Net Zero Strategy and Heat and Buildings Strategy

Lord Oates Excerpts

Wednesday 20th October 2021 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for bringing yesterday’s Statement on the net-zero strategy and the heat and buildings strategy to your Lordships’ House. As he knows, the clock is ticking, and it is less than two weeks to go before COP 26 in Glasgow. I congratulate the Government on getting these two vital documents out—two coming along together at once—to fulfil long outstanding commitments to show the spread of attention needed across the economy. These are two vital aspects to the challenge to decarbonise all areas of our national life, our homes and buildings, and to how the Treasury values net zero in its command of the nation’s finances.

COP 26 is making the Government face up to the size of the challenge, and we support them in the focus that that brings on climate change action. We want the conference to be successful. It comes at a very opportune time in world affairs, and it comes now. Can the Minister update the House on the amount of commitments that the Government have secured to their goal of raising £100 billion annually for climate investments internationally?

There are many aspects of the Statement that are rightly welcomed—that the Government recognise that they must take action now, and that these two major initiatives represent vital change in the economy and environment. People are thinking that the Conservative Government are taking Britain back to the 1970s, with energy shortages and high prices. At this last moment before COP 26, there is a growing sense that the Government are finding the climate emergency too big to ignore and yet too hard to grasp. As the Minister is presenting both documents, can he confirm that the Treasury is now fully committed to helping industry and the public through this present crisis? There is a sense that the funding commitments nowhere near match the size of the challenge. There has been almost a decade since David Cameron shredded vital confidence on action when he slashed the renewable energy incentives that so many wished to participate in to do their bit.

Emissions from buildings are higher today than they were in 2015. There are 19 million homes rated below EPC band C that desperately need insulation and upgrading. However, having said that, I welcome the element on the incentivisation for heat pumps, especially recognising those off the grid, most notably in rural areas. It does rather leave consumers at the mercy of electricity prices, and the Statement makes mention of a further £950 million for a home upgrade grant scheme to decarbonise low-income homes off the gas grid. Can the Minister expand on this and say how many households this will benefit?

I wonder whether the support for heat pumps is actually a step back in support. To the majority on the grid, heat pumps are generally seven times the cost of conventional gas boilers. The £5,000 grant appears less than the help that is currently provided through the RHI. Granted that the RHI is being scrapped in April, and that it pays back over a longer timeframe, is the Minister convinced that the Government are doing enough to defray the huge up-front costs for consumers? The Government say that they would like to see conventional gas boilers no longer included in new house builds from 2035. Can the Minister show more commitment? Why cannot the Government bring in a ban on all new conventional boilers being available after at least 2035? This would parallel the challenges and ban on the production of new petrol and diesel cars from 2030.

The hydrogen sector would certainly welcome the commitment towards hydrogen-ready boilers, that all quotes for any replacement or new boiler must include one for hydrogen-ready boilers. While they are still more expensive than conventional boilers, they certainly do not carry the huge price disadvantage of heat pumps. The Statement does not add any additional funding to the £240 million in the hydrogen strategy, which will not be made available until 2023. How do the Government plan to kick-start green hydrogen production at home when, to date, all orders for green hydrogen technology have been made overseas?

Hydrogen would certainly benefit the transport sector in the long term as well. In the meantime, I welcome the promotion of electric vehicles. Can the Minister outline the Government’s plan to help make electric cars more affordable for all consumers? I also welcome the emphasis on investments across the regions, most notably the HyNet cluster in the north-west, and stress to the Minister the need to engage effectively with metro mayors and local authorities, who are all eager to promote the net-zero agenda.

The Government used to insist that they were technology-neutral in their policies. They then moved to the scattergun approach of the Prime Minister’s Ten Point Plan without setting out a comprehensive plan across the economy. As they now fill in the gaps left, are the Government moving in this Statement from a scattergun policy towards picking winners and losers? This Statement, welcome as it is, resembles a pick ’n’ mix of support—so much has been omitted. I will leave it to other speakers to raise those many areas. However, the Government must go over to the touchline and check the monitor of reality. The Statement says that the Government will “gradually” move away from fossil fuels. “Gradually” is too slow. Action is needed now, and the Government must immediately cease the contradiction of providing support for fossil fuels both in the UK and overseas. The Government have said—the Statement repeats it—that the conference needs to be “a turning point for humanity.” What has been taking the Government so long? The earth is on the edge across the globe, and the Government must act as if they really believe it.

[Lord Oates (LD)]

My Lords, I welcome the opportunity to respond to the Statement on these important and extensive documents, and I hope that the Government will provide time at an early opportunity when the House can have a full debate on the full detail that is included in the hundreds of pages that have been published.

I know that in the past when I have responded to publications, the Minister has sometimes been offended that I have not been as effusive in my praise as he thought was merited. As I know him to be a sensitive soul, I will try to start off as positively as I can. There is merit in the fact that, after so long, we actually have the documents at last. There is merit in the fact that the Government remain committed to our climate change goals, and we should give thanks that climate has not become the political dividing line that it has in other countries. I also welcome the decision to introduce a zero-emissions vehicle mandate and a new target for greening all electricity generation. However, I am afraid that, after that, I am running out of things to credit the Minister and the Government with.

The Treasury tells us in the Net Zero Review:

“The transition has implications for current and future taxpayers”—


but it does not tell us what they are. It provides no indication of how the black hole arising from declining fuel duty revenues will be replaced. It says only that

“the government may need to consider changes to existing taxes and new sources of revenue”.

Likewise, in addressing the crucial issue of carbon leakage, which is critical to the viability of our industries as we decarbonise, the Treasury blandly tells us:

“Further work is required”


and that

“a case for conducting a formal call for evidence may emerge.”

There is nothing in the document about using the financial regulatory system to curb the financing of new and dangerous fossil fuel exploration and exploitation, and there is nothing about net-zero requirements on all planning decisions. The complacency is breath-taking. The Treasury clearly thinks that the climate emergency is a distant threat rather than the clear and present danger that looms before all of us.

The heat and buildings strategy is even more devastatingly unambitious. The Government propose a grant scheme that they estimate will deliver 90,000 heat pumps per year, and they convert what was assumed to be a mandate to end new conventional boiler installations into an aspiration. Every year, something in the order of 1.2 million new gas boilers are installed. The Government’s target for heat pumps will reduce that number to just over 1.1 million new gas boilers installed every year. Bearing in mind that they have a lifespan of about 15 to 20 years, it is immediately apparent that we will be building in a long legacy of fossil fuel heating year after year. If that was not bad enough, 90,000 units will not provide the scale to drive down costs and incentivise installers to retrain in heat pump installation, so the Government’s hopes of falling prices driving demand will remain a fantasy.

However, worse than all that, there is no credible plan to upgrade the energy efficiency of our existing homes, which should be the very first priority. If we are going to upgrade the millions of homes the Government say we need to, we have to rapidly scale up our capacity so that we have the skills base to deliver at least 1 million home upgrades a year. We are nowhere near that yet and there is no plan here to achieve that. Installing heat pumps in homes that are leaking energy makes no sense at all, but the Government offer no route to tackling these problems.

What about the money? I would ask what happened to the £9.2 billion promised for energy efficiency in the Conservative Party manifesto, had it not become abundantly clear by now that a promise in that document now seems the best indicator of what will not happen rather than what will. However, it is clear that, after the green homes grant scheme ended, we are now being given a promise of less money over a longer period of time, and it seems to achieve less than we were promised.

So, while I welcome the continuing ambitions of the Government, I remind the Minister that, some months back, he acknowledged in response to questions that the Government needed not only ambitious 2050 targets but a credible short-term action plan to get there. Regrettably, this is not it.