Scottish Affairs Committee
Oral evidence: Hydrogen and carbon capture in Scotland, HC 83
Monday 16 January 2023
Ordered by the House of Commons to be published on 16 January 2023.
Members present: Pete Wishart (Chair); Deidre Brock; Wendy Chamberlain; David Duguid; Sally-Ann Hart; Douglas Ross; Dr Philippa Whitford.
Questions 195 - 281
Witnesses
I: Michael Matheson MSP, Cabinet Secretary for Net Zero, Energy and Transport, Scottish Government; Susan Stirling, Carbon Capture, Utilisation and Storage Team Leader, Energy Industries Division, Scottish Government; and Stuart McKay, Head of Hydrogen Policy, Scottish Government.
II: Rt Hon Graham Stuart MP, Minister of State (Minister for Energy and Climate), Department for Business, Energy and Industrial Strategy; Stefanie Murphy, Director of Hydrogen and Industrial Carbon Capture Directorate, Department for Business, Energy and Industrial Strategy; and Alison Conboy, Deputy Director, Hydrogen Production, Department for Business, Energy and Industrial Strategy.
Witnesses: Michael Matheson MSP, Susan Stirling and Stuart McKay.
Q195 Chair: Welcome to the Scottish Affairs Committee and the last evidence session in our report and inquiry into hydrogen in Scotland. We are delighted to be joined this afternoon by Scottish Government Ministers and UK Government Ministers. We will start with the Cabinet Secretary for Energy in Scotland, Michael Matheson. Michael, would you please introduce yourself and your colleagues and make anything by way of a short introductory statement?
Michael Matheson: Good afternoon to the Committee. I am joined by Stuart McKay, who is the Head of Hydrogen Policy, and Susan Stirling, who is the Policy Team Leader on Carbon Capture and Storage.
The Scottish Government see the development of domestic hydrogen and hydrogen production for export as an important part of our just transition to net zero by 2045. The opportunity for Scotland in the developing global hydrogen market is significant and has the potential to bring great benefits to Scotland and the UK as a whole. However, realising this opportunity means acting at pace to secure our place within the global hydrogen market and achieve our vision of Scotland as a net exporter of renewable hydrogen and hydrogen for supply in the UK and EU markets as early as the mid-2020s.
We published our hydrogen action plan on 14 December last year. This plan, which is available to the Committee online, sets out the strategic approach and action required to support the development of the hydrogen economy to achieve our ambition of 5 GW of installed renewable and low-carbon hydrogen production capacity by 2030 and 25 GW by 2045.
The levers available to the UK Government, particularly with trade negotiations, legislative frameworks and standards, and trade promotion, will also be crucial to ensuring that Scottish companies can benefit from global markets and opportunities. Action by the UK Government is also critical for enabling the developing of CCUS in Scotland to support the hydrogen opportunity. We believe that the failure to award the Scottish CCUS cluster track 1 status in the cluster sequencing process was illogical. Delay to the development of the Scottish cluster, while unlikely to halt the cluster, will significantly slow the development of the key technologies and infrastructure, including the production of low-carbon hydrogen.
The Scottish cluster is also absolutely vital for the just transition to net zero, not just in Scotland but across the UK. We therefore ask the UK Government to accelerate the deployment of carbon capture and storage in Scotland by providing clarity on the criteria and timing for awarding the Scottish cluster and we continue to with the UK Government directly on this.
It is my hope that by building on the engagement so far the Scottish and UK Governments will be able to work together to create the conditions for success for the development of the hydrogen and low-carbon energy sector in Scotland and the UK to ensure that they capture the opportunity that could be developed as a result of a transition to a clean energy system.
I will pause there and I am happy to respond to any questions the Committee may have.
Q196 Chair: Thank you for that very concise introduction and the introduction to your colleagues.
As you said, there has been a number of announcements from the UK and Scottish Governments. There has been your own hydrogen action plan, which you alluded to, as well as the draft energy strategy and just transition plan that was announced last week. I know that you talked about getting the extra 5 GW by 2030 as well as some other targets. Could you tell the Committee a little bit about what exactly has been announced in both of those and give us some sort of suggestion about extra resources allocated and what you hope to deliver and achieve by these plans?
Michael Matheson: The hydrogen action plan that we published in December sets out the range of ambitions and actions that we will take to deliver on supporting and developing the hydrogen economy in Scotland, in low carbon and also in renewable hydrogen. It sets out how we will take forward the range of actions to deliver on the 5 GW, or at least 5 GW by 2030. It sets out the actions we will take, for example, on helping to develop the supply chain right through to how we work with partners overseas to develop export opportunities and to look at transportation options at both a domestic and international level. We have assigned in the region of £100 million to help to support the delivery of that action plan over the course of the next couple of years. That is looking at supporting the development of technology and innovation in the development of hydrogen and also how we can expand and develop opportunities, including infrastructure, to support the development of green hydrogen.
The action plan also sets a number of areas where the UK Government could take action to help to support the development of the hydrogen economy, particularly legislation and market mechanisms, which will be critical to help to give the sector the confidence it needs to start development. It also has a section that covers export potential and the very significant opportunity for Scotland to become a major exporter of low carbon, in particular green hydrogen, as a source of energy for not just the UK but for northern Europeans as well. It sets out a range of different actions we will take to achieve that.
Alongside that, in October last year we also set out the hydrogen proposition that looks at the supply chain in Scotland, the businesses that are based in Scotland that may be able to tap into hydrogen with electrolyser manufacturing and some of the technology that goes alongside that. We have been promoting that internationally to attract inward investment. A significant level of engagement has come about as a result of the publication of the proposition. We are absolutely making sure that we are not just focused on the production element of hydrogen but trying to get a value added through the inward investment and economic benefits that come from manufacturing the components that go into the production of hydrogen. We published that in October.
Last week in our energy strategy we published a refinement of what is contained broadly in our hydrogen action plan, reinforcing a commitment to the importance of the hydrogen economy and, alongside that, the importance that CCUS will play not just in meeting our net zero targets but in helping to support low-carbon hydrogen development in the future and why it will play such a significant part in the course of the next five to six years.
Q197 Chair: I am grateful for that. A lot of the evidence that we have secured in this Committee is saying that there are big developments and propositions about developing the production of hydrogen, but a lot of the difficulties and issues seem to be stimulating demand for low-carbon hydrogen as well as issues and difficulties with storage. Are the Scottish Government doing anything to assist to overcome some of the difficulties that we have with stimulating demand and also ensuring that we have the necessary storage to achieve our ambitions?
Michael Matheson: If you were to have had this session at this time last year I would have probably said to you that my expectation is that low-carbon hydrogen will probably play a large part in the hydrogen economy in the coming years. In the course of the last year I think it is fair to say that there has been a very significant change in the thinking around the hydrogen economy, largely because of the way issues with gas supplies as a result of the war in Ukraine have had an impact on energy prices. There is now much more of a focus on the development of green hydrogen and the cost base of green hydrogen has also dropped significantly over the course of the last year.
We already produce hydrogen that is largely grey hydrogen, but the biggest challenge in developing the hydrogen market has been a lack of a clear uptake for its use in the future. That started to crystallise in the course of last year at a very significant pace in a way that wasn’t there over a year ago. We can now see a real drive for using low-carbon hydrogen as a form of helping to decarbonise our energy-intensive industries; for example, Grangemouth right up to the north-east with the heavy industries that went into the Acorn project. We also see a real drive towards rolling out much more green hydrogen and that has largely been driven because of the change in the market in the last year and also the cost base for green hydrogen reducing quite markedly.
There are probably two parts to looking at infrastructure. The first is infrastructure for storing hydrogen in Scotland for the way in which low-carbon hydrogen and green hydrogen could be used as a replacement for natural gas, to help to balance our energy system in the way in which natural gas does now. The storage aspects, of which there is a lack not just in Scotland but across the UK in general, need to be addressed. BEIS published a paper in the autumn of last year looking at domestic infrastructure and how that could be repurposed for hydrogen. There is a piece of work there.
Q198 Chair: Just on that, Cabinet Secretary, we were fortunate enough to visit the H100 project. We saw the proposed plans for domestic heating being supplied through hydrogen. Is that the sort of thing that you would be looking to develop and progress in Scotland with the responsibilities you have in this field?
Michael Matheson: I think that there is potential for that. That is an example of using the domestic network and how you can use domestic storage to supply local demand but also to meet national demand through the energy system; for example, instead of storing natural gas, storing hydrogen that can be used for generating electricity. The second area of infrastructure that is important is issues around transportation at our ports and storage at our ports for export purposes. We are carrying out a piece of work looking at some of the opportunities to see what further infrastructure needs to be put in place at our ports to help to store and transport hydrogen.
Those two areas of infrastructure are probably the areas of priority for us. Most of the work so far has been done on the domestic infrastructure and we are doing work now looking at the infrastructure that is needed at our ports for export purposes. The H100 project is an example of a local project demonstrating or that will demonstrate how hydrogen can be used to help to decarbonise the gas network by replacing natural gas with hydrogen.
The question will be whether the UK Government should set a date for when they will be looking to transfer the natural gas network over to a hydrogen-based system. I think that there is still quite a bit of uncertainty there. The role that hydrogen will play in decarbonising our domestic heating systems and replacing with hydrogen in the natural gas system is still somewhat uncertain. I think it is 2026 before the UK Government are due to make a decision in the matter.
Q199 Chair: We have the UK Government Minister joining us after we conclude this session with you and these are the questions that we hope to put to him, certainly around the network access to the grid and some of the issues associated with that.
Lastly from me, when we look at what the Scottish Government and the UK Government are doing, you seem to be pretty much aligned in objectives, ambitions and what you hope to do to secure and bring forward this technology. Is the working relationship good with the UK Government on this? I know that we have separate issues on CCUS, which I know colleagues will want to ask you about, but how would you characterise the relationship with the UK Government on this? Are you getting everything you require as a devolved legislature to make sure that you can do what you need to do in setting Scottish Government ambitions?
Michael Matheson: By and large our engagement is good and there are a lot of areas of commonality between the Scottish Government’s and the UK Government’s ambitions for hydrogen. Our officials have a good working relationship and I have a good working relationship with the new Minister on this. Prior to that it was Greg Hands, who I had a very good working relationship with on hydrogen.
There are some areas of difference on hydrogen policy. For example, we see the potential for growing the export market much more than the UK Government do. There is real potential for Scotland to be seen as one of the leading nations in Europe in delivering green hydrogen in particular for export purposes. It is critical that we move quickly to cement that position. There is a lot of interest in Scotland’s capability in being able to deliver green hydrogen at scale in a fairly quick timeline compared to other countries. The reason for that is because of our extensive renewable network, particularly onshore and the potential we have with offshore wind, which is the gateway to delivering green hydrogen. We are ahead of quite a number of countries in being able to do that because we have already gone through leasing grounds and so on where buildouts can start to happen in the course of the next five and six years. We are in a position where we can move forward with this at quite a considerable pace.
The UK Government are much more focused on domestic. However, they are increasingly recognising the potential for export of hydrogen and we are continuing to engage with them to make sure that they work with us to try to realise the opportunities for us in Scotland on the export market.
Everything that I have had to say on CCUS has been very clear that I think it is a missed opportunity and I think that the sector recognises there is a missed opportunity with the Acorn project and the Scottish cluster. The UK Government can’t meet their net zero targets without the Scottish cluster; Scotland can’t meet its targets without the Scottish cluster. It is mission critical. The Committee on Climate Change described it as a necessity to deliver on our targets. I haven’t seen all the net zero strategy review that was published last week, but I think the central message is let’s get on with it and move forward with the CCUS.
The unique thing about the Scottish cluster is that it would import carbon. We have a real potential not only to help meet our own domestic needs through the Scottish cluster but to have quite a considerable storage industry associated with that through the importation of carbon that can be stored in Scotland. That has potentially significant economic advantages for us. We will continue to press on that. I know that my colleagues here and others continue to push the UK Government to try to give us a definitive timeline on the track to the sequencing process so that the Scottish cluster has a clear understanding on the course of direction to take and the timeline for it.
Chair: Thank you. I know that other colleagues will have questions on CCUS, so I will leave that to them, but now I will hand over to Deidre Brock.
Q200 Deidre Brock: Good afternoon, Cabinet Secretary, and to your colleagues as well. You mentioned that it was critical we move quickly to cement our potential for green hydrogen export and we have been reading a lot about big plans for projects such as a green hydrogen production facility in Orkney from a consortium and the potential for wind sites for powering an electrolyser in the Cromarty Firth. Can you tell us a little bit about the work that the Scottish Government are doing to ensure that private companies and local authorities understand each other’s roles in planning consent for new hydrogen projects?
Michael Matheson: I think that there is a challenge for some of the local authorities in recognising that there are significant opportunities but also significant technical challenges that come along with planning applications for major production facilities such as for producing hydrogen.
We are taking forward a couple of things. We have just completed a review of the national planning framework 4, which went through Parliament last week following a very extensive consultation. The general view in the industry is that the changes that we have made to that to help to support us in meeting our net zero targets are considerable, so they have been broadly welcomed as making significant changes to ease some of the planning difficulties that renewable energy projects or net zero-type technologies may have faced in the past. We have those addressed through the national planning framework.
The second thing we carried out was an exercise with the heads of planning of local authorities, which was an event that took place in December or November last year, where we brought together the Improvement Service, Scottish Government officials and heads of planning from across all Scotland’s local authorities to look specifically at hydrogen and applications that may come in for hydrogen production facilities to try to address some of the issues they may face or to provide some clarity on some of the issues that should be taken into account.
The combination of policy through NPF4 and the practical event that we took forward with the heads of planning was specifically to try to help to address some of the challenges that they face when considering applications for hydrogen production facilities.
Q201 Deidre Brock: Can you give us an insight into the sorts of areas that were smoothed out through the national planning framework 4 being passed?
Michael Matheson: One of the things in the national planning framework that needs to be taken into account by local planners is the scope to which a project will help to support us in meeting our net zero targets and tackling climate change. That is now a material consideration that they must take into account, which is why it has been so widely welcomed by those in the climate change agenda, those who are pursuing various forms of net zero technologies or renewable energy projects. From a planning perspective now, they have to take into account the impact that a project will have in helping to support us meeting our targets.
Q202 Deidre Brock: Terrific, thank you. Getting back to the councils and the Scottish Government’s relationship with them, can you tell us how you are liaising with councils such as Orkney, where that consortium is hoping to have the green hydrogen production facility and Highland with Cromarty Firth to maximise jobs through the just transition plans in this field? Do you feel that the local authorities are alive to the potential for increased job opportunities there, particularly for those who are in industries such as the fossil fuel industry who are currently concerned about their role in climate change and addressing the problems that arise from that and where their jobs will sit in the new future that hydrogen production presents?
Michael Matheson: You mentioned two councils, Orkney and Highland. From my engagement with each of those councils, they have a very good level of recognition about the potential benefits that can come from renewable technologies and renewable manufacturing facilities that could be provided within their respective areas. You will have seen the work that Highland Council put in on the green freeport initiative for Cromarty and Inverness area because it recognised the value that would go with that. Orkney had a bid in as part of that process, too. I was up in Orkney last year at EMEC, looking at the hydrogen production facility there, along with the leader of the council. They see huge potential there for a hydrogen production facility.
We have very good relationships with the local authorities that have the potential for large-scale industrial production facilities on the hydrogen side and we are keen to make sure that we build on that going forward. It is fair to say we realise that there are real economic opportunities, the potential for creating hundreds if not thousands of jobs in some cases. From our direct engagement with them, I am very comfortable with the relationship we have with them and I am keen to make sure that we continue to build on that going forward to maximise the opportunities for our colleagues in local authorities to play their part in delivering on these projects.
Q203 David Duguid: Thanks for joining us today, Cabinet Secretary. I was going to come in at some point with a range of questions anyway, but Deidre Brock just prompted a question in my mind when you were talking very positively about the engagement with Orkney Council, for example. What engagement have you had with Aberdeenshire Council on what we hope will be the inevitable planning permission requirements for the St Fergus plant itself for Acorn or the Peterhead power station that we hope to go net zero in conjunction with Acorn? Can you say a bit more about your relationship with the Aberdeenshire Council on that?
Michael Matheson: I had the fortunate opportunity to meet with the Deputy Provost of Aberdeenshire Council and Aberdeen City Council last week when I was in Aberdeen at the opening of the new national subsea facility, which will play an important part in helping to support the energy transition in the north-east. Of course, the national subsea centres can play an important part in helping to support carbon storage. They were there as partners because it is part of the regional group in the area. We have a good partnership with them. It is also fair to say that Aberdeenshire Council and Aberdeen City Council recognise that the Acorn project has the potential not only to protect but to potentially create many jobs in the future. That is why any delay in decision making creates uncertainty for the partners in the Acorn project.
I was in St Fergus in—I think it was—August last year and met with all the partners at the site. It became increasingly apparent to me that there is anxiety about potential delays in the track 2 sequencing process that might result in partners who are already investing in this project starting to withdraw from it if there is not clarity going forward. Both the councils, like us, are keen to see it moving forward as quickly as possible and we will certainly continue to do everything we can to make sure that is the case.
Q204 David Duguid: It will come as no surprise to the Committee—and I should probably declare an interest as the MP for Banff and Buchan where St Fergus is located—that you will get no argument from me in promoting the acceleration of the project. I will ask a couple of quick questions on carbon capture and storage and then I want to come back to it.
Susan Stirling might want to come in on this, going by what her remit is on the briefing papers here. There is also a role played by the Scottish Government in engaging with local stakeholders and you have talked about going to the site. What level of engagement do you have or do you intend to have with other stakeholders in the area such as community organisations or local elected representatives at a domestic level?
Michael Matheson: The reality is that I don’t think there is much difference between any of us on the importance of the Acorn project. I recognise that St Fergus is in your own constituency. Grangemouth is just on the edge of my own constituency, given it is part of the cluster, and it will play an important part in helping to support the decarbonisation of the Grangemouth area as well. Within about 50 km there are something like six of Scotland’s biggest emitters, so it will play an important part in supporting decarbonisation. I am very aware that there are stakeholders from Grangemouth right up to St Fergus in your own constituency who have an interest in the Scottish cluster being successful and the role that it can play.
We have, through our officials, major engagement with the partners in the Scottish cluster. I have direct engagement with a whole range of the stakeholders who are involved in the Scottish cluster. Officials also engage directly with some of the local authorities on different issues as well. I am very open to looking at where we can do further work through that engagement.
However, I think that the issue we have now, the issue that is critical now, is the timeline for the track 2 sequencing process. If there is any further delay to that, there is a danger that we will start to fall behind: first, we will not be able to meet our climate change targets and, secondly, we will find ourselves in a situation where other countries will overtake us in the development of this technology. That would be a catastrophe for us all and it would be a disaster for those in the industry. If anything, I think now that getting clarity on the timeline is the most important thing for all the stakeholders.
Q205 David Duguid: Given that that decision process is reserved to the UK Government and UK Government Ministers, what have you done to help those stakeholders engage more directly with UK Government Ministers? Can you help facilitate that or have you helped facilitate that in the past?
Michael Matheson: Yes. We have engaged through the partners to find out exactly what their key issues of concern are and how they believe the process should be moved forward and we have reflected that back to the UK Government. We have worked with the partners in the partnership to try to help to deliver that message to the UK Government directly. I know that they have also come to us for advice on how they can highlight the importance of the cluster to climate change targets and we have provided them with information to support them in doing so.
Of course, you will also be aware that we have made £80 million available for the project to try to help support some of the early financing of it and some of the technology around it. Our engagement in trying to encourage that has largely been through the cluster partners and also through our direct engagement with the UK Government in the matter.
Q206 David Duguid: I am glad you brought up the funding. That was going to be my last question on the CCUS. Contrary to what some press reports may have suggested—and I wouldn’t put all the blame on you because sometimes the press can exaggerate comments—did I understand you correctly when you said earlier that the project has not been halted, it has not been stopped, it is progressing? With that in mind, how much of that £80 million that you mentioned has been spent on the project thus far? Do you know how much has been spent by the UK Government?
Michael Matheson: I don’t know how much has been spent by the UK Government, but the £80 million is to help to support the development of the technology associated with it. The organisations and partners who are involved in it are not able to take that forward until they get clarity on the track 2 status, what the timeline for that project will be. Until they have clarity on the track 2 timeline, they don’t know what investments they need to make and over what period. They also don’t know what the market mechanism will be for the obligation of the cluster until the track 2 process has been completed.
You can understand that investors are reluctant to make investments at the moment when there is uncertainty. It would halt the project because if we don’t get clarity this year and the track 2 process doesn’t start this year, the UK will not be able to meet its net zero targets without it. You can see that in the UK Government’s net zero strategy they ramped up the contribution that negative emission technology could play in meeting climate change targets. It effectively means deploying every form of carbon capture utilisation and storage you can in the UK, so at some point they will have to take forward the Scottish cluster. The danger here is that the longer you delay it, you restrict the investment you need into the technology, which will be necessary for its development. Our funding was to try to help support that. At the same time, you find yourself in a situation where other countries start to develop the technology and steal a march on us with it.
It will go ahead at some point. The issue more than anything is the delay. I have heard various timescales that, to be honest with you, have been quite concerning. I was told that there could potentially be a delay up to 2027 at one point. I don’t believe that that will be the case but I was told that potentially could be the delay. If that was the case, that would be a real mistake because we need it deployed in 2027, not a decision made in 2027. There is now speculation that we might get an update in the spring. However, any update in the spring will need to be meaningful and it will also have to be very clear about the timeline for taking forward the track 2 sequencing process so that the investors in the Scottish cluster get a clear understanding on the timeline for making investment decisions on the Scottish cluster.
Chair: I am very conscious of the time.
David Duguid: Very quickly, as the Cabinet Secretary was not able to answer the question, the UK Government have spent—not put on the table, but spent—£41 million and, of course, the £80 million will be most welcome as well when it is spent. On the speculation about timing, the mood music I am hearing, as the Cabinet Secretary has alluded to, is it is a case of when, not if. I just wanted to put that on record.
Q207 Douglas Ross: Good afternoon, Cabinet Secretary. You have launched a number of papers recently that are full of figures and statistics. Do you have any concern that your own reputation and that of your Government has taken quite a kicking recently based on the widely and wildly inaccurate claim that you continued to use on Scotland’s potential for renewable energy? What do you say to people who would now question the figures you are currently using, given that history of you personally and the SNP Government continuing to use a figure that is incorrect?
Michael Matheson: No, I don’t. Many of the figures contained in, for example, our energy strategy are from either independent sources or have been verified by our own economists and statisticians. Some of those have also been subject to independent verification from outwith the Scottish Government. I am very confident that the figures that we have in our energy strategy, in our hydrogen action plan and our onshore wind policy statement that we published in December are all accurate and that they will stand up to scrutiny.
Q208 Douglas Ross: Were you previously aware that you were using inaccurate figures with the 25% renewable energy figure that you continued to use?
Michael Matheson: When we became aware that it was not an accurate figure, we updated that.
Douglas Ross: When did you become aware of that?
Michael Matheson: If you let me finish, I will be able to hear what you are saying. I am sorry, when you speak and I am speaking I can’t hear you, so if you speak when I am speaking we just cancel each other out. What I said is that we have already said we will undertake work to revise that and that work is being undertaken now.
Q209 Douglas Ross: You said in the answer that I heard “when we became aware”. When did you become aware of that inaccurate figure?
Michael Matheson: I think the figure, if I recall correctly, was something back in September.
Q210 Douglas Ross: Your junior Minister, Lorna Slater, told the Scottish Parliament that Ministers became aware on 8 November. Was that an inaccurate statement from Lorna Slater?
Michael Matheson: No, I don’t think it was. I don’t have the papers on the issue in front of me, but the figure that was provided by Lorna Slater was correct at the time.
Q211 Douglas Ross: You are saying it was back in September but Paul Wheelhouse, who has not been an MSP since 2021 and was previously a Minister within the Department you now serve as Cabinet Secretary, was made aware of concerns from civil servants about it prior to his failure to be re-elected in 2021. Are you honestly trying to say that you only knew about it back in September of last year?
Michael Matheson: I am, yes.
Q212 Douglas Ross: That is very interesting. We take at face value what our witnesses say here and I hope we don’t have to revisit any incorrect statements by you in this evidence session.
I will go on to ask about hydrogen and the announcement on freeports, particularly Cromarty and the Firth of Forth, on Friday. You are the Cabinet Secretary who has two Green Ministers within your portfolio in the Scottish Parliament. Are they fully supportive of the freeport announcement that was made jointly by the UK and Scottish Governments on Friday?
Michael Matheson: I think it was quite clear that the Green Party take an issue on green freeports, which is why it is not part of the Bute House agreement.
Q213 Douglas Ross: There is no collective responsibility within the Scottish Government for freeports with your partners?
Michael Matheson: It is not part of it. They have a different position on the market, which they stated at the time on Friday when the announcement was made. As Ministers, they are not directly involved in issues around the green freeports.
Q214 Douglas Ross: But they are in the Department that is directly involved with you as Cabinet Secretary. They are your junior Ministers. You don’t think that their lack of support, and indeed their outright opposition, is a concern within your own Department that your junior Ministers—
Michael Matheson: No, the Scottish Government—
Douglas Ross: Sorry, Cabinet Secretary, when I speak and you speak, we will cancel each other out. If you just wait for me to finish, I will be able to ask you to answer. You don’t have any concerns at all that your junior Ministers take a diametrically opposed view to you on such an important issue as freeports in Scotland?
Michael Matheson: No, I don’t.
Q215 Douglas Ross: Why not? When you have discussions about the opportunities and the benefits—25,000 jobs coming to Cromarty and I think it is 40,000 or 50,000 at the Firth of Forth—do you not have concerns that your junior Ministers don’t support that?
Michael Matheson: No, because the Scottish Government support them.
Douglas Ross: They are Scottish Government Ministers. I shouldn’t really have to point that out to you.
Michael Matheson: Yes, I am well aware of that, but from the Scottish Government’s policy point of view we support the green freeports and we are taking forward policy measures that will help to support them going forward. Their role and the difference in the view of the party in the matter doesn’t raise any concerns with me on the extent of the impact that will have in taking forward the policy.
Q216 Douglas Ross: You are happy that you can take a different approach from your Ministers. Would you strongly disagree and, indeed, question how the Greens could describe freeports, which the Scottish and UK Governments have backed, as a “failed and dated Tory gimmick”? Your Green colleagues are wrong to say that, aren’t they?
Michael Matheson: If you want to take evidence from the Green Party on their position on freeports, my suggestion is to ask them to come along as witnesses and they can set out their position on what their opposition is.
Chair: Cabinet Secretary, we are here to try to get your evidence concerning hydrogen and I am hoping that Mr Ross will start to ask some questions about the focus of this inquiry. You have asked questions about the Greens and about freeports. Can we now get back to the substance of this session, please, which is hydrogen in Scotland?
Q217 Douglas Ross: Thank you, and I will go back to my line of questioning, which is about hydrogen in Scotland that we can benefit from through the freeports at Cromarty. Therefore, do you disagree, would you disassociate yourself with the remarks of the Green Party who call these Tory gimmicks? They are wrong, aren’t they? I am just asking for your opinion.
Michael Matheson: I think anybody who has any detailed understanding of the hydrogen economy will know that we are not just dependent on green freeports. The way in which the hydrogen economy will develop will largely be through export-driven interest in the importation of green hydrogen. The gateway to achieving that is through both onshore and offshore wind. I think that the hydrogen economy would still develop and grow very significantly even if we didn’t have green freeports in Scotland. They may help with some companies who choose to base themselves there with the tax advantages that they get there.
Good practical examples of that are the hydrogen production facility that is being taken forward by Scottish Power and the distilleries at Invergordon or Gordonbush that has been taken forward by SSE in the Highlands, which have not been dependent upon any freeport status. I fully expect that hydrogen development within the north-east of Scotland and areas that are not covered by freeports will continue to grow and develop. I don’t think that realising the ambitions that we have in developing Scotland’s hydrogen economy, particularly the export potential it has, is largely dependent upon green freeports.
Q218 Douglas Ross: Cabinet Secretary, you have mentioned freeports a number of times. I am going to try for the fourth time, I think. Why can you not, as a Scottish Government Minister who has backed these plans for Scotland to have two freeports, say that your Green colleagues, who are allowed, as you say, because it is not mentioned in the Bute House agreement, to take a different view—why can you not say that in your personal opinion or in your Government’s opinion the Green Party is wrong to criticise these freeports and the investment and jobs that they will bring into the country and that they are wrong to call them a failed and dated Tory gimmick?
Michael Matheson: The reason I have mentioned freeports on a number of occasions is because you have raised the matter with me. My view is that they will not play a key part in helping to deliver and realise our ambitions for the hydrogen economy in Scotland. You just have to look at the hydrogen action plan. There are over 60 hydrogen projects that are in development or proposed across different parts of Scotland. Only a limited number of them will fall to areas that are covered by green freeports. I think that the hydrogen economy will develop nevertheless without green freeports or with them. For some businesses that choose to base themselves within a green freeport there may be some tax advantage to them as a result. I don’t think it will have a big part to play in helping to realise the extent and opportunity we have in developing the hydrogen economy in Scotland, which I think potentially will not only generate a significant amount of income for the economy but has the potential to help to support significant employment across the country.
Douglas Ross: Okay, I am going to move on because I am struggling to understand why the Cabinet Secretary for Energy in Scotland cannot say categorically that these freeports—
Chair: Just before you do move on, I want to remind colleagues that we have the Cabinet Secretary until about 4 pm. He might be a bit more generous with his time because I am hoping to get in Philippa and Wendy in the time that is available.
Q219 Douglas Ross: Thank you, Chair. I just cannot understand the strategy being adopted by Michael Matheson to fail to acknowledge that the Greens have such an outrageous position on this.
Mr Matheson, last week you issued your Government’s proposals on the future of oil and gas; 90,000 jobs across Scotland depend on that sector. What assessment have you done about the impact of your strategy on those jobs in Scotland?
Michael Matheson: It is a draft strategy that went out to the sector to get their views on it and we have had extensive engagement with them on that. Their view, as you can see from the strategy itself, is that they believe that by ramping up investment in renewable energy, both onshore and offshore, by ramping up capacity in hydro and marine—so expanding in hydrogen as well—we have the potential to see more people employed in the energy sector in Scotland. Our assessment and the work that we have carried out, which is embedded in the strategy itself, sets out that they believe we will end up with more people employed in the energy sector as we move through the transition.
The key thing is to make sure that it is a managed transition. As we see the decline in oil and gas and you can see within the strategy the figures that are provided by the North Sea Transition Authority and the work that it has carried out, we need to make sure that we ramp up renewable energy opportunities for those in the oil and gas sector as we see that decline in oil and gas. Our assessment is that there will be net positive in the employment that it will create in the sector overall.
Q220 Douglas Ross: Aberdeen and Grampian Chamber of Commerce urged you to “reverse this damaging, job-destroying position before it is too late”. Will you take on board the points and the views of Aberdeen and Grampian Chamber of Commerce?
Michael Matheson: Of course, during the course of our consultation exercise we will hear a whole range of different views on it. You will also recognise that there are those within the renewable energy sector who very much welcome the strategy, recognising the opportunity that it creates and the potential for further jobs in the energy sector in Scotland. For example, you can take Offshore Energies UK, which welcomed in particular the strong support within the strategy for both CCUS and also for hydrogen, which it sees as being a major part in supporting the transition within the north-east of Scotland.
I recognise that there are different views around the strategy, which is inevitable when you set out a whole range of different policy areas within a strategy. However, we will certainly listen to the views being expressed by stakeholders, including the Chamber of Commerce and those within the industry, as we look at finalising the strategy in the next couple of months.
Q221 Douglas Ross: Finally, the SNP leader at Westminster supports and sees no reason why the Campbell oilfield should not go ahead. Do you agree with your SNP Westminster leader?
Michael Matheson: We have been clear that unlimited continued extraction of oil and gas within the North Sea is not compatible with meeting our climate change targets, which is why any further extraction should have a compatibility checkpoint within it. That is consistent with the position that has been set out by the Committee on Climate Change, which is both the Scottish and UK Government’s independent advisers on these matters. What I heard the Westminster leader saying at the weekend is that he believed that there should be a compatibility checkpoint and that if it gets to that threshold it should be allowed to go ahead. That is exactly what a compatibility checkpoint is about. That is why the CCC has said that it should be in place. That has been the consistent position of the Scottish Government over the course of the last year.
Q222 Wendy Chamberlain: Thank you, Cabinet Secretary, and your colleagues, for the time today. Cabinet Secretary, you said in response to the Chair’s first question that there had been a movement in relation to green hydrogen. What are your views on the role of low-carbon hydrogen in homes in Scotland? Has the opinion shifted there?
Michael Matheson: There is still a lot of uncertainty around the role that hydrogen will play in supporting the decarbonisation of domestic heating. That uncertainty is in part due to a lack of clarity about the timeline for when we will start to move away from using natural gas in the existing domestic system.
It feels to me as though the increasing view in the sector is that we will move towards much greater electrification of domestic heating and probably much more towards shared heating sources, district heating systems, as being a major part of meeting our future domestic heating needs, alongside a big drive to reduce energy demand through greater insulation. It feels to me that it is a clear path but, if I was being honest, it is very difficult to say accurately whether we will see wholesale replacement of a natural gas domestic gas system with hydrogen. I suspect it will initially be a combination, a mixture, and then greater electrification and district heating will play a bigger part, rather than just moving to wholesale hydrogen replacing our natural gas system. However, that is just my sense of the way things are developing.
Q223 Wendy Chamberlain: The Chair mentioned the H100 at Fife, which we visited in May last year, so this inquiry has been going on for a little while. In September there were reports that that is not proceeding to timeline and that take-up might be part of that as well. You talked about district heating. Are you seeing, particularly in rural and isolated communities, that there is a demand for utilising green hydrogen in that regard?
Michael Matheson: Yes, I think that district heating will play a bigger part in our urban areas but not in our rural areas, for obvious reasons. In rural areas there is a potential role where hydrogen could play a part in helping to decarbonise energy systems. Again, because it is a limited market, the technology in that area is still very limited.
You will be aware that there are a number of closed LPG systems in Scotland that are presently in operation. There is one in the Western Isles; there is one in the Highlands. There are six or seven of them in Scotland. I cannot remember the exact number off the top of my head. I know that Scotia Gas Networks is looking at the potential, aside from the H100 project in Fife, of working in partnership with onshore wind providers in those areas to use them for the development of hydrogen that could then be used to provide green hydrogen in those localities. However, it is at a very early stage where they are considering that. In some of those instances there is potential for a hydrogen-based system, maybe through the partnership that SGN is working on at the present moment.
In terms of how it will replace LPG individually, in individual properties, there is still quite a bit of uncertainty around the technology and how that would be managed and so on, given all the transporting charges that you have with green hydrogen. It could play a part but I could not give you a clear sense of exactly to what extent and where.
Q224 Wendy Chamberlain: It sounds like for a variety of factors hydrogen from a home perspective might be quite specific in relation to the sort of networks that you were describing there, given the degree of uncertainty on other fronts around boilers as well.
I want to pick up quickly on the LPG point. We have been made aware that upstream partners at Mossmorran have advised customers in Scotland that they are going to be utilising their supplies in the European markets as well, and that potentially is going to see an increase on LPG costs. Do you have any thoughts or views on that or were you aware?
Michael Matheson: Yes, I was aware of the issue and I do have concerns about the issue as well. What we have been told is that there will continue to be supply to meet need but the cost is going to be considerably greater than it was previously. Because it is an area that is reserved, it is a matter that I have already taken up with UK Ministers. I raised this matter with them last week because of ongoing concerns, seeking reassurance around security of supply and costs associated with it. I know that some of those, for example, who are in caravan parks are experiencing significant increases in their costs, which the existing discount scheme does not sufficiently meet or address. I asked whether there are further measures that the UK Government will look at putting in place to help to support people in those circumstances. It may be that UK Ministers can tell you more on exactly what action they are taking to try to address this issue. It is an issue that I was aware of and it is an issue that I have raised with the UK Government, given the concerns that have been highlighted about it.
Q225 Wendy Chamberlain: Thank you. It is handy that the Minister is going to be coming after you.
Moving on to green skills development plans, other members have already touched on that in terms of jobs. Do you feel that the energy strategy and just transition plan is focused sufficiently on keeping high-skilled oil and gas workers in Scotland to work in low-carbon hydrogen? I knocked on a door on Friday in my constituency and spoke to somebody who was working in oil and gas in the North Sea but who has started working in Qatar. There does seem to be a concern within the workforce that there is not going to be the jobs or that there is going to be a gap before other jobs come online. I would appreciate your thoughts on that.
Michael Matheson: One of the real strengths that we have as a country is our oil and gas sector and the skillsets that we have within it. I come across lots of targets that have been set by countries on looking at developing hydrogen capacity between now and 2030. Very often they say that you need two key ingredients. You obviously need cheap, renewable electricity and you need water. My view is that you need three important ingredients: cheap electricity, water and skills. One of the things that we have in Scotland is—particularly with those who work within the gas sector—the ability to transfer the skills into hydrogen production.
Therefore, we are in a very strong position compared to many other countries that are looking to develop hydrogen, because they do not have the same oil and gas sector that we have and the skillsets that go alongside that. That is why we set out in the energy strategy and just transition plan the need to make sure that this is a managed transition. As we see that decline in oil and gas taking place, it is about supporting the transfer of those already in our energy sector into the new, clean technologies, which is why, within the just transition plan, we set out how we are going to try to achieve that.
Chair: Thank you. I know that we do not have much time and we have to let you go, Cabinet Secretary, but I hope that we have time to take some questions from our new Committee member, Philippa Whitford.
Q226 Dr Whitford: Cabinet Secretary, you mentioned yourself the need to develop demand. That came out in quite a few of the reports that we have seen, not just to focus on production but on demand. As chair of the all-party group on Germany here, I am aware that several of the individual states that visited in the last year have also come to Scotland, and we are all aware of the challenge that Germany faces. Have the Scottish Government managed to capitalise on that? Have they been talking to the Länder? Have they achieved any memoranda of understanding? You did say export is the focus for Scotland in the future.
Michael Matheson: We have had very extensive discussions with the Länder in Germany, a number of the states over the course of the last couple of years, and we now have what I see as being a very strong relationship with a number of the states within Germany. We have a memorandum of understanding in place with several states now, specifically on hydrogen. We also have letters of intent, which we have recently put in place with Bavaria as well. We have also had some direct engagement with our Berlin hub with the federal government, given their particular interest in hydrogen. We are looking to take forward a joint event with a number of the states and the Scottish Government later this year in Germany, specifically around hydrogen. Ivan McKee, Angus Robertson and I have also had extensive engagement with a number of the states in Germany, which is why we now have a very strong relationship with them with a very specific focus on hydrogen.
It is not just about importation of hydrogen. It is also about looking at developing some of the technology that is associated with it. Some of the MOUs that we have in place are around port infrastructure but also about developing academic partnerships around the development of the technology associated with hydrogen production. It feels to me that there is not a month goes by where we do not have a delegation from Germany here in Scotland engaging with us specifically on hydrogen, given the nature of the relationship that we have in place and the scale of their ambitions in taking forward green hydrogen.
Q227 Dr Whitford: In particular, as was referenced earlier in this session, heavy industry is clearly likely to be the earliest user. North Rhine-Westphalia, with the Ruhr area—have we made any progress or had any discussions with them? In my meetings with Ministers there, that has been their interest in steel and glass and so on, their heavy industry, smelting.
Michael Matheson: That is one of the states that we have a memorandum of understanding in place with now specifically, because of their interest in hydrogen and the potential of Scotland to be seen as being an exporter to them in the future.
Q228 Dr Whitford: What are the Scottish Government doing with regards to that infrastructure, both for storage at ports and export at ports, and also exploring what the future of exporting will be? Will we be talking ammonia, will we be talking tankers, will we be talking pipelines?
Michael Matheson: The thing that has shifted quite a bit over the course of the last year has been that when it comes to green hydrogen a significant part of the costs associated with it are to do with the transportation of it, from an export market point of view. You can see a number of different things here. We are carrying out a piece of work looking at different options for transportation of hydrogen from Scotland, and also hydrogen derivatives. We are looking at the potential for green ammonia. We are also looking at methanol and also the potential for liquid organic hydrogen carriers.
We are part of a consortium in partnership with the Net Zero Technology Centre in Aberdeen and also with the Port of Rotterdam in carrying out a feasibility study, or a piece of detailed work, into the use of liquid organic hydrogen carriers from Scotland into the north of Europe directly. That is a piece of work that is due to be completed in the coming months, in the summer of this year.
The second area that has grown significantly as an area of priority in recent times has been in relation to pipeline infrastructure. You can see from the “REPowerEU” paper that was published by the EU that it is setting out its ambitions for a hydrogen backbone in Europe, going from the Iberian coast right into the centre of the North Sea. One of the areas that we are very keen to see is that pipeline being extended into the north of Scotland, and the north-east of Scotland in particular.
We have commissioned a piece of work, which is being carried out again through the Net Zero Technology Centre in Aberdeen, that has recently brought in subsea expertise around this, looking at the possibility of repurposing existing oil and gas infrastructure in the North Sea that could be used for hydrogen and also looking at the potential for new infrastructure being put in place in order to connect into the EU’s hydrogen backbone. We are due to get that work completed in the course of the spring of this year, including some of the commercial opportunities that go with that. We see that as being a critical element in helping to make sure that we do not find ourselves in a situation where Scotland is a missing link in the hydrogen backbone in Europe, given that we have the potential to be one of the biggest suppliers of it. If we do, it potentially pushes up the cost of our hydrogen compared to other countries that can tap into the pipeline.
Q229 Dr Whitford: Obviously, Cabinet Secretary, these are major infrastructure projects. What are the financial barriers to carrying them out and what are the Scottish Government doing, either by themselves but also working with the UK Government, to get over those barriers so that when the production is ready that export market and exportability is ready to go?
Michael Matheson: This is probably an area, as I mentioned earlier, where there is a slight difference between the Scottish Government’s position on hydrogen and the UK Government’s position on hydrogen. The UK Government are much more focused on domestic and meeting domestic needs, whereas Scotland will be a net exporter of green hydrogen and the export market is potentially going to grow at a much faster rate than domestic demand is going to grow. Therefore, helping to make sure that we have the right infrastructure in place to support our export of hydrogen is critical. That is why we have commissioned this work on the pipeline and why we are also part of the partnership looking at marine transportation into northern Europe as well.
We have made representations to the UK Government on the need to make sure that they prioritise export from Scotland much higher than it has been in their thinking to date. Although in their updated hydrogen plan there is more of an indication towards hydrogen being exported, it is not to the degree that we think that it will play in the mid-2020s and into the mid-2030s. We think that there is much more to be done there.
In terms of the commercials and the financing around all this, alongside carrying out the feasibility work on the repurposing of existing oil and gas infrastructure and looking at a new pipeline being put in place, we are also carrying out a commercial assessment looking at how that could be funded. The general sense is that if there are sufficient off-takers at the other end, commercially it will stand on its own two feet, where companies will see it as an investable proposition for them. However, to get to that point, we need to have a very clear and strong position on developing our export market so that we have the off-takers in place that will give investors the confidence that they need to invest in things like additional pipeline infrastructure to connect into the European backbone. That will be critical in helping to deliver on our export ambitions.
Chair: Thank you, Cabinet Secretary. There were a couple of questions outstanding, which I am sure you will get back to the Committee on in due course. If there was anything else that you feel that you could usefully contribute to this inquiry, please also get in touch. Thank you ever so much for your participation and answering all our questions so fully. We will take a short adjournment until we get our next guests in place.
Witnesses: Rt Hon Graham Stuart MP, Stefanie Murphy and Alison Conboy.
Q230 Chair: Welcome back to the Scottish Affairs Committee for what will be our last evidence session on hydrogen and carbon capture in Scotland. We are delighted to have the Minister responsible with us, who will now introduce himself and his colleagues and anything by way of a short introductory statement.
Graham Stuart: Thank you, Mr Chairman. It is a pleasure to be with the Committee today discussing such an important and exciting topic for Scotland and, indeed, the whole UK. I have with me Stefanie Murphy, who is the Director of the Hydrogen and Industrial Carbon Capture Directorate. To my right I have Alison Conboy, who is the Deputy Director of Hydrogen and Industrial Carbon Capture. The Committee will be delighted that on such a technical topic the Minister has officials here who may be able to provide more substantive and detailed information to back up my high-level strategic insights.
Hydrogen and CCUS will be critical to delivering UK energy security, high-skilled jobs and economic growth and will help the UK to reach net zero. As the Committee will have discovered, if it did not know before, there are certain areas of industry and other areas where we can find no route except by use of carbon capture and hydrogen. That is not just true of us, it is true of every industrialised nation in the world. Therefore, if we convert our current position into a leadership role, there are huge benefits that will spring from that for Scotland and the rest of the UK.
That is why we have set an ambition of up to 10 GW of low-carbon hydrogen production capacity by 2030, including four CCUS clusters by the same year. The UK approach is to promote every aspect of the hydrogen economy—production, demand, networks, storage, and research and development—and to give industry maximum clarity about Government support, and to drive private sector investment right across the value chain.
The Government have produced a world-class hydrogen strategy. Our flagship policies are being delivered UK-wide, benefiting projects across the Union, including in Scotland. Of course, it is leveraging the whole of the Union and every energy user in it that gives a particular opportunity to Scotland, which may be smaller per capita, but in terms of hydrogen CCUS the potential is enormous.
Scotland has a key role to play in the development of a UK hydrogen economy, with potential to produce industrial-scale quantities of hydrogen from offshore and onshore wind resources, wave and tidal power, as well as CCUS, supported by a strong company base and valuable skills and assets in oil and gas, offshore wind and energy systems. We look forward to working with you, Mr Chairman, and of course with the Scottish Government, as we do, in making sure that these opportunities are realised.
Q231 Chair: Thank you ever so much for the clear and concise opening remarks. A few of us around this table hoped that you would have used this opening statement to say something positive and reassuring about Acorn and perhaps even indicate a timeline. We know that there is a delay to the first clusters, and everybody around this table is hoping that that is not going to impact on the second clusters. To kick off, given that it has featured so heavily in the previous session, could you reassure us about Acorn and tell us when we may expect to get some sort of positive announcement?
Graham Stuart: As I have said, Mr Chairman, with our targets for 2030 we are going to need four—maybe even more but we have committed to four—clusters by 2030. CCUS is a priority for the Government and we are progressing at pace. We will invest up to £1 billion to establish carbon capture and storage in four clusters, as I have said, by 2030. The first two clusters have been selected and in August we published a shortlist of associated projects. We recognise the potential benefits of the Scottish cluster and the role it could play in industrial decarbonisation in Scotland. Acorn submitted a bid into the track 1 sequencing process, forming the reserve cluster. Should either of the track 1 clusters not be able to deliver, we would call on the Scottish cluster instead. Further detail on the track 2 process will be set out in the spring.
Look at IRA in the United States. Look at the EU and everyone’s response to Ukraine. The whole world is moving in this direction. Look at the transformation that we in Glasgow helped deliver, from 30% of global GDP covered by net zero pledges in 2019 when we took on the presidency to 90% covered by that today. There is a huge demand signal globally. I agree with you, Chair, and with the whole Committee, if I am picking that up correctly, who are impatient to see us move forward at pace.
The Energy Security Bill is, of course, proceeding through the Lords and it has pretty strong support. I teased Alan Whitehead, my Labour shadow, for the fact that he wrote a letter. It must have been the first letter in history, I would have thought, from an Opposition shadow Minister demanding that the Government come and speed up their Bill. However, that suggests the fact that across the piece we all recognise that there is an opportunity here and we do not want to miss it.
Q232 Chair: With all that positivity and reassurance, could we expect a very positive announcement around springtime when it comes to the Scottish cluster?
Graham Stuart: The Scottish cluster is in a pretty good position. It is in that reserved place anyway, and we are going to need multiple clusters to get to 2030 anyway. I cannot prejudge that announcement, however much you might tempt me.
Chair: You know that we are going to try anyway.
Graham Stuart: From the general tenor of what I have just said, we would absolutely be looking for colleagues to hold us to account, make sure that we are on the critical path and managing as swiftly as we can. It is hard to imagine, given our ambitions, that there would not be a place for a well-developed, well thought-through programme.
Q233 Chair: We will take that as positivity. In your opening remarks you mentioned the British energy security strategy and the ambition of stepping up to 10 GW of low-carbon hydrogen production by 2030. This is caveated by the always strongly worded “subject to affordability and value for money”. Is this a realistic target and will it be achieved?
Graham Stuart: That is our aspiration, subject to that caveat. As you will understand, there is a whole series of pressures and stresses on public finances and the like, but we are confident that this is the right place to be investing. For the reasons that I have set out, which are even stronger now than when those strategies were put in place, the case for—
Q234 Chair: Who will make the assessment about the affordability and value for money? Would that be your Department or is it something that will come from the Treasury?
Graham Stuart: It will be a cross-Government decision in which the Treasury and any finance matter is always at the heart.
Q235 Chair: And an announcement in spring on this?
Graham Stuart: I will let you know. All these steps are always a cross-Government agreement and until you have it, it is hard to announce that you have agreed before you have agreed.
Q236 Chair: You have announced a hydrogen champion, which is something that very much intrigues this Committee. It is Jane Toogood. Her credentials look fantastic. If you were going to appoint somebody to be a champion, they do not come any better qualified. What exactly is the good Ms Toogood going to be doing and how do you see her operating across the country? How much will she be involved in the setting up of some of the projects and ambitions that you have?
Graham Stuart: I have already met with her. As you say, she is a very impressive person. She has a very impressive track record. Her role is to help to galvanise the private sector by acting as a Government-appointed champion, taking that Government imprimatur but using her private sector connections and her time in a way that Ministers have less of to go out there and make sure that at every opportunity the story is told of the opportunity here, the Government’s ambition in the space, and to encourage investment into our supply chain and production and future transport and storage as well.
Q237 Chair: Lastly from me, what we have found in this Committee is that although the production of hydrogen is not the easiest part in all this, it is the part that seems to be securing the most focus and attention. Are you sure that we are doing enough in order to incentivise demand when it comes to hydrogen? We will get to some of your domestic targets and some of the things that the Science and Technology Committee brought up in its very interesting report on hydrogen. We will come on to that, but generally what are you doing to make sure that we have that demand? We will come on to issues about storage. Are you certain that we are doing enough to ensure that the storage is in place to meet some of these targets and ambitions?
Graham Stuart: I am never certain about anything but, as you say, it is a complex matrix. In your last session—and you have may have looked at it in other sessions—you looked at the grid. The whole net zero transformation relies on a grid, and if you do not have that in place then whatever you are deploying, whether it is offshore wind, nuclear, carbon capture or hydrogen, you have an issue. It is a complicated game of SimCity in which you have to make sure all the pieces are in the right place at the right time.
We have our world-leading hydrogen strategy. That sets out a good framework. In terms of demand, we think that the most important thing is to get the production. If we support production using CfD-style approach, helping to bridge and giving enough guarantees that they are confident—
Q238 Chair: Are we going to use the CfD approach?
Graham Stuart: A CfD-style approach.
Chair: CfD style?
Graham Stuart: In the business model. If you remember with offshore wind it went essentially from a bilateral approach originally to try to get the market going. My officials—they were not mine then—were engaging with people in order to get that going until it grew to the point where you could move to the 2015 AR1, or whatever it was, the first auction, and then use the auction mechanism to reveal the price. We are going through a comparable pathway of working with industry to incentivise them to get into production with a view that by as early as 2025 we might be able to move to a more auction-style approach.
By getting the production and by doing it in a way that means that they feel confident of the price that they will then be producing it for, that is a fundamental way of delivering demand. If you think about it, it is one of the most neutral ways. There is not much, if any, green hydrogen right now. If we can start providing it and we can provide it, with a bit of support initially, at an affordable price, the uses will come forward. We think that it will be more efficient if we do that than if we go around trying to pick who the demand people are.
Having said that, we are doing quite a lot to support the demand side as well, supporting fuel switching to hydrogen in industry through the £289 million industrial energy transformation fund, and the £55 million industrial fuel switching 2 competition. We are providing multimillion pound support for transport decarbonisation, including competitions, trials and roll-out of hydrogen for buses, HGVs, shipping and aviation, and supporting the industry to deliver first of a kind, 100% hydrogen heating trials, a neighbour trial by 2023, a large village trial by 2025 and a plan for a potential town pilot before the end of the decade if we decide that that major role for hydrogen and heating is one that we want to support.
I would never claim perfection but I think that our model, focused on production to get it to the right price, is fundamentally the right approach, but we do have a whole series of funds to stimulate demand as well.
Chair: We will definitely want to come back to some of these issues.
Q239 David Duguid: I have a very quick question on hydrogen and I will come back later on carbon capture and storage, as you might expect.
It was obviously a very welcome announcement last year of stepping up the ambition from 5 GW to 10 GW by 2030. We heard earlier from the Scottish Government Minister Michael Matheson that the Scottish Government policy is to have 5 GW. In fact, if I remember rightly, the Scottish Government and the UK Government both said 5 GW by 2030, before this upgrade.
I have two questions. First, how much of that 10 GW is coming from Scotland as a UK target? Secondly, could you say something about how aligned the UK Government policy is with the Scottish Government policy and do they fit together?
Graham Stuart: I think that they do fit together neatly. Having doubled it, clearly the 10 GW can incorporate the 5 GW. It is not a grossly dissimilar percentage to what you might expect, given the natural resources and lie of the land, but that is not me making a commitment. I think that it is pretty well aligned. I was not in for your session with the Scottish Minister but I would say that we were pretty well aligned and looking to drive this forward.
Q240 David Duguid: Can you see where the confusion comes from? I may have raised it with one of the predecessors in your role. How can the Scottish Government say 5 GW by 2030 and the UK Government say 5 GW by 2030? Was it all going to come from Scotland?
Graham Stuart: That is no longer the situation. Our ambition changed, and the Scottish Government set an ambitious target as well.
Q241 David Duguid: Can I confirm that the UK Government target is a UK-wide target?
Graham Stuart: Yes, of course. Absolutely. The strategic approach set out in Scotland’s hydrogen action plan encourages growth of the sector in Scotland and includes the potential for exports alongside domestic supply, including that 5 GW of installed hydrogen capacity by 2030. That does complement the actions set out in the UK hydrogen strategy.
Frankly, if it were not for the business models, which we will be producing UK-wide, I am not sure that there would be the capacity and funding available to drive that level of ambition in Scotland. There is an enormous benefit to Scotland being part of the Union and being able to access that, if it does turn out to be levies on bill payers, across the whole of GB converting disproportionately into investment into Scottish hydrogen and CCUS. It is another strength of the Union and benefit of the Union, which I am sure you would recognise, Mr Chairman.
Chair: Thank you for pointing that out to us. I will leave that one lying with the Committee and it can interpret it in the way it wants.
David Duguid: It wasn’t where I was heading but I will take it.
Q242 Deidre Brock: Can I get a confirmation, then, Minister? You are saying that that 10 GW figure by 2030 includes—the doubling of the target of the UK Government meant that you were taking on the 5 GW ambition of the Scottish Government. The Government did get quite a lot of criticism for that 5 GW target, if I remember rightly, at the time as being quite unambitious. We are not talking about 15 GW, we are talking about 10 GW because that now includes Scotland’s contribution?
Graham Stuart: Scotland is part of the Union and we are making judgments for the UK Government, so this is a target for the whole of the UK, evidently.
Q243 Deidre Brock: It was not evident at the time. I had to ask one of our witnesses about that. I do not think that it was entirely clear to a lot of people. It looked as if the UK Government were announcing that they had doubled their target in response to the criticism that they were receiving for being unambitious, but they were just incorporating Scotland’s ambitions.
Graham Stuart: No, no, we doubled our target for our own reasons, and the Scottish target fits perfectly well within that. Whether it is delivered or not, we will see. We have the UK law of net zero obligations and the Scottish Government have set their own, as we have councils doing. We have people setting local, regional and national targets within the overall system under the umbrella of the UK.
Q244 Deidre Brock: On your claim that Scotland would be unable to achieve that target without UK Government assistance, is there a breakdown of figures on the support? Ms Conboy, do you have access to that information so that we can confirm that for the Committee?
Graham Stuart: The point being that it is not UK Government support. I am saying that the likelihood is that it would not be able to because the system that we have, unless you have an alternative, relies on leveraging bill payers across GB. It is through that system that we are able to support the business models, the hydrogen business model, as we were able to support the business model for offshore wind and so on. Being able to access the bill payers across the whole of GB means that in any region of GB, if you are better able to have a disproportionate size of the renewables industry, obviously it is partly driven by access to that levy support from taxpayers and energy users across the country.
Q245 Deidre Brock: That is quite a claim, though, isn’t it? You are stating that the Scottish Government would not be able to do this without the UK Government’s support. I suppose it ties in—
Graham Stuart: It seems quite likely to me. I am not making some definitive claim, but given that the business model relies on all GB’s energy users, that is what underlies my insight, such as it is.
Chair: We will maybe leave that aside. We all now know that 5 GW plus 5 GW equals 10 GW, in case we did not know that in the first place.
Q246 Sally-Ann Hart: Increasing our grid capacity is vital for the UK to reach our net zero target. In the response to the Select Committee’s 2021 report on renewable energy in Scotland, the UK Government recognised the need for increased capacity in the grid. What actions have you taken to ensure that Ofgem is enabling strategic investment around connecting renewable energy and, therefore, low-carbon hydrogen sites in Scotland to the grid?
Graham Stuart: That is an excellent question. As I touched on in my opening remarks, since I took on this job, with this phenomenal array of deployment and pieces in moving to net zero, underlying it all is the grid. For me, a few months into this job, the focus is that we have to get the grid right. Without it we would have a problem.
The Government are working collaboratively with Ofgem and I meet with Ofgem regularly to consider what work needs to happen now and what appropriate funding mechanisms could be used to support it if necessary. It is going to work closely with industry partners and Government to address any barriers that are presented to the development of the infrastructure in the near term and ensure a suitable framework is in place.
It has been said that in a way we have had a reactive system before in terms of grid capacity. Given the absolute transformation that we are looking to do in a very short time, the president of the National Grid said that there would be six times more expenditure required in grid over the next seven years than over the last 30. That is an enormous financing, deployment, logistical and political set of challenges to deal with, because we have to make sure that the infrastructure as it lands is done in a way that is acceptable to people. However, you are absolutely right that the stuff we are talking about today and so much else in the energy space is dependent on us getting grid into a position that it needs to be in, especially as we are moving at such speed.
Q247 Sally-Ann Hart: It appears—I might be wrong—that when you mention reactive, Ofgem is reacting to need in the past rather than being proactive and investing before the need arises. You know where the sites are going to be. In order to speed it up, it is important to ensure that Ofgem should ensure strategic investment ahead of need so that it is not on a back foot. The Outer Hebrides council—sorry, I cannot pronounce it; I did try—has explained the difficulties that it has been facing for many years over the local grid connection, and we find that in our briefing notes here. It is finding it particularly difficult. What are the UK Government doing—and it is a UK Government issue—to reassure it that action will be taken to build a grid connection in a timely manner so that it can maximise its renewable energy output?
Graham Stuart: On your general point you are right. Not to criticise Ofgem, that was a system that suited at the time and it meant that it did not spend money speculatively. It did it at lowest cost and it did what was necessary in order to keep the system going. Now we need a different dynamic. That is why the British energy security strategy said that we would come forward with a new model by 2025. We need to move at pace to make sure that we have a system in place, whether it is in the Celtic Sea or whether—there are so many demands.
We are looking at something called the holistic network design, trying to make sure there is better co-ordination. Previously, if you took something like offshore wind, it was classic linear connections that they got permissions. Now we are trying to look at it collectively to minimise impacts onshore. Overall, your point is well made.
I do not know whether my colleagues have anything to add specifically on the particular connection you raised, but generally speaking there are delays, which we do not like, all over the country from companies wanting to do the right thing and put solar all over their roof and then being told that they cannot get a connection for years, right the way through to major offshore wind projects being told that they might have a delay in the grid. Without the grid we will not be able to move at the pace we need to and realise these opportunities.
Alison Conboy: On the specific council issue that you mentioned, it is something that we are aware of. In 2021 the UK Government and the Scottish Government both decided to invest together in a growth deal for the council. We are in regular contact to follow up with specific issues and the implementation of it. We will continue to do that but it is an issue that we are aware of and a project that we are supportive of.
Sally-Ann Hart: Thank you. I want to look at the role of hydrogen in homes. I can move on to that question.
Chair: Before you do, Philippa was keen to come in on something that she heard from the Minister.
Q248 Dr Whitford: Yes, on the topic of grid connection and grid development. Obviously, we are well aware that with the shift to renewable energy rather than big hydrogen power stations that is being held back by the grid charges faced by generators. In the north of Scotland they pay 15 times the rate per megawatt hour to put it into the grid. Will Ofgem be pressurised? Will the Government make a decision on that? Otherwise, companies that might invest have to look at the millions that they pay every year in grid charges if they develop that in the north of Scotland where we have no shortage of wind, or offshore where we have no shortage of wind. It is not just the physical connections but at the moment this is holding back all Scotland, but particularly the more remote, the more coastal and the further north you go, which is the biggest source of renewable wind energy.
Graham Stuart: We have it as an important principle, which I think is the right one, that fundamentally we want a system that reflects real costs. If we create a system that is indifferent to transport costs, by definition we will have projects built in the wrong places.
Dr Whitford: But the gas—
Graham Stuart: If you think about it, if it fundamentally costs more, if it requires more system reinforcements—which I think is the jargon term—to be put in place than another, then the price signal is the only right way to ensure that we spend; we want to green our economy. We also want to come out in the 2030s not only with a decarbonised electricity network, we want it to be the lowest cost so that we have lower costs for residents in their homes and we also have competitive industrial energy for industry.
If you start building in favour, or that it is somehow unfair, if the reality is that it costs more, as long as those costs are genuinely reflective—if they are exaggerated in any way, if there is a reason to look at it again— I know in terms of consumers that, for instance, in the far north of Scotland there is an intervention specifically to lower those costs, because the cost of delivering energy in the far north is so high that we made a policy decision to support those residents to make sure that they get—
Q249 Dr Whitford: I am talking about generation. Generation is something that the whole of the UK gains from, as you have already talked about. To say, “We want you to generate green electricity so that we meet our net zero target but we’re going to charge you 15 times the rate to put it in the grid”, you may or may not go ahead. I am not talking about consumers, I am talking about generators.
My understanding is that we do not have that differential in the gas grid. We are not charging the North Sea or Aberdeen more to put the gas into the grid to go all over the UK. I understand that when it came in in the early 1990s it was to build a big, dirty power station close to a city. However, those days are gone. We are asking companies to invest in remote coastal, island, northern areas to generate green electricity but we are penalising them massively for using the grid. Surely that financial infrastructure barrier needs to be sorted as well as the actual physical links.
Graham Stuart: Dr Whitford is right in saying that generators in Scotland pay higher charges, but that is because they are further from demand centres and drive greater transmissions reinforcements. Officials may be able to deal with the issue with the parallel with gas. I am not an expert on the relative costs of those transmissions, but the cost-reflective approach does help to ensure an efficient use of the grid and it limits overall costs to GB bill payers, which is very important. By law, transmission charging is a matter for Ofgem, as the independent regulator. We are in close touch with it and it recognises the importance of transmission charging reform to the deployment of renewable generation in Scotland and across GB.
Therefore, I think that the principle is right, but if that is a challenge, to make sure that we look at that again and that Ofgem looks at it again to make sure that we have the balance right, that is a proper challenge that we have. Renewable generation projects in Scotland do not appear, it has to be said, to be deterred by transmission charges, given that there is 6.9 GW of wind generation connected or currently under construction. Therefore, it does appear, despite those cost-reflective charges—
Dr Whitford: We do not know about the ones that have not gone ahead.
Q250 Chair: We did an inquiry on this issue back in 2021. There might be colleagues around the table who were part of that. Sally-Ann, you were. One of the biggest frustrations we heard from renewable companies and producers was the cost of transmission charges from areas where the resource was. We know that there is going to be a reform of the grid, but the plea from this Committee, particularly in the work that we have done previously on this, is that we look at this very issue about ensuring that companies are incentivised to bring the resource in from where it is actually happening. All we are looking for is a commitment from you as the Minister responsible that that is the type of work that you are going to be doing.
Graham Stuart: A huge amount of work is going into the whole grid design. We are looking at the incentives for whether it is a factory roof and what the charging regime there is like. Again, there are reasons why we have the current system but there are also reasons why we should challenge that system and ask, if we made policy tweaks, could it lead overall to a better outcome? That is the sort of thing that we are doing. We have major reviews across the piece looking at how we get this right going forward. We need a transformed system. If it turned out that we could have had gigawatts more renewables coming on stream and reducing our emissions and helping us to reduce our dependence on expensive foreign fossil fuels, then—
Dr Whitford: That is the thing. We need to think about the cost of not doing it and the cost of failure.
Graham Stuart: Chris Skidmore did his report launch today. As he would say, you have to think not only of the cost and the opportunities of net zero but of not zero. If you put the two against each other, you realise net zero is the smarter route to go.
Chair: We will leave that aside. You have heard the Committee very clearly on that particular issue. Sally-Ann has further questions on domestic.
Q251 Sally-Ann Hart: Yes, I want to pick up on something that Philippa Whitford did say. When you are looking at rural coastal communities, there is that Local Electricity Bill that would enable rural and coastal communities to generate their own electricity, but again it is the transmission charges into the local grid. That is something that we really need to look at because that is an opportunity, particularly in rural Scotland, which could be an answer.
Graham Stuart: We are looking at those questions but I would caution against having too simplistic an approach. If we put obligations on in a way that are disproportionate to the benefit, we could end up causing greater costs. We have to make sure that we do not have perverse outcomes from the best intentions.
Q252 Sally-Ann Hart: Moving on to hydrogen in homes, when we were up in Scotland doing our renewable energy and looking at hydrogen production, the idea of hydrogen replacing natural gas is really exciting and the fact that it can use the existing gas pipeline. Do you think that hydrogen will play an important role in homes now and in the future?
Graham Stuart: I do not have a view on that. We are doing a lot of work. There are a lot of critics of it who say that it is not very efficient. There are others who say, “To heck with efficiency, in terms of effectiveness it works.” That is a balance and that is why we are facilitating, through the Energy Security Bill, taking forward more work on this. We have stages of trials going up in scale. We have committed by 2026 for you to be able to get a straight answer from the Minister in my role as to what our view is on it. At the moment we are pursuing it, examining it, looking at it.
There is the issue of blending as well, which is something for us to look at. That could potentially reduce the emissions from heating systems by 6% or 7% just from blending. That may or may not be an entirely different element to whether you move over to fully hydrogen heating of some buildings. Then what are the costs? If you have a system that is fundamentally electrified, how does that work? Going back to the costs of transmission and the like, will that work with hydrogen going through existing pipes, assuming that they can be adapted to do so? There are a lot of questions up in the air at the moment. The work is going on and we are moving forward methodically to make a decision but we are not rushing to do so.
Q253 Sally-Ann Hart: Have you looked at the safety of hydrogen in homes? Is that something that you are also looking at?
Graham Stuart: Safety is fundamental. Before any community trial can go ahead the Health And Safety Executive needs to be satisfied that the network operators have plans to put the appropriate safety controls and measures in place. As with natural gas, measures are needed to ensure that hydrogen is stored, distributed and used in a safe way. No community trials will take place until all necessary safety assessments have been successfully carried out.
Q254 Sally-Ann Hart: Looking at gas boilers, gas boilers account for about 90% of the heating appliances in homes and obviously the cost of replacing them is high. There are available now gas boilers that can convert to hydrogen. Are you inclined to mandate hydrogen-ready boilers now for every boiler replaced in the UK as soon as possible? If you are not, what is stopping you from mandating that?
Graham Stuart: As I say, work is going on to assess these matters. Hydrogen used for heating systems on a large scale does not exist at the moment, if I am correctly informed, so there is a lot to decide on going forward. Heat pumps, on the other hand, although expensive, are coming down, and we have set out our ambition to see 600,000 installed by 2028. It is very important to bring the price of that down but it is moving in that direction. Heat pumps are established and our analysis suggests that 90% of homes could be made suitable, if they are not already suitable, for heat pumps, and 80% of those that are off grid.
However, as so often in the energy pieces, it turns out that when you look for the silver bullet that should kill all the other inferior technologies, you come to the conclusion that we pretty much need everything. We nearly always seem to need everything, without prejudging and trying to stay as technology neutral as we can, while being clear about the goals that we are setting.
Sally-Ann Hart: I was going to ask you a question about heat pumps but you have covered it. Thank you very much.
Q255 Chair: Is it still the UK Government’s ambition to phase out the installation of new natural gas boilers from 2035?
Graham Stuart: In Chris Skidmore’s report he suggested that that should be pulled forward by two years, when he launched that this morning with me. March is going to be a big month for Government announcements. We have to respond to the Climate Change Committee, which was delayed, for us to take on board what is now called the mission zero review by Chris Skidmore, and a number of other things.
I am not necessarily promising but I would expect that, given all the other announcements, we would seek to respond to that, including that recommendation, definitively or otherwise but at least respond to it, by the end of March.
Q256 David Duguid: It will come as no surprise to the Minister or, indeed, the Committee that I want to swing back to carbon capture and storage now. Minister, you and I have spoken at length about this subject, as I have done with your predecessors. Therefore, it was good to hear you say earlier on that you have confirmed governmental support for carbon capture and storage in principle, and much more than has already been committed to thus far. I think I am right in saying that you also confirmed at the dispatch box in BEIS questions towards the end of last year that you believed, in response to a question from a fellow Member, that track 2 should be accelerated. It sounds like that is, in principle, fundamentally the intention. That is good to know as well and I believe it is well established and covered in the Chris Skidmore report that we have been talking about, but I have not seen that yet, let alone read it. I am looking forward to reading that.
Graham Stuart: It is quite long.
David Duguid: Yes, I heard that. I looked at the pictures very quickly and I thought I saw carbon capture and storage there, so that is fine.
In terms of the funding of the project so far, it was brought up earlier with Cabinet Secretary Michael Matheson when asked what the UK Government had invested. Could you confirm what the UK Government have invested into Project Acorn up to this point? If you can, could you provide any specificity on precisely what that money has been used to be spent on?
Graham Stuart: I would probably answer the question more generally. Stef might be better able to answer the specifics on Acorn.
Stefanie Murphy: Sure. Acorn has had funding from the Industrial Decarbonisation Challenge, which UKRI has administered on behalf of the Department. I would have to get an updated figure on exactly how much of that has been drawn. We can provide that later if that is helpful.
Q257 David Duguid: The number of 41 billion is what I always seem to get back from the Department but I never learned what it has been precisely spent on. I would be interested to hear what that was.
Stefanie Murphy: Again, we can check on the specifics—
David Duguid: Did I say “billion”? Sorry, it is million. Wishful thinking there, I meant to say “million”, yes.
Stefanie Murphy: In general, the Industrial Decarbonisation Challenge funding has been provided for FEED studies and DEVEX-type spending. It is in that area. I would have to check back in with UKRI to get the exact figure that has been drawn down by the Acorn project and exactly what it has been spent on, but it would be on those kinds of activities.
Graham Stuart: Over 40 million.
David Duguid: Over 40 million, yes. Thanks for that.
Graham Stuart: Here to help.
Q258 David Duguid: We would not say no to more but it is nice to know that that has been provided thus far.
Again, talking to the Cabinet Secretary earlier on, he talked about the Scottish Government’s engagement with the industry and the stakeholders in the industry. When I asked him about how much engagement he helped facilitate between the industry and the UK Government he seemed to take that on himself to be the go-between with the UK Government.
Graham Stuart: Who did?
David Duguid: Michael Matheson, the Cabinet Secretary. Could you comment on what direct engagement you yourself or other UK Government Ministers have had specifically with Acorn project developers and what effect that has had?
Graham Stuart: I have not personally met with the Acorn project developers. As to our overall engagement, given 40 million-plus of support, I imagine it has been quite intensive for quite some time, not least going through the selection process and the like.
Stefanie Murphy: We meet regularly with the Acorn project and the people in charge of that, both in the lead-up to the launch of the track 1 process and throughout. As the reserve cluster it has been important that we continue to engage with them and we have had detailed talks with them in that capacity and to start to talk to them about track 2 as well.
Q259 David Duguid: That is a very important point you just raised as well, being the reserve cluster. They are often referred to as being on some kind of reserve list, but of course there is no list, there is only one reserve cluster. Stefanie, could you expand on that? What exactly does being in the reserve cluster mean? Presumably, it is a bit like being a substitute on a beach at a football match. You have to be as prepared to play the game as much as the 11 people that are already on the field. Is that what the situation is like?
Stefanie Murphy: The idea behind the reserve cluster is that there is an awful lot that needs to happen to get these clusters up and running. The idea of the industrial CCUS clusters is a new delivery project for the UK so it makes sense to have a cluster that can continue some degree of project development so that, should we encounter an issue with delivery in either of the two selected clusters, then there is a cluster that is warm and waiting and can be accelerated on to track 1 in the place of one of the existing track 1 clusters, rather than having to go back to the drawing board. That is the rationale for the reserve cluster.
Q260 David Duguid: It sounds like the project is still very active and progressing towards operation at some point in the future and still very much engaged with the UK Government.
Stefanie Murphy: For sure, yes.
Graham Stuart: We have to decarbonise the whole of British industry and there is no route to it that does not involve carbon capture and hydrogen. Notwithstanding the disappointment, the truth is we need four clusters by 2030 and we need to keep moving. The ones outside these industrial clusters we have to have answers, solutions, for them. The whole of UK industry needs to be decarbonised. That is where we are going.
As I say, without crossing our line, the idea that the Acorn project is not going to be part of that seems highly unlikely. We are moving at speed so being in track 1 or track 2 will, I think, in the longer term seem immaterial.
Q261 Douglas Ross: Good afternoon, Minister. I will start off on a local issue that I know has national implications. I represent an area where many people use alternative fuels. Indeed, I was emailed this morning by a lady near Cardhu, who was looking forward to receiving the Government’s £200 payment for those who are on alternative fuels. It was announced, I think, in December that people could expect that in the new year. Could you give us an update on when constituents like mine in Moray and across the country would receive that?
Graham Stuart: Thank you for that. We have put in a lot of effort to make sure that we do help people through this winter with various layers of support, from the energy price guarantee, which is, of course, subsidising people’s electricity and gas, to the EBS scheme, which is the £400 scheme. I am pleased to say that in Northern Ireland the vouchers have started going out on a major basis today, where everyone in Northern Ireland is getting the alternative fuel payment and the EBSS payment, so £600 for the households.
We are working this month to get the EBSS, the £400 alternative payment system, up and running. That is where they do not have a relationship with an electricity supplier so we have to find other routes. We are working through local authorities and we aim to have that portal open for everybody by the end of this month. That is January for the EBSS alternative payment, the £400, and then local authorities across GB will be responsible for—that information has come through the gov.uk portal and will hopefully come to them having been triaged and they will do the final checks. Then they will make the payment to the families. That is that.
Then you move on—I apologise but it is a complex world—to the alternative fuel payment and we have said that we would look; most people who will be eligible for that are in postcodes that are off grid by definition, so we know they are off grid. A lot of people who are off grid, half are electricity users for the heat rather than alternative fuel and they are already being subsidised through the energy price guarantee. We do not want to double-subsidise them so we have to look to reduce dead weight. Therefore, we are able to use other data to identify those areas that we know are off grid, which we know through census and other information have high alternative fuel use. When we know who they are we are going to electricity suppliers in February to say to them to credit the £200 to their electricity account in February. However, there are those who are alternative fuel users who do not have an electricity account, so we will then use the same portal that we are using—I have probably lost you—for the £400 payment for them to apply. We hope to have that open by the end of February as well.
That does not necessarily mean you will have it, but the aim is that to the best of our ability everybody should have had the money in the winter, which gives us through until whenever. That is what we have been doing and working with officials to try to get these programmes in place while protecting public money, minimising fraud but moving at speed because people need it this winter because the bills have gone up.
Q262 Douglas Ross: Indeed. We have quite significant snowfall in Moray today so this is a concern just now. The constituent who wrote to me this morning had been in touch with her energy company, which said that unfortunately it does not have enough information at the moment to share with its customers. When do you think the energy and the electricity companies will have that information and how confident are you that people will receive that through the energy companies, not through the portal, by the end of next month?
Graham Stuart: I am pretty pleased with the way the EBS scheme has gone in GB. Everybody’s electricity bill—you will have seen the credits on the account, and the suppliers in GB have pretty sophisticated systems and, generally speaking, it has worked without too much difficulty. You always get fringe cases and it becomes quite complicated, but I am confident that we are in a good position with that data in place. A lot of it is down to the capacity of the teams who have been working on all these fronts and, of course, working on the non-domestic as well. It is pretty challenging.
Q263 Douglas Ross: Thank you very much. I will move on to an issue I raised with the Cabinet Secretary. The Scottish Government announced a strategy for energy in Scotland last week. That looked at, as quickly as possible, shutting down the North Sea oil and gas industry. Ninety thousand jobs in Scotland rely on that industry. As UK Energy Minister, what do you think of the SNP’s plans to try to shut down that industry as quickly as possible and its proposals for immediate presumption against the exploration of any new sites in the North Sea?
Graham Stuart: The overwhelming supply of energy in the UK right now comes from fossil fuels, more than three-quarters. That is where we are at and we are the most decarbonised major economy in the world of the G7. That is reality. We are going to be burning oil and using oil, as well as burning oil and gas, to 2050 and beyond within our net zero pathway. An estimate would be a quarter of current gas use would be being burnt in 2050, hopefully with carbon capture as part of that.
We need oil and gas and we are going to be importing it, given that more than three-quarters of our energy today comes from fossil fuels. We either produce it ourselves with 120,000 UK jobs, if not more, 90,000 of which at least are in Scotland, or we import it from elsewhere with all the transportation costs. If you take something like gas, I think it is two and a half times the emissions around the transport and production from liquid natural gas imported into this country than the gas produced here.
I have been mocked in the press—“Climate Minister says new oil and gas licences are good for the environment”. It is an easy hit to go for but the truth is if we—and that is why we are doing the credits as well for the oil and gas companies because I witnessed Ithaca, an independent company, Equinor and BP looking to electrify west of Shetland. If we are going to be burning oil and gas we should produce our own to the highest possible environmental standards. We have a voluntary bid by those in the basin to decrease their emissions by 50% around production by 2030 and are on track for that. Why on earth, if you just took oil and gas by itself, would you not want to produce it here? Why would you want to give billions to foreign countries to produce it there? We get no tax from that, with higher emissions attached. It is environmental nonsense. It is just opposing, it seems to me.
Then you take the point that we need Equinor. Who is at the heart of the hydrogen East Coast Cluster? Equinor. BP is part of it as well with the Endurance field. We need the heft of these companies. We need their engineering capability. We need the offshore and subsea skills, so the last thing we want to do is cut them off at the knees and lose the very technology, the very people, the very jobs that we are going to require in order to make a success of hydrogen and carbon capture.
I keep waiting to get myself educated to see the world from the angle that some people see it from, but I just can’t see it. If you are going to burn oil and gas, and we are, there is no red button to switch it off tomorrow. It is not like it is a choice. It is not some terrible Tory choice to keep doing it. That is the nature of this economy and on net zero we are still going to be burning it in 2050 so why not produce our own and do it to the highest possible standards.
That is my view. It is the right thing to do and I think it is a big mistake by the Scottish Government. It will be unpopular; it should be unpopular. It is not good for the environment, even though it is an easy argument that might be winning in the press right now. Anyone who thinks about it would go, “How can it be better to burn somebody else’s gas with much higher emissions attached than burn our own and keep our jobs here, tax it here and have all the benefits of having it here?”
Q264 Douglas Ross: I agree with you 100%, Minister, and I am not sure they are necessarily winning it in the press if anyone read the P&J last week, which was understandably rightly critical of the SNP plans and the impact it will have particularly for the north-east of Scotland.
Finally on that point before I come on to another issue, the SNP often criticises the UK Government for not engaging with it ahead of big announcements and policy statements, so I assume it is not hypocritical and you were heavily involved in discussions with the SNP ahead of its announcement of this plan last week. Obviously, your oil and gas licences are determined by the UK Government, not the Scottish Government, so their proposals for a presumption against any new explorations would have presumably been discussed with you personally, Minister to Minister. Was there any advance notice?
Graham Stuart: It is disappointing. I am not aware of them reaching out to me at all on any of the policy proposals. I know there is talk around hydrogen again. Obviously, international relations is a reserved matter and I think it is important the devolution settlement is respected on both sides. It would have been better if there had been that discussion. It would have been good to have exchanged these insights and talked about what a net zero plan looks like.
If you look at the Scottish progress against net zero, Scotland was in a good position but the Climate Change Committee, you will be aware, has said that Scotland’s climate targets are in danger of becoming meaningless. I quote, “The Scottish Government lacks a clear delivery plan and has not offered a coherent explanation for how its policies will achieve Scotland’s bold emissions reduction targets”. That is what the Climate Change Committee said, and meanwhile then there is this virtue signalling about being opposed to oil and gas when we are going to be burning it for decades to come, making out somehow that having foreign jobs, foreign tax revenues and higher emissions is somehow better for the environment and better for Scotland, when quite clearly they are not.
Q265 Douglas Ross: Absolutely. This is my final point, Chair. In response to my colleague Sally-Ann Hart, speaking about the grid connection, I think you said this energy and the grid were crucial going forward in terms of hydrogen and green energy. Another area that I think is crucial and we have looked at in our evidence session is education and training. What are the two Governments in Scotland, the UK Government and the Scottish Government, doing together or individually to ensure that we have the workforce to meet the needs of our green economy and green energy for decades to come? In many areas I think we do not do enough to promote the sector, the benefits it can bring and the highly skilled and highly paid jobs in the future. Could you outline anything that you and your Department have been doing on this?
Graham Stuart: That is an excellent question, Mr Ross, because the transformation is so fast and we are going to need people. If we don’t have the people, we are going to struggle. The independent Green Jobs Taskforce was announced in November 2020 and was convened by Ministers from BEIS and the Department for Education. The taskforce reported its conclusions in July 2021. In line with the recommendations of that taskforce, the green jobs delivery group was established as the central forum through which Government, industry, trade unions, the skills sector, local government and other key stakeholders work together to ensure that the UK has the workforce needed to deliver a green industrial revolution, and I co-chair that.
The green jobs delivery group continues to work at pace to develop a programme of work across government, industry and the further education sector to address the skills challenges to deliver net zero. As I say, one of the areas linked to that is the just transition for oil and gas workers because of all that expertise. The last thing we want to do is to have those people going abroad when we need them to stay here and be part of a transition, which means having oil and gas production and at the same time possibly increasing renewables. I do not think they are in contradiction.
The main thing to remember is it is not production that drives things, it is demand. It is getting the petrol and diesel-burning vehicles off the road that will make a difference, not whether you will explore for oil and gas somewhere. It is getting heat pumps instead of methane boilers into homes. That is what we have to do, work on the demand side, and that is what the Climate Change Act sets in place as a framework.
BEIS analysis suggests that our ambition for 10 GW of low-carbon hydrogen production capacity by 2030 could support more than 12,000 jobs in the UK, growing to 100,000 by 2050 in a high hydrogen scenario. We are working on it, but we are going to have to keep working on it to get that out and make sure the signals are long term enough so that colleges, training providers, parents, young people, whoever, see the careers that are going to open up, they can see it with confidence and they can be guided into it. There is a lot of work to do and we just have to keep cracking on.
I think on that the Scottish Government and ourselves would see things exactly the same way, a recognition of the challenge and a desire to do something effectively together.
Q266 David Duguid: I have a quick question on what the Minister just said about the green jobs delivery group. Given energy is reserved but skills and education are devolved, is that something that is done on a UK-wide and an inter-ministerial-type approach or how does that work?
Graham Stuart: It is a very good question and Alison can give the technicalities.
Alison Conboy: You are right that a lot of the work that we do in this space is done very closely with the Scottish Government. I guess an example would be the North Sea transition deal after which the Energy Skills Alliance was set up, which has a joint programme of work and recently published an integrated people and skills strategy. That has concrete actions in it, for example, around apprenticeships, making sure that apprenticeships are offered, appropriate and brought up to date, that there are add-on modules if you are already doing an apprenticeship and you want to know about hydrogen. That is one example. There is also joint working, for example, around Aberdeen to make sure that there is an appropriate transition of the area and the jobs available there. That is an area where the Scottish Government and UK Government do work closely together.
David Duguid: Other north-east towns and cities are available, not just Aberdeen. Okay, thanks for that. I just wanted to chip that in.
Q267 Deidre Brock: On the remarks that we heard from you then about the oil and gas industry, Lord Deben, who is the chair of the Climate Change Committee, of course, and used to be a Tory Minister, and indeed the Conservative Party chair, has criticised the deal—this is from 2021 and he has made comments since then—between the Government and the oil and gas industry. He said a tougher plan was crucially important for the UK to tackle the climate crisis. Do you agree with that?
Graham Stuart: Without the context of his exact words—
Deidre Brock: It is the North Sea transition deal. It came out in March of last year or 2021.
Graham Stuart: We can always do more but maintaining our support for our domestic oil and gas while pushing them to have higher and higher production standards seems to me the right thing to do and why we are doing it. Economically, it is sensible. From a fiscal point of view, it is sensible. For maintaining skills for the transition, it is sensible.
I recognise that there are different views. You can talk about the Cumbrian coal mine, another that comes up as an example. As far as I am aware, you can’t make steel without coking coal and, therefore, having the greenest coking coal mine going while you need it again seems to me compatible. Perhaps I am just not purist enough. I just look at it practically and ask, “Will this get in the way of our net zero ambition?” If the answer to that is no, then will it actually help reduce emissions while we are on the pathway and in the transition? If the answer to that is yes, then I think it is a good policy.
Normally, if you go through these things technically and someone loses the argument, they start talking about signalling. The chief signal we can send is sticking to our net zero pathway, which is very challenging, and leading the world as we have done in reducing our emissions and having a credible practical pathway that carries the maximum number of people with us and keeps them in employment while we are at it.
Deidre Brock: That was a very quick scoot through.
Graham Stuart: You find lots of people who think that we should send—
Deidre Brock: He is the chair of the Climate Change Committee and a former colleague of yours.
Graham Stuart: Yes, a close friend and colleague of mine today.
Q268 Chair: We will leave it there. I am sure you know, Minister, we just find it quite absurd when we are trying to get to net zero targets that we are still giving licences to take further oil and gas out of the ground. If we are talking about signals, I think that is a general signal. I know you have your views, which you have put very strongly to this Committee today, but I know you appreciate and understand that there are other voices.
Graham Stuart: Yes, these are my views and others are available.
Chair: Exactly.
Graham Stuart: It is a very mature basin in the North Sea. Even with the new licences it is falling at around 7% a year in production terms, far faster than is required globally.
Chair: There is always an excuse to take more out of the ground. We will maybe just leave it at that. There is a range of views on this issue but it is not the focus of this inquiry, interesting though it is. Wendy Chamberlain will bring us back to hydrogen.
Q269 Wendy Chamberlain: Thank you, Minister and officials, for your time today. I wanted to stay on skills, following on from Douglas Ross and David Duguid’s questions. You quoted something that I wanted to bring up, which was from the hydrogen sector development action plan published in July last year, which said, and indeed you quoted it in your evidence, in a high hydrogen scenario the hydrogen economy would be worth up to £13 billion and support up to 100,000 jobs. That is quite different figures from the Scottish Government dating from their hydrogen policy statement in December 2020, which states that in the most ambitious scenario where there is already growing demand it could result in a £25 billion annual growth contribution to Scotland’s gross value added, with over 300,000 jobs supported by 2045.
I just wanted to check. First, it sounds like maybe there is a difference in ambition here, but is that because the Scottish Government had added in their export of green hydrogen ambitions or is that included within the UK Government figures?
Graham Stuart: I have not analysed that so I can’t give you an answer to it. I could perhaps write to the Committee on that. When you are looking a long time ahead, and it depends what you include—because one of the exciting things about this hydrogen carbon capture we haven’t talked about is it is a big thing in itself, a lot of jobs, but given all the ESG obligations, given the world now committing to net zero, what are the dynamic impacts on the UK economy? If we can come out having harnessed all our renewable energy, having converted a lot of it into green hydrogen that we will use at home to decarbonise our industry, carbon capture availability—I think between us and Norway we have about 80% of European storage capacity—the hope is that we come out in the 2030s leading the world, having done the right thing but with lower cost electricity, lower cost hydrogen, lower cost storage than anyone else. The dynamic impact on that in terms of industrial regeneration could be phenomenal.
Bigger than all the industry we are talking about directly in this stuff could be the dynamic impact as to where it puts us. When you look at the north of England, you look at Scotland, it is something worth fighting for. Sorry, that was me going off rather than talking about the numbers. The truth is that predicting precisely, I would not criticise the Scottish Government unless they had been particularly extreme.
Q270 Wendy Chamberlain: There is a very big difference. There is 100,000 from a UK perspective but 300,000 from a Scottish Government one. It does seem quite a disconnect.
Alison Conboy: I can mention something on the numbers. Again, I can’t speak to the 300,000, I am afraid, but I can say that for the UK Government numbers, one thing we are aware of is our estimates to date, given this is a very nascent industry, have focused on what we understand of the production units themselves. What they have not done is capture the jobs from the rest of the supply chain, the end use, the fuel switch. That is not because they are not important, it is just we do not have a way to estimate that.
Wendy Chamberlain: It may be that the Scottish Government have done that and there is less of a disconnect than it first appears?
Alison Conboy: It could be.
Wendy Chamberlain: Okay, that is very helpful.
Graham Stuart: If we do not have anything useful to add, can we equally be forgiven not to write?
Q271 Wendy Chamberlain: I think that sounds fair, Minister. The green jobs delivery group and the green jobs taskforce you have already answered questions in relation to, but I wanted to pick up again as part of the hydrogen sector development action plan that there is a UK Government commitment that by 2023 the Government will co-host an international green skills conference. That sounds like quite a concrete outcome from the taskforce and the delivery group. I would be interested to hear what the plans are and how they are progressing in that regard.
Alison Conboy: I am happy to speak. We laid that out and the issue of green skills, as you mentioned, continues to be something that we work across government on. Plans are progressing and we would be happy to provide some more information in writing if helpful.
Q272 Wendy Chamberlain: Is there a conference date? Is there a location?
Alison Conboy: That is not information I am able to provide you today but I would be happy to provide it in written form.
Wendy Chamberlain: Given that it is looking at 2023, that is now this year.
Graham Stuart: We will write. I think that is a very fair point.
Q273 Wendy Chamberlain: That is great. My third question is one that is unrelated but one that I had also raised with the Cabinet Secretary in the previous session, which was in relation to upstream partners announcing that the LPG production at Mossmorran was going to European markets rather than within the UK supply chains. There is concern about increased prices as a result of that. The Cabinet Secretary said he would raise that with you. I would be interested to hear what was said and what your own concerns are.
Graham Stuart: We are working closely with the companies concerned—there is Grangemouth as well—to make sure there is a suitable supply. There are commercial decisions driven by the pricing and I do not want to go into that. All I can tell you is that we are aware of the issue and we are engaging with the companies concerned. We hope that a route can be found to ensure not only from a pricing point of view that people are protected, but also from a supply point of view, even more fundamentally.
Q274 Wendy Chamberlain: I am just very conscious, Minister, that you have outlined at length to Douglas Ross all the various ways that we are trying to get money to people, particularly where they are using LPG. If the supports that Government are putting in place are completely cancelled out by this decision, that is surely a concern.
Graham Stuart: It would be a concern if that were to materialise in a material shortage of fuel on the market.
Wendy Chamberlain: Great, I am glad it is on your radar.
Q275 Deidre Brock: With regard to the hydrogen sector development action plan, I believe that it states that the UK Government are going to conduct an international benchmarking exercise to understand UK comparative advantages relative to overseas competitors and the competitiveness of UK Government levers for hydrogen, and from this developed set of recommendations to further enhance the UK hydrogen sector competitiveness. Do you have any date set for the document yet? When will we be able to see it for scrutiny?
Alison Conboy: I can speak to that. That work is ongoing. It is the team that sits within our team so I am aware of the benchmarking work as it continues. The purpose there is, as you laid it out, to get a sense of the areas where we are expecting the UK to be most active in exporting. That work will continue. We have not laid out to date, as I am aware, any specific plans of when we will publish that but we would be happy to provide information when we do.
Graham Stuart: Are we nearing the end? I am late—
Dr Whitford: I am the last.
Chair: Sorry for detaining you for so long. We have found the session so interesting and the responses so fulsome.
Q276 Dr Whitford: Obviously, with the focus on energy security that we have seen over the events of the last year, storage is critical and even more critical in hydrogen because of the variation in production when it is associated with renewable energy. What focus are the UK Government putting on developing a long-term storage infrastructure and who is going to do that? Will that be open to industry or will it be Government? Will it be a national infrastructure for storing hydrogen?
Graham Stuart: We are working on the transport and storage business models—I think is the jargon of that—and looking to bring that forward. I should not prejudge, but essentially we would look to incentivise the private sector to do it. That would be the approach that we would typically favour.
Stefanie Murphy: I can add a little bit to that. We published a consultation last summer, which concluded in November, that looked into some of the issues around hydrogen transportation and storage. It covered, as the Minister said, the business models that we committed in the energy security strategy to deliver by 2025 and some of the issues around those. It also looked a little bit more widely at the issues around storage. What is the strategic need for storage? How much might we need? Where might it be? What are the different types of storage locations and rock types that might be suitable?
We are aware of a number of projects, some in the clusters and some outside of the clusters. We are talking to developers frequently about those, some onshore, some offshore. As the Minister has said, we very much expect that if we can get the policy and financial frameworks for investment right, then those projects will come forward. We plan to respond to that consultation in the early part of this year and we will work on the next steps, which are likely to include legislation.
Q277 Dr Whitford: Obviously, we lost our gas storage in the UK, which meant that unlike some of the European countries who built up stores before winter, that was not an option available to the UK. However, because of that variability in hydrogen production is it not more vital that there is a degree of national infrastructure about it, it is not just open to a company to close or sell off or whatever?
Graham Stuart: On the public debate around storage—I will choose my language carefully, which is unfamiliar to me—we have such diversity of supply with so much of our own, with the Norwegian pipeline that comes into my constituency, the second largest LNG capacity in Europe, that if something goes wrong you can have an energy security point of view, but we have the supply we need, which means that storage is really a flex in the system. It is different to Europe, where essentially they do not have enough supply coming in to meet their needs in a winter. They are literally reliant on storage for supply.
When you see these comparisons, how come Germany has this many days and Britain has let theirs languish? It is because we have a completely different gas system. I just throw that in because it is an important thing to clock. It is easy to think that somehow we just let it go foolishly. I do think that we have a very different system.
Hydrogen, of course, is an entirely different thing again. I know that Centrica with Rough and others have talked about the potential to play a role and that in any scenarios storage will be part of that. We are still at the early stages of modelling that, working that through and working out the best way to go. That is where we are at but I think there was recognition that storage is part of the story.
Q278 Dr Whitford: Given Scotland’s potential for significant green hydrogen production, what priority do the UK Government give on exporting? We hear from the industry and we read quite a lot in the papers of the need to stimulate demand, to pull the production through, to encourage investment, particularly with Europe being in energy difficulties, the Ruhr area in Germany obviously looking for replacements for gas in heavy smelting industries. What focus are the UK Government putting on that, such as on poor infrastructure and pipeline infrastructure, within the UK but also to export out?
Graham Stuart: That is a good question. The truth is we are at pretty early stages. What we have to do is to get this thing going and we have our clusters to do that. We have compact areas. Not all the technologies are new but they have never been pulled together in this way before. Our focus is, first and foremost, domestically. We have this obligation, unlike others, in law to decarbonise our economy. That is our No. 1 focus, but I do agree with you that there is big potential going forward. Again, it is part of that vision, isn’t it, that we should have all this renewable energy, we optimise it, not just for ourselves but as a service to the rest of Europe.
If you can have the spare green energy we stop constraint payments because it gets turned into hydrogen, which is not only a good thing in itself but acts as a store. You have the carbon storage on the doorstep as well. Ideally, we would be potentially bringing in the carbon from our European partners and storing it, and a pipeline will be going the other way with hydrogen going out. I think there is a recognition in many continental countries that currently it does not look like they would have the capacity to produce it so they want to be hydrogen importers. It is making sure that while focusing primarily on getting our own industry going here and meeting our needs we are not blind to and do not miss any of the decision points that would allow us to be a major exporter going forward as well. There could be a big economic benefit to Scotland and the rest of the UK.
Q279 Dr Whitford: Do you not think that a pool of increased demand, which is to some extent already present in central Europe because of the energy situation, can speed things up rather than wait until we are producing and then—
Graham Stuart: I agree, we are looking at—
Dr Whitford: Sorry, just to finish, you mentioned pipelines, but who do you think would be building the infrastructure between countries, whether it is pipelines or ports? You mentioned carbon dioxide going one way and hydrogen going the other. How do you think that might get done?
Graham Stuart: I do not think there is any point in me speculating now. If I look at the interconnectors, they are all commercial. They are not driven by the state. We just facilitate. We have interconnectors, gas and electric, going into different European countries and we have set ambitions to increase that level of interconnection.
On that model hopefully there would be a strong business model and a price signal. That is how it works with gas and electric. The price signal from Europe this last year was strongly up for electricity because the French nuclear fleet was down and the electrons went that way. That is how it works, just as the price signals draw the ships with LNG to our LNG facilities often then to be piped straight through to Europe.
I do not think I can tell you precisely how that would be. The big thing would be to get ourselves going, deliver these projects. We are looking to do an MOU with Germany, and I went to Brussels twice in a week before Christmas as we have gone back to joining in with the North Sea co-operation. There is the interconnectors there. We are trying to work very closely with our European partners there and, of course, the Irish Government. Again, Ireland is very much linked to us and dependent in a sense on us, so we are working ever more closely with the Irish Government as well. They had big ambitions on various renewables as well and, again, can be an exporter to us and then through into the EU.
Q280 Dr Whitford: Finally, with the focus being on domestic replacement with hydrogen, on what timescale do you think that you would see production within the UK and Scotland leading to export, if you are putting one behind the other?
Graham Stuart: I am not sure that we have got that far yet. It is developing and it will be something we want to look at and be able to answer. The Scottish Government, I know, are keenly looking—there is going to be a limited use in Scotland so very much focused naturally on thinking, “Can we turn this into an export?”
Our needs are quite significant. We have to not only do the clusters, we have to do the whole of industry. We have to find ways of piping it there or doing what is required in order to ensure that we stay on our track.
Alison Conboy: I know you heard from the Scottish Government earlier about agreements they had with the Länder, and just to confirm we have had complementary discussions with the Federal Government at the German level, just to assure you that those conversations are happening.
In terms of timelines of projects, we are expecting by 2025 to have up to a gigawatt of electrolytic and up to a gigawatt of CCUS-enabled hydrogen produced in the UK. There is nothing stopping, in principle, those projects, even those first projects, exporting volumes of hydrogen where they are able to do so. The key thing is that government policy is not subsidising the volumes to be exported, recognising that if it is levied on GB consumers, those volumes being consumed within the UK is most appropriate. There is nothing preventing those projects exporting volumes of hydrogen should they wish to do so.
Graham Stuart: I plan to engage closely with my European energy Minister counterpart, as I already am, because it seems to me there is good long-term co-operation there and benefits. If they are going to need it and we can produce it and, as you say, Dr Whitford, you can channel that demand signal through, then that is going to unleash more investment and greater speed, which will meet both our needs and theirs if we get the structure of that right.
Chair: Thank you very much. We have to let the Minister go.
Q281 David Duguid: I just have a very quick and very specific question. You probably cannot answer it today but it would be good if we could get the answer in writing, if possible.
Given that we are already importing about half our gas and our own gas supplies are going to be declining, even with the new oil and gas fields, has there been any assessment done, or could there be an assessment done, on how much overseas gas in particular we would continue to need to export between now and 2050?
Graham Stuart: To import?
David Duguid: To import, yes, even as we progress to net zero.
Graham Stuart: That might exist but I will happily write. In terms of that earlier conversation, it is quite useful to tot that up as to how many billions or tens of billions or even hundreds of billions we might be spending on that on a net zero pathway just to act as a wake-up call.
David Duguid: You set out very well earlier how much imports and our own domestic production—
Graham Stuart: Yes, I will write but if I can go now.
Chair: Yes, of course, we are sorry to detain you, Minister. The Committee very much appreciates your responses and your co-operation. I know that you have a couple of things to write to us on so we would be grateful to secure that.