Energy White Paper

Lord Callanan Excerpts

Wednesday 16th December 2020 Lords Chamber

[Lord Oates (LD) [V]]

My Lords, I welcome the ambition and vision set out in the White Paper; however, as the Minister will be aware, ambition and vision are necessary but not sufficient conditions for success. What we need now is attention to detail and practical, credible implementation plans. Sadly, the White Paper lacks them.

First, while it rightly emphasises the need to secure a fair deal for consumers, the White Paper fails to set out credible means of doing so. Can the Minister tell us why the paper envisages the cost of decarbonising our energy system continuing to be piled on to electricity bills? It should be borne fairly across the economy, because placing the transition costs on bills is both highly regressive and counterproductive if we want, as the paper rightly suggests, to shift from gas use to electricity. Will the Government correct this omission and act to reduce electricity bills by shifting this burden?

Secondly, the White Paper places an emphasis on expanding offshore wind generation. I welcome that, but there is no reference in the Statement to onshore wind generation, one of the cheapest forms of generation available, and it is referred to only fleetingly in the paper. Can the Minister explain this?

Thirdly, nuclear continues as a government obsession, even though it is now ruinously expensive compared with non-carbon sources of energy. The physical engineering requirements for nuclear have always been extremely challenging, but the financial engineering required is now impossible. And yet we continue, despite the fact that, over 60 years since the UK’s civil nuclear programme began, we still have no means of safe, long-term storage of high-level nuclear waste—waste that is deadly for longer than any human civilisation has ever survived. How can the Minister justify such an economically and morally illiterate policy?

Fourthly, the White Paper envisages 5 gigawatts of hydrogen capacity by 2030. Can the Minister clarify whether this is green or blue hydrogen CCUS and tell us who will assume long-term liability for CO₂ storage under the Government’s plans for carbon capture and storage? Does not this liability issue further underline why our focus should be on green hydrogen? Does the Minister recognise that we need to invest heavily now in contracts for difference to further drive down the rapidly reducing costs of green hydrogen in the way that was done previously on wind generation?

Fifthly, the Government have relied in their Statement on the ability of home energy efficiency upgrades to reduce domestic energy bills. The Liberal Democrats agree that energy efficiency measures are critical to tackling emissions and reducing bills, but this is another area where government action falls short of its rhetoric. The Government told us that the Green Homes Grant would deliver 600,000 home energy efficiency upgrades by the original end date in March next year. It is likely to be a fraction of that. Can the Minister tell us the actual numbers that will be delivered by that date?

My noble friend Lord Stunell, a former DCLG Minister with huge experience in this area, could have told the Government that this would be the case. In fact, he did tell the Government—repeatedly. Does the Minister not recognise that there is no hope of upgrading the 28 million homes that need it unless we have a long-term investment programme that provides industry with the confidence to invest in the recruitment and skills training required?

Finally, will he agree to consult my noble friends Lord Stunell and Lord Foster of Bath, who, as former Ministers, both have extensive experience in this area and could help the Government prevent mistakes like this reoccurring in the future?

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I thank the noble Lords, Lord Grantchester and Lord Oates, for their comments, particularly the noble Lord, Lord Grantchester, who was fairly positive in pointing out some of what he agreed with. He said that the Statement was largely positive, with some good solutions, and that he was pleased with much of it—although he did have some critical questions, which I will come to. The noble Lord, Lord Oates, was slightly less positive, and had some questions which I will attempt to address as well.

Both noble Lords raised the issue of poorer households, and they were right to do so. We have set out measures that will help households manage their energy consumption and keep bills fair and affordable, providing financial support for the most vulnerable and low-income households of at least £6.7 billion over the next six years. That includes the Green Homes Grant that the noble Lord, Lord Oates, referred to, which could see lower-income households save up to £600 a year on their energy bills, and the warm home discount scheme through to 2026 to cover 750,000 extra households. I understand the ambition that the noble Lord, Lord Oates, wishes us to meet, and I think we are making a good start, even if we do not perhaps match exactly what he would like to see.

Both noble Lords raised the subject of low-carbon electricity, which is vital. We are committed to fully decarbonised electricity generation by 2050. The current trajectory should see us largely decarbonised in the late 2030s. They both also referred to offshore wind power, and we have a manifesto commitment of 40 gigawatts of offshore wind, including 1 gigawatt of floating wind, by 2030, which will support up to 60,000 jobs.

Both noble Lords raised the important subject of hydrogen. We are aiming for 5 gigawatts of hydrogen capacity by 2030, which will unlock £4 billion in investment and support for up to 8,000 jobs. That is why we are supporting the deployment of power with CCUS by 2030, as the noble Lord, Lord Oates, referred to.

Nuclear power was raised. We believe that nuclear power continues to be an important source of clean, reliable and safe energy as part of our net zero mix. It will help result in lower costs for consumers. With the existing nuclear fleet largely retiring over the next decade, we do need further capacity. That is why the Government are entering into negotiations with EDF on the Sizewell C project in Suffolk, with a view to making an investment decision on a large-scale nuclear project before the end of this Parliament.

The noble Lord, Lord Grantchester, asked about the Committee on Climate Change’s advice on carbon budget 6. It is fair to say that, across the majority of our policies, our ambition to 2030 is broadly equivalent to that set out in the Committee on Climate Change’s advice. The White Paper actually goes further than the CCC in the deployment of low-carbon hydrogen production by 2030. We believe that our NDC is in line with its recommendations. Consistent with that ambitious plan, we want to create the space for companies to innovate and find new and better ways to achieve this target. As always, we remain grateful to the CCC for its advice. We will set out our approach to its reports and to achieving our emissions reductions targets in the net zero strategy next year.

The issue of SMRs was raised by the noble Lord, Lord Grantchester. I agree with him that this is an area that will be fruitful in the future and one that we need to move forward with and support.

[Lord Howell of Guildford (Con) [V]]

My Lords, I declare my interest in this area as in the register. This is a highly impressive and very ambitious programme, not least on the nuclear front, which the Minister has just been talking about. I want to ask about carbon-free home heating. There are 23 million homes in the United Kingdom—so the White Paper says—connected to the gas grid for heating, hot water and cooking. If, as we have been told, it will cost between £5,000 and £8,000 to convert each one, and if the whole national gas grid has to be upgraded to accommodate the smaller hydrogen molecules, we are talking about an astronomical sum of money and decades to complete it. Does my noble friend agree that a lot more reassurance is needed for all householders about how much it will cost each of them and how much disruption there will be in every home, and that this really is the best use of resources in the main task of combating global climate change?

[Lord Callanan (Con)]

I am grateful to my noble friend for his comments and particularly for his comment that the White Paper is highly ambitious. He might want to speak to the noble Lord, Lord Oates, on that. Of course, he is right to point out the immense challenge that faces us in decarbonising heat and buildings. We will publish our heat and buildings strategy next year, but there are a number of elements to that: investing in building insulation through schemes such as the ECO scheme and the Green Homes Grant; and investing in the production of hydrogen and in the various experiments and research and development on the potential for hydrogen to replace gas in the domestic grid. My noble friend is perfectly right that this is ambitious. It is an area that needs further work and study, but we are making progress. A new heat network transformation programme is launching next year, starting with £122 million of funding, which was confirmed at the spending review. The White Paper is laying the foundations for reducing the emissions from buildings, which we will build on in the study next year.

[Baroness Hayman (CB) [V]]

My Lords, I declare my interests as set out in the register. The Secretary of State in the other place spoke of unleashing private sector investment to fulfil the ambitions of the White Paper. To provide the legislative and regulatory clarity and certainty necessary to stimulate that investment, particularly in the wind sector, will the Government commit to act swiftly to bring forward the legislation promise on energy competition networks? Will they ensure that our net-zero commitments are at the heart of the new energy planning framework promised for next year?

[Lord Callanan (Con)]

The noble Baroness makes some very good points. I cannot give her the specific reassurances she wants; I understand her ambition for this sector, but the process of legislation is subject to parliamentary time, agreement with the business managers, et cetera. I have noted her points, and we will bear those comments in mind when planning the legislative programme.

[The Lord Bishop of Salisbury [V]]

My Lords, I very much welcome the energy White Paper. One thing we have learned during this pandemic is the importance of the local. What assessment have the Government made of the further potential of local solar, wind and micro hydro energy schemes and of what finance might be needed to facilitate their collectively enormous potential? Given the comments in the other place about the lack of rural infrastructure for energy, might the Minister find it helpful to consider the possibility of churches being places for siting bidirectional charging points for electric vehicles?

[Lord Callanan (Con)]

I thank the right reverend Prelate for his support. It is an interesting suggestion; I think I am correct in saying that the grant system for the production of charging points is available to churches, but if it is not I will certainly write to him on that. He is right that we need to transform the energy delivery system from one that was designed for large nodes in a fossil fuel world to a much more diversified system of national and local energy production. His comments are well made.

[Lord Rooker (Lab) [V]]

I am very pleased to see the Statement—the White Paper is winging its way to me at the moment. I am a bit disappointed that there was no mention in it of a potential barrage scheme or about the potential of small modular reactors. Could the Minister expand on those issues? The news about Sizewell C is excellent, but, if it is going to replicate Hinkley in the main, as I understand it will, why will it take so long? Can we not do some regulatory and other approvals in tandem? Speed is of the essence here, without skimping on safety. It should not take decades from the decision to go ahead to get the power out of a nuclear power station. I urge all speed on this.

[Lord Callanan (Con)]

The noble Lord’s comments are well made. We all find frustrating the length of time it takes to do anything in this country with the planning system and all the approvals needed, but safety is critical. We must make sure that everything is safe, has the proper approvals and goes through all the proper planning processes, et cetera. I accept his disappointment about barrage systems, but the key point is that these are all different systems with different considerations and investment appraisals. Some of these schemes were extremely optimistic; we have to try to select systems and projects that are good value for money, but we always bear all these systems in mind and are interested in future schemes coming forward for investment appraisal.

[Baroness Sheehan (LD)]

My Lords, the Government’s policy to extract every last drop from our part of the North Sea is incompatible with our net-zero target, the Paris Agreement and our leadership of COP 26 next year. When will the Government follow Denmark’s lead and stop for good the issuance of new licences for oil and gas exploration and plan instead for a just transition so that jobs and communities in Scotland and the north-east are protected?

[Lord Callanan (Con)]

I know the noble Baroness has strong feelings on this because she has asked me this question before. She should bear in mind that hundreds of thousands of jobs are dependent on the North Sea. We are delivering the North Sea transition deal, providing support for the people and communities most affected by the eventual move away from oil and gas production. We are supporting the transition of skills and supply chains for a clean energy transition and focusing export finance on low-carbon opportunities internationally. Many companies producing in the North Sea are committed to the net-zero challenge, so, rather than just say that they cannot produce any more, we need to work to help them in the transition away from fossil fuel production.

[Lord Lansley (Con) [V]]

My Lords, the White Paper refers to the creation of a net-zero hydrogen fund. As my noble friend knows, achieving production of clean hydrogen at a commercially viable scale is challenging but necessary if we are to achieve the switch to hydrogen fuel in our heavy goods vehicle fleet. Can my noble friend say whether the fund will enable us to achieve that objective of switching HGVs to hydrogen?

[Lord Callanan (Con)]

My noble friend is right to point out the scale of the challenge. We are investing £240 million of capital co-investment in low-carbon hydrogen production, which was committed to in the spending review. That is just one of the measures that will support our ambition for five gigawatts by 2030. The hydrogen strategy package, planned for next year—I am sure my noble friend will follow it with great interest —will set out more details in this space, including how we intend to leverage private sector investment through business models to satisfy the demand he suggests.

[Lord Broers (CB) [V]]

My Lords, I congratulate the Government on the most realistic energy plan we have seen in recent years. It realises that in the generation of electricity it is essential to sustain nuclear power or CCUS to address the problem that renewables are intermittent. The many applications of batteries are included without making the mistake of proposing that they can back up renewables on a national scale. It also includes the important role that hydrogen can play in storage and as a fuel. However, although there are tens of graphs in the accompanying document showing what will be realised in many different circumstances, I was unable in the short time available to find some of the essential data underlying these calculations. Where can these be found? For example, how were the additional costs of CCUS and the total cost of renewables, including their back-up, derived?

[Lord Callanan (Con)]

The noble Lord asks some very pertinent questions on the back-up detail and some of the graphs provided in the White Paper. I think it would be a more productive use of the House’s time if I wrote to him with the details he requests.

[Lord Whitty (Lab) [V]]

My Lords, I welcome the fact that we now have a strategy, but, on domestic heating, how do the Government plan to engage with the 23 million households currently supplied by gas, whose boilers, appliances and radiators will need to be retrofitted in double-quick time? What is the Government’s approximate timetable for the key decisions that will be required on the development of green hydrogen production and the introduction of hydrogen-based grids?

[Lord Callanan (Con)]

Like a number of other contributors, the noble Lord points out the importance of hydrogen. It is a potential key option for decarbonising heating, but it also needs to be looked at alongside the potential for heat pumps, heat networks, et cetera. We are developing all these options simultaneously, ensuring that we have the best available option for consumers and preparing the ground for the strategic decisions on these areas that will need to be made in the mid-2020s. On hydrogen heating, as I said, we are supporting a range of research, development and testing projects designed to help determine the feasibility of using low-carbon hydrogen as an alternative to the use of natural gas for heating. However, these are long-term decisions. We will publish the heat and buildings strategy next year. If the noble Lord is a bit patient, he will see the hydrogen strategy in the new year as well.

[Baroness Walmsley (LD) [V]]

My Lords, will the Government focus on green hydrogen production for heavy transport and industrial use, and phase out other types of hydrogen production as soon as possible? Our gas infrastructure for homes is currently unsuitable for pure hydrogen. What is the cost of upgrading it and how does that cost compare with installing heat pump networks, which are safer, deliverable now, cheaper and require less generating capacity than other available options?

[Lord Callanan (Con)]

The noble Baroness is right to point out the challenges but, of course, what we require is probably a combination of all these different strategies. Further work will be needed to understand the full extent of the changes that are required to transition the national gas infrastructure to carry hydrogen and to understand the associated costs. Not all properties are suitable for the use of heat pumps, but we are working closely with the gas industry and stakeholders to develop a programme of works to assess the safety, feasibility costs and benefits of using low-carbon hydrogen as an alternative to natural gas.

[Baroness Hooper (Con) [V]]

My Lords, I welcome the White Paper and the Prime Minister’s avowed intention to make the UK the Saudi Arabia of offshore wind power; indeed, I welcome the White Paper’s target of 40 gigawatts of offshore wind by 2030. However, this will clearly require the construction of many more huge wind turbines. Can my noble friend tell us about the supply chains for the construction of offshore wind turbines? How much of the technology and manufacture will be uniquely British, and how much will we be dependent on imports?

[Lord Callanan (Con)]

My noble friend makes a very good point. We will invest in the growth of the UK’s renewable manufacturing base to stimulate the UK’s supply chain. We will also support the delivery of the industry’s target of 60% of UK content in offshore wind projects by 2030 through requiring developers that are awarded a contract for difference to honour the supply chain plan that they put forward. We will put the UK at the forefront of manufacturing for wind turbines and, to support this growing industry, we will invest £160 million in modern ports and manufacturing infrastructure, providing high-quality jobs in our coastal regions.

[Lord St John of Bletso (CB)]

My Lords, in welcoming this White Paper and its ambitious programme, I declare my interests as disclosed in the register.

Given that 30% of UK households do not have access to off-street parking and it will take significant investment to upgrade electric vehicle charging infrastructure to meet future demand, what plans do the Government have to invest in hydrogen-powered infrastructure that is likely to be much more accessible and sustainable? Would it not be sensible for Her Majesty’s Government to invest more in technologies that would allow them to leapfrog battery-driven technologies straight into green hydrogen ecosystems?

[Lord Callanan (Con)]

Of course, huge amounts of money have been invested by both the Government and industry in the development of fuel cells, which are required for the use of hydrogen in vehicles. Again, I suspect that we will use a combination of technologies. Clearly, electric vehicles will have a huge role to play but, if fuel cell technology advances and the costs of hydrogen production come down, we will hopefully be able to have more vehicles powered by hydrogen as well.

[Lord Berkeley (Lab) [V]]

My Lords, the Minister just said, in response to another question, that nuclear will be clean, cheap, reliable, safe and lower cost. He will be aware that of the three EPR designs for nuclear reactors, one at Hinkley Point, one in Finland and one at Cap de Flamanville in France, the costs of the one at Flamanville have quadrupled since 2007, up to €12.4 billion today, and they do not expect generation to start until 2023. I understand the French Government have said they will not build any more of this type of reactor until they see whether this one works. Would it not be better to go for smaller-scale nuclear generation than continue with a new nuclear power station when we have not even got Hinkley Point anywhere near running?

[Lord Callanan (Con)]

I know the noble Lord is a sceptic as regards large-scale nuclear power; we have said that we will enter negotiations with EDF on the Sizewell C project but it will be subject to full government regulatory and other approval. Of course, value for money will be crucial. In addition, as I said earlier, we will be advancing support for SMRs at the same time.

[Lord Greaves (LD)]

Like my noble friend, and like the previous speaker, I am mystified by the Government’s obsession with large nuclear, which is going to be neither clean, safe, secure nor value for money. However, I want to ask about small modular reactors, which are the latest flavour of the month. How many does the Minister expect to be operating throughout the world within the next five years? What is the timescale for actual, practical design of a British version, and when would he expect manufacturing to start?

[Lord Callanan (Con)]

Of course, AMRs have not yet been commercially deployed anywhere in the world and we are at the earliest stages of research and development, but we recognise their potential for decarbonisation. The Government have ambitions to deploy an AMR demonstrator, a prototype reactor, by the early 2030s. Additionally, we will be allocating £385 million to support the development of both SMRs and AMRs.

[Lord Walney (Non-Afl)]

It is now two years since the Toshiba NuGen deal in west Cumbria collapsed. Small modular reactors are very welcome but are still many years off, so what are the Government doing to maintain the world-class nuclear skills base in that county and prevent it dissipating?

[Lord Callanan (Con)]

Coming from the north myself, albeit from the north-east and not the north-west, I understand the challenges that the noble Lord refers to. The commitment is to enter into negotiations regarding the Sizewell C project in Suffolk, but we keep all these options regarding nuclear power at different sites under review. First, we will see how this goes and then move forward with SMRs and AMRs as well, which do have potential. I am sorry that I cannot give the noble Lord a commitment at the moment, but we keep these options under consideration.

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

I am afraid that the 20 minutes allocated for Back-Bench questions have now elapsed.