Gas Boilers and Heaters: Replacement Programme

Lord Callanan Excerpts

Tuesday 12th January 2021 Lords Chamber

[Lord Howell of Guildford (Con) [V]]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I declare my interests as set out in the register.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

We are currently developing different pathways to decarbonise heat, and as such it is too soon to estimate these costs accurately. However, the climate change committee estimates that the investment required to decarbonise the entire economy and meet net zero is less than 1% of GDP until 2050. Ensuring that the costs of transition are allocated fairly is a priority, and we will publish a call for evidence on affordability and fairness by April.

[Lord Howell of Guildford (Con) [V]]

My Lords, I thank the Minister for that reply. These estimates are interesting but, according to the Government’s excellent energy White Paper, there are 23 million existing homes attached to the gas supply grid. While it clearly makes sense to equip newly built homes with hydrogen or heat pumps or other technologies, is not the cost of retrofitting all existing homes—estimated by a government research paper at anything between £2,500 and £8,000, or more, per dwelling—and possibly having to replace large parts of the gas delivery grid as well, clearly going to be absolutely astronomical, whether it falls on consumers or taxpayers? Given the tiny contribution, at best, that this whole project could conceivably make to taking over all global emissions growth, is this really the wisest or most effective use of our national resources in combating worldwide climate change?

[Lord Callanan (Con)]

I understand the point my noble friend is making, but we do of course have a legal commitment and obligation to reach net zero emissions by 2050. Of course, 19% of total UK greenhouse gas emissions come from buildings, so we clearly need to take action in this sector. We also marry that up with an ambitious international agenda. We are hosting COP 26 this year and we will seek to persuade our international partners to follow this agenda as well.

[Baroness Blower (Lab) [V]]

My Lords, there are certainly home owners who live in flats on estates that were possibly originally built as social housing, with communal gas boilers and integrated estate-wide heating and hot water systems. Individual solutions will not be possible in these circumstances. Will the Minister say whether any thought is being given to such circumstances to quantify the problem and, if so, what support will be available to replace or upgrade such systems?

[Lord Callanan (Con)]

I point the noble Baroness to the social housing decarbonisation fund, which will deliver transformational change by upgrading a significant amount of the social housing stock that is currently below EPC up to that standard.

[Lord McCrea of Magherafelt and Cookstown (DUP) [V]]

In recognising the Government’s desire to reduce greenhouse gas emissions throughout the United Kingdom, one must also recognise the need to ensure that the transition is fair to householders and businesses. Therefore, can the Minister tell the House what detailed study has been done to identify any additional costs there will be to run any new heating system? How can we ensure that those living in poverty will be able to bear that financial burden and keep their families warm?

[Lord Callanan (Con)]

The noble Lord is right that we need to make sure that the change is affordable. We have a number of schemes to help low-income families. We have the ECO scheme and the green homes grant scheme, both of which considerably incentivise low-income families to make these changes.

[Lord Cormack (Con) [V]]

My Lords, may I press my noble friend on this point, bearing in mind that this will be government-enforced expenditure and will place a significant strain on many household budgets? Following this Question Time, will he discuss with the Chancellor the phasing out of all the means-testing of the winter fuel allowance and its replacement at an appropriate time with a boiler grant, especially to all those in receipt of universal credit?

[Lord Callanan (Con)]

We are committed to keeping the winter fuel payment to ensure that older people have the security and dignity they deserve, but we do have boiler grants, as my noble friend referred to them, through the green homes grant that are specifically designed and targeted at poorer members of society.

[Lord Oates (LD) [V]]

My Lords, I declare my interests as set out in the register. We need to ensure that green hydrogen is the predominant form of hydrogen used in the gas grid and elsewhere. To that end, what consideration have the Government given to using contracts for difference to drive down costs and encourage innovation in the production of green hydrogen, as we did so successfully for offshore wind during the coalition Government?

[Lord Callanan (Con)]

I understand that the noble Lord is very keen on green hydrogen and I agree with him on these points, but we are committed to consult on the preferred hydrogen business model in quarter 2 of 2021 to finalise a decision next year. Alongside this we will bring forward further details in 2021 on the revenue mechanisms that will be available to support these proposed business models.

[Baroness Neville-Rolfe (Con) [V]]

My Lords, planning for the phasing out of all use of gas boilers is, to my mind, a very bold step, especially when the nature of the possible replacements is unclear. What steps are the Government taking to ensure that the energy and construction industries will have the capacity to cope with this change? For example, I understand that there is currently capacity to install only 30,000 heat pumps a year, whereas the need is estimated to be more than 600,000.

[Lord Callanan (Con)]

My noble friend makes some very good points, but the forthcoming heat and building strategy will set out the direction of travel for decarbonising heat. We are working closely with the industry to create the jobs needed to meet net zero. We recently carried out research. There will be enough skilled heat pump installers to deliver our ambitions. We recently published that supply chain research, which shows that heat pump manufacturers are able to meet a significant ramp up in demand.

[Lord Thurlow (CB) [V]]

My Lords, some 1.75 million boilers are installed every year. I understand that the cost of the hardware alone, using an average price, is in excess of £3 billion annually. Most manufacturers are based abroad and the profits are being sucked out of the UK economy, principally into euros. We must expect these numbers to increase dramatically as fossil fuels are abandoned. Will the Minister please explain what the Government are doing to recapture more of this huge business by encouraging British technologies and British businesses to reclaim this important and growing sector of our economy?

[Lord Callanan (Con)]

The noble Lord is right. We have a number of incentive schemes. I referred to the ECO scheme and the green homes grant scheme. We want to be one of the world leaders in this field and we are working with manufacturers to advance the technology to bring it down to affordable levels to enable its wide- spread use in the UK.

[Lord Grantchester (Lab) [V]]

The recent energy White Paper stated that

“we will assess the case for encouraging, or requiring, new gas boilers to be readily convertible to hydrogen”.

Having recently experienced on 30 December the seizing up of a system boiler, I would like to know what assessment is needed for the Government to require hydrogen-ready boilers to be quoted alongside the conventional, and for the price premium for hydrogen-ready to be reduced progressively towards a conventional price if the consumer or bill payer is unaware of the requirement for all new boilers to be hydrogen-ready by 2025. Is this in the heat and building strategy that the Government are still preparing to publish?

[Lord Callanan (Con)]

We are supporting the development of prototype hydrogen-ready boilers that are not available at the moment through the Hy4Heat programme, which is due to conclude this year. Subject to its findings we plan to consult later this year to seek views from stakeholders on the role that hydrogen-ready appliances will play in the transition to net zero.

[Lord McNally (LD) [V]]

My Lords, the Minister referred to ground source heat pumps. How realistic are they as a green energy solution in terms of construction and cost?

[Lord Callanan (Con)]

They are one option. Air source heat pumps are another option and hydrogen a third. Domestic retrofit of community energy systems will also play a role. We will need to use a number of different technologies, but ground source heat pumps are certainly one possible technology.

[Lord Best (CB) [V]]

My Lords, it is clear that retrofitting all UK homes with low-carbon heating is a long way off. Very many households will depend on heating by electricity, which is at present much more expensive than its fossil fuel alternatives. Will the Minister confirm that the Treasury’s net zero review is looking at rebalancing the cost of electricity to make it more affordable, not least for those otherwise facing deep fuel poverty?

[Lord Callanan (Con)]

The Treasury’s net zero review, to which the noble Lord referred, is considering how the transition to net zero will be funded. Alongside this we are publishing a call for evidence by April to begin a strategic dialogue between government, consumers and industry on affordability and fairness. We have also expanded government support schemes, which I referred to earlier, to those on low incomes, who are likely to benefit from them or to be at risk of fuel poverty. We will respond to our consultation on fuel poverty in due course.

[The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)]

My Lords, the time allowed for this Question has elapsed and accordingly we moved to the third Oral Question.