UK Hydrogen Economy

Alan Brown Excerpts

Thursday 17th December 2020 Westminster Hall

[John Spellar (Warley) (Lab)]

It is a pleasure to serve under your chairmanship, Ms McDonagh. I congratulate the hon. Member for Rother Valley (Alexander Stafford) on securing the debate and on his considerable enthusiasm and the detail with which he presented it. I think we all agree that hydrogen has considerable potential, but at present that is exactly what it is. I do not mean that in the way that the electricity industry talks about nuclear fusion—nuclear fusion is the future and always will be. I mean it as a call to action, so that we explore the production and utilisation of hydrogen at pace. One benefit of covid has been to demonstrate how, without cutting corners, we can evaluate systems and roll them out. We, particularly Whitehall, need to learn from that.

My hon. Friend the Member for City of Chester (Christian Matheson) slightly chided me to say that we were going off topic, but given the way that the Government work, it is absolutely crucial that we get to the heart of this and change the processes within government, otherwise we will find it very difficult to survive in this future world. Key to this is the civil service’s addiction to process, with extended timescales and time not being a factor. That is true under Governments of all parties. It is enormously important that Parliament relentlessly holds it to account to get things moving.

It could be argued that both Brexit and covid enable and also force the Government to change. That means that we are compressing processes but also, and equally importantly, paralleling them: trying different approaches, seeing what works, and seeing what does not work and shutting that down.

To start with transport, buses and trains are a considerable component of the hydrogen economy and contribute to clean air, particularly in urban areas—by definition—but an important issue is where they are made. Up until now, the Government have been indifferent to where they are manufactured. We have the capacity in Ballymena, Falkirk and Leeds to produce the buses, but what those facilities need, of course, is a market. They need to get on the manufacturing learning curve. The operators need to get the operational experience and find out what the issues and problems are. There needs to be continuing feedback between operators and manufacturers, and that will of course enable us to secure the export markets that have been mentioned.

It might be that, in some conditions, batteries will prove to be better. We need to test that out and assess what will work. We need to learn the lessons that have been mentioned before about where we missed out on batteries and allowed that work to go abroad. We have the largest installation of wind farms in Europe, yet so much is manufactured abroad. Governments, including devolved Administrations, have not focused on that enough.

On domestic heating, nobody mentioned that town gas is composed of a substantial percentage of hydrogen. It might be a much better answer, as was mentioned, than heat pumps for flats and terraced properties, which is a big issue in moving to alternative form of heating.

Also, we need to look at how the production of hydrogen will take place. Let us be realistic. If we are going to roll out the utilisation of hydrogen, some of that initially, but hopefully very shortly, will need to come from hydrocarbon sources. That might be dealt with by carbon capture, but I sometimes think that that is the easy answer that people trot out to deal with that. We need to move much more towards green sources of hydrogen, and we therefore need to look at the institutional barriers. It is truly extraordinary that in the first two months of this year, National Grid paid wind farm operators £72 million to not run their wind farms. That is absurd, and it has been going on for a decade.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Is the right hon. Gentleman aware that £50 million was also paid out to turn off the nuclear plant? It is not just wind farms.

[John Spellar]

Indeed. I was not being dismissive of wind farms; I was talking about the institutional barriers. That is not a technical barrier; it is an institutional barrier. It is the same with nuclear. The problem is that in order to qualify for the renewable transport fuel obligation that was mentioned by the hon. Member for Rother Valley, new capacity has to be utilised. We have existing capacity, even though it is not needed. At the same time, we are paying the wind farm or nuclear operators, and that is acting as a barrier to producing cheaper hydrogen. These are the sorts of areas where Ministers, with the support of Parliament, need to be cutting through. We obviously also need to look at the question of energy storage—hydrogen is an effective form of energy storage—but we need to do a proper evaluation.

I am mindful of the constraints on time. I am slightly concerned about the Government’s announcements, because I would like to see a bit more cost accounting. I would like to see a proper analysis of how much each different system is costing. I am not saying that we should not have a subsidy at a certain stage. I would like to see it being a diminishing subsidy, because we have to exercise that rather than all having our pet theories and ideas, important as they are for driving the process. We need to make sure that this is affordable going forward. If we are to compete in an international market, that is where it will really be tested—whether something is affordable or not. I shall yield to the Chair and conclude my remarks.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Ms McDonagh. Like everybody else, I congratulate the hon. Member for Rother Valley (Alexander Stafford) on bringing forward this important debate—his second debate. He has a huge interest in the subject and spoke very well on it. Believe it or not, I agree with pretty much everything he said.

Because of time constraints, I will not pay tribute to everybody who has spoken, except to say that it has been a very good debate. I agree with pretty much all the contributions. The hon. Member for Waveney (Peter Aldous) said it is not a competition, but then made a very valiant plug for East Anglia. Everybody else said that it is not really a competition, but we have to be careful. The way some of the system is set up by the Government at the moment, with picking clusters ahead of others, makes it very much a competition. I would like to see a greater commitment from the Government on taking out carbon emissions, particularly through CCS, and on giving the go-ahead for five or more clusters rather than a couple at a time.

For the most part, when it comes to hydrogen, the UK Government say the right things and have set out some very welcome measures in the White Paper. If the UK and Scotland really are to be world leaders in this technology, it needs more work and greater financial commitment. The reality is that the White Paper was a year and a half late, which has had knock-on consequences for the rest of the policies that follow. The planned production of a hydrogen strategy is obviously welcome but, as the hon. Member for Rother Valley said, we cannot wait any longer. We really need that strategy to come out as soon as possible in 2021.

Germany published its hydrogen strategy in June 2020, so if we do not watch, the UK is going to be a year behind Germany. As we know, it has committed €9 billion. The £240 million net zero hydrogen fund may be welcome, but over a 10-year period, it looks quite paltry compared with Germany’s €9 billion. The UK plan target of 5 GW of low-carbon hydrogen production by 2030 is welcome, but it is the same as Germany’s. Could greater ambition be shown, to get ahead of the game?

When it comes to hydrogen business models, the UK Government are again behind the curve. The proposal to finalise those models in 2022 should and could be speeded up. We know the contract for difference process has worked well in bringing down the costs for renewables, although there are issues about the supply chain, but CfD could still be looked at for hydrogen production. Meanwhile, the effort—I am repeating myself on this point—that has gone into plugging nuclear is beyond belief. Let us put that effort into hydrogen and CCS and other low-carbon technologies.

Again, although the UK has made good progress in decarbonisation, 27 million homes are still reliant on fossil fuels for heating, and transport is still a huge contributor. In both those sectors, hydrogen will be pivotal, as has been said. On heating, we still need to see the buildings and heating decarbonisation strategy, and a future homes strategy is required. As the hon. Member for Rother Valley said, we need to look at a whole mix of options for our decarbonisation. Heat pumps, for example, are welcome, but we need a clear strategy and technology selection framework for that to develop and go forward. The way in which those measures will be paid for also needs to be evaluated, because there is a limit to what can be passed on to consumer bills. We already have too much fuel poverty in the UK; we cannot risk any more.

When looking at the 27 million homes that are still reliant on fossil fuel heating systems, and others that are reliant on electrification, it is impossible not to see hydrogen as the only large-scale conversion approach. Even so, the full large-scale roll-out of hydrogen would be in 2030, which means that every week for some 20 years, 27,000 homes will need their heat sources decarbonised. That is a huge task that requires much planning, and perhaps even an independent body to oversee it—like the switch from town gas, it will require a massive effort. Manufacturers in the UK already make hydrogen-compliant boilers, so will the Government mandate the sale and installation of hydrogen-ready boilers by 2025? That is an industry ask.

I welcome the H100 trial in Levenmouth and Fife, where up to 300 homes will be powered by green hydrogen. Interestingly, that project is funded by the Scottish Government and Ofgem, but no money is forthcoming from BEIS as yet. I wish Scottish gas networks well with that trial, and I hope that it will lead to an unlocking of money from and trials by the UK Government.

As has been touched on, hydrogen blending has long been talked about and planned as a way of initially reducing carbon emissions from the domestic heating system. There has been a lack of joined-up thinking on that, however, because, as I hope the Minister knows, the Gas Safety (Management) Regulations 1996 need to be changed to allow that blending to take place. That is a must, but the Government keep holding off on it. The Health and Safety Executive is consulting on that, but the time that we need for the consultation process, and to decide what to do and whether to change the regulations, could be a barrier to what the industry wants to do.

As my hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) mentioned, another facilitating requirement is a robust measuring system to allow the trading of hydrogen. That is a simple but necessary step. Those ideas have been waiting in the National Engineering Laboratory’s funding proposals for too long. The proposals ask for £10.5 million for a clean-fuels metrology centre, which could be the world’s first, and I have written to the Secretary of State about it. If the Minister could meet or write to my hon. Friend about that, it would be much appreciated.

On transport, hydrogen needs to play a major role in the reduction of shipping and aviation emissions. Again, for joined-up thinking, I urge the UK Government to include those measures in the 2050 net zero target. Those international emissions must be included if we are really serious about net zero. The Scottish Government have included those emissions in their 2045 net zero plans to drive innovation and industry. Other welcome initiatives include the world’s first hydrogen-powered crane—I welcome the Department for Transport’s £400,000 grant for that—and the setting-up of the Jet Zero Council, as well as the Airbus plans for ZEROe.

Aberdeen has led the way on buses with the introduction of 15 of the world’s first hydrogen double-decker buses. The Scottish Government invested £3 million in that project, but another £8.3 million came from the EU. In future, that money must be replaced by the UK Government if we want to roll out more hydrogen buses across the UK. As has been touched on, that is a fantastic manufacturing opportunity for bus companies such as Alexander Dennis and Wrightbus.

Will the UK Government provide a capital subsidy for ultra low emissions vehicles, including hydrogen buses? Will they consider changes to the bus service operators grant to move away from diesel buses? As the hon Member for Rother Valley asked, will any consideration be given to subsidising hydrogen as a fuel to incentivise its use? That could be done through the renewable transport fuel obligation. Again, for a forward-thinking strategy, will the Government set targets for the roll-out of hydrogen HGVs and buses? Those are all sensible measures that would help to create that step-change process.

Finally on transport, it is clear that the maritime sector is also gearing up for change. I welcome the HyDIME project—that is hydrogen diesel injection in a marine environment—that has been supported by £400,000 from Innovate UK for the design, construction and integration of a hydrogen-diesel dual fuel conversion system to take place on a commercial ferry operated between Kirkwall and Shapinsay. The project will unlock the licensing system to allow further projects to follow. Ports across the UK are looking at developing hydrogen as a fuel and the design of hydrogen-fuelled ferries.

Away from transport, Scottish Power’s Whitelee wind farm project proposed in my constituency demonstrates that the co-location of renewables and hydrogen production is on the cusp of commercial profitability. The proposal is to develop and install a combined solar photovoltaics, green hydrogen production facility and battery energy storage system in the existing wind farm site. It is proposed that hydrogen production will commence by 2023, with that sold as transport fuel within the Greater Glasgow area. That is the joined-up thinking that we really want to see developed across UK.

I cannot mention hydrogen production without mentioning Peterhead and St Fergus. The UK Government need to make up for the betrayal on that project and include it within the first CCS cluster to be given the go-ahead. I hope the Minister can confirm that while the White Paper shows only Grangemouth on the map of the UK, it will look at the overall project that links with St Fergus in the north and the hydrogen production facility. We also need the oil and gas transition deal to be signed off.

I can see I am getting a look from the Chair, so I will wind up. There are fantastic opportunities at stake here and I really hope that the UK Government grasp that. We need to see policies put in place going forward.