Future Hydrogen Economy

Alan Whitehead Excerpts

Tuesday 14th June 2022 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I congratulate the hon. Member for Redcar (Jacob Young) on securing this important debate. We are at a juncture with regard to the future of hydrogen. We have pretty much got over the debate on whether hydrogen will play an important role in future low-carbon energy. We have had that debate in all sorts of ways over recent years, and I think that it has been resolved. Hydrogen will play a really important and central part in our low-carbon energy structures of the future. We are now charged with ensuring that we get it right as far as the distribution, development and production of hydrogen are concerned, and that it is used in the right places and for the right things. As the hon. Member for Aberdeen South (Stephen Flynn) intimated, this is a question of using hydrogen to get to the places where electricity cannot be used.

The hon. Member for Redcar mentioned trains and HGVs. It is improbable that HGVs on batteries will be ploughing up and down our roads for 300 or 400 miles with a little bit of freight on top. It will be hydrogen; it has to be hydrogen. We have to get the infrastructure in place to get that right, and we have to get the production of hydrogen right to fuel that new network of long-distance logistics.

The hon. Member mentioned heat, which I would put third in the hierarchy of uses for hydrogen. We certainly have an early win of putting hydrogen into the system up to 20%, but it is unlikely that we will run the whole of our heat on hydrogen, not least because if we put blue hydrogen in to replace the 80% of boilers that run on gas, we would increase our gas imports by about 10%. We would increase gas coming into the country rather than decrease it, which is what we want.

That brings me to the green-blue debate. It is not that we should have no blue and only green. As my hon. Friend the Member for City of Chester (Christian Matheson) said, in the industrial clusters there are some first-rate projects that integrate carbon capture and the use of hydrogen in the right place, which will, in the first instance, need blue hydrogen to get going. We must be clear that the longer-term future is green hydrogen and it should be in our planning from the start, not least because since the Government made their calculations about the relative cost of blue and green hydrogen in the hydrogen strategy, the cost of blue hydrogen has increased by 36%. It is now generally recognised that, by 2025, assuming that gas prices continue at their present level, if we look at future gas prices, as I am sure the Minister has, we will see that blue hydrogen will be something like £85 per MWh and green hydrogen £58 per MWh, and that is before the conclusion of the debates about the roll-out of green hydrogen.

It really has to be green, not because one is against blue but because of the way in which the gas debate is going and the fact that we need to get electrolysis in place to get green hydrogen in the volumes required for the future. That means, as the hon. Member for Redcar has said, that we will need a lot of storage. We know that SSE is already producing salt caverns for the East Coast Cluster. The Rough field will, we hope, come into commission for hydrogen in the future, but we are going to need a lot more storage than that and it will have to be strategically located around the country. We will also need the networks mentioned by the hon. Member to get hydrogen to where it is needed. There is a lot of work to be done to get hydrogen properly in the place where it is needed for the future low-carbon economy. There is a lot of thinking to be done about the relative priorities that we give to different uses of hydrogen in the economy, to ensure that it has the best effects.

If I can pay a slight compliment to the Government, they have begun to do a lot of thinking about the hydrogen strategy, but a lot more needs to be done to get us in the right place and, most importantly, to get the right instruments to encourage hydrogen development and to ensure that we get hydrogen production properly aligned with how we are going to use it. We do not want to look back in 10 years’ time and say, “If only we had done this, this and this, we could have got so much more going with our hydrogen.” That should be the Government’s priority and what they need to concentrate on over the next period, so that the hydrogen economy takes off.

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate my hon. Friend the Member for Redcar (Jacob Young) on securing this important debate, on his incredible work and passionate advocacy for hydrogen ever since he arrived in the House, and on his chairing of the APPG on hydrogen.

This Government recognise that now, more than ever, we must focus on generating cheaper, cleaner power in Britain to support our long-term energy security and to achieve net zero by 2050. Hydrogen has the potential to help decarbonise vital UK industry sectors and to provide flexible energy across power, transport and, potentially, heat. Our drive for renewables makes hydrogen especially valuable. Excess renewable electricity can be used to produce hydrogen, which can be stored over time and used to generate electricity when there is less sun or wind to power the grid.

That is why in the British energy security strategy, published this April, we committed to doubling our ambition, as my hon. Friend the Member for Redcar and others have pointed out, to up to 10 GW of low-carbon hydrogen production capacity by 2030. As the hon. Member for Southampton, Test (Dr Whitehead) mentioned, at least half of that will come from green hydrogen, or electrolytic hydrogen, drawing on the scale of the UK’s offshore wind ambitions.

The energy security Bill announced in the Queen’s Speech will deliver on the commitment to build a sustainable homegrown energy system that is more secure, clean and affordable, and will include measures to facilitate the delivery of the hydrogen business model, driving investment across the UK.

The enormous potential of hydrogen for our economy is plain to see. In the UK alone, the sector could support 12,000 jobs by 2030 and unlock over £9 billion in private investment in the UK. By 2050—net zero date—the UK’s hydrogen economy could be worth up to £13 billion and support up to 100,000 jobs, many of which will be in our industrial heartlands.

I will address the specific points made by my hon. Friend the Member for Redcar, which were delivered with passionate advocacy in his excellent speech. On blending, we are on track to make a policy decision in 2023 and we are exploring whether to enable blending of up to 20% of hydrogen into GB gas networks.

We have invested £25 million in the BEIS Hy4Heat programme to develop hydrogen-ready boilers. We have to have certainty around the safety and efficiency of these systems, and assurances that consumers will not face a premium from the introduction of these boilers, but that remains an area of active work.

My hon. Friend the Member for Redcar passionately advocated for bringing the hydrogen village trial to Redcar. We expect the final location to be selected in 2023 and for it to become operational by 2025. We expect the trial to last a minimum of two years.

I heard directly from National Grid about Project Union a few weeks ago. It is a fascinating project that we will continue to study. My hon. Friend’s plea to extend the gas storage at Rough is a live conversation with Centrica, and it would not be appropriate for me to comment on that today.

[Dr Whitehead]

Will the Minister give way?

[Greg Hands]

I want to try to respond to the different contributions, but I will give way to the hon. Member for Southampton, Test.

[Dr Whitehead]

This is a very friendly intervention. For the record, will the Minister state the importance of the role hydrogen will play in industrial decarbonisation, particularly in industries such as steel, ceramics and cement? I am sure he will want to put that into the mix, as it were, as far as the deployment of hydrogen is concerned.

[Greg Hands]

The hon. Gentleman is absolutely right about the importance of industrial decarbonisation. That is one reason why we are following the cluster approach, to make sure that those hard to decarbonise industry sectors are close to those clusters.

I will group my response to the two contributions from the HyNet group—the hon. Member for City of Chester (Christian Matheson) and my hon. Friend the Member for Warrington South (Andy Carter)—if I may call them that. The hon. Member for City of Chester also mentioned powered aircraft and maritime, which are very much in the mix for using hydrogen for transport. I had an excellent visit to the constituency of my hon. Friend the Member for Warrington South towards the end of last year, when I saw the potential for the Novelis canning factory to use hydrogen and other means. I have just come from meeting my co-chair of the green jobs delivery group to make sure that the skills are there. On the caps and the impact on companies in the HyNet process, my Department is in regular contact with major cluster projects, including HyNet, about how the Government and the industry can work together to realise our 10 GW ambition as part of the CCUS cluster sequencing process. I am happy to write to my hon. Friend with further details about the companies in HyNet.

My hon. Friend the Member for Waveney (Peter Aldous), who is a passionate supporter of green energy right the way across the board, told us about the clean hydrogen cluster in East Anglia and the Lowestoft power plant project using hydrogen for municipal buses and the refuse fleet, which was also mentioned by the hon. Member for Aberdeen South (Stephen Flynn). On one of my many visits to Scotland, I was really excited to see the Whitelee wind farm just south of Glasgow, which is the second largest onshore wind farm anywhere in Europe. Last autumn, we launched a £9.4 million project with Scottish Power to take the excess onshore wind power generated at Whitelee and turn it into hydrogen for Glasgow’s buses and refuse carts—similar to the scheme mentioned by the hon. Member. By the way, I am looking forward to being in Aberdeen again this week for the fourth time in my nine months as Energy Minister.

The hon. Member for Birkenhead (Mick Whitley) made some good points about hydrogen. I think he also managed to squeeze in a quick swipe at the nuclear industry, so I urge him to think again. I am a bit surprised that he took a swipe at the nuclear industry, as I know that he is sponsored by Unite and other unions. The unions are among the biggest supporters of nuclear in this country, so I urge him to listen a bit more closely to his union sponsors’ support for the nuclear industry. I also note that he is on the Liverpool city region freeport management board, so he is clearly able to embrace new Government policies and take advantage of them bringing things to his district. I urge him to think again on nuclear.

My hon. Friend the Member for Broxtowe (Darren Henry), who is co-chair of the midlands engine APPG, is absolutely right to say that we need to lead on low-carbon hydrogen technology. The technology side of this issue is incredibly important.

As it happens, today I have talked about renewable and low-carbon energy with Gordon Lyons, the Northern Ireland Economy Minister and a party colleague of the hon. Member for Strangford (Jim Shannon), who is absolutely right to say that Northern Ireland will play a key role in the production and export of hydrogen.

In the brief time available, I will outline the next steps. We recently published a hydrogen investment package, which set out the key policy detail that industry has been waiting for, and paved the way for the launch of two significant funding mechanisms: the net zero hydrogen fund, and our hydrogen business model. The net zero hydrogen fund will be coming this summer, and we aim to run annual allocation rounds for electrolytic hydrogen as soon as legislation and market conditions allow, moving to price-competitive allocation by 2025. In July, we will announce the blue hydrogen projects that we will negotiate with the CCUS cluster sequencing process.

We have developed an investor road map to give more clarity on what we have done, what we are doing and what we are committed to doing in developing the UK hydrogen opportunity. We have already mentioned hydrogen transport storage infrastructure, and we have committed to design new business models for that by 2025. We have published a UK low-carbon hydrogen standard, because it is really important that we have a standard for what defines low-carbon hydrogen, and we have also published a hydrogen sector development action plan on supporting the UK supply chain for hydrogen.

I hope that my hon. Friend the Member for Redcar agrees that the Government have provided a clear long-term signal that we are committed to building a world-leading UK hydrogen economy. I thank him again for securing this timely and informative debate, and for allowing us to explore the role of hydrogen in our clean and affordable UK energy system.

My final point is that I was in Berlin in January and met my German opposite number, whose name is Stefan Kaufmann. I found out in advance that his expertise in hydrogen is so extensive that he is called Mr Hydrogen. I said to him, “Stefan, one day I want to be called Mr Hydrogen,” but then I thought that, actually, the person who really deserves the title of Mr Hydrogen in this country is my hon. Friend the Member for Redcar.