Biomass: Power Generation

Lord Callanan Excerpts

Wednesday 13th March 2024 Lords Chamber

[Baroness Boycott]

To ask His Majesty’s Government what evidence they have that power generation from biomass is (1) good value for the taxpayer, (2) not leading to forest degradation in other countries, and (3) compatible with reaching net zero emissions by 2050.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, biomass plays a vital role in ensuring that the electricity system is both reliable and low-carbon by providing dispatchable power when intermittent renewables are not available. Generators receive subsidies only for electricity generated from biomass that is compliant with stringent sustainability criteria. As set out in the biomass strategy, the Government will review sustainability criteria this year. The Climate Change Committee is clear that sustainable biomass can provide a low-carbon and renewable energy source.

[Baroness Boycott (CB)]

I thank the noble Lord very much for his Answer, but it seems incorrect that we should fund any sort of forest degradation, either in this country or in others, such as Canada or the USA. We know that some countries are cutting down old-growth forests to feed companies here in England, such as Drax. A tree planted today, even if you replace it, is not going to sequester carbon until, probably, the end of the century—certainly not within the timeframe that we need. I hope that the Minister can agree with me on that point at least. Can he also agree that, given the short timeframe we are operating in, we should question, or potentially remove, the renewable classification from biomass electricity for the very big companies in this country, such as Drax?

[Lord Callanan (Con)]

I can agree with much of what the noble Baroness says but, like everything else, the situation is more complicated than that. There are many forests across the world—we are talking about forests in the US and Canada here; they are not third-world countries—that are renewable, sustainable and properly managed. The vast majority of the biomass used is a by-product from existing wood cultivation. The main wood is used for forestry, boards, joinery, et cetera, and the by-product is used for biomass. Not permitting biomass would not necessarily result in those forests just carrying on as they are.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend look clearly at developing more home-produced products, such as fast-growing willow coppice, that will both give a sustainable source of energy to Drax but also help hard-pressed British farmers at this time?

[Lord Callanan (Con)]

My noble friend makes a good point. It is not just Drax; there are many commercial and domestic biomass boilers as well that I am sure would be happy to use sustainable British-produced biomass.

[Lord Browne of Ladyton (Lab)]

My Lords, when biomass subsidies were initially awarded, was it envisaged that the Drax power station would receive more than £2 million a day in biomass subsidies, emit about 12 million tonnes of CO₂ a year, and, last year, take more than 40,000 tonnes of wood from old-growth forests in British Columbia—a practice, incidentally, which Drax previously decried in its own sustainability reports? If not, what criteria will the Minister’s department use when a decision is made about whether subsidies should be extended beyond 2027?

[Lord Callanan (Con)]

The noble Lord posed a number of different questions. First, as I said, sustainability criteria are extremely strict. They are policed by Ofgem. I have spoken to the chief executive of Ofgem about this—it is investigating the allegations. It is Ofgem’s job to uphold the rules and it will not hesitate to take action if the rules are breached. We have some strict sustainability criteria, and it is important that Drax and every other producer abides by those rules. Drax is responsible for about 5% of the UK’s electricity generation, and noble Lords should be aware that this is important for keeping the lights on, and for British energy security.

[Lord Howell of Guildford (Con)]

I agree that there is biomass and biomass, but in this case trees are being cut down to provide wooden frames to replace steel frames in construction, and are therefore contributing to carbon reduction. I understand that the residue of that cutting down—the sawdust and so on—makes up the pellets that we are talking about now for Drax. Should that other side not be borne in mind, together with my noble friend’s view that it is a very complex matter? Just going for the obvious target often leads to the wrong, opposite results?

[Lord Callanan (Con)]

My noble friend is right. It is a complicated subject and should not be the subject of easy sloganeering or campaigning. A number of different issues are involved. What the primary wood is used for is, of course, a matter for the US authorities and for the Canadians.

[Earl Russell (LD)]

My Lords, yesterday at Oral Questions, the Minister— the noble Lord, Lord Benyon—said:

“Biomass is a perfectly legitimate renewable energy source if the wood that is being used is a renewable and sustainable harvest”.—[Official Report, 12/3/24; col. 1897.]


My question is simple: can the Minister—the noble Lord, Lord Callanan—confirm exactly what steps the UK is taking to verify beyond doubt that no old-growth timber is being cut and burnt at Drax?

[Lord Callanan (Con)]

Of course I agree absolutely with the statement made by my noble friend. As I said, I have spoken to Ofgem, which is investigating. It is its job to enforce against these criteria. My officials are in touch with those in British Columbia for further discussions. However, there are many perfectly legitimate reasons why timber would be removed from old-growth forests—for instance, for firebreaks, diseased wood, et cetera. This is a complicated issue. Drax is an important part of the UK’s energy security. Let us make sure that it does this sustainably and abides by the rules before we rush to judgment.

[Lord Birt (CB)]

Has the Minister actually studied the detailed and evidenced findings of the last few weeks from “Panorama”, confirmed by the Government of British Columbia, that Drax is, in fact, burning wood from old-growth primary forests—rich, diverse habitats that are over 150 years old and will take 80 years or far longer to grow back—and that it is doing so in defiance of its 2017 commitment? Against wind, solar, hydro and nuclear, is not the case for biomass as a source of renewable power fatally weak and wholly unconvincing?

[Lord Callanan (Con)]

As the noble Lord knows—we have been in correspondence on this—I do not agree with him. As I said, we are in discussions with the British Columbia authority. This is not a third-world country; it is perfectly capable of sustainably managing its forests in its own way. There are internationally agreed strict sustainability criteria. It is important that Drax follows those rules. Ofgem is studying its application and will not hesitate to take action against it, as I have said.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I think we are missing a point with some of these answers. The fact is that this is taxpayers’ money going on a business scam. Why can the Government not see that?

[Lord Callanan (Con)]

I do not agree with the noble Baroness—I often do not agree with her. This is not a business scam. It is actually bill payers’ money, not taxpayers’ money, but we spend it on a number of different sources, including those mentioned by the noble Lord, Lord Birt. It is not an either/or equation; we need a variety of different sources of fuel for our electricity and our energy uses. If the energy crisis taught us anything, it is the importance of not relying on one particular source. Yes, we need wind, solar, biomass, nuclear and some gas-fired generation in the short term. We need a resilient energy mix across all the different sources.

[Lord Geddes (Con)]

My Lords, on the general subject of renewable energy, in the announcement yesterday of two new gas-fired power stations, an announcement was also made that there were times when renewable energy was not available to generate power. Does my noble friend agree that this simply is not true? Tidal power is constantly available.

[Lord Callanan (Con)]

The noble Lord has asked me about this a number of times. As I have said to him, we are supportive of tidal power and are allocating funds to its development through the various CfD auctions. But I think he will recognise that it is not yet available at scale and in the quantities we would need. We are very proud of our renewable resources: almost 50% of our electricity production is now from renewables; we have the five biggest wind farms in the world; we are easily the biggest producer in Europe; and we are seeing lots of applications for solar development. Renewables are great, but it remains the case that they are not available all the time; we need more storage and back-up, and need other sources as well.

[Lord Rooker (Lab)]

At the risk of upsetting a few colleagues, I ask: is the Minister aware that some of the forests in Canada and America were originally planted for paper? The paper mills closed because paper was not wanted; towns were decimated because they were one-product towns for the paper mills. Drax came along and saved some of those towns in the early days.

[Lord Callanan (Con)]

I do not know the truth or not of that; I will take the noble Lord’s word for it. As I said, these are complicated matters involving a number of different factors.

[The Earl of Devon (CB)]

My Lords, the renewable credentials of biomass are dependent on the trees cut down being replaced by trees that survive and live to full growth. Sure enough, the tragic disease and deer predation of our English forestry means that biomass is not a net-zero source of energy.

[Lord Callanan (Con)]

I do not quite understand the point the noble Earl is making. There are many sustainable forests across Europe and North America, where, as he says, there are different degrees of growth. Trees are cut down, and new ones are planted. For instance, in many of the forests in Scandinavia, more trees are planted than harvested, so it is a “sustainable plus” resource. We should be careful not to dictate to the North Americans —to the Canadians—how they manage their own forest resources. They are fully developed countries; they have environmental movements, as we do in this country; and they ensure that all their production is sustainable. As I said, we are in discussions with the Government of British Columbia, who are quite capable of managing these resources for themselves without being lectured to by us.

Energy Bills Discount Scheme (Amendment) Regulations 2024

Lord Callanan Excerpts

Tuesday 12th March 2024 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Energy Bills Discount Scheme (Amendment) Regulations 2024.

Relevant document: 15th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 7 February 2024. As we are all aware, Russia’s illegal invasion of Ukraine led to an exceptional rise in energy prices. At the time, the Government responded decisively to these unprecedented circumstances by delivering critical support to households and non-domestic energy consumers facing significant increases in their bills.

Through the energy price guarantee and energy bill support scheme, the Government have spent more than £35 billion supporting households. Non-domestic customers will receive about £8 billion through the energy bill relief scheme and the energy bills discount scheme, which I will refer to as the EBDS. The swift action to introduce this legislation protected consumers from these inflated prices, mitigating what would have been more severe effects of this economic pressure had the Government not intervened.

The EBDS provides a discount on energy bills for the 2023-24 financial year for energy customers on non-domestic tariffs. The EBDS provides a further, higher level of support where those on non-domestic tariffs have domestic end-consumers. This is to support customers on heat networks who were not supported by the energy price guarantee that was available to other domestic customers.

Heat network customers were not protected as heat networks normally purchase their energy through commercial contracts, which they then sell on to domestic customers. All eligible heat suppliers with domestic customers were required by the EBDS regulations to apply for this additional level of support and to pass this benefit on to their customers. They were required to do this within 90 days of the scheme being launched or within 90 days of becoming eligible. The support given by this scheme ensured that householders who might have otherwise been exposed to the full wholesale market price were instead protected. This support is estimated to be worth about £180 million in total or an average of £1,200 per customer supported.

I turn to the specific amendment to the EBDS regulations that we are discussing. Under current regulations, if a heat supplier has failed to apply to the scheme within the deadline set by the rules, it can still apply for support. Indeed, we have required heat suppliers still to apply for support in order to ensure that as many households as possible can benefit. However, the current regulations allow suppliers to apply for support even after the scheme ends at the end of this month. This means that a customer would not get their support in a timely manner, and it also means that the Government would be legally required to process and pay for the administration of applications potentially indefinitely, at a large administrative cost to the taxpayer.

Therefore, this amendment instead provides for an end date, after which no further applications can be made. The final date will be specified in rules that will be made and published if this instrument is approved by the House. The deadline we intend to set is 31 March 2024, which aligns with the end of the period of cover of the EBDS. We have publicised this 31 March end date widely across the relevant sector. There would be one exception to this 31 March deadline for heat suppliers that become eligible so close to the deadline that it would be unreasonable to expect them to apply. Those heat suppliers would have until 14 April to apply.

I come to the most important aspect of this scheme: the impact it has on households facing high bills. It is right to introduce this deadline for those customers too, so that they benefit from this scheme when they need it most, not at an undetermined point in the future. It is essential that as many people as possible benefit from this support, and my department has been conducting extensive engagement to encourage applications from all eligible heat suppliers.

We are also mindful of the number of vulnerable domestic customers who live on heat networks. We have taken action to try to ensure that these customers receive the support they need, for example, by working with applicants in the social housing sector to ensure that all those applications are approved.

To be clear, this deadline does not stop customers being able to seek redress where their network has failed to apply. The Energy Ombudsman in Great Britain and the Consumer Council for Northern Ireland can provide support with dispute resolution and require payments to be made to customers. If necessary, customers can also choose to pursue claims through the civil courts.

To conclude, this instrument amends the EBDS regulations so that the duty for heat suppliers to apply for support is a duty to apply in a timely way, ahead of a deadline. This is a responsible step to ensure that we support customers while limiting the administrative burden on the taxpayer as pressures from energy bills, thankfully, ease. I commend these regulations to the Committee, and I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I remind the Committee of my interests as a generator of small-scale hydroelectricity and as a recipient of feed-in tariff payments.

I do not have any specific comments on the SI, which simply fixes a wrinkle in the various energy support schemes, but I point out the concern raised by the Secondary Legislation Scrutiny Committee that up to 60,000 domestic customers may be missing out on the support available. The Minister has given some examples of what the Government are doing, but it seems that more could be done to ensure that domestic customers do not miss out on this money. How many heat networks are there and have we made attempts to contact all of them to push them into making applications?

I take this opportunity to ask the Minister more generally about progress in dealing with the underlying distortions that made the schemes necessary in the first place. As he said, the support schemes arose because of the substantial increases in energy prices following the Russian invasion of Ukraine. It was entirely understandable and right to support people and businesses under those circumstances, but those schemes did nothing to fix the underlying distortions in the electricity markets that are, in part, the cause of the high pricing.

The key feature is the fact that the price is driven by the marginal pricing of electricity and therefore by the price of gas. That means that the price of electricity from all sources, including renewables, where the generation cost fell during the same period, was driven by the increased gas cost. It meant that people on apparently 100% renewable tariffs saw their electricity prices more than double, even though the cost of renewables had fallen. Quite apart from raising the question of how legitimate those renewable-only tariffs are, this led to some generators earning supernormal profits at the expense of consumers. The support schemes meant that we saw the strange situation of some generators having their excess profits subsidised by the Government. The same was even more true of the gas producers.

I realise that it is more complex than that, as I am sure the Minister will say, especially with the expansion of contracts for difference, but it is generally recognised that electricity prices need to be decoupled from the marginal rate, and especially from gas prices, to remove the distortions and fluctuations that the current situation generates. I asked the Minister about this in an Oral Question on 6 September 2022. He referred then to

“the review of market arrangements, which is looking urgently at that exact situation”.—[Official Report, 6/9/22; col. 91.]

Yet I see that the Government have today launched yet another consultation covering, among other things, exactly the same issue. Launching another consultation does not feel like the urgency that he promised 18 months ago. Can he provide an update on progress and when we might finally see electricity pricing decoupled from the marginal cost of gas generation and the market distortions reduced?

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, as we have heard, this instrument enables the Secretary of State to set a date after which heat networks can no longer apply for support under the energy bills discount scheme. Under the scheme, qualifying heat suppliers are required—that is the word used—to apply for support, which they then pass on to their domestic customers in the form of energy bill discounts. The Department for Energy Security and Net Zero has said that not all QHSs have applied for EBDS support. Although the scheme itself will end on 31 March, there is currently no effective date for applications to be received. The Minister has set this out—so far, so tidy.

DESNZ has estimated that 3,000 qualifying heat suppliers may not have applied for the EBDS, but we do not actually know, because there was no register of the qualifying heat suppliers. We do not know how many there are or where they are, so we cannot follow them all up. That is one of the problems with the scheme that was set up. However, we estimate that up to 60,000 domestic customers may lose out on support as a result of qualifying heat suppliers not applying for a scheme discount, as required.

As we have heard from the noble Earl, Lord Russell, the noble Lord, Lord Vaux, and the Minister the value of lost discounts is about £1,200 a customer. That loss will disproportionately affect disadvantaged groups, such as the elderly and ethnic minorities—people who have been described as “skint little people”—who are significantly more likely to be on heat networks. Could the Minister set out what specific initiatives have been undertaken to encourage take-up of EBDS bids by heat networks? Have they made inroads into identifying where the qualifying heat suppliers are, so that they can be targeted and encouraged to apply? Which initiatives have been successful, if any, and how recently? Has it been an evolving, slow process?

The proposal in this instrument makes administrative sense, rather than leaving open an estimated total liability of £6 million for not closing the scheme to new applicants. Administrative sense is one side of this equation; the other side is the customers, and it seems less considered from their perspective. The Joint Committee on Statutory Instruments and His Majesty’s Opposition initially expressed concern that an obligation was being placed on intermediaries without any means of enforcing it. It is all very well requiring someone to do something when, if they fail to do it, nothing happens except that the individuals can take them to court or to the ombudsman.

How many times has that happened during the course of the scheme? I suspect it is very few times, if any. Can the Minister tell us whether any such initiatives have been taken? Essentially, this is about a vulnerable customer being required to take their landlord to court to get a subsidy for their gas bill. The chances of that happening are fairly remote, but we will no doubt hear from the Minister on that. This means that companies and organisations that have failed to apply for, or pass on, discounts have simply got away with it. Who knows the truth of that? We do not know who they are.

As I indicated, we support the closing of the scheme and the ending date for applications, but we are unhappy with the way the scheme has been allowed to drift into oblivion with no forfeit for those who should have acted on it.

[Lord Callanan (Con)]

I thank all three noble Lords for their contributions. I am proud to say that, through the scheme, the Government have provided support to hundreds of thousands of households, helping them with financial pressures when they needed it most. The Government remain fully aware of the continued challenges posed by cost of living pressures, including the impact of energy bills. We are providing extensive financial support to households, including a package of support to assist households with the rising cost of living—this will total over £104 billion, or £3,700 per household on average, between 2022 and 2025. All three noble Lords recognised the extensive package of support that was put in place.

I totally understand the points made by the noble Earl, Lord Russell, and the noble Lord, Lord Lennie, on the heat network sector. The noble Earl is right that our database is not as good as it could be in terms of what heat networks are available. It is perfectly possible at the moment for anybody to build a block of flats and, in effect, set up a heat network; they do not necessarily have to tell the Government about it. However, if noble Lords remember, we recognised that in the Energy Act, where we took powers to regulate the heat network sector. That is why we are introducing new consumer regulations for heat networks and, from next year, we will have new consumer protections in place, provided through the Energy Act. That will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be unfair, or if prices are significantly higher than comparable heating systems. They are, in effect, natural monopolies, and therefore it is right that consumer protections exist. Those regulations will also seek to introduce back-billing rules, which exist already to protect gas and electricity customers.

The noble Lord, Lord Vaux, raised an important point about reaching as many customers as possible. It is indeed a priority for my department to ensure that as many customers as possible access the support available to them. So far, 12,000 applications have been approved under the scheme, which means that hundreds of thousands of domestic customers have been supported. We think that that figure of 12,000 represents the vast majority of qualified heat suppliers. We know that a scheme that was very much developed in haste in response to the energy crisis—as noble Lords will remember—was never going to be perfect. On top of that, we will strive to make sure that as many people as possible are reached by the scheme— but we think that it has reached the vast majority of eligible customers. We are targeting communications at heat suppliers with vulnerable customers, including housing associations and local authorities, and we will continue to do so.

The noble Lord, Lord Vaux, raised an important question—not at all related to this statutory instrument—about the distortions of gas and electricity pricing, and the protections provided to customers as part of that. It is fair to say that this is a big issue that we are concerned about. Ultimately, the answer to the noble Lord’s question is that, as the amount of gas on the network declines and the amount of gas used to generate power declines, prices will stabilise and there will be a steady decoupling. There are no immediate solutions to that. Perhaps it would be more sensible for me to write to the noble Lord with more detail on the considerations that have gone into this, because a lot of work has gone on, including a lot of studying of the market to see how we can improve it. I recognise that many people consider that they are getting renewable electricity through their suppliers, but the price that they receive for it reflects the cost of gas in the system, because it is a centralised market. I recognise that people see that as anomalous, and we are looking closely at this.

As I said, we recognise that customers on heat networks are not currently protected by the same set of protections as other customers, so in future they will be protected by Ofgem via the regulations that I mentioned earlier. The noble Earl, Lord Russell, raised concerns about the impact on vulnerable customers on communal networks. Careful consideration has been given to equality when amending these regulations. We are fully aware that heat networks are more likely than other comparable heat sources to serve vulnerable and elderly customers, which is why we have carried out a number of activities to try to ensure that they receive the support to which they are entitled. We continue to engage with stakeholders such as the Heat Trust to learn about any issues with the customer journey, such as on the pass-through, and any other heat networks struggling with their applications so that we can continue to provide them with support.

--- Later in debate ---

[Lord Lennie (Lab)]

In the unlikely event that a customer takes a heat network to a court or ombudsman before the scheme closes, I presume that that application could continue beyond 31 March if it is not resolved by then and that the payment could duly be made.

[Lord Callanan (Con)]

That is indeed the case. The application would continue beyond 31 March. Even after the scheme has ended, the responsibility of the supplier during the application of the scheme continues to be legally valid and therefore it is possible to take retrospective action against a heat supplier that has not fulfilled its legal obligations.

Motion agreed.

Heat Pumps

Lord Callanan Excerpts

Wednesday 6th March 2024 Lords Chamber

[Earl Russell]

To ask His Majesty’s Government whether it remains their policy for 600,000 heat pumps to be installed per year by 2028; and, if so, what actions they are taking to achieve this goal.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the Government remain fully committed to supporting the transition to low-carbon heating; this includes the aim to grow the market to 600,000 heat pump installations per year by 2028, and a range of measures are supporting this market growth. From 2025, we also expect that heat pumps will become the primary heating technology for new homes, under the future homes standard.

[Earl Russell (LD)]

My Lords, I thank the Minister for his Answer to my Question. There have been numerous rumours in the press that the Government might be about to scrap the so-called boiler tax. Is this indeed the case and, if so, how will the Government continue to work with industry to make sure that this important target is met?

[Lord Callanan (Con)]

Of course there is no such things as a boiler tax and therefore it is impossible to scrap it; but if the noble Earl is asking about the clean heat market mechanism—which is not a boiler tax—we will be implementing it because it is an essential part of meeting that 600,000 target and, of course, our carbon budgets.

[Baroness Whitaker (Lab)]

My Lords, installers say that heat pumps can be installed in flats—not all of them, but quite a lot of them—and a lot of people live in flats. The problem seems to be with the manufacturers, who are reluctant. What will the Government do to enable heat pumps to be installed in flats where there is space?

[Lord Callanan (Con)]

Of course the grants are also available to anybody living in a flat. Sometimes there are space constraints, because you need an outside condenser unit and, potentially, a new hot water cylinder. The primary means of decarbonising flats will almost certainly be heat networks, which could of course be powered by heat pumps.

[Baroness Pidding (Con)]

My Lords, has my noble friend the Minister seen the excellent investigative journalism article published by DeSmog last year, which revealed that a lobby group, the Energy and Utilities Alliance, has been paying a PR agency to “spark outrage” and plant hundreds of anti-heat pump propaganda articles in both national and local media?

[Lord Callanan (Con)]

I thank my noble friend for that question; I did see that article and I completely agree with her that it was very good investigative journalism. I am supportive of a sensible debate on competing technologies, but planting misleading and false stories about heat pumps to negatively affect public support for the technologies is, frankly, a disgrace, and the big boiler manufacturers that fund the EUA should be ashamed of themselves.

[Lord Cameron of Dillington (CB)]

My Lords, the Minister will be aware that if heat pumps became universally used as a primary source of heat in rural Britain, the electricity supply to many villages and market towns would crash. That is before they start using electric cars en masse. What are the Government going to do to ensure that the national grid will be able to provide an adequate supply of power across all of Britain?

[Lord Callanan (Con)]

The noble Lord is right; we will require a massive upgrading of the national grid. That is proceeding and we have plans in place for it. Ofgem has authorised tens of billions of pounds-worth of expenditure to upgrade the grid. This is a transition; we gradually need to move away from gas supplies and gas boilers, and on to electrification of heat and electric vehicles. It will happen over time, but it is happening.

[Lord Leigh of Hurley (Con)]

My Lords, I declare an interest in that I have had two air source heat pumps for the last 10 years, and I somewhat regret it. With the median heat gain for air source heat pumps at 2.8, and the electricity-to-gas ratio of 4, they do not make sense. I ask my noble friend the Minister, and indeed all Members of the Chamber, if they would be so good as to speak to their local plumber—if they can get hold of him or her—and ask them the question that I asked, as to whether it is in any way possible to imagine 600,000 installations per year, given the level of training that would need to be given to plumbers to do that.

[Lord Callanan (Con)]

There are a number of parts to my noble friend’s question. First, on expanding the supply chain, he is of course right, but there are thousands of new installers being trained every year. I spoke to MCS, which is the trade organisation, and it is registering new companies every week to do this installation. We are funding training courses under the heat training grants. However, the main part of his question is about the price differential between electricity and gas. He is right—we need to rebalance those costs, and the Government will issue a consultation on that later this year.

[Baroness Blake of Leeds (Lab)]

My Lords, the number of heat pumps per 100,000 people in the UK is about eight times lower than the average across the EU. What steps are the Government taking to investigate how other countries have found success in raising their adoption rates, and will they apply any lessons learned to increase our own adoption rate, which is far lower than it needs to be?

[Lord Callanan (Con)]

The noble Baroness is right; it is lower than it needs to be, which is why we have plans to expand the installation rates up to the levels that I mentioned. We have a number of schemes to support that: the clean heat market mechanism, which I mentioned; the boiler upgrade scheme; and we increased the grants to £7,500. We support it under the social housing decarbonisation fund, and under the eco scheme as well. We have ambitious plans to expand the installation rate.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. If we are to improve the uptake of heat pumps, does the Minister agree that we need to improve the uptake of energy efficiency measures, so that the pumps are more effective in the homes they are installed in? At ping-pong on the then Social Housing (Regulation) Bill, his colleague the noble Baroness, Lady Scott of Bybrook, promised that the Government would issue a consultation on heat efficiency standards in the social housing sector within six months of Royal Assent. That six months has now run out, but the consultation has not even started. I wonder if he knows when it is going to start?

[Lord Callanan (Con)]

There are a number of aspects to the noble Baroness’s question. With regard to the consultation, I do not want to speak for the noble Baroness, Lady Scott—I do not know if she is in the Chamber—but I believe it will be issued imminently. With regard to the first part of the question, I say that we need to expand energy efficiency, irrespective of whether your home is powered by a heat pump or by a gas boiler. Using less gas and less electricity are both a good thing.

[The Lord Bishop of Manchester]

My Lords, the Minister kindly referred to the social housing decarbonisation fund, but there are something like 2.7 million homes owned by the social housing sector, with a projected cost of £36 billion to decarbonise them. Does he recognise that the fund is far too small to deliver that, and if so, what extra support will be made available to housing associations for them to achieve this for their poorer tenants?

[Lord Callanan (Con)]

I am sorry, but I do not agree with the right reverend Prelate. The social housing decarbonisation fund has been a massive success. Just last week, we announced its next phase: £1.1 billion-worth of government funding, matched by another £1 billion-worth of funding from housing associations and local authorities. I have had a number of meetings with them all, and they all agree that the fund is an excellent process and going well. The social housing sector is actually the best performing of all the different tenures.

[Lord Cunningham of Felling (Lab)]

My Lords, what studies have the Government carried out on terraced housing in our country? Many people live in terraced housing with little or no front gardens and little, if any, gardens behind. Where will the heat pumps go in those circumstances? What, if any, research have the Government done on that?

[Lord Callanan (Con)]

A huge amount of research has gone into it. We reckon that about 90% of homes in the UK are suitable for heat pumps. Obviously, there is a wide variety of different homes; the area that the noble Lord and I come from has a lot of terraced properties. You can use ground source heat pumps with common arrays in the road, and you can use heat networks that have one remote location powering the heat pumps. There are a number of different technologies where this is perfectly possible.

[Lord Birt (CB)]

My Lords, we languish not only very close to the bottom of the European league table of heat pump installation but at the bottom of another European league table: the ratio of the price of electricity to gas, with electricity being far higher. The Minister has discussed the matter before. When will we rebalance that imbalance in the UK?

[Lord Callanan (Con)]

If the noble Lord had been paying attention earlier, he would have noticed that I answered that question in response to my noble friend Lord Leigh. This is a difficult political issue—I will not shy away from that fact—but the Government are aware that we need to make progress on it, and we will issue a consultation this year.

Overhead Electrical Transmission Lines

Lord Callanan Excerpts

Thursday 29th February 2024 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, I start by thanking my noble friend Lord Swire for bringing forward this extremely important issue. It is right that we should debate it. I also thank all noble Lords who have contributed to this debate.

I remind noble Lords that the revised national policy statements for energy infrastructure, including a specific one with the catchy title of EN-5 on network infrastructure, came into force less than two months ago. Among other things, these set out the Government’s expectations for the use of undergrounding, which is the practice of laying electricity transmission cables underground and the subject of this debate.

That National Policy Statement for Electricity Networks Infrastructure states, as other noble Lords also recognised, that

“overhead lines should be the strong starting presumption for electricity networks developments in general”.

However, in nationally designated landscapes, such as national parks or areas of outstanding natural beauty—for example, Dedham Vale, which my noble friend mentioned—

“the strong starting presumption will be that”

developers

“should underground the relevant section of the line”.

That accounts for the importance of protecting the natural beauty of these areas. That strong starting presumption for overhead lines remains flexible, however, and undergrounding may be used in other areas in certain circumstances—namely, where there is

“a high potential for widespread adverse landscape and/or visual impacts”.

The noble Baroness, Lady Blake, acknowledged this point.

I hope that my noble friends Lord Swire and Lord Effingham are at least partly reassured on the flexibility available in certain locations. Such decisions will be weighed up by the Secretary of State. Furthermore, my noble friend Lord Effingham asked what proportion of overhead cables will be replaced with underground ones. I can advise that only those in protected landscapes would be. It is a relatively small or modest proportion. We acknowledge the beauty of our areas of outstanding natural beauty, hence our starting presumption of undergrounding in these areas.

My noble friends also asked about communications with Ofgem. I am not aware of any specific discussions that we have had with it on the possibility of increasing funding for the visual impact provision projected by the energy industry, but my officials will go back to Ofgem and I will write if we discover any further information or discussions on that subject.

The Government arrived at this policy position for various technical, operational, environmental and, of course, cost reasons. I seek the indulgence of the Committee to talk noble Lords through them, but before we delve into the depths of underground cables, if noble Lords will forgive the pun, and before I turn to the specific points raised I will give some context to the debate.

As Members of the Committee and, I assume, everyone taking part in this debate will know, the Government remain committed to our net-zero targets. To get there, we are accelerating domestic energy production. However, it is similarly critical that we expand our network infrastructure—a point recognised by all noble Lords. Without that, how are we to get the electricity generated in the North Sea, off the coast of Aberdeenshire and the rest of Scotland to the consumers who wish to use it?

To achieve this, we need to build about four times as much transmission infrastructure by 2030 as we built in the previous 30 years. I repeat that point: we need to build four times as much infrastructure by 2030—in five or six years’ time—as was built in the previous 30 years. It will require an estimated £40 billion to £60 billion of investment in our electricity transmission infrastructure by 2050. Let me be straight: in practice that will include building more overhead lines to connect supply to demand. I accept that will be an unpleasant pill to swallow for many in the Committee and, undoubtedly, within the country as a whole and some rural areas. However, it is one that we cannot shy away from.

The reason for that is that there are many benefits to so doing. Overhead lines are much easier to maintain. Trying to identify a fault in an underground cable is like finding a needle in a haystack, with multiple disruptive excavations needed, and often takes many weeks to complete. Overhead lines are much cheaper to build, as has been said. Some estimates suggest that undergrounding may be between five and 10 times more expensive, as the noble Lord, Lord Bruce, mentioned. Costs depend on the topography of an area and other factors. Those costs are ultimately passed on to consumers through their electricity bills. That is a difficult case to make to families up and down this country who are struggling with the cost of living, and it sets a high bar to meet for changing the Government’s policy.

I have talked about the urgent need to accelerate the deployment of new transmission infrastructure, and overhead lines are much quicker to build than underground lines. Some of us think that the time taken to build overground lines is long enough, but it would cost much more if we had to put them all underground. As noble Lords will well know, and have raised, time equals money and the longer the delays to rolling out transmission infrastructure, the higher developers’ constraint costs. Network constraints occur when the electricity transmission system is unable to transmit power to electricity users because the maximum capacity of the circuit is reached. The National Grid electricity system operator manages those constraints by paying generators to switch off or turn down in locations where the network is congested, and to switch on or turn off in locations closer to electricity users. Those constraint costs are ultimately passed on to consumers.

Analysis from National Grid indicates that, if delays to network build persist, annual constraint costs could rise from around £2 billion per year in 2022 to around £8 billion per year in the late 2020s. That would be the equivalent of an extra £80 per household per year. Undergrounding more of our essential transmission infrastructure would, I am afraid to say, only increase that cost to consumers even further.

Let me be clear that undergrounding has an important part to play in developing and delivering our critical network infrastructure, and is rightly the default starting position for protecting our most important landscapes, where overhead lines cannot be rerouted. This helps to mitigate the visual impact associated with overhead lines and pylons, which many communities are understandably concerned about—such as with those natural landscapes in East Anglia to which my noble friend Lord Swire referred. Burying cables underground, as the noble Lord, Lord Bruce, ably demonstrated and pointed out, also protects them against adverse weather conditions.

Another question that my noble friend Lord Effingham asked was about whether all future consultations on overhead lines can factor in the benefits of undergrounding. It is important for me to emphasise that developers, not government, are responsible for bringing forward the preferred design of an electricity networks project. The noble Baroness, Lady Blake of Leeds, asked how the balance was achieved in all cases by developers—and I assure the noble Baroness that developers take into account many things, including regulatory requirements, planning policy, cost, technical feasibility and environmental impacts. In doing so, it is all about striking a balance between all those different and often competing considerations. The consenting process considers and scrutinises those proposals. Undergrounding transmission is, I am afraid, not a simple change that can be made late in the process of a project’s development; it is something that needs to be considered very early in that process.

My noble friend also warned in his speech that something awful was about to happen to our countryside, by which I presume he is referring to the pipeline of overhead transmission infrastructure waiting to be built. It is equally important to emphasise that we must not downplay the environmental impacts of undergrounding. In fact, installing underground cables requires significant engineering works, which not only prolongs the construction time compared to overhead lines but causes significant damage to the surrounding area. The breadth of land needed for trench cabling, for example, is around the width of a football pitch. To the point made by the noble Lord, Lord Bruce, about situating water pipes next to underground electricity cables, I am afraid that that might not be such an efficient prospect after all. Of course, it would serve only to widen that trench even wider.

I move on to the point about the environmental and ecological impacts of overhead cables. The environmental impact of undergrounding, as I said, can be significant and indeed permanent, not only during installation but during operation. It can, in essence, create a somewhat sterilised strip of land where there were once trees and hedgerows, causing habitat and species loss. We should ask ourselves whether that is a price worth paying because of the visual impact of overhead lines; we may have different opinions about that. As with many discussions and considerations of energy policy, it is about balancing out different risks and problems in every area.

[Lord Bruce of Bennachie (LD)]

I understand what the Minister is saying, but we have certainly had experience of quite a number of pipelines being laid from the north of Scotland right across Scotland. That was years ago, but you would not know where they are now. So, yes, there was disruption at the time, but it settled completely.

The Minister acknowledged as well that security of supply could be an issue. Is that a factor that should be weighed a bit more heavily where there are lines that are systematically prone to disruption on a regular basis, so that undergrounding might be a better offer?

[Lord Callanan (Con)]

Yes, I absolutely concede the noble Lord’s points but, given the modern policy environment and all the legal impacts, much energy infrastructure that was built many years ago would be very difficult to build today. In past generations, consumers were perhaps much more understanding of installations of nationally significant infrastructure than they are now. I absolutely accept the noble Lord’s point. In all these considerations, it is also about balance—balancing out competing factors, of which cost is one and convenience is another, but security of supply is an equal factor that also needs to be considered. I suspect that the noble Lord is probably considering the low-voltage distribution network rather than the high-voltage transmission aspect of the supply.

My noble friend Lord Swire talked about the different creative technologies available for laying underground cables and asked whether the Government had considered those factors. Ultimately, it is not for the Government to opine on those matters. Those innovative solutions are quite rightly being driven forward by industry and they are a brilliant example of how we can use such innovations to support the delivery of our energy infrastructure ambitions and our net-zero infrastructure. The transmission owners and others are the experts in this field and, of course, we will continue to liaise with and support them in their endeavours.

I hope I have—but I suspect I have not—succeeded in persuading noble Lords that undergrounding is far from being the silver bullet in our endeavour to expand our network transmission infrastructure and meet our net-zero targets. In fact, using underground rather than overhead lines may in some respects have the opposite effect and lead to more delays rather than fewer, given that the installation takes much longer. In some cases, the upfront costs are perhaps not worth it in the longer term, as my noble friend Lord Effingham suggested. In our bid to greatly expand our domestic energy production and meet the needs of households up and down the country, I am afraid that we need to act and build networks faster than we have ever done in the past.

It is for those reasons, which I have talked the Committee through, that the Government have decided to maintain our policy position of a starting presumption of overhead lines for electricity network developments in general. That is not to say that the Government stand idly by while communities living in the path of new transmission infrastructure are affected; it is quite the opposite. That is why, at last year’s Autumn Statement, the Chancellor announced proposals for a community benefits scheme for communities living near transmission network infrastructure, which the noble Baroness, Lady Blake, asked about. The communications campaign is due this year and I invite the noble Baroness to get in touch directly so that we can provide more details on it.

I am afraid that I am running out of time, so I will move to my conclusion. I will write to noble Lords if I have not answered any of their points.

I do not need to tell the Committee that, as with so many issues, no policy is etched in stone indefinitely. In fact, the Government would not be doing our job properly if we did not keep policies under review. However, that falls far short of committing to look again at the Government’s current policy on undergrounding less than two months after it came into force. Now is not the time. The Government can determine whether this should be reassessed if and when more evidence is provided by industry. For now, the best place for the majority of transmission infrastructure is—I am sorry to say—up in the air, for technical, operational, environmental and cost reasons and, most importantly, to protect consumer bills.

[Baroness Blake of Leeds (Lab)]

May I ask for a written response with reference to the community benefit packages and the consultation package, just to give us an update? Several months have gone by and we should be moving on this.

[Lord Callanan (Con)]

I would be happy to write to the noble Baroness on that matter.

Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024

Lord Callanan Excerpts

Tuesday 13th February 2024 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 19 December last year.

The 2011 report by the noble Lord, Lord Hutton of Furness, started the Government on the road to the reform of public sector pensions. Although the Public Service Pensions Act 2013 made a large number of reforms, it did not cover all public bodies, including those within the Nuclear Decommissioning Authority group.

The Nuclear Decommissioning Authority, or NDA, is the statutory body responsible for the decommissioning and safe handling of the UK’s nuclear legacy. It has 17 sites across the United Kingdom, including Sellafield. The NDA was created in 2005 via the Energy Act 2004. However, many of its sites have been operating since the middle of the 20th century. This lengthy history has therefore led to a complicated set of pension arrangements. This includes two pension schemes that, although closed to new entrants since 2008, provide for final salary pensions and are in scope of the reforms. These are the combined nuclear pension plan and the site licence company section of the Magnox Electric Group of the electricity supply pension scheme.

In 2017, the then Department for Business, Energy and Industrial Strategy and the NDA engaged with the trade unions to agree a reformed pension scheme tailored to the characteristics of the affected NDA employees. This resulted in a proposed bespoke career average revalued earnings—also known as CARE—scheme, which, following statutory consultation with affected NDA employees and a ballot of union members, was formally accepted by the trade unions. The bespoke scheme is in line with the move to CARE made by the rest of the public sector.

Subsequently, a formal government consultation was launched in May 2018 and the Government published a response in December 2018 confirming the proposed changes. The reformed scheme still offers excellent benefits to its members. Notably—indeed, unusually for other reformed schemes—it still includes provision for members to retire at their current retirement age. For nearly all of them, this will be 60.

A statutory framework which applied to pension benefits across the NDA estate meant that specific legislation was needed to implement the new reformed scheme. The Energy Act 2023 provided the Secretary of State with the powers to make secondary legislation designating a person who will be required to amend the provisions of a nuclear pension scheme. This secondary legislation is being made to require the NDA and Magnox Ltd to amend relevant NDA pension schemes and implement CARE-based pension reform in accordance with the broader public sector pay policy. The instrument will also modify the statutory pension protections contained in the Energy Act 2004 and the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990 in support of the reforms.

In conclusion, these measures will bring the Nuclear Decommissioning Authority group’s final salary pensions into line with wider public sector pensions. It will also deliver savings to the NDA budget, which will be recycled to support its mission of decommissioning the UK’s nuclear legacy. On that basis, I commend these regulations to the Committee.

[Lord Young of Cookham (Con)]

My Lords, I am grateful to my noble friend for that explanation, particularly as he does not seem in the best of health. I do not want to add to his distress, but I want to raise three issues.

--- Later in debate ---

[Earl Russell (LD)]

I thank the Minister for introducing these regulations. There is little information available other than the statutory instrument and the accompanying Explanatory Memorandum. I also note that this has not been picked up in any way by the Secondary Legislation Scrutiny Committee. I do not have many overriding concerns or objections, and I understand that it is likely to be the same for others speaking today. I will pick up the points that the noble Lord made, particularly in relation to the small numbers who have been excluded under paragraph 7.3.

These measures will bring NDA pensions into line with wider public sector pensions in a move from a final salary scheme to a career average scheme. The proposals have been agreed with the unions and include provisions for retirement on full pension before the state pension age. I welcome that.

As is customary, I will ask the Minister a few questions. Most of them relate to the same issue, namely that of timing—the cause of the timing and whether that delay has had any impact on the proposals being put forward today. I am just not certain, so I will ask questions around those issues.

As the noble Lord said, this was originally completed way back in 2017 and the consultation was published in May 2018. The Explanatory Memorandum blames a lack of parliamentary time for this almost seven-year delay in bringing this into law. Can it really be correct that it has taken a full six or seven years to find a few minutes of parliamentary time to carry these small changes forward? Maybe it is, but I seek clarification on that point.

Considering these proposals are now late, is there any impact as a result? The report says that the unions supported the proposals. Has their position changed since they were originally consulted? Has the Minister or his officials gone back to the unions to ask for an update on their position? Was the last time they were consulted back in 2017? I seek clarification on that, because it was not clear from the information provided.

The Explanatory Memorandum states that the proposals will save an estimated £200 million over the term of the scheme. Is that figure still correct following the delay? Is it the same amount? Has there been any loss of public funding from the delay in bringing these proposals forward? Are there any changes to the long-term savings?

Obviously, we are dealing with the Nuclear Decommissioning Authority. If any issues of people being exposed to radiation that were not known about came to light after these proposals came forward, would there be any changes in the pensions available to them as a result of the changes to the scheme?

Paragraph 10.3 of the Explanatory Memorandum mentions that most of the responses were against the proposals, but there is very little information. I understand that there were not many objections and that these were small numbers, but there was no information in the pack about the reasons for the objections. Could I ask for a sentence on that?

Paragraph 11.2 says that these proposals will impact 8,000 staff and that consultations will begin on 1 April. Is that still the same number? Has it changed over time?

I note the Government brought forward their civil nuclear road map last month, which involves a big expansion of our civil nuclear programme. Is the reason why this been delayed for seven or eight years and then rushed forward related—

[Lord Callanan (Con)]

No.

[Earl Russell (LD)]

No? Okay, that is fine. Finally, how will the Minister monitor the implementation of the changes? Will that be reported anywhere?

[Lord Lennie (Lab)]

My Lords, this instrument enacts the Nuclear Decommissioning Authority pension scheme, based on the review of public sector pension schemes by my noble friend Lord Hutton in 2011. This resulted in the Public Sector Pensions Act, which enabled the majority of public sector pensions to move from final salary to career average revalued earnings schemes. About 8,000 workers are affected as a result of this instrument. We have nothing to complain about on the scheme, but the process has raised a few questions, as the noble Lord, Lord Young, and the noble Earl, Lord Russell, have pointed out. I would like these to be addressed.

During the consultation, many respondents raised concerns that the proposed definitions and the application of the proposed powers were insufficiently clear or too broad. Many sought assurances that the powers would be restricted to implementing the reform agreed with their national trade unions. Furthermore, respondents requested either member or trade union and/or trustee engagement prior to the use of any of the powers. Could the Minister respond to those concerns?

The trustees of the CNPP and MEG-ESPS asked that they be given sufficient time to review the final rule amendments, indicating that about 12 months would have been appropriate. The response to the consultation says that, in the light of this specific request, as much notice as possible would be given to the trustees and members prior to implementation. We now know that the implementation date will be 1 April 2024. Can the Minister tell us when the Government notified the trustees of the changes? Did they deem this sufficient for their purposes of consultation and informing their members?

The noble Lord, Lord Young, raised a concern regarding the reform of the pensions for NDA employees who are covered by the Electricity (Protected Persons) (Scotland) Pension Regulations, which were not included in the public consultation. There are very few of them, as the noble Lord and the information provided say. How many are there? If a change is to be brought in for the persons in Scotland, presumably another full consultation will take place to precede any further regulations.

Finally, to repeat the question of the noble Lord, Lord Young, and the noble Earl, Lord Russell, the decision to introduce the scheme was taken on 28 December. There has been plenty of parliamentary time for this half-hour debate to take place, so could we have the actual reason why it was delayed so long?

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their valuable contributions to this debate.

I will start with the points made by my noble friend Lord Young and the noble Earl, Lord Russell. On the small numbers of people excluded, if an individual is entitled to pension protection under the Electricity (Protected Persons) (Scotland) Pension Regulations, they are not in scope for the changes in the NDA group. Whether an individual has this protection will depend on whom they were employed by and the pension scheme that they were eligible to be a member of in March 1990. The Government have reserved their position to keep this under review.

I think that every noble Lord rightly raised the delay in bringing forward these provisions. It was not that we could not find 20 minutes of parliamentary time over six years—if that were true, my noble friend would have a very valid point—but that we did not get the primary powers we required, as he will recall, until the Energy Bill was enacted late last year. It was entirely a result of needing the primary powers before we could make these changes, not a lack of parliamentary time. A great many other measures were held up due to lack of parliamentary time, but that was not the reason for the delay here. My honourable friend the Minister for Nuclear in the other place met the trade unions last year to discuss the NDA provisions in the then Energy Bill. They noted that they were also concerned about the length of time but, when the delay was explained, they were broadly understanding of the reasons.

On the £200 million of savings, despite the delay in the introduction of this legislation, we estimate that the level of savings remains broadly accurate. The exact level will depend on the change to pension arrangements and will vary depending on when members of staff retire, but we still believe that the savings will be significant, of the order of £200 million.

The number of staff affected—broadly 8,000—remains the same. Employees affected were aware of the changes due to be enacted as of April 2024, and there has been a great deal of communication during the last year, including a website set up for those affected. If changes are required to schemes not covered by these regulations, such as schemes in Scotland, that would require further consultation. The Government remain committed to ensuring that public sector pension reform proceeds in line with the 2011 review of the noble Lord, Lord Hutton. These regulations are essential to the success of the implementation of CARE-based pension reform in the NDA group in accordance with broader public sector pay policy.

Reflecting back, it is evident that the complexities of the NDA group’s pension schemes required tailored reforms. Engagement with the trade unions resulted in a bespoke career average revalued earnings scheme, aligning with the broader public sector framework and maintaining valuable benefits for its members. Furthermore, the reform preserves commitments to those excellent benefits, notably including provisions for members to retire at their current retirement age, as I said in opening, which for the majority will be 60. These measures will align NDA group final salary pensions with wider public sector standards, ensuring fairness and efficiency, yielding substantial financial savings and bolstering the NDA’s mission of responsibly decommissioning the UK’s nuclear legacy. I think I have answered all the points put to me—

[Lord Young of Cookham (Con)]

I am very grateful for my noble friend’s explanation that it was not a shortage of parliamentary time. As there are four former business managers in the Committee at the moment, will he ensure that in future his department does not blame the absence of parliamentary time when that is not the reason for the delay?

[Lord Callanan (Con)]

My noble friend makes a very good point. I will communicate that to officials. With that, I commend these reforms to the Committee.

Motion agreed.

Global Heating

Lord Callanan Excerpts

Thursday 18th January 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

I thank and pay tribute to the noble Baroness, Lady Sheehan, for bringing forward this important debate. It has been short but interesting none the less, with some excellent contributions from across the Chamber. I will seek to address as many of the points made as I possibly can.

Although the title of this debate focuses on efforts to adapt to climate change, it is of course equally of paramount importance that we do our utmost to limit further warming in this critical decade. In sharp contrast to the picture painted by the noble Baronesses, Lady Jones and Lady Blake, and the noble Earl, Lord Russell, the UK is—and is proud to be—a world leader on climate change. We are totally committed to net zero, to the Paris agreement and to keeping 1.5 degrees alive. We were the first major economy to halve its emissions, and we have one of the most ambitious decarbonisation targets in the world. We have achieved that while growing our economy by more than 70% since 1990. We have a much better record than—to pluck a random example—Germany, where the socialists and the greens are in government, because it is practical action that counts rather than fancy green rhetoric.

On assessments relating to the likelihood of exceeding 1.5 degrees of warming relative to pre-industrial levels this year, the World Meteorological Organization and the Met Office recently confirmed that 2023 was the warmest single year on record globally, at around 1.45 degrees above pre-industrial levels. While reaching 1.5 degrees above pre-industrial levels in a single year does not mean that the Paris agreement long-term average temperature goal has been reached, it is clearly a concern that record temperatures are already being set. The latest IPCC synthesis report drove home just how important it is that we limit the rise in average global temperature to 1.5 degrees above pre-industrial levels. Every increment of global warming will increase the adverse impacts of climate change, multiplying hazards and compounding risks that are more difficult and more complex to manage. That is why we put keeping 1.5 degrees within reach at the heart of our own COP 26 presidency and our international climate diplomacy efforts since then.

To answer the points made by the noble Baronesses, Lady Jones, Lady Hayman and Lady Blake, the Prime Minister has underscored our commitment to delivering on net zero. Our 2030 target means the deepest cuts of any major emitter since 1990, and we are determined to deliver on that. We were the first major economy to set a net-zero target in law, and we are committed to delivering net zero at home and, of course, to driving forward progress internationally to keep 1.5 degrees within reach in this critical decade.

However, it is of course a fact that the UK produces just 1% of global greenhouse gas emissions. We can address the remaining 99% and keep 1.5 degrees in reach only through international action and leadership, which is what we are providing. We made it the centrepiece of our COP 26 presidency and under the presidency, the proportion of global GDP covered by net-zero targets increased from 30% to over 90%. We will continue to focus on the most practical and deliverable measures that bring the largest global carbon savings.

At COP 28, we focused on driving forward efforts to protect forests, to scale finance for the transition and to accelerate net-zero transitions across a number of different sectors. On forests, we announced £576 million to support countries taking action to halt forest loss and to protect nature, and we saw the commitment to halt and reverse deforestation enshrined in the UAE consensus. We drove forward initiatives to scale finance, including the Prime Minister announcing £1.6 billion worth of new international climate finance programmes, and we endorsed the climate finance framework, which champions reform of international financial institutions to make them bigger, better and fairer.

The UK was also at the forefront of efforts to accelerate decarbonisation in many key sectors. To take an example, the International Partners Group, co-led by the UK and the EU, launched the Vietnam Just Energy Transition Partnership—JETP—a £15.5 billion resource mobilisation plan to help accelerate Vietnam’s transition from fossil fuels through to clean energy. The Powering Past Coal Alliance, which we also co-chair, announced 13 new members—including the USA, which has the world third-largest coal fleet—all committed to phasing out unabated coal power and to building no new coal capacity. We were also pleased to see two new breakthroughs launched on buildings and cement. In response to the question asked by the noble Baroness, Lady Kingsmill, these are just some of the international partnerships and initiatives that we will continue to drive forward action on.

As many noble Lords noted in the debate, important progress was made in Dubai. We are now globally unified around a commitment to transition away from fossil fuels, underpinned by a goal to triple renewables and double energy efficiency. A new fund for loss and damage has been established, and the first global stocktake under the Paris Agreement was successfully concluded.

Of course, we all know that that is not enough. Looking ahead, we have to work harder with partners to ensure that many of these key commitments are met, such as that to triple renewable power. The noble Lady Baroness, Lady Kingsmill, questioned what we, as the UK, are doing to scale up renewables. First, we have made very significant progress already. Since 2010, renewables have gone from less than 7% of our electricity supply to 48% in the first quarter of this year. Today, the UK is proud to be home to the five largest operational offshore wind farm projects in the world, and we have an extremely ambitious target to increase offshore wind to 50 gigawatts of capacity by 2050.

On the international side, we will continue to scale up renewables through UK initiatives such as Power Breakthrough and the Green Grids Initiative, which is all about scaling up the net-zero grids that we will all need for a net-zero future.

In answer to the point made by the noble Baroness, Lady Sheehan, on new oil and gas licences, this is of course a matter which we have debated across this House many times. I point out that while the Government are of course scaling up our own clean energy sources, such as offshore wind and nuclear, I agree with my noble friend Lord Lilley and the noble Lord, Lord Young of Norwood Green, that the UK still needs to utilise oil and gas for most of our energy needs. That will be a continued need over the coming decades.

New licences will slow the decline in UK production levels, rather than see them increase above current levels, as has been implied. Even with any new licences, oil and gas production in the UK is still expected to decline by 7% year on year—faster than the average global decline needed to align with the UN 1.5 degrees centigrade pathway. I have made the point many times before that it makes no sense to import LNG from other countries with higher carbon emissions when we could obtain it from our own resources, albeit that these resources are continuing to decline as the fields become depleted.

On adaptation, as noble Lords have set out, the impacts on climate change are already being felt. The UK has long recognised its importance. We are delivering on our commitment to spend £11.6 billion on international climate finance through to 2025-26, to ensure a balance between adaptation and mitigation, including at least £3 billion on protecting and restoring nature.

To support the most vulnerable in our world who are experiencing some of the worst impacts of climate change, at COP 27, the Prime Minister announced that we would triple our funding for adaptation from £500 million to £1.5 billion by 2025. Over the past 12 years, our international climate finance has helped over 100 million people cope with some of the worst effects of climate change. At the COP 28 summit, the UK negotiators were successful in helping to agree a framework to bring the global goal and adaptation into alignment. Of course, although we accept that there is further work to be done, this is a critical step towards more meaningful action. During our COP 26 presidency, we secured a commitment to double adaptation by 2025. We will continue to push for more donors to help deliver on this commitment.

To address another point made by the noble Baroness, Lady Kingsmill, we welcome the establishment at COP 28 of the new fund covering loss and damage, with funding in excess of $650 million. The UK announced a contribution of up to $40 million to this fund, with a further $20 million for funding arrangements, including for early warning systems and disaster risk finance. Given the scale of the need, it is essential for the success of the fund that it attracts new and wider sources of funding, including grants and concessional loans from public, private and some innovative sources. We will continue to progress this as much as we possibly can.

Also at COP 28, my colleague, the Minister for Development and Africa, announced a further £100 million of UK funding to help many vulnerable people adapt to climate change. The UK can be proud of its record and of everything that we are doing—both domestically and through the leadership we are providing abroad.

[Lord Young of Norwood Green (Lab)]

Before the Minister sits down, will he respond to the point I made about the Government’s support for small nuclear reactors?

[Lord Callanan (Con)]

I am happy to do so. I did not cover it directly in my speech because we made a big announcement about it last week. I answered Questions on it in this House only the other day. We are progressing big-scale nuclear reactors. We are committed to making a decision shortly on the progress of Sizewell C. We have provided £200 million to Rolls-Royce for the development of new SMRs. Great British Nuclear is rolling out our campaign of both SMRs and AMRs. Many of our existing nuclear plants will go offline towards the end of this decade. We need to make sure that we make the investments to replace them because that will be essential if we are to reach net zero. The noble Lord’s point is well made.

My time is up, so I will draw my remarks to a close. The House can rest assured that the UK will continue to deliver on net zero at home and to push and accelerate action internationally, while championing the need to address many of the worst impacts of climate change. The science demands that we drastically accelerate global action on mitigation in what will be a critical decade ahead. We will progress all these efforts both at home and internationally. Once again, I thank the noble Baroness, Lady Sheehan, for securing this debate, and all noble Lords who contributed.

[Lord Gascoigne (Con)]

My Lords, I thought I would just repeat the point made earlier in the Chamber by both the Leader of the House and the Opposition Chief Whip, the noble Lord, Lord Kennedy of Southwark, concerning the importance of brevity in this debate—indeed, in all debates. If noble Lords speak for the full time limits in this debate or exceed them, there will be insufficient time for the Minister and the noble Earl, Lord Kinnoull, to respond. So I humbly request that noble Lords stick to the allocated speaking time, which is a maximum of seven minutes. Thank you.

Civil Nuclear Road Map

Lord Callanan Excerpts

Monday 15th January 2024 Lords Chamber

[Earl Russell (LD)]

My Lords, I thank the noble Lord, Lord Lennie, for his contribution. This road map is overdue but at least it is here. The question is: will timely financial investment and industry participation follow? The Liberal Democrats recognise that nuclear energy has always been part of our energy mix and will continue to be so as we transition away from fossil fuels.

The road map creates new risks and does little to provide energy security in the medium term. It sounds very glorious to meet one-quarter of our electricity demands by 2050, but will it deliver? It is a bit of a curate’s egg. On these Benches, we think that the Government are putting too many of our energy eggs in the “grand nuclear gigawatt energy infrastructure projects will always deliver” basket. Gigawatt nuclear energy projects have a long history of being announced with much fanfare, running into a blizzard of problems, becoming delayed, being delivered late and way over budget or not being delivered at all. The reality of nuclear projects in the UK is that Hinkley Point C is well over budget, now £33 billion, and late. Little progress has been made on Sizewell C, despite years of discussion and attempts to find ways to finance it.

The current proposed financing package charges already hard-pressed consumers up-front. Why will it be any different this time? This strategy requires the extension of four AGR nuclear power plants beyond their planned end of life and is subject to regulatory approval. When does the Minister expect the regulators to take these decisions? Mini reactors should be explored, but this should be as well as, not instead of, investing in renewable energy.

If planning and regulatory processes can be streamlined for nuclear, surely that can be done for offshore and onshore wind. We welcome the £300 million invested to free the UK from energy dependence on Russian advanced nuclear fuels. This is critical to our security. When does the Minister expect that the UK will be totally free from Russia? The Government must be able to give a true account of the costs of nuclear decommissioning.

The future is renewable. By 2030, technology improvements could slash today’s prices by one-quarter for a wind and half for solar. Other technologies, such as long-term storage, are also promising. The Liberal Democrats are committed to ensuring that 80% of the UK’s electricity is generated by renewables by 2030. The UK Government are aiming to decarbonise Great Britain’s electricity system fully by 2035, yet they have not provided a coherent strategy to achieve their goal. Investment in renewables and green technologies is essential. How do the Government plan to integrate the nuclear road map with their renewables ambitions? Given the scale of renewables that the Government are planning, inflexible nuclear base load systems are an ill fit. We need the flexibility provided by technologies such as interconnectors, storage and demand flexibility. Finally, when will we see a full and comprehensive integrated energy strategy to achieve net zero with a clear road map for renewables?

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

I thank the noble Lord, Lord Lennie, and the noble Earl, Lord Russell, for their introductions. On the comments from the noble Lord, Lennie, we of course welcome the support of the official Opposition. The noble Lord is right to say that these are essentially very long-term schemes. It is good to have a degree of cross-party consensus between the two main parties about the importance of nuclear to our future energy system and energy security.

I was not sure of the Lib Dem position. The noble Lord started off quite positively, saying that the Lib Dems welcome the role of nuclear, which of course is a change from their attitude during the nuclear financing Bill. I think I spotted in what the noble Lord was saying a hint of possible support, but we will have to wait for clarity on that. I also agree with his comments about renewables. It is not an either/or choice; we need to do both. We need to contribute to nuclear to support our baseload ambitions and, of course, continue our world-leading support for renewables and the future rollout of solar, offshore wind and all the other renewable technologies.

We have published three key documents which reinforce the UK’s position as a leader in the civil nuclear renaissance: first, a civil nuclear road map; secondly, a consultation on alternative routes to market; and, thirdly, a consultation on a proposed policy for siting new nuclear power stations. In response to the question from the noble Lord, Lord Lennie, this really does set us on a path towards deploying up to 24 gigawatts of nuclear power in Britain by 2050, as part of the cleaner, cheaper and more secure energy system of the future. The road map very much establishes our vision for a vibrant British nuclear sector, which includes exploring building a major new power station and investing in advanced nuclear fuel production. It includes key enablers such as skills regulation, financing and effectively managing our nuclear legacy, and it sets out our long-term ambition for nuclear, providing high-level timelines and key decision points for a wide range of nuclear technologies over the next decade.

Finally, in recognition of our enhanced nuclear ambitions and the exciting potential offered by these new technologies, we are launching a public consultation on the proposed siting of new nuclear stations to help attract investment into the UK nuclear sector, and empowering developers to find suitable sites to enable a wide range of potential communities to benefit.

The noble Earl, Lord Russell, asked about freeing us from Russian nuclear fuel. I can confirm that it is the ambition of the Government to make sure that we are completely free of any components of Russian nuclear fuel by 2030.

[Lord Howell of Guildford (Con)]

My Lords, this road map is extremely welcome. However, in view of the fact that Hinkley Point C is now €15 billion over budget and many years late, and has almost bankrupted Électricité de France, with the Chinese partners reportedly stopping all further payments, does my noble friend think it wise to make a replica of the Hinkley Point project at Sizewell C and make it the spearhead of our nuclear programme, when smaller modular reactors and new technologies could be ready many years sooner and with much less burden on the taxpayer and the consumer?

[Lord Callanan (Con)]

My noble friend makes a good point, but the attraction of using a similar design is that many of the teething problems that have been undergone at Hinkley will hopefully be solved by the time we get to a decision on Sizewell. As I said, my noble friend makes a valid point and, again, it is not a question of either/or. We will continue the development of SMRs and AMRs in conjunction with large-scale nuclear.

[Lord Birt (CB)]

My Lords, I welcome the Government’s Statement on their long-term nuclear policy. It is and it should be a critical component of our strategy for achieving net zero. However, I want constructively to raise some points. I worked at No. 10 in 2004 when the decision was made in principle to give the go-ahead to a new nuclear plant, which of course became Hinkley Point C. It has become a 25-year project. This is a genuine question: what lessons does the Minister think the UK can learn about how we manage these ambitious long-term infrastructure projects? Did we set out to fund it in the right way?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Lord makes a number of good points. Clearly, there are some lessons to be learned from the process of Hinkley. We absolutely funded it in the right way, to go back to the point made by my noble friend Lord Howell, because the cost is being borne by EDF—and it is very kind of the French taxpayer to help us out in our nuclear programme. That is one of the reasons why we needed to look at alternative funding mechanisms for the Sizewell project. Of course, there are always lessons that can be learned in the regulatory process, the planning process and so on to try to bring these projects onstream a little sooner.

[Lord Jones (Lab)]

My Lords, the Minister will know of the great contribution made to the generation of nuclear power by the plants of Trawsfynydd, in the magnificent landscape of old Meirionnydd, and Wylfa on Ynys Môn, Môn Mam Cymru, or Anglesey. Can he give any encouragement today to people who wish to see further generation at the Trawsfynydd plant and the renewal of energy production at Wylfa? Does he know that those plants are far-flung in the north-west of Wales, where well-paid and skilled work is very rare? Can he give any encouragement at this stage?

[Lord Callanan (Con)]

I welcome the noble Lord’s comments. We recognise the substantial contributions that many communities in Wales have made over the years towards our nuclear policy in the UK and all the energy that we have received. Part of the consultation is a check on the siting of new nuclear plants, and community support, the existence of existing grid connections and so on will play important roles in future siting policies. The plants that he mentions score very well in that regard.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I draw attention to my nuclear interests as outlined in the register. I wholeheartedly welcome this report—and its earlier cousin, Towards Fusion Energy—particularly its emphasis on the cross-Whitehall endeavour to build the skilled workforce that the industry needs, which we all know will be a challenge. But back to Wales. Following on from what the noble Lord, Lord Jones said, can my noble friend the Minister reassure me that, in deciding sites for a further large-scale and small modular reactor, sufficient weight will be given to the levelling-up needs of north-west Wales, where the creation of a nuclear cluster, including gigawatt generation at Wylfa and both SMR and medical radioisotope production at Trawsfynydd, would indeed be transformative?

[Lord Callanan (Con)]

My Lords, I know from many conversations that I have had with my noble friend her absolute commitment to pursuing the cause of Wales and the contribution that it can make to our nuclear renaissance. I give her the absolute reassurance, building on the reply that I gave to the noble Lord, Lord Jones, that the communities she has mentioned are very well placed to benefit from the new nuclear policies that we have announced. On her other point, my noble friend is correct to say that we need to build a skilled nuclear workforce to ensure that we have the people we need to power this future nuclear renaissance.

[Viscount Hanworth (Lab)]

My Lords, the road map makes frequent reference to high-temperature gas-cooled reactors. An indigenous project to build such a reactor, called U-Battery, was shelved due to a lack of government support. From whom do the Government propose to import such technology—which, by the way, was pioneered in Great Britain? When will the Government give sufficient support to our native industry, which was once pre-eminent in the world?

[Lord Callanan (Con)]

The noble Viscount makes an important point. We had one of the most pre-eminent nuclear industries, but that industry was left to die during a number of Governments, particularly starting with the Labour Government in 1997. Now we are on a different page. There are a whole host of different new technologies and processes coming forward in this space, and it is very much the job of Great British Nuclear to guide us in the process of selecting the best technologies to take forward.

[Baroness Stuart of Edgbaston (CB)]

My Lords, could I have reassurance from the Minister that, in his discussions about civil nuclear energy and the skills space, which has been mentioned several times before, he works very closely with the Ministry of Defence? At the very time when it has an increased demand for those types of skills, it is experiencing a shortage. I do not want to see us robbing Peter to pay Paul and still not having enough people who can do these jobs.

[Lord Callanan (Con)]

The noble Baroness makes a very valid point. We are looking forward to the upcoming findings of the nuclear skills taskforce, very ably chaired by Sir Simon Bollom. I am sure he will have some interesting comments and observations for us in taking forward the diverse needs of the workforce.

[Lord Naseby (Con)]

Is my noble friend in a position to tell us when there will be a move forward on the advanced small modular reactors? My understanding of the background is that Rolls-Royce has been ready for the best part of two years, and I understand the same is true for the competitors, which are supposed to be bidding in due course.

[Lord Callanan (Con)]

I am happy to reassure my noble friend. We have given Rolls-Royce £210 million to help in the development of the next phase of small modular reactors. There are a number of competing technologies. Great British Nuclear will be making progress on selecting the most appropriate technology in the months and years to come.

[Viscount Stansgate (Lab)]

My Lords, on page 28 of the road map document, reference is made to the fact that additional sites will be needed beyond those already designated. In the light of what the Minister has just said about the process of consultation, when does he expect the Government to be in a position to make announcements as to which sites have been chosen?

[Lord Callanan (Con)]

There is quite a process to go through before then. We announced today the consultation on the national policy statement on siting, and we look forward to seeking the views of various interested parties and communities. There will be a further consultation once we have produced the national policy statement. There are a few steps to go through yet, but we want the process to be as transparent as possible, involving communities, residents and companies looking to take this work forward.

[Lord Walney (CB)]

My Lords, further to the question from my noble friend Lady Stuart, do the Government understand the scale of the step-up needed to run a massive civil nuclear expansion alongside military expansion? There is the renewal of the deterrent and the additional responsibilities that the hugely welcome AUKUS agreement places on the UK, getting not simply the workforces ready but the interdependencies across the supply chain in the UK.

[Lord Callanan (Con)]

We very much understand that. I know the noble Lord, in his previous constituency interests, had a close connection with these matters. It is important that we take the two projects forward together. There are a lot of synergies in the experience and training required among very skilled workers, and we are determined to make sure that we have the appropriate skills here in the UK.

[Lord Jackson of Peterborough (Con)]

My Lords, I welcome the road map and particularly the important focus on energy security. However, is not the wider context that many of the delays over the years have been as a result of the planning system and, therefore, that the Government need to look holistically at reform of strategic infrastructure planning, the compensation code and compulsory purchase? We have not had new legislation on compulsory purchase for over 40 years. Are those wider issues not just as important as access to private and public money?

[Lord Callanan (Con)]

My noble friend makes a good point. Separate processes for potential reforms to the planning system are going forward in government across a range of areas. Of course, it is important not just for the nuclear industry but in terms of grid connections, solar farms and all the other technologies coming forward. We need to find ways to do these things more quickly in this country and to make sure that people have appropriate opportunities to feed in their views, their objections, et cetera, but there is no reason why it should take literally decades to do some of these schemes.

[Lord Liddle (Lab)]

My Lords, speaking as a native of Cumberland and a former Cumbria county councillor, does the Minister recognise that the most enthusiastic supporters of new nuclear power are to be found in west Cumberland and among the people who work at Sellafield and in its associated activities? Will he end the record of dither and delay—this is not a party-political point—about what is to happen in the nuclear industry? Does he recognise that at Sellafield and at Moorside there is a potential site for SMRs and the major new gigawatt nuclear power station, which was planned but then scrapped, although it is now apparently back under consideration?

[Lord Callanan (Con)]

I agree with a lot of what the noble Lord said. I absolutely accept the strong support of the communities in west Cumbria. I am not sure I agree that they are the most enthusiastic—I am sure our colleagues from Wales would disagree about that—but we can probably agree that they are as enthusiastic as many other communities. His party-political point about dither and delay was slightly unfair; much of it was started under a Government whom he was close supporter of. But perhaps we should put those matters aside and welcome the fact that both Front Benches now agree that we should take forward the new nuclear renaissance we have announced.

[Lord Lansley (Con)]

My Lords, I draw attention to my registered interest as co-chair of the UK-Japan 21st Century Group, and to the fact that I have family members living on Anglesey. I say to my noble friend that they, too, share the view that the further development of nuclear power generation at Wylfa would be very welcome on Anglesey. Since Hitachi withdrew from the project at Wylfa, we have legislated for the regulated asset base model. With the example of Sizewell C, is there scope, and indeed action, to bring Hitachi back for a project at Wylfa again?

[Lord Callanan (Con)]

Wylfa is one of a number of excellently co-ordinated and positioned sites. I am not sure I want to give it any prominence beyond what it already has; there are a number of other potential sites. I am sure we will be very interested in having further discussions with Hitachi if it wants to progress those proposals.

[Lord Hope of Craighead (CB)]

My Lords, the sole remaining nuclear power station in Scotland, at Torness, is nearing the end of its useful life. Are discussions taking place with the Scottish Government about the contribution that Scotland can make to the road map once the Torness power station has to be closed down?

[Lord Callanan (Con)]

The noble and learned Lord is absolutely right: Scotland has an excellent long tradition of support for nuclear power. Sadly, that is not shared by the existing Scottish Government. We would like to have discussions with them on this, but they seem to have set their face against nuclear power. Of course, some of the planning powers are devolved, so they are entitled to take that decision. However, speaking on behalf of their friends in England and Wales, I am sure we will be very happy to help them out with power in the future, with the many cross-border connections.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I begin by welcoming the Government’s launch of the consultation on amending the contract for difference bidding, which will potentially allow repowering of onshore wind to be included within it. Of course, that could potentially see us finally getting new onshore wind, which we have not seen for so long—the cheap, affordable facilities that can be spread around the country. That can be done very quickly, if the Government sort that process out. But as the noble Lord, Lord Lennie, said, we are talking about the suggestion of small modular reactors and the final investment decision in 2029. The Minister in the other place said that we would not be looking at them until well into the 2030s. Are the Government not simply being distracted from the solution to our energy issues and energy security, which is renewables?

Given that the last estimate I have seen for the nuclear clean-up of our old nuclear is a cost of £260 billion—an estimate made by Professor Stephen Thomas at the University of Greenwich—and that the Nuclear Decommissioning Authority has just been warning that ageing equipment at Sellafield means that there is a serious risk of a fire there, should we not clean up the old mess before we risk creating new ones? Will the Government make sure that there is no public cost in any future clean-up, if indeed we see any new nuclear?

[Lord Callanan (Con)]

Yet again on this subject, the noble Baroness sets up a false choice between either nuclear or renewables. We are in favour of doing both; they both have a contribution to make to our diverse energy system. I bow to no one in my support of renewables. I think that wind and solar are great, and they are relatively cheap compared with fossil fuel sources; they will make a massive contribution to our energy supply in future. But they are intermittent, so it is important to have baseload capacity as well. You cannot run your whole energy system on wind and solar, however much the Greens would like to tell us you can. We need other sources as well—we need diversity, we need storage, and we need nuclear. We can do both.

[Baroness Lawlor (Con)]

My Lords, I welcome the Statement on the development of civil nuclear. I thank my noble friend for his answers so far but, given that it is a long-term project, two things must be kept under constant review and need constant effort. Have the Government made any further plans or given any thought as to how they will allocate finances between the large-scale nuclear projects, the SMRs and the AMRs? Bearing in mind that the research and technology will continue to change, we should not be tied too much to those that may not be so easy to achieve. What is the thinking about changing the weight given to the different sorts of nuclear? That is my first question.

In relation to long-term development, I pick up on the remarks of the noble Lord on the Cross Benches who talked about the large-scale structures involved and the kind of education and training we need for nuclear physicists, who are very highly trained. Physics is not a growing subject at university—many universities have closed their physics departments. That goes right down to the skilled technicians and technologies that we need to run any civil nuclear plant. I pick up on the comments of the noble Lord who mentioned the skills near Sellafield. We need to keep whatever skills we have, but there is a lot of work to be done at every level of education and training so that we have the workforce. Can the Minister comment on that?

[Lord Callanan (Con)]

I thank my noble friend for her suggestions. Of course, we need to pay close attention to the skills needs of the future, which is why we have set up the nuclear skills task force and are eagerly awaiting its report for us to take forward. My noble friend is also right that we need to keep a close eye on the costs of the different technologies. She is right to say that they are essentially long-term projects, but many of our energy infrastructure projects are long term—even offshore wind developments take a number of years to bring to fruition. Many of the projects that are coming on stream now were started a decade ago. Obviously, we want to try to bring down the timescale for those deployments, but nevertheless all those infrastructure projects contributing towards our long-term energy security of supply are essentially long term, and nuclear will be an important part of the mix.

[Lord Lucas (Con)]

My Lords, is the European pressurised reactor working reliably and safely anywhere in the world and, if so, where?

[Lord Callanan (Con)]

My noble friend makes a good point—but, of course, these are matters for the regulators, which will keep a close eye on the safety, security and efficacy of the technology.

Hydrogen Production Revenue Support (Directions, Eligibility and Counterparty) Regulations 2023

Lord Callanan Excerpts

Monday 18th December 2023 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Hydrogen Production Revenue Support (Directions, Eligibility and Counterparty) Regulations 2023.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 8 November this year. On 26 October, the Energy Act 2023 received Royal Assent. The Act provides a legislative framework for hydrogen, including provisions relating to the hydrogen production business model—a funding model to support the production and use of low-carbon hydrogen in the United Kingdom. Delivering this policy will be essential to kick-start the hydrogen economy and move towards the Government’s ambition to have up to 10 gigawatts of low-carbon hydrogen production capacity by 2030, as set out in the British Energy Security Strategy.

Under the business model, projects will be paid a subsidy for the hydrogen produced through a revenue support contract, similar to the highly successful contracts for difference for low-carbon electricity production. The business model, contracts for hydrogen, will be managed by a hydrogen production counterparty. Initial projects are to be selected through allocation rounds run by the Department for Energy Security and Net Zero. To receive business model support, a project must be an

“eligible low carbon hydrogen producer”.

Where such a project is allocated support, the Secretary of State will issue a direction to the hydrogen production counterparty to offer to contract with that project.

I hope noble Lords noticed that, last week, we announced 11 major new electrolytic hydrogen projects across the UK that will be offered support under the hydrogen production business model. This represents the largest number of commercial-scale green-hydrogen production projects announced at once anywhere in Europe. These new projects, stretching all over the country from the south-west of England and south Wales to the Highlands of Scotland, will invest over £400 million up front over the next three years, in a major boost to the UK’s green economy. In addition, CCUS-enabled hydrogen projects have also been shortlisted through the track 1 phase 2 cluster sequencing process.

I turn now to the detail of the regulations and their important role in all this. Fundamentally, the regulations satisfy the duty in Section 66(4) of the Energy Act 2023 by determining the meaning of “eligible” in relation to a low-carbon hydrogen producer. They tell the world who can be eligible for support.

The regulations set out that only new hydrogen production facilities, or existing hydrogen production facilities adding new production capacity, that can demonstrate that their proposal for the production of hydrogen is capable of complying with the UK low-carbon hydrogen standard, will be considered eligible. This will ensure that eligibility keeps pace with how the Government define low-carbon hydrogen. I recall that a number of amendments tabled during the passage of the Energy Act 2023 sought to ensure that regulations on eligibility made reference to the low-carbon hydrogen standard, so I hope that the Committee will welcome these provisions.

The regulations also set out the process by which the Secretary of State may direct a counterparty to offer to contract with an eligible low-carbon hydrogen producer. This follows a similar approach to contracts for difference, with which industry is very familiar. Similarly, the regulations include requirements for a counterparty to publish the full contracts entered into and establish a public register of key information. As noble Lords would expect, such publication is of course subject to redaction of confidential information and personal data. The regulations also set out various requirements in respect of Secretary of State directions to a counterparty. They include the circumstances in which directions cease to have effect and enable the Secretary of State to revoke a direction before it has been accepted.

Furthermore, the regulations require a counterparty to promptly notify the Secretary of State if it is, or considers it likely to be, unable to carry out its functions. Your Lordships may think such a provision sounds familiar, and indeed it is; it is very similar to the approach taken by the Nuclear Regulated Asset Base Model (Revenue Collection) Regulations 2023, which I am sure the Committee is following very closely.

The department has considered the content of these regulations extremely carefully. We carried out a full public consultation earlier this year, seeking views on the principles enshrined in the regulations and satisfying the statutory requirement to consult, as set out in the Energy Act 2023. We received 28 responses from various organisations and members of the public. We carefully considered all of them, although I am pleased that the majority supported our proposals. Accordingly, in our government response, which we published on 30 October, we set out plans to proceed largely as proposed, albeit with some amendments made in response to the feedback that we received.

This secondary legislation represents an essential step for implementing the hydrogen production business model to ensure that we can support the deployment of low-carbon hydrogen projects to achieve those 2030 ambitions, to improve our energy security and to help achieve net zero. I therefore commend these draft regulations to the Committee.

[Lord Naseby (Con)]

My Lords, I very much welcome this statutory instrument and congratulate His Majesty’s Government on bringing it forward so speedily. I just wonder whether my noble friend has any idea of how many potential clients there are in the United Kingdom. That would be interesting in itself.

Regulation 2(4), on page 2, defining an

“eligible low carbon hydrogen producer”,

is very sensible and has thankfully been included. Of course, because of the publicity for the domestic trial in the north-east of England, hydrogen is getting a bit of an unfortunate image. I am not sure whether any incentive can be produced to help the local communities—which I would say are getting difficult, but let us say they are being very careful—to do those trials. If there is not, there is not, but this is a negative reaction and not one I welcome.

Finally, it is usual for most statutory instruments, certainly the ones on which I comment, to have a sunset clause for review. I do not see one, unless I have missed it, but that would have helped.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

Can I just put on record my appreciation for the incredible contribution that the noble Lord, Lord Teverson, has made in this area? I certainly benefited enormously from our working closely on the Energy Bill, and going forward from that.

I also echo the Minister’s comments on the progress that has been made; during the passage of the Bill, there were times when we wondered how we were going to get through it. I assure the Minister that the announcement of the first funding round, with its 11 successful green hydrogen projects, has been noted and is welcome. I certainly look forward to hearing about their progress.

I want to make a few comments on the regulations before us. As we have heard, this statutory instrument is one of the first to follow from the 2023 Act and we know that there are more to come. The regulations cover, in particular, the process whereby the hydrogen low-carbon business plan will be implemented during the initial allocation period of contracts for hydrogen producers; all of this goes towards the target of 10 gigawatts of hydrogen production.

As I understand it, schemes will be identified and quality-assured by the Minister, who will then direct the hydrogen counterparty—it is identical in structure to the low-carbon contracts company—to provide contracts for companies that have been deemed eligible. All of that is absolutely fine and the right thing to do, especially when we consider the initial allocation process.

The Explanatory Memorandum states that the initial allocation will give way to a competitive tender process later on. Some more detail on that would be useful as we go forward; perhaps it will be forthcoming. However, at this moment in time, we are considering the initial allocation process, which is to be informed by the centrepiece of the SI: the low-carbon hydrogen standard, which has been outlined for us today. This refers to a detailed document setting out the greenhouse gas emissions and sustainability criteria that programmes applying for an allocation contract should follow.

I note the stringent qualifying criteria for a project’s eligibility. Of course, they require a project not to exceed a certain level of carbon emissions and to measure fugitive hydrogen—that is, the process whereby hydrogen is produced and all the implications around hydrogen—for its duration. It is a system-wide standard for the low-carbon nature of that hydrogen. For a project to get a direction from the Minister, it must comply with the standard when it receives agreement to proceed.

I just want to pick out that point. As we understand it, the standard will evolve. Indeed, the standard to which the SI refers is version 2 of the UK low-carbon hydrogen standard; that evolved from the initial standard, which was produced immediately after the Act was passed. Version 2 has emerged from consultation with the correction of various elements of the initial standard that could have caused difficulties. It has tightened up several matters that were uncertain, difficult or in need of clarification. It is absolutely clear in the documentation and the Explanatory Memorandum that it is intended that the standard will evolve; this means that the department envisages that it will produce further iterations of the standard in future. The low-carbon hydrogen standard as it currently stands is therefore likely to change. Does the Minister think that this will present some difficulties for those companies that have had their contracts approved? Clearly, although they will be signing up under version 2, they may not necessarily comply if we move on to versions 3 or 4—or more. It would be good to get some assurances around what the implications will be for companies in the earlier rounds.

There needs to be a bit of thought about whether those companies could be disadvantaged as we go forward. Will the Minister have some discretion in considering this? Of course, it could go either way, although it is very unlikely that there would be a relaxation of the carbon emission standards, but there is something to pick up there. Is it possible that, with these changes, companies might be put in a place where there are more costs, expense and planning? It would be useful to have more understanding of the methodology that will be used to determine whether companies are continuing to adhere to the standard once it is set in the contract. From the initial comments, I understand that the Minister is satisfied that this will work well. Could he expand on some of the changes that might come along?

During the consultation, some respondents suggested that further information could be published in a contract register, including outturn volumes, CO² capture rates and CO² capture quantity. It is obvious that a balance needs to be struck between transparency and what useful information is kept confidential but, as making this information public seems like it would have a positive impact, is it that the impact is not deemed significant enough to lower confidentiality? Alternatively, is it that there are further drawbacks to publishing this information that have led the Government to proceed with the initial approach? A bit more clarification around that decision-making would be welcome. On the other hand, 10 of the 23 respondents disagreed with information that the Government are proceeding with publishing, primarily due to the financial aspects. Could the Minister please elaborate on the decision-making process there?

I welcome the progress that has been made and look forward with interest to see how we can move forward in the area of hydrogen, which seems to be fairly fraught—I note the comments of the noble Lord, Lord Naseby. I am also interested in the response on the review. It is very noticeable that that is missing, because of the process. But, in such a new departure, a review would be useful and welcome.

[Lord Callanan (Con)]

I thank all noble Lords for their contributions to the debate. Low-carbon hydrogen will be an essential part of our future energy mix, and the hydrogen production business model seeks to address one of the key barriers to its deployment: the higher cost of low-carbon hydrogen, compared to higher-carbon counterfactual fuels. The Government remain committed to delivering on our hydrogen ambitions—first, those to help support energy security, but also our decarbonisation goals.

The message from the 2023 progress report from the Climate Change Committee was the need to deliver policies to enable deployment at scale of new industries such as hydrogen. I think that sentiment is widely recognised across this House and by industry. Last week’s announcement represents a major step forward in helping producers to deliver a fuel of the future today, backing some of our fantastic businesses here in the UK to go greener. These regulations are vital to enable those contracts to be awarded, so that projects can take the investment decisions that will kick-start the deployment of low-carbon production in all parts of the United Kingdom. But we are not stopping there. A new second round of funding is already available for producers to apply for, so that they can develop the next round of projects and then subsequent ones that help to build on that success. I will deal with some of this in more detail as I go through the questions raised by noble Lords.

--- Later in debate ---

[Noble Lords]

Oh!

[Lord Callanan (Con)]

Damned by faint praise. We have always had an excellent relationship and I am sure we can look forward to many exchanges from the Back Benches when he has left the Front Bench of Liberal Democrat politics and joined the real world of politics that the rest of us take part in. I am joking—it has been a pleasure to work with him. On so many issues we generally agree and see eye to eye. It has been fun working with him, and I am sure we will have lots of contact in the future. I thank him for all the work that he has done contributing to these discussions and many of the legislative discussions we have had in the Chamber. With that, I commend these regulations to the Committee.

Motion agreed.

Limiting Global Temperature Increase

Lord Callanan Excerpts

Wednesday 13th December 2023 Lords Chamber

[Lord Whitty]

To ask His Majesty’s Government whether (1) the position of the OPEC states, and (2) the lobbying of fossil fuel companies, at the Dubai COP 28 have made it more difficult to achieve the goal of limiting global temperature increase by 2050 to 1.5 degrees Celsius above pre-industrial levels.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the UK Government do not comment on the positions of different groups and countries. The UK worked tirelessly with all parties to push for an ambitious outcome at COP 28 that keeps 1.5 degrees within reach, and we welcome the deal reached this morning, which is the first time that there has been a global agreement to transition away from fossil fuels. It maintains the Paris Agreement to limit global warming to 1.5 degrees centigrade.

[Lord Whitty (Lab)]

My Lords, I join with the Minister in accepting that the current draft is a darn sight better than the dreadful draft presented two days ago, but it is still, sadly, deficient. In the run-up to the COP, we not only saw the petrostates and fossil-fuel companies trying to derail any reference to fossil fuels in the agreement; we also saw the IPCC and the scientists warning us that we were well off the Paris trajectory towards 1.5 degrees, to which we are all supposed to be signed up. Perhaps we also ought to acknowledge that any improvement due to the UK Government’s intervention was down to our own Minister, the noble Lord, Lord Benyon, with the actual leader of the British delegation being called back from saving the world to saving the Prime Minister. Is not this Government’s moral authority to persuade smaller, more vulnerable and poorer nations to adopt a net-zero policy sadly undermined by our continued licensing of oil and gas extraction in the North Sea and other retreats from our green policies? Can the Minister give us a date for abandoning those polices?

[Lord Callanan (Con)]

There was a whole series of questions in the noble Lord’s statement. This was an international agreement, involving almost 200 countries. Is it perfect? Is it everything we would have wanted? No, but it is certainly a great achievement by our extremely hard-working negotiating team. I do not agree with the noble Lord on the second part of his question about licensing and increased production in the North Sea. Even if they come on stream, the output in the North Sea will still continue to decline and we are still committed to phasing out oil and gas production.

[Lord Naseby (Con)]

Will my noble friend reflect that it is not just carte blanche? There will be situations where an oil company finds a new field, perhaps like the one 200 miles north of the Falklands, where the quality of the oil is far better than the oil that we produce in the North Sea, and it would make economic sense to substitute one for the other in the future. Then at some stage, that field will be reduced. It is not absolutely static, is it? We now want a situation where the industry decreases but at the same time improves the product.

[Lord Callanan (Con)]

My noble friend is right, in that different circumstances will apply to many countries, but we are very clear about the trajectory that we are on. We need to bear in mind that this is a transition. It cannot happen overnight, but we are clear on the direction in which we are travelling.

[Earl Russell (LD)]

My Lords, do the Government now regret their decision to recall our Climate Change Minister 6,831 miles to London, putting party before planet? As a nation, we were not adequately represented at the crucial point in these negotiations. Is it not the truth of the matter that the Conservatives have prioritised their own local difficulties over crucial negotiations to tackle the climate emergency?

[Lord Callanan (Con)]

I am sorry, my Lords, but that really is a nonsensical question. Graham Stuart is a Member of Parliament and has duties to perform in Parliament. The negotiating team were in constant contact with him, all the time. He flew back out to COP last night. Our own Minister, my noble friend Lord Benyon, was there as well, occupying the UK chair, alongside the fantastic team of negotiators, who held the pen for many of the negotiations and secured some far-reaching commitments in line with UK’s policy objectives.

[Baroness Boycott (CB)]

Now that we have reached an agreement in Dubai, is the Minister sill completely confident that the UK will reach our target of a 68% reduction on NDC by the end of 2030? As has been mentioned often in this House, we have rolled back on some of our commitments, such as those on electric vehicles and various other things, and I cannot believe they will not have an impact on that target. Can I have the Minister’s reassurance that he will publish the Government’s evidence base that the things which have recently taken place, in terms of rollback, will not affect the crucial outcome?

[Lord Callanan (Con)]

I can happily tell the noble Baroness that we remain committed to all our targets.

[The Lord Bishop of Oxford]

My Lords, I assume the Minister will be aware of the large amount of lobbying taking place, not only at the COP but around the COP through social media. One oil company is estimated to have spent $1.8 million on TikTok videos alone, seen by millions of people across the world, and helping to spread climate disinformation. Does the Minister think the Government should be doing more through the Counter-Disinformation Unit to challenge climate disinformation, given the scale of what is happening and the risk to the world of the failure to curb emissions?

[Lord Callanan (Con)]

I understand the point that the right reverend Prelate is making, but one person’s disinformation is another person’s free choice and free speech. There is always robust debate about all of these issues. There will be continue to be robust political debate about it, and I think that is right in a democratic society. We are very clear on the policy that we should be following and that we are committed to. We are committed to net zero; it is a legal obligation. The Government are committed to that trajectory.

[Baroness Sheehan (LD)]

My Lords, the agreed wording of COP 28 in the small hours of this morning does not go far enough, given that scientific consensus is strongly in favour of a phase-out of fossil fuels. Nevertheless, this is what we have signed up to. Can the Minister say whether the Government will publish a plan to say how they will meet our commitment to

“Transitioning away from fossil fuels in energy systems, in a just … and equitable manner, accelerating”

—and that is a key word—

“action in this critical decade”.

[Lord Callanan (Con)]

We are into semantics and wording, but a transition away with clear deadlines is, in our view, a phase-out in all but name. It is not the language that we would have preferred, but in a multilateral negotiation there has to be compromise. We are very clear on the trajectory we are following. We have published numerous plans about our transition. We are accelerating the rollout of renewables and reducing our use of oil and gas, and that will continue.

[Baroness Blake of Leeds (Lab)]

My Lords, I too recognise today’s COP agreement as an important moment for the world. It is the first time there has been a global commitment to a transition away from fossil fuels. There will always be those vested interests pushing back, as there was at COP. The reality is that limiting global warming to 1.5 degrees still requires much to change. Despite the Minister’s attempts to reassure us, it was disappointing that, when their leadership was most needed at COP, our Government put their party infighting first. To keep 1.5 degrees alive, they will need to do better and lead by example. Therefore, as a result of the statement released this morning, what plans do the Government have to show strong international leadership and to make sure that we bring in the changes of direction needed? Are there any plans for changes at this moment in time or not?

[Lord Callanan (Con)]

I repeat the answer I gave earlier: these statements demean the noble Baroness. The UK provided fantastic leadership. We have an official, Alison Campbell, who co-chaired a number of the panels. She was the penholder on a number of these negotiations. We succeeded in all of our aims. There was robust political leadership; Graham Stuart was there. For a lot of the time, our own Minister, my noble friend Lord Benyon, was there. There were many other Ministers who were also there. There was no gap in UK representation or in the agreements that we achieved.

[Baroness Fox of Buckley (Non-Afl)]

My Lords—

--- Later in debate ---

[Baroness Fox of Buckley (Non-Afl)]

My Lords, whatever about the lobbyists from the fossil fuel companies, do the Government have any assessment of the cost in terms of CO₂ used to travel to Dubai, or in terms of public money paid to facilitate the tens of thousands of pro-net zero lobbyists, NGOs and consultants who attended COP 28? Can the Minister reflect on the impact for developing countries of not using fossil fuels when they are so essential for enabling their citizens to achieve the prosperity of western economies?

[Lord Callanan (Con)]

On this issue of lobbying, tens of thousands of people were at COP, representing a whole series of different shades of opinion. Of course, there were lobbyists from all sides, but that does not mean you have to agree with the position that they take. A wide range of views were represented; I said to the noble Lord, Lord Foulkes, when he asked me something similar last week, that you listen to the views, and there are lots of people having meetings around it, lobbying groupings and so on, but the negotiation is done by committed teams of officials who probably do not watch any of the TikTok videos that the right reverend Prelate referred to. However, as I said earlier, the needs of countries are also different in different environments. We are fortunate, being a relatively wealthy country, that we can transition away from fossil fuels. It is much more difficult for some third-world countries, which is why we are offering them considerable amounts of finance—we have £11.6 billion of international climate finance with which to help them with the transition. We are leading on initiatives such as the Powering Past Coal Alliance, which helps developing countries to move away from coal-fired power stations as well. So we are taking a range of different initiatives in collaboration and co-operation with a number of different other countries.

Hydrogen Heating

Lord Callanan Excerpts

Monday 11th December 2023 Lords Chamber

[Baroness Sheehan]

To ask His Majesty’s Government what assessment they have made of the finding of the National Infrastructure Commission that there is no public policy case for hydrogen heating, set out in the Second National Infrastructure Assessment published in October.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, heat pumps and heat networks will be the primary means of decarbonising heat for the foreseeable future, and will play an important role in all 2050 scenarios. Of course, we welcome the NIC’s input, are carefully considering the analysis and will respond to the report in due course.

[Baroness Sheehan (LD)]

I thank the Minister for his reply. My first question is about the residents of Redcar. Their council leader has written to the Secretary of State to say that they do not want a hydrogen heating trial. Am I correct in saying that they will be allowed to follow the residents of Whitby and veto the proposal? After all, the Minister himself has said as much from the Dispatch Box. Secondly, what assessment have the Government made of recent scientific developments that show that hydrogen leaked into the atmosphere has an indirect global warming impact around 12 times greater than that of carbon dioxide?

[Lord Callanan (Con)]

With respect to the noble Baroness’s first question, I think she needs to read the letter from the leader of Redcar Council more carefully. I do not think it supports the analysis she gave. Nevertheless, I have said on numerous occasions that no hydrogen village trial will take place without strong support from local residents. On the noble Baroness’s second question, yes, hydrogen does have a high global warming potential, which illustrates the importance of not allowing it to leak at all.

[Lord Howell of Guildford (Con)]

My Lords, is the National Infrastructure Commission’s report really welcome? What it says in that report is that hydrogen molecules are just too difficult for 23 million domestic supplies at home. It wants to dig up or close down entirely the existing retail gas distribution system as well, because it thinks it does not fit in with our global aims—and it is absolutely right. And it wants to turn us into an all-electric economy. But have we got the slightest clue where all this extra electricity will come from, how it will be transmitted and delivered, and how that can be done at reasonable cost to the consumer? Until we have a clearer view on those things, it is very hard to just say that we welcome the NIC report.

--- Later in debate ---

[Lord Callanan (Con)]

Well, I did not say that we necessarily welcomed the NIC’s report; I said that we were studying it, and of course it will provide a useful backdrop to and illustration of the decisions that we will make. To go back to the point of the noble Baroness, Lady Sheehan, we will announce a decision on the trial in Redcar very shortly. I think the noble Lord makes a good point; where does all the extra electricity come from? Of course, there is detailed scenario mapping done on that; we have very exciting and ambitious plans for lots more offshore wind, lots of solar development and lots of nuclear development—so there will be ample supplies of electricity available.

[Lord Watts (Lab)]

Does the Minister agree that it is pointless improving heating systems if many houses are badly insulated? What will the Government do to step up the programme to make sure that people can live in decent homes?

[Lord Callanan (Con)]

I agree with the noble Lord that energy efficiency and insulation are extremely important. That is why we are spending £6.5 billion over this Parliament on insulation, energy efficiency and clean heat measures; but, of course, there is always a lot more to do and we will have more to say on that shortly.

[Lord Naseby (Con)]

Is it not extraordinary that Germany appears to have decided that all its heating for domestic should be in a hydrogen/gas mix, and there are apparently at least four or five other European countries far ahead of us? How is it that the national infrastructure plan can ignore the work that appears to be being done on hydrogen on the ground in this country, with factories being built at the moment for the use of transport and all the extensive work being carried out in trials?

[Lord Callanan (Con)]

I do not think my noble friend is correct about attitudes in Germany. The latest information I have is that 10 homes in Germany—no more than that—are subject to the trial. The issue of blending hydrogen into the gas network is of course a separate issue, and that too is something on which we will have more to say shortly.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. Is the noble Lord, Lord Howell of Guildford, not completely right in one respect: that there is confusion about the transition—how it will be funded, how it will come about, how North Sea oil and gas will fit into that, when it will diminish, when it will completely finish being important in our energy mix? Is it not time we got below some of the very high-level aspirations of the Government and into the detail of what a transition plan will actually mean for the country?

[Lord Callanan (Con)]

The noble Baroness is absolutely correct. We have set out in great detail what the transition plan looks like. As I said in my Answer, electrification—heat networks in particular—will play a very important role in the decarbonisation of heat.

[Baroness Blackwood of North Oxford (Con)]

My Lords, among the more controversial recommendations of the report was a very sensible recommendation to set clear resilience standards and better maintenance practices for all infrastructure sectors. As the Minister’s department considers the report, will he pay particular attention to those recommendations?

[Lord Callanan (Con)]

My noble friend makes a very good point. We will of course fully consider those recommendations alongside the views on hydrogen heating.

[Lord Lennie (Lab)]

My Lords, newspaper reports at the weekend suggested that the Government were looking for an entire town to use as a hydrogen heating pilot. Given the difficulties in Whitby and Redcar, referred to by the noble Baroness, Lady Sheehan, which are not yet resolved but will be very soon, and recent scientific developments, which she also referred to, about indirect warming from hydrogen emissions being higher than previously thought, does the Minister think that now is the right time to be pushing ahead with this?

[Lord Callanan (Con)]

The noble Lord will find out whether now is the right time to be pushing ahead with it when we announce the decision. He should not necessarily believe everything that he reads in the newspapers.

[Earl Russell (LD)]

My Lords, the Second National Infrastructure Assessment argues:

“Gas boilers, which currently heat around 88 per cent of English buildings, need to be phased out and replaced by heat pumps. Around eight million additional buildings will need to switch to low carbon heating by 2035, and all buildings by 2050”.


Can the Minister tell us how the Government plan to implement these recommendations and make carbon-neutral home heating available in time to meet our net-zero commitments?

[Lord Callanan (Con)]

There is a long and detailed answer to that, but there are a number of different elements to it. We will be consulting very shortly on the future homes standards, which will take advantage of new technology in terms of setting standards for all new developments. Clearly, there is a big challenge with existing, particularly residential, properties. I have said that heat pumps and heat networks will play the majority role in decarbonisation efforts. There could also be a role for renewable heating fuels, where there are some exciting developments.

[Lord Whitty (Lab)]

My Lords, given the growing case against using hydrogen as the main source of domestic and office heating, are the Minister or Ofgem about to stop supplier companies offering so-called “hydrogen-ready” boilers to those who need a boiler replacement? Is the Minister any further ahead on the kind of technology that is going to be used for district heating schemes?

[Lord Callanan (Con)]

I think the CMA is looking into some of the claims. Chancellor, it is a complicated area, because you can blend hydrogen into the existing gas network and that will work perfectly satisfactorily with all existing gas appliances. In that respect, all appliances are hydrogen-ready. But I am sure Ofgem will want to look at the full implications of that as well.

[Lord Geddes (Con)]

When my noble friend helpfully lists forms of alternative renewable energy, could he be kind enough to include tidal?

[Lord Callanan (Con)]

I know my noble friend feels very passionately about this. As I have said, we allocated some contracts for difference in the last round for tidal. I am sure we will want to do so in the next round again, provided the bids are competitive—but it does contribute a relatively small part of our energy mix.

[Lord Newby (LD)]

My Lords, does the Minister agree that part of the answer to the question from the noble Lord, Lord Howell, about hydrogen as an appropriate source of heating is that producing hydrogen in itself uses a tremendous amount of energy? It is one of the least energy-efficient ways of producing an alternative source.

[Lord Callanan (Con)]

The noble Lord is right. Of course, there are two separate issues. Hydrogen will play an important role in the transition; there are lots of industrial processes, such as heavy transportation, for which there is no realistic alternative to hydrogen, and we will be announcing the results of the first hydrogen allocation round shortly—a lot of things are happening in the near future. Hydrogen will play an important role in decarbonisation and long-term energy storage because we principally “waste”—in inverted commas—quite a lot of electricity in curtailment payments because we cannot use it. So, in terms of large-scale storage of energy, it can play an important role, as well as in industrial processes. There will be some important uses for hydrogen. There is a separate question about whether it should play an important role in home heating, about which we will decide shortly.