Low-carbon Off-gas Grid Heating

Ben Lake Excerpts

Thursday 16th June 2022 Westminster Hall

[Ben Lake (Ceredigion) (PC)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I begin by congratulating the right hon. Member for Clwyd West (Mr Jones) on bringing this very important and timely debate before the House this afternoon. I will underline and support most if not all of the remarks that he made. He made a very powerful case in favour of the Government pausing, taking a step back and reconsidering their approach to decarbonisation of heating fuel for rural households, for the following reasons. On average, rural households tend to have been built a lot longer ago, so the energy efficiency is somewhat lower. Also, something that we need to bear in mind—we do not do that enough, in my opinion—is the discrepancy between average rural incomes and those of our urban counterparts, which the right hon. Member made very clear in his speech.

I am very grateful for this opportunity to speak not only about the impact that the transition will have on households, but about the impact on businesses. In recent times, when we have understandably been focusing a lot on the cost of heating for domestic households, the impact that rising prices are having on businesses has often been missed, and many of my constituents have raised it as a real concern for them. I would like to elaborate in a moment on their case studies.

I fully support the right hon. Member’s calls for the Government to pause and reconsider their approach. I was particularly struck by his argument about needing a just and fair transition as we decarbonise the economy. I fully agree that we need to decarbonise our society and economy, but it has to be done in a just and fair way. Otherwise, it is not realistic and will, at worst, place a substantial cost on the shoulders of those who can least afford it. I very much endorse his remarks.

This debate is timely. Rising prices have caused a great deal of concern and worry for households and businesses across the country. Following April’s energy price cap increase, the Welsh Government estimated that some 45% of households in Wales could fall into real fuel poverty. Although the energy price cap offers some solace to those lucky enough to be included in it, it is not applicable to off-grid homes and businesses. They have been exposed and are vulnerable to sky-high prices that are increasing at a rapid pace. This is especially true in rural areas such as Ceredigion. According to the mid Wales energy strategy proposed by the Growing Mid Wales partnership, as many as 72% of properties in Ceredigion are off the mains gas grid.

My constituents are therefore particularly exposed, both to the recent increases in the price of heating fuel and to any policy changes the Government might bring in to decarbonise their fuel source. We know—but it bears repeating—that prices have typically increased by some 150% over the past year. Eye-watering sums have been quoted for some of my constituents. On top of the fact that so many households and properties in Ceredigion are not connected to the mains gas grid, our housing stock is very inefficient, primarily because it is quite old. In neighbouring Gwynedd, some 56% of the housing stock was built before 1945. In Ceredigion, only 36% of homes reach a C rating on the energy performance certificate standard.

As part of this conversation about how we transition and decarbonise fuel sources for off-grid properties, we seriously have to look at energy efficiency measures. The right hon. Member made the case far more eloquently and persuasively than I could, but I will reiterate that if we are serious about this, we need to improve the energy efficiency of our housing stock. Only 2% of homes in Ceredigion were built after 2012. The vast majority of the housing stock to be built for Ceredigion by 2050 has already been built. We need to renew our focus on energy efficiency measures.

We also need to accept the fact that for many rural households this will entail greater Government support. The case has been made already, but I want to reiterate it. Rural households tend to have lower incomes than our urban compatriots. We cannot afford some of the measures that have been proposed. Many of my constituents would desperately like to insulate their homes, improve the efficiency of their homes and install a number of measures, including in some instances heat pumps—be they air-source or ground-source heat pumps—but they simply cannot afford the cost.

I would like to mention the impact that the current crisis is having on businesses. We need to think about how we include them in our efforts to decarbonise our off-grid properties. One hospitality business in Ceredigion —it is off-grid—has informed me that its energy bills have increased by some 450%. It is, without putting too blunt a point on it, making them consider whether they can continue in business. It is otherwise a very profitable, successful business, but this hike in fuel prices for off-grid heating has caused them to consider their future. I do not think that good businesses like that should be allowed to fail because of the current crisis. As part of the debate, we need to look at interim measures that the Government may wish to consider in order to give them some short-term support. That business is very confident that if it can ride out this current storm, it can return to a very profitable, successful situation.

In addition to businesses, we need to remember the community groups and assets in rural areas and in off-grid properties that are also suffering. This morning I spoke to the people who run Calon Tysul, a community-run swimming pool in in Llandysul in the Teifi valley. They informed me that they are now spending as much as £1,500 a week just on fuel to heat the swimming pool, not accounting for the heating costs for the other section of the facility. They are already having to consider very difficult decisions, which they do not want to make, about scaling back swimming lessons and the like.

That group is in an interesting situation, because it does have plans to decarbonise its heating sources—for example, it plans to instal solar panels, which will drastically reduce elements of its heating and energy bills. The problem is the timescale. The group cannot quite make it through the current six-month period without having to seriously scale back their operation. So my question for the Government is: what interim, short-term measures can we put in place to help organisations such as Calon Tysul, and other community swimming pools and leisure facilities, to see out the current storm?

I fully support the need to decarbonise our housing emissions and the fuel for off-grid properties in general. The Department for Business, Energy and Industrial Strategy has estimated that some 20% of our off-gas grid homes are technically unsuitable for low-temperature heat pumps, but analysis, undertaken by firms such as Equity, found that 44% of rural homes currently using heating oil can be considered “hard to treat” when the cost of the transition is taken into account.

I have already mentioned the age of the housing stock in many rural areas, which is a real issue. As the right hon. Member for Clwyd West mentioned, we not only need to consider the cost of the measures themselves, whether heat pumps or something else, but the associated installation requirements have to be put in place for people to get the best out of the technology. The right hon. Gentleman quoted the heat and buildings strategy and its assessment of the current cost of heat pumps, but for the average off-gas grid home it is £12,000, and potentially a further £2,000 if measures such as cavity wall insulation are included. I realise that the heat and building strategy refers to the cost for the average off-grid home, but we need to reiterate the fact that in many parts of the UK the cost will be far greater.

I think of my own constituents in Ceredigion, where some 35% of homes were constructed before 1900. Over a third of the properties in Ceredigion were built in the 19th century, which is striking. I am not an expert, but I would imagine that the cost of insulating those homes and bringing them up to the relevant EPC rating to allow them to benefit from measures such as heat pumps will be significant. I am not surprised in the least that a whole range of analysis has suggested that households living in such areas will find it almost impossible to afford the up-front cost of many of these measures.

I know I am repeating myself, but it is important to make the point that we need to improve financial support for these households. Many of them will be able to afford other measures—I am not saying they are struggling, as such—but they will not be able to afford the additional cost of retrofitting their homes and installing some of these low-carbon technologies.

I am conscious that I am at risk of detaining the Chamber for too long, but I would like to ask the Minister a couple of questions and I would be grateful if he could address them in his response. We know there are various support measures for hydrogen development, for example, but there are questions about the extent to which they will be applicable to rural off-grid homes. The Minister and I had an exchange in the Welsh Affairs Committee on this point, and I am interested to know his thoughts on supporting the roll-out of local carbon gas alternatives such as BioLPG, as mentioned by the right hon. Member for Clwyd West. It is drop-in technology that could well offer us a short to mid-term solution if we are keen to decarbonise homes in rural setting.

I end by asking the Minister how we can support rural properties, whether domestic households or businesses and community groups, to weather the current storm. I know that there are a whole range of exciting projects in Ceredigion, where we have housing associations retrofitting houses. We have groups such as Llandysul, with some plans in the pipeline, but they face a period of six to nine months of real difficulty. Is there something that the Government could do as a short-term measure, just to see them through?

One couple who live in an off-grid house have contacted me to say that they have been quoted over £1,000 to fill their oil tank. That is more than their monthly income as a couple, and the problem is that they have been told they cannot place orders for volumes less than 500 litres. If it were possible to have some clarification on that point, it would be very welcome, because other households in Ceredigion have also told me that they would be able to afford 250 litres at the moment, but the 500-litre minimum is a stretch for them at current prices, and they cannot quite make it. I appreciate that that is a very short-term measure and that it is addressing an immediate problem rather than something in the future, but if we are talking about a just transition, we need to make sure that everybody comes along with us and that nobody shoulders a disproportionate amount of the cost of what we should all hope will be a shared endeavour.

--- Later in debate ---

[Greg Hands]

We have to think about the nature of that market, which I am satisfied the CMA has the ability to regulate. Although it involves an energy product, that does not mean that Ofgem, rather than the CMA, is best positioned to provide the oversight to prevent anti-competitive practices. There is a lot of Government support for off-grid properties, as there is for on-grid ones, including the £400 payment and the £150 council tax discount in England, with Barnett consequentials for Wales, Scotland and Northern Ireland.

[Ben Lake]

The Minister has jogged my memory. Some farmers have told me they have commercial electricity contracts to service their homes, and are therefore worried that they may not receive the £400 payment. I know the Government are looking at the technical details, so perhaps he could take that point back and ensure that it is addressed.

[Greg Hands]

Of course, energy prices for businesses attract a lot of very keen Government attention. The hon. Gentleman is right to suggest that there was a consultation on the workings of the scheme, which has closed; the Government will respond shortly. Energy costs for businesses is an area of active Government interest. We provide a lot of support for energy-intensive industries, and want to ensure that overall we have a sustainable position, whereby businesses are able to afford energy bills in order to continue the vital work that they do for us across the rest of the economy.

Many of the additional Government support measures, including the warm home discount, the winter fuel payment and the cold weather payment, are also available for those off the gas grid. Energy efficiency measures are a major area of Government investment, with £6.6 billion to be provided over the course of this Parliament. I have already mentioned the boiler upgrade scheme, which costs £450 million, and the home upgrade grant, which amounts to £1.1 billion.

As somebody who used to work in a swimming pool, I was intrigued by what the hon. Member for Ceredigion described as the difficulties facing the swimming pool in his constituency. The great news is that one of the Chancellor’s key announcements this year was the reduction of VAT on solar panels. I am sure Plaid Cymru was very supportive of the Chancellor’s overall package of measures, which will bring particular benefit to the swimming pool in the hon. Member’s constituency.

The use of hydrogen is an interesting question. Decisions will be made in the coming years on where we think hydrogen can be used as a source of heat. We will have to think about our hydrogen production capacity, and the alternative pressing needs for hydrogen, such as decarbonising industry and major forms of transportation, including maritime, heavy goods vehicles and aviation. There are a lot of potential uses of hydrogen, we will need to look at the option of using it to heat buildings before taking a decision, particularly given the other alternative uses of hydrogen.

The hon. Member for Ceredigion mentioned the rules around heating oil providers not providing less than 500 litres. I urge him to speak to the UK and Ireland Fuel Distributors Association, which is a helpful trade body. I think the basic problem is that providing small volumes of heating oil is likely to raise fixed costs, and therefore to make an inefficient market with ultimately more expensive provision. His motive is a good one—to try to make heating more affordable, in smaller pieces, for constituents who are facing trouble with their bills—but the perverse impact might be to raise the fixed costs of such deliveries, but I urge him to speak to UKIFDA, which is the real expert.

I congratulate the hon. Member for Strangford (Jim Shannon) on being the chair of the healthy homes and buildings all-party parliamentary group. We are of course keen to see Northern Ireland, like all parts of the United Kingdom—I stress that it is fantastic to have all four nations represented here today—play its full role in decarbonisation, and to ensure that it is supported during times of high prices. He said that he had learned that I speak to Gordon Lyons, the Northern Ireland Minister for the Economy, frequently and perhaps even weekly. In fact, I spoke to him only yesterday about ensuring that Northern Ireland’s renewable energy opportunities are boosted. The hon. Gentleman will also know that one of the key reasons that we are taking the approach that we are on the Northern Ireland protocol is to ensure that things such as the VAT cut on solar panels can be enjoyed as much by the people of Northern Ireland as by the people of England, Wales or Scotland. Watch this space; we are always keen to help in Northern Ireland.

The SNP spokesman, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), called UK Government support inadequate. Well, almost regardless of what we had announced as the level of support, I could have predicted that he would say that it was inadequate. I remind him—