Sustainable Aviation Fuel Bill

Debate between Lord Berkeley and Lord Harper

Report stage
Tuesday 10th February 2026 Lords Chamber

[Lord Berkeley (Lab)]

My Lords, this is a very interesting amendment, because a revenue certainty contract, as the noble Lord, Lord Moylan, said, is wonderful for the suppliers. It presumably links in not just the price but the volumes—which may change from year to year —and the sources. The noble Lord opposite mentioned the issue of Drax and where that material comes from every year. Would there be a 10-year guarantee price for that? As the noble Lord, Lord Harper, said, any old agricultural product that was edible could be covered as well. And we have not yet discussed the worry that many people have about the number of trees and everything else being cut down in the Amazon basin, which could also be covered by this. So, a revenue certainty contract is pretty difficult and this amendment is a good start in at least limiting its scope and time.

[Lord Harper (Con)]

My Lords, my noble friend Lord Moylan set out the challenge—the thing you have to justify—to put the revenue certainty mechanism in place. It was certainly one of the things that I grappled with, and challenged the industry on, when I was the Secretary of State for Transport and we were developing the beginnings of this policy. As my noble friend said, the SAF mandate sets out some guaranteed demand for the industry producing sustainable aviation fuel. The challenge I always put to those thinking about investing in producing the technology was exactly the challenge that the noble Lord, Lord Moylan, set out: if you have guaranteed demand, what is the barrier to producing that product?

We discussed this in Committee. The logic is that, for some of these products, it is new technology that requires significant upfront capital investment, and the judgment is that, if you compare it to other similar sorts of investments that these investors are making, the risk is higher than with those other investments. Therefore, if you do not do something to close that gap, you will not see the investment in the technology, particularly here in the United Kingdom, where we want to see the production take place, at least in part, if for no other reason than resilience.

What you are really dealing with is closing the gap between the risks involved in producing SAF and the alternative products that those investors could invest in. I do not think, therefore, that you need an open-ended contract. You need to put some limits around it. I am sure that the Minister will have some responses on what those limits should be, but a very obvious one would be to have a time limit, so that investors have some certainty: they have guaranteed demand and a period when they will get a guaranteed price. That should enable the risk premium to be reduced and enable the investment and production to take place.

If we start from the assumption that it certainly does not need to be an infinite period and should therefore be fixed, the debate is therefore just about what the length of that period should be. Now, the Minister may want to come back and say that the 10 years proposed by my noble friend is the wrong number or limitation period, in which case I would be happy to listen to the arguments that he makes about an alternative period, but I do not think that the right answer is that it can be any length at all, with no cap on it. I would be much more comfortable if we put a cap on it.

Again, if, at some point in the future, there was a clear justification for changing it, there would be nothing to stop this or a future Government coming back to Parliament to change the position. But I do not want to see open-ended contracts in place, particularly since we have legislated for there to be guaranteed demand. So I strongly support my noble friend’s amendment, unless I hear a very good counter case from the Minister.

--- Later in debate ---

[Lord Berkeley (Lab)]

My Lords, I support this amendment, which we discussed at some length in Committee. The amendments then, which other noble Lords supported, covered the relationship between the sustainable aviation fuel used for aeroplanes and the same fuel used for home heating. I declare an interest as having a boiler in Cornwall that survives very well on home heating.

Interestingly, sustainable aviation fuel produced through the HEFA process generates hydrotreated vegetable oil as a by-product. HVO accounts for approximately 30% of the output, a significant amount that should not be overlooked. HVO can play an essential role in helping to decarbonise the 1.7 million oil-heated households that are off the gas grid. Otherwise they use electricity, which is expensive.

Last month, we had a delegation from the village of Kehelland in Cornwall who have all been trying out HVO in their houses for about three years. They travelled, leaving at 2 am, to meet the Minister at DESNZ to present their response to the consultation that we discussed earlier—a 500-mile round trip shows they are pretty committed. But what is interesting is that, in describing their experience of using the fuel, they highlighted how renewable liquid fuels can cut emissions from home heating by up to 88% compared with kerosene—88% is a figure worth having. They work simply as a drop-in replacement. The Government’s consultation said that, of all those considered, this was the most cost-effective option for off-grid consumers.

However, the consultation still questions the feedstock availability for the fuel, which we discussed in earlier amendments today. It is puzzling that the DfT is confident that there is more than enough feedstock to boost SAF production by 22%. The research done by the industry, the EU Commission and the Irish Government indicates that there is enough feedstock—again, we have discussed that at length. I was pleased to welcome the Government’s confirmation in a Written Answer that the targets under the SAF and RTFO mandates

“are set considering global availability of feedstocks and competing demands between transport modes and across sectors of the economy”.

That seems to highlight that there is enough material for both aviation and home heating, so it would be a great shame if we pitted one sector against the other, rather than try to have a bit more of what you might call cohabitation in-between.

To incentivise HVO production, I believe a renewable liquid heating fuel obligation needs to be implemented—that is the solution—triggered under Section 159 of the Energy Act. That would create the necessary market mechanism, in a similar way to the SAF mandate and the RTFO, to give certainty to the industry to distribute HVO to households at an affordable price. I hope that I can persuade my noble friend when he responds to try to ensure that his department, the Department for Transport, and DESNZ are working hand in hand to ensure that we can scale up the production of sustainable aviation fuel to capture the benefits of HVO for home heating. I must not keep asking him for meetings every day, but, if he would accept, it would be very nice to have a meeting with him and our colleague the noble Lord, Lord Whitehead, the Minister for Energy Security, to discuss the benefits of this approach. The consultation closes today, so it seems to be the right time to meet.

[Lord Harper (Con)]

My Lords, I have to confess to having been a little perplexed when the noble Baroness, Lady Pidgeon, moved Amendment 13, because I had just listened to the speech of her colleague, the noble Earl, Lord Russell. I thought my noble friend Lord Moylan’s proposal simply to publish and have some transparency about ticket prices was perfectly reasonable, but the noble Earl, Lord Russell, set out a whole raft of reasons why that was entirely unreasonable, incredibly difficult, completely unnecessary, bureaucratic and costly and why we should not bother ourselves with it, and he then proceeded not to support my noble friend’s amendment. Although I disagree with the noble Earl, he made some perfectly reasonable arguments, although not ones that I agree with. I am perplexed because his noble friend’s amendment is very comprehensive and would place some really quite significant reporting requirements on the Government in a way that seems to be completely at odds with the argument that the noble Earl just made.