on our competitors and cement Britain’s place as the hydrogen nation. I have already mentioned the absolute necessity of the prompt publication of the forthcoming hydrogen strategy. In addition to that, I have several policy asks of the Minister.

I will first reiterate my policy asks from my hydrogen transport debate, which, unsurprisingly, are still relevant three weeks later. Those were to set ambitious targets for the mass commercialisation of hydrogen technology; to stimulate supply and demand in parallel, focusing initially on regional clusters; and to ensure relevant Government Departments work collaboratively.

However, this debate has a wider scope, so there are additional specific policy asks. Generally, we must ensure that the upcoming hydrogen strategy sets out a clear road map for how the UK will create the renewable hydrogen it needs. We must institute long-term, stable and predictable policy and regulatory frameworks to reassure investors. We must ensure that the Government and Ofgem make decisions quickly and decisively. We must support hydrogen innovation by funding research and development. We should support trials of 100% hydrogen. Government industries should now invest and collaborate to ensure that technology, development and commercialisation take place in tandem.

For transport, we must aim for at least some of the 4,000 zero-emission buses to be hydrogen buses. Most importantly, we must reform the RTFO to allow renewable energy from all sources to be eligible. We must introduce changes to the bus service operators grant to stop discrimination in favour of diesel vehicles, and the Department for Transport must build on the University of Birmingham’s hydrogen train success, by supporting hydrogen train fleet development. Additionally, we must support the opening of 100 hydrogen refuelling stations by 2025, to support the roll-out of hydrogen transport.

For the gas network and home heating, we must support the roll-out of hydrogen-ready boilers for existing homes by 2025 at the latest; outline in detail how the vision for hydrogen towns can be delivered; set out how the gas grid can be repurposed to enable the safe distribution of hydrogen; enable hydrogen to be blended into the gas network; and ensure that the heat and buildings decarbonisation strategy promotes a technology-neutral approach. We must also provide clarity on the business models that underpin hydrogen—for example, carbon capture and storage, pricing and demand mechanisms.

For industry, we need to lay out specific hydrogen production targets, prioritise the reskilling and upskilling of workers, and ensure that there is early decision making on permissions, business models and the role of regulators. I appreciate that this is a substantial policy list, but I hope the Minister will be able to enlighten me about his plans, both verbally during this debate and in writing at a later date.

As I draw to a close, I reiterate that I believe the hydrogen economy will be transformative for the UK. Not only can it decarbonise across all sectors, ensuring that we achieve our net zero target, but it protects industry and retools it for our green future. The hydrogen economy will create skilled jobs in left-behind areas, such as Rother Valley, revitalising parts of the UK that have suffered the grim effects of deindustrialisation.

We have a unique opportunity to corner the hydrogen market, positioning Britain as the world leader in the production and use of hydrogen. That will not only be a shot in the arm domestically as we recover from the coronavirus pandemic, but it will enable UK plc to export our technology and expertise around the world in a post-Brexit age. The hydrogen economy will improve our energy security and resilience, which are critical in light of both the devastating pandemic and hostile Chinese and Russian relations. However, in order to reap these rich rewards, I urge the Government to act now to avoid losing out, as we did with batteries and the wind farm supply chain. We have first-mover advantage, but other countries are waking up; we must be ahead of them.

In a brave new decade with many unknowns, we do know that decarbonising our economy is important for environmental, economic, security and health reasons. Hydrogen can be one part of our energy solution, used in conjunction with other technologies, if we take action now to ensure that the UK’s hydrogen economy works for everyone, and we confirm our place as the hydrogen kingdom.