Energy Bill [HL]

Baroness Bennett of Manor Castle Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

[Baroness Liddell of Coatdyke (Lab)]

I will speak to Amendments 43, 45, 48 and 58. Again, they are trying to cope with some of the wide definitions that are contained within the Bill. I am most impressed with the fact that the Government have defined a UK Low Carbon Hydrogen Standard, which was updated in July of this year. It includes guidance and a calculator tool for hydrogen producers to use for greenhouse gas emissions reporting and sustainability criteria. That standard has been designed to demonstrate that low-carbon hydrogen production methods can meet a greenhouse gas emissions test and threshold, and these amendments require the regulations to have regard to that standard when assessing the eligibility of low-carbon hydrogen production. It goes back to what I said beforehand. We are not necessarily nitpicking here; we are seeking to get an amendment into place that allows us to have due regard to low-carbon hydrogen standards in setting objective criteria against which to assess the eligibility of low-carbon hydrogen production. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I will speak to Amendment 46 in my name. As the noble Baroness, Lady Liddell of Coatdyke, clearly set out, this group of amendments is trying to implement something that the Government themselves have established: the UK Low Carbon Hydrogen Standard: Guidance on Greenhouse Gas Emissions Reporting and Sustainability Criteria, which I believe dates originally to April and was updated in July. I find myself in the unusual position of saying that I want to enforce something that the Government have established. Experts in this area tell me that the conditions set out in these standards are: the greenhouse gas emissions intensity of hydrogen for it to be considered low carbon; the emissions being considered up to the point of production; and, very importantly, the risk mitigation plan for fugitive hydrogen emissions. There is perhaps not much public awareness of the risk of that, but we need to share and understand it. The criteria are set out there.

I am not particularly attached to the way this is done in my amendment; I was simply trying to put Amendment 46 down to say that, for the subsidies to be available, it must meet the Government’s own standard. That seems the simplest way, but I am very happy to be convinced that there are various other ways; other amendments are going in the same direction. I am happy should we still need to get to this on Report to talk to people about what the best way of doing it is, but surely the Government want to enforce their own standards.

[Baroness Worthington (CB)]

My Lords, I will speak to Amendment 47 in my name. I find myself in the unusual position of being more environmentally ambitious than the noble Baroness, Lady Bennett of Manor Castle, in that the standard that my amendment would introduce on hydrogen would be more stringent and would ensure that we are investing in this form of clean energy only if it is truly clean.

It is a not well understood fact that hydrogen actually has a global warming potential which is not insignificant. When released into the atmosphere, it has the effect of inhibiting the breakdown of methane, which we all know is a powerful greenhouse gas. The latest papers to come out that the Government have produced themselves indicate that, over a 100-year timescale, hydrogen has a global warming potential of 11 times that of CO₂. That is over 100 years, but we are probably concerned about the next 20 years, in which case that rises to it having 33 times as powerful a greenhouse gas effect as CO₂.

When it comes to hydrogen, I know it is often touted as the great white hope and the great solution—in fact, we have had adverts plastered all over Westminster telling us that hydrogen is the answer. However, it has to be considered carefully in context. It is very difficult to produce and to transport, and it is very dangerous to have around the house. In fact, studies have shown that it is potentially between three to four times more likely that someone will be injured from a hydrogen explosion in the home compared to natural gas. Already, natural gas has an unhappily high number of accidents and injuries from its use in the home.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, for their amendments in this group.

Amendments 43, 45 and 48 seek to ensure that the question of who is an eligible low-carbon hydrogen producer is determined solely by regulations that set objective criteria against which to assess eligibility, and in doing so must reference the low-carbon hydrogen standard.

Amendment 58 seeks to clarify that a low-carbon hydrogen producer must be eligible to receive support, which the other amendments would ensure means that they are compliant with the low-carbon hydrogen standard. Amendment 46 has a similar purpose; I thank the noble Baroness, Lady Bennett, for it and for her encouraging comments about the policy.

Amendment 47 seeks to introduce an emissions standard for low-carbon hydrogen production and would require the Government to target support at areas that cannot benefit from other cleaner, more efficient or cost-effective decarbonisation processes. I thank the noble Baroness, Lady Worthington, for this amendment.

A low-carbon hydrogen producer is defined in Clause 61(8) as

“a person who carries on (or is to carry on) activities of producing hydrogen which in the opinion of the Secretary of State will contribute to a reduction in emissions of greenhouse gases”.

The intention of this definition is to ensure that support under hydrogen production revenue support contracts may be provided only in respect of low-carbon hydrogen production that contributes to our decarbonisation ambitions.

Clause 61(3) places a duty on the Secretary of State to make provision in regulations for determining the meaning of “eligible” in relation to a low-carbon hydrogen producer. This approach to defining eligibility in regulations is similar to that taken for low-carbon contracts for difference in the Energy Act 2013. The regulations that define the term “eligible generator” for low-carbon contracts for difference have themselves been updated since they were introduced in 2014 as the industry and technologies have evolved; this has proved a flexible and enduring approach since 2014.

This duty is required as the Secretary of State is only able to direct a hydrogen production counterparty to offer to contract with an eligible low-carbon hydrogen producer. An allocation body will also be able only to give a notification to a hydrogen production counterparty specifying an eligible low-carbon hydrogen producer to offer to contract with. It is not practical to define an eligible low-carbon hydrogen producer in the Bill because eligibility may change over time as the industry and technologies evolve. The Government plan to consult on these regulations by early 2023.

The Government consulted on a UK low-carbon hydrogen standard last year, and a government response was published in April this year. This world-leading standard sets out a greenhouse gas emissions threshold as well as other criteria for hydrogen production to be considered low carbon, and sets out in detail the methodology for calculating the emissions associated with hydrogen production. This includes the steps that producers are expected to take to prove that the hydrogen they produce is compliant.

The standard was developed following a public consultation and multiple engagement sessions with industry and academic experts, including the Hydrogen Advisory Council and its low-carbon hydrogen standard working group. As set out in the response to the consultation on a low-carbon hydrogen business model, published in April this year, we are proceeding with our proposal to require volumes of hydrogen produced to meet the UK low-carbon hydrogen standard in order to qualify for and receive funding under the business model. The low-carbon hydrogen standard is set out in guidance and we expect it to be updated over time to ensure that it remains fit for purpose and reflects our growing understanding of how new technologies work in practice, including how hydrogen production interacts with the broader energy system. I hope that gives some comfort to the noble Lord, Lord Oates, and the noble Baroness, Lady Blake, that the standard may well change over time as our understanding of the practice grows.

With a focus on investor confidence, our current approach gives a significant degree of certainty about eligibility, which will provide prospective investors and developers with the clarity and transparency that they need to bring projects forward. While the low-carbon hydrogen standard is an integral part of the low-carbon hydrogen regime, direct reference to an emissions standard in this legislation would undermine both the need for the standard to be capable of evolving over time and the need for the legislation to be certain. The approach currently set out in the clause makes best use of regulations for setting eligibility and guidance that can be more responsive to the evolving nature of the low- carbon hydrogen standard.

Amendment 58 seeks to insert “eligible” in Clause 70(1)(b). We do not consider this necessary, as the reference to

“that low carbon hydrogen producer”

in subsection (1)(b) is referring back to the

“eligible low carbon hydrogen producer”

in subsection (1)(a).

The noble Baroness, Lady Worthington, mentioned the production of methane and it being an unhealthy by-product of hydrogen, and that a green hydrogen lobby group which I was not aware had been consulted. I will certainly take that back to the department. We have numbers on the rate of hydrogen per kilogram of greenhouse gas emissions compared with the low-carbon hydrogen standard, but I will be delighted to write to her, rather than befuddle everybody with the science here.

I therefore ask that the noble Baronesses and noble Lords withdraw and not press Amendments 43, 45, 46, 47, 48 and 58, but thank them for helping to test the robustness of the Government’s decarbonisation ambitions.

[Baroness Bennett of Manor Castle (GP)]

I am not a lawyer, and nor is the Minister, so I will understand if she wants to write to me. However, my understanding is that, if the Bill says that it complies with the UK low-carbon hydrogen standard, and then that standard was updated, the legal binding would be updated. Maybe we need wording to say that it complies with the UK low-carbon hydrogen standard as presently exists and is updated in the future. I am not sure what the wording should be, but surely if you have a standard that is being updated, saying in the Bill that you will meet that standard does not mean that the 2022 figures are fixed in stone.

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[The Earl of Kinnoull (CB)]

My Lords, I rise with my European Affairs Committee hat on. I see these as enabling amendments for the storage of energy. The first Parliamentary Partnership Assembly, which took place in May, had a specific session on energy security. The mood was clear: the 70 politicians—35 from Westminster and 35 from the European Parliament—felt that, in a difficult security environment, energy was a European-level matter and that we should think about it as such. Interestingly, I was at a European security conference on Monday and the exact same theme came through. Yesterday, we were settling the agenda for the second Parliamentary Partnership Assembly, and this theme will be on the agenda again.

Many of the speeches and thinking this evening have been from the United Kingdom view of the world. However, we should be enabling ourselves to consider this from a European perspective. As we might be storing gas for others, such as the Germans, anything in these amendments which would allow a future Secretary of State the flexibility to do that would be a good thing from a European context. Therefore, they would be good from a European affairs point of view.

[Baroness Bennett of Manor Castle (GP)]

My Lords, in the interests of time, I will comment only on Amendment 240, in the name of the noble Lord, Lord Foster of Bath, and offer strong support for it—alongside some potential improvements or broadening-out suggestions at this stage.

It is interesting that, in 2015, Steve Holliday, the then CEO of National Grid, said that the idea of baseload relying on coal-fired or nuclear power stations was “outdated”:

“From a consumer’s point of view, the solar on the rooftop is going to be the baseload.”


This would obviously need to rely on batteries for it to work 24/7. Mostly since that time, 3.3% of British homes have installed solar panels, but many of them were installed before batteries were a viable option. Those home owners should not pay the high levels of VAT to enhance the system for the benefit of both themselves and the whole of society.

I have later amendments talking about community energy schemes. I can think of numerous ones that I have visited over the years where solar panels were put on cricket pavilions, community halls et cetera. We have been talking mostly about domestic settings, but there are also many community settings in which the addition of batteries may now be a practical option.

We will be talking a lot in later groups about the issue of energy efficiency and improving energy security by reducing our demand. My understanding of the information from the Consumer Protection Association —and I stand to be corrected if I am wrong—is that double, triple and secondary glazing are not currently covered by the VAT concession. It seems to me that this could possibly be included in this amendment; perhaps it is something we can work on.

[Lord Teverson (LD)]

My Lords, I begin by making it quite clear that my energy storage interests are not around long-term storage or retail storage.

I absolutely support the amendments put forward by my noble friends, but I will not talk about them. Instead, I will follow up on the amendment tabled by the noble Lord, Lord Moylan, and relate it to some of the discussion that took place earlier today in the House around storage, because gas storage is really important at this present time, and it will continue to be in future. I like the way—through a percentage or whatever we use—that we can see a relevant ratchet downwards, as we would expect. However, what alarmed me earlier today was that, in terms of current storage, we appear to be in the hands of independent directors of independent companies that have responsibility to their shareholders under the law, but not to the energy security of the country. That was very clearly stated by the Minister in terms of the decision to turn off the Rough facility in 2017. As I said at the time, if that was the case then, I see no reason why that is not also the case in future; there seemed to be no proposal by the Government to change that situation. I am interested to hear the Minister’s response to that part of my original question.

I will also go back to what the noble Baroness, Lady McIntosh of Pickering, said, because part of the Minster’s earlier answer was that our storage is the gas we have in the North Sea. But we all know that that store is going down, and I certainly would not, from these Benches, resist trying to increase that in the short term during the energy crisis to ensure that our energy is there—the situation would be different in the medium and long terms. That flow is going down and our imports are going up. I do not know if these two years were particularly representative, but the last figures from the Minister’s department said that, in 2020, we imported £5 billion-worth of gas. A year later, that went up to £20 billion-worth of imports of gas—a quadrupling. That was not all because of a price increase at that time, most of which has happened in 2022.

Another statistic reveals that, while we think we have multiple sources, 75% of imports came from one country, which is Norway. Norway is a dependable friend of the United Kingdom; we would not argue otherwise. But we must be clear that Norway’s bigger customer is Germany. Germany and the other European countries which import gas from Norway are probably more desperate—this is likely not the right phrase to use—for that resource than we are. As I said, I very much support the outline of the amendment tabled by the noble Lord, Lord Moylan, and ask the Minister what security we actually have, and for how long, over our supplies—that is, the 75% of imports that we have from Norway. What is our legal entitlement to that flow into the future?