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Environmental Audit Committee 

Oral evidence: Mapping the path to net zero, HC 104

Wednesday 15 March 2023

Ordered by the House of Commons to be published on 15 March 2023.

Watch the meeting

Members present: Philip Dunne (Chair); Barry Gardiner; Ian Levy; Clive Lewis; Caroline Lucas; Cherilyn Mackrory; John McNally; Cat Smith and Claudia Webbe.

Questions 305 - 395

Witnesses

I: Rt Hon Grant Shapps MP, Secretary of State for Energy Security and Net Zero, Department for Energy Security and Net Zero; and Ashley Ibbett, Director General for Energy Infrastructure, Department for Energy Security and Net Zero.


Examination of witnesses

Witnesses: Rt Hon Grant Shapps MP and Ashley Ibbett.

Chair: Good afternoon, and welcome to the Environmental Audit Committee, where we have our routine scrutiny session with a Secretary of State. In our series of scrutiny of Secretaries of State, given the changes in portfolios, we are particularly pleased that the right hon. Grant Shapps MP has been able to join us with his change in responsibilities as the Secretary of State for Energy Security and Net Zero. Welcome, Grant. Would you like to introduce your colleague?

Grant Shapps: Sure. Perhaps, even better, I can ask Ashley to introduce himself.

Ashley Ibbett: Good afternoon. I am Director General for Energy Infrastructure at the Department for Energy Security and Net Zero.

Q305       Chair: Thank you. Perhaps we could start with you giving us a sense of the responsibilities of the new Department, how it has changed, and what the emphasis of putting net zero in the title of your Department means? Obviously, it is very welcome from this Committee's point of view, but what does it mean in practice?

Grant Shapps: Thanks very much, Chair, and thanks to the Committee for inviting me along. I had these responsibilities in the old BEIS set-up with the winding-up of the COP team who were coming across to the Department. Putting net zero into the name itself puts a rather stronger emphasis on net zero. Just as a comment on the full departmental name, Energy Security and Net Zero, I like to think of net zero as being the flipside of the same coin, which is energy security. It is really important in terms of the way we now deploy net zero that it is baked into everything we do that it is, in a sense, part of who we are and what we do as a Department. The naming is quite deliberate to make it an absolutely essential part of our mission.

Q306       Chair: One of the issues I have been raising with the Prime Minister, and other Ministers who have had various responsibilities to do with net zero, has been the challenge of dealing with siloed Departments. As the Environmental Audit Committee, we range across Government and we regularly have Ministers from different Departments coming in to talk about the same subject. Will you have any responsibility with any similarities to the role that Alok Sharma played when he had the presidency of COP to reach into other Departments to challenge their progress towards delivering net zero Britain?

Grant Shapps: Energy security and net zero have been defined as one of the great challenges of our time and, as I say, I think they are two sides of the same coin. It is of note, perhaps, for this Committee that probably for the first time ever the net zero part of it occupies a very senior position in the Whitehall Cabinet ranking. Under the great offices of state, it is the next Department, so it outranks all other Departments.

 

Chair: Congratulations.

Grant Shapps: And more to you for your many years of effort to get it to the point where it has that kind of recognition. In terms of working with and cajoling other parts of the Whitehall machineit is something my Director General will know more about than I do in a sensethere is a Whitehall hierarchy where the machine responds to the relative ranking of different Whitehall Departments. The fact that net zero gets a very high ranking is something which I imagine the Committee, would have, if not explicitly then implicitly, called for on many occasions.

Q307       Chair: In the short minutes that we have had since the Chancellor delivered his statement on the allocation of money, were that to follow the allocation of seniority, you might have thought that your RDEL would increase over the three years in the Budget. It does in the second year, but it falls in the third year. It goes from £1.4 billion in the current year, which is obviously an allocation with the previous Department, to £1.6 billion in 2023-24, and then falls to £1.5 billion in 2024-25. Why is that?

Grant Shapps: This might be more a Director General question but let me just set it in context. Some people—I believe wrongly—think of this Department as the successor but several to the old DECC Department Energy and Climate Change. This Department is twice the size and is doing vastly more. Our new permanent secretary was permanent secretary at DECC and he says it is unrecognisable. This is vastly bigger in size, scale, purpose and what have you.

My second observation would be the challenge for us is not RDEL—of course, I am always happy to have more of it—it is CDEL. What you have seen an hour ago is a very generous Budget on the CDEL provisions, including, of course, that headline figure of carbon capture utilisation and storage, or CCUS, which is a big hope for this country, being provided £20 billion over 20 years. It is a big part of the certainty programme, but also other parts of the programme, including nuclear renaissance and small modular reactors being a big part of that as well. In a sense, I have a Department twice the size of the old DECC more interested in the CDEL and what we are going to deliver through it than RDEL. We need to work within our means, as all Departments do, but perhaps Ashley will say more.

Ashley Ibbett: As you say, Secretary of State, in the spending review we received a generous capital allocation compared with some of our Whitehall counterparts, recognising the huge programmes we are delivering to support net zero. Obviously, there is a process going on to tease out the budgets from one Department into now three, but I think the overall figure is one that is a good settlement for us as an organisation. The Secretary of State talked about the announcement of the £20 billion for carbon capture utilisation and storage, which is another important signal.

Q308       Chair: CDEL goes from £4.7 billion estimation for the current year to £8.2 billion in two years time, so that is a £3.5 billion increase. Just to try to illustrate where that is goingyou mentioned both nuclear and carbon capture, usage and storage—if £20 billion has been divided over 20 years, is it fair to think of that as being divided broadly equally, or is it like most capital programmes ramped up towards the end?

Ashley Ibbett: The £20 billion will be spread out over the lifetime of the projects that we bring forward through the CCUS programme. We do not know the exact spending profile today. We are still in negotiations with those projects about how their costs will stack up, so that will emerge in due course.

Grant Shapps: I can probably be helpful by saying that we will be coming forward in pretty quick time with the full energy package information, so I do not think the Committee will have to wait too long.

Q309       Chair: Thank you. In your former Department, and I appreciate you were only a Secretary of State for a short number of months

Grant Shapps: I did months rather than just days as Home Secretary, so I was pleased.

Q310       Chair: Yes, another cause for celebration and congratulations over the last year, but hopefully you will be spending years now rather than months in the new role. You managed to underspend about £300 million of funding for net zero programmes. Some of it was diverted to Sizewell C, but it appears as if £161 million was sent back to the Treasury. Could you explainand this may be a question for Mr Ibbettwhy that happened and why, given the demand for net zero projects, you could not find things to spend that money on?

Grant Shapps: Shall I have a first go at it?

Chair: Please.

Grant Shapps: I was there for about four months, I think, as BEIS Secretary. As you say, part of that money has gone into Sizewell, so it is not an underspend. I think it is £132 million of that. You will recall that last year, in 2022, all Departments were asked to contribute to Ukraine and my predecessor made a decision to release £155 million, I think it was, for that purpose. I can tell you now that I would have done the same if I had been there. That is one of the very key reasons. There was also a £75-million local authority delivery home upgrade scheme, which was Cambridge and Peterborough combined authorities, and they failed to deliver on the programme, which was a big chunk of it. Anyway, Ashley, you may have more detail.

Ashley Ibbett: That is right. A large amount of it was obviously in support of the effort in Ukraine which, as the Secretary of State says, was very important. There are various other factors at play in the different programmes, including some demand-led schemes where the demand was not as high as might have been anticipated and, as the Secretary of State says, with some of the local authority funding, the local authorities themselves revised the amount they thought they were going to spend.

Q311       Chair: My final question is on the Budget, but others may have questions as we go on. The Chancellor has, I think, met one of the key asks of this Committee, which was to ensure that renewable energy schemes invested in by renewable energy companies would benefit from capital allowances. Now, he did not phrase it in that way. He phrased it as though investment into capital expenditure would be fully expensed for three years. Am I interpreting what he said correctly?

Ashley Ibbett: I have only just heard the detail of that announcement as well. We will work through it internally and with the companies involved to understand what it means for them

Grant Shapps: My answer was going to be that I will write to the Committee with the full details.

Q312       Chair: It would be very helpful if you could. When doing so, could you also clarify whether any of the investment is expensable beyond the year in which it is incurred, ie, can you carry forward capital expenditure to offset against future profits? Clearly, for established businesses generating significant profits, a capital allowance is likely to be usable in-year, but for small or emerging companies that are spending their way into profitability, it may be of much less value. It would be very helpful to know if you can carry that forward.

Grant Shapps: I would be very pleased to come back to you with the detail.

Chair: Thank you very much. John McNally.

Q313       John McNally: Thank you, Chair. Secretary of State, my questions are on the net zero strategy and the relevant recommendations of the CCC’s 2022 Progress Report. In June 2022, the High Court ordered the Secretary of State to lay a revised net zero strategy before Parliament by the end of this month 2023. When do you expect to present this revised net zero strategy to Parliament? Will you, as a matter of courtesy, have spoken to or discussed this with the devolved Administrations?

Grant Shapps: That obviously predates my time but, yes, I will be presenting exactly what the Court required this month, so it will be before the end of the month. Of course, we will have discussions with the devolved Administrations, as we have been doing all the way through. I speak officially on a very regular basis, and ministerially we speak whenever there are big moments coming up, for which this would comfortably qualify.

Q314       John McNally: Thank you very much for that answer. In the revised strategy, how do you plan to demonstrate and quantify how the Government will achieve the statutory net zero target?

Grant Shapps: As the Committee well knows, we have over-exceeded on Carbon Budgets 1 and 2. We will succeed on Carbon Budget 3. We are now concerned to ensure we continue along this track. I will be setting out the Government's plan in considerable detail as, indeed, required by the Court order. Even without a Court order we would want to do this because this is what we are about in our approach to achieving net zero by 2050 and the Carbon Budgets along the way. It is only a couple of weeks until the end of the month; you will not have to wait too long.

Q315       John McNally: Time is not on your side.

Grant Shapps: Thank you for reminding me. I can confidently tell you that we will, indeed, respond as required and to the timetable.

Q316       John McNally: That is extremely important. Moving on to a really important and very topical point, the 2022 Progress Report to Parliament. The Climate Change Committee stated that detailed plans are still needed for waste management, land use and agriculture, and, of course, achieving full electricity decarbonisation by 2035. Will the revisions being made to the strategy address the lack of detailed plans in this particular area? I know there have been a lot of submissions, from the Scottish Government in particular, on this subject. Could you elaborate on what your plans are in this matter?

Grant Shapps: There are a couple of different issues but, first of all, it is important to recognise what has been achieved so far. You have a 12% reduction in greenhouse gas emissions between 1990 and 2021 from agriculture, which is obviously going in the right direction. We recognise there is a lot further to go. We have to balance that off against food security and much else in the way that land is used. I can tell you that I am proactively working with my colleagues across Government, particularly DEFRA in this case, to bring this to the right place. Again, we will have more to say. As you know, we are committed towards eliminating the biodegradable waste in landfill by 2028, and that is in line with the Government's resource and waste strategy. I do not think there is anything more to add, but you will not have to wait too long.

Q317       Ian McNally: Will the new strategy seek to reduce its reliance on negative emissions technology? We have been hearing an awful lot of people talking about carbon reduction. Carbon is causing a lot of problems and a lot of issues in many of our constituencies, particularly on biomass and cutting down trees. That will probably be touched on later on in the conversation with you, but I just feel that maybe the technologies themselvesthere is a lot of technology out thereneed to be better addressed at this moment in time. I guess we are all looking for some sort of certainty of policy in that regard.

Grant Shapps: It is slightly tricky having this before doing the full reports. Perhaps I will be able to say more in a different session, or you may be able to get further into this with a specific Minister. Let us see if there is anything that Ashley wants to add.

Ashley Ibbett: No. As you say, we are hoping to produce a strategy later this year on the biomass issues. There are a range of different technologies available to reduce greenhouse gases in agriculture and across all other sectors and we are deploying them as effectively as we can.

Ian McNally: Thank you, Chair.

Q318       Chair: Thank you, John. We are going to come on to specific technologies in a moment. Just following up on what John McNally was saying, a member of this Committee, as you well know, is Chris Skidmore who thought it appropriate not to join us today until you responded to his Mission Zero report. Will you be doing that in parallel with the response to the Court requirement for a new net zero strategy?

Grant Shapps: Yes.

Q319       Chair: It will be published at the same time, essentially?

Grant Shapps: Correct, yes.

Chair: Thank you. Obviously, we will be very interested in that, and we will probably want to discuss it with you or another of your Ministers. I think Barry Gardiner has a supplementary on it.

Q320       Barry Gardiner: Secretary of State, one of the things that the latest report from the Committee on Climate Change spoke about was the plans still needed for, among other things, waste management. They may not have had it in mind, but given the announcement from the Chancellor earlier, and, of course, your own experience at BEIS of nuclear waste management and the cost of that to your Department in those days, what element of the capitalthe CDEL that you have just talked aboutwill be allocated to waste management, particularly in light of the new announcement from the Chancellor about the nuclear proposals that your Department will now be responsible for?

Grant Shapps: I do not have the exact number for you right this second, an hour after the Budget, but I will be able to come back to you on that. Just on the wider principle of nuclear, of course, there is a lengthy period of work to protect the waste. That is something which is a very established principle of interest to this Committee. Last week I was at the Anglo-French summit in Paris. I signed, among other things, an agreement with my French counterpart to share our expertise in technologies. I held a roundtablewell, more than a roundtable, it was a summit within the summit, with French and British experts in this field. On the numbers and CDEL, it is probably better if I write with more detail unless Ashley happens to have this.

Ashley Ibbett: I do not know the number off the top of my head, but a substantial proportion of the Departments budget goes to the Nuclear Decommissioning Authority.

Q321       Barry Gardiner: In 2019, I think I am right in saying, it was £4.9 billion that you estimated. That estimate has obviously increased since then. You have had the calamity of the Magnox contract not being fulfilled. What was your revised estimate in BEIS? Of course, please do write to as you have suggested with the latest estimate.

Grant Shapps: I am sorry not to be able to bring you detailed figures on this off the top of my head. You are right. The decommissioning figures of £4 billion, £5 billion, £6 billion a year are the numbers that stick in my mind, looking forward. Last year, we probably produced about 15% of our energy requirements through nuclear. As a policy, we want to see that at about 25%; we want to do more gigawatts and, as I said, small modular reactors. We accept that there is a long decommissioning waste management cost which is attached to having cheaper electricity to produce on the day and there is a long tail to it.

Q322       Barry Gardiner: Have those costs been factored into your assessment as to whether this is a cost-effective way of reaching net zero and energy security?

Grant Shapps: Yes, absolutely. Interestingly, I was in France, where they produce 75% of their electricity through nuclear power, and I had some very interesting conversations with my French opposite number, with President Macron, and also with EDF who are the company behind both Hinkley Point C and Sizewell C. We have, as two neighbour nations roughly the same size, the same requirements in terms of economy, taking very different routes. They have stuck with their nuclear programme. By comparison, we have gone massively to renewables, so we were comparing both the immediate and the lifetime costs. As I say, everything from those conversations last week and the research I have done since I have been in the Department, leads me to think that a mix where we have about a quarter of our power at a baseload from nuclear looks about right to me. What that means is that the vagaries of the sun not shining and the wind not blowing are made up for by having a baseload which enables you to manage the overall picture.

Q323       Barry Gardiner: Secretary of State, that baseload is not flexible, is it?

Grant Shapps: It can be flexible. This was an interesting conversation with the French. This is a question of design. The French reactors are flexible. They can go down to 20% of their 100% power by, effectively, having movable rods. They do have flexibility, which was very interesting to learn about because we do not. That is a factor of how we design our power plants going forward, and there is no reason why, potentially, they could not be in the future. There will be other considerations as well, including the way small modular reactors are designed and might operate. Also, of course, on the renewable side, there are the practicalities of greater battery storage, hydro storage, and other factors.

Chair: We are coming on to the small modular reactors, so I do not want to go in that direction just yet.

Barry Gardiner: Absolutely. I have strayed too far. Thank you very much.

Chair: We are going to move on to hydrogen with Claudia Webbe.

Q324       Claudia Webbe: Thank you, Chair. What role will hydrogen have in the UK's decarbonisation strategy?

Grant Shapps: A very big one. To put numbers on it, 10 GW of low-carbon hydrogen is our immediate goal, our first goal by 2030. I see hydrogenespecially having been Transport Secretary previouslyas a massively important part of decarbonising sectors that are difficult to do in other ways, in particular heavy transport, ships, the heavier end of things like trucks and lorries, potentially trains. I have ridden a hydrogen train. It is really important, and today's Budget and what I will say very shortly on the development of hydrogen will flesh that out a lot more.

Q325       Claudia Webbe: Where are we in the production of low-carbon hydrogen, and what is the Government's role in that?

Grant Shapps: I am going to be saying a lot more about it. but we are, as I think the public know, quite a long way through a project of shortlisting the first electrolytic allocation round. I will be saying more about it very soon, and that will help set us on that path to the 10 GW. Ashley, you may want to comment.

Ashley Ibbett: As you say, we will hopefully announce the shortlist for the electrolytic allocation first round very soon. We have committed to having up to a gigawatt of green hydrogen in construction or production by 2025, and the same for blue hydrogen. The ambition for 2030 is up to 10 GW of hydrogen, at least half of which would be electrolytically produced. Hydrogen is coming forward both electrolytically through the process we have described and as part of the CCUS programme we are running.

Q326       Claudia Webbe: By electrolytically, do you mean green hydrogen?

Ashley Ibbett: Yes.

Q327       Claudia Webbe: Do you differentiate significantly between green hydrogen and blue hydrogen?

Ashley Ibbett: We think both have a place and a role to play in the economy. Obviously, as a country, we have abundant resources for CO2 storage and, indeed, for hydrogen storage. By using blue hydrogen, storing the CO2 in the North Sea aquifers is a potential route. Electrolytic is a different technology and what we want to do through the programmes we are running is to find out which is going to be the most cost-effective form or mixture of those different types of hydrogen.

Q328       Claudia Webbe: You are saying you have something to announce that you cannot announce here, but what timeframe are we talking about for when the UK can visibly see the production of hydrogen?

Grant Shapps: 2030 for 10 GW as has been said. We think that would be about 12,000 jobs and about £9 billion of private investment. That is the scale of it—a gigawatt by 2025. We are in 2023 now, and you will start to see this very quickly by the very nature of wanting to get to a gigawatt that quickly. Once we publish this strategyas indicated to the Committee, there will be a big bang moment—there will be a lot of information coming your way very soon with actual timescales, or most dates attached to it by then.

Q329       Claudia Webbe: Hydrogen is useful, particularly for heavy industry and transport. Do you distinguish where we are going in terms of hydrogen and heavy transport? I have ridden on a hydrogen bus, for example, around Belgium. The emission of just water is obviously useful. When and where are we likely to see that happen?

Grant Shapps: As you rightly point out, there are schemes already up and running. I have ridden on a hydrogen train in Coventry, I think it was, and there are experiments in hydrogen going on all over the country as well. There is a dilemma to all this, which is in order to make hydrogen work there needs to be an off-taker. In other words, someone to buy it. In order for someone to buy it they need to know it is going to come. I notice there is a real chicken and egg that goes on with hydrogen.

I have done things in the past during my time as Transport Secretary, for example, making Tees Valley a hydrogen hub. We put a small amount of money in, low millions initially. On successive visits to Teesside, I have really noticed that rather than seeing hydrogen as a single end use, ie, just for buses or just for transport or whatever, we are seeing it used in lots of different sectors. I have seen Teesside develop in lots of different ways, and it has been a very positive use of taxpayer money, which has created a lot more private investment.

It goes back to your fundamental question. Exactly where will it be used and exactly which technologies, and when and how? It is trying to provide confidence to the marketplace, trying to provide some certainty of off-take, but also needing the market to decide where it wants to use it. We have just had one of our hydrogen buses, for example, Wrightbus, I think, in Northern Ireland. You have people like JCB using a conventional engine which has been rebuilt and designed for hydrogen for on-road, large, heavy mechanical machinery, diggers and the like.

There are lots of exciting opportunities coming along, but we do not precisely know who the end customer will be. We have the world's only, I think, flight trials going on with Rolls-Royce, easyJet and ZeroAvia in aircraft. I have been to see the ZeroAvia aircraft but, again, will aviation be hydrogen in 15 years time and not battery electric or sustainable aviation fuel? No one quite knows yet, and that is why we are trying to prime the market.

Q330       Claudia Webbe: A final question from me. In terms of what you are doing to incentivise the industry towards green hydrogenand I emphasise green hydrogen because I think that is the net zero carbon we are talking about, the low carbon we are talking abouthow are you going to incentivise the industry to push ahead with green hydrogen?

Grant Shapps: There are several things. We have worked on a UK low-carbon hydrogen standard because there is a lot of confusion about hydrogenblue, green, pink, if it is from nuclear and this whole rainbow of colours—so we are providing a clear definition of hydrogen, what low-carbon hydrogen is. We have a hydrogen business model, which was described as the world's first national low-carbon hydrogen subsidy scheme, which Ashley will now describe in detail. We are putting in place lots of different approaches to provide that certainty.

Ashley Ibbett: Absolutely right. We are using the Net Zero Hydrogen Fund, and what we are doing there is working with projects, offering them a mixture of capital support to help build the equipment and ongoing running cost support attuned to what the particular needs of those projects are, and making sure their supply and demand are in tune so that you grow both at the same. We are trying to create a blended set of finance to suit the individual circumstances of projects that are coming forward to ensure that package is the one that will drive them forward in the most effective way.

Q331       Chair: I think the chicken and egg analogy is absolutely right. I attended a meeting with one of the heavy users, the Aluminium Federation, and they were complaining to me that there is no visibility of commercial scale industrial-quantity hydrogen for six or seven years. That accords with what you just told us in terms of the 10 GW. Their concern is that unless there is some clarity that there will be an industrial supply at a price that is remotely sensible, they are just not going to be in a position to invest in what they would like to do, which is to try to find ways to deploy hydrogen for these energy intensive activities. The Australians have got a rather famous H2 for A$2, so trying to get the price of the hydrogen unit down to A$2, which is currently at about A$6. Do you have any such vision and hydrogen strategies about to come out?

Grant Shapps: First, in fairness, most people recognise this country has had an early lead in hydrogen. My big concern is to ensure we hold on to that and, indeed, accelerate it, and that is what this forthcoming set of announcements, in part, is going to do. They are going to have visibility to that, and it really answers Claudia's question of yes, but when and to what scale? We are going to be able to answer a lot of that, which I think is very helpful. It is also one of the reasons whyalthough I know some people are more sceptical about blue hydrogenit is important to recognise that, in order to get to where we want to go, we have to get through some form of transition along the way and that means scale. That is why we should not turn our back on things which are not absolutely purist, otherwise I do not think we will ever get there. There is so much more coming on this. You are tempting me to stray into future announcements.

Chair: I am afraid we have so much interest in the Committee, so we are spending a bit of time on hydrogen, and we have a little bit more to come from Cat Smith.

Q332       Cat Smith: Thank you, Chair. Thank you, Secretary of State, for your time this afternoon. Obviously, demand for hydrogen looks set to grow, and you have been talking a lot about transport. It seems everyone has ridden a hydrogen train or a hydrogen bus. I am afraid I have not. I have, however, ridden a hydrogen bicycle. The variety of different opportunities for using hydrogen as a fuel means that by 2030, we could be looking at expecting to reach 38 TWh of requirement. Secretary of State, I wondered whether you could tell us about what progress you have made to grow the hydrogen economy to meet that level of demand, potentially, by 2030.

Grant Shapps: By the way, I am fascinated by a hydrogen bicycle.

Cat Smith: I am sure I could get you an invitation, Minister, if you are in Lancaster.

Grant Shapps: I have an electric one, but a hydrogen one? I guess you have to refuel it. Anyway, rather boringly, I am probably going to have to take you back to my answer a few moments ago, which is that we are working very, very hard on the hydrogen economy. Again, I will be saying a lot more about it and providing more certainty to it. It stretches way beyond just the transport sector, which I have focused on so far, to how it works in other spheres, including heating, whether there is a mix in the household energy side of this, and much else. I am not sure I can tell you much more on this today beyond the 10 GW other than to say, I see hydrogen as being enormously complementary to our renewable and, potentially, nuclear programmes as well.

I know other Members on this panel will be equally geeky, but I can lie awake at night and watch the I am Kate website, which takes the energy generation figures from National Grid and a number of other places and puts them into pie charts and shows how much energy we are producing from different sources—not only that but the cost per megawatt hour. What is really interesting is at night-time those figures can turn negative and that can be a windy night where we have not really got much to do with the energy . How fantastic it would be if we could—rather than paying energy producers to stop producing, which reminds me of the old Common Market wine lakes or somethinguse that energy and convert it into hydrogen at that point in time. That would be incredible. The same with nuclear power. When there are high renewables going on and we do not need that baseload, if you could turn it into hydrogen then you can see how this whole ecosystem can, and I think will, be very significant in the future.

Q333       Cat Smith: Secretary of State, at the beginning of your answer you mentioned different uses for hydrogen. Can I ask about what your vision is for hydrogen in the domestic heating market because, of course, the House of Lords Environment and Climate Change Committee recently statedand I am sure you are aware of thisthat Hydrogen is not a serious option for home heating in the short to medium-term and, actually, it was the mixed messages from Government that were hindering that take-up of heat pumps. Do you think there is misplaced confidence in the availability of hydrogen that limits the consumer appetite?

Grant Shapps: To be completely candid, this is work in progress. I can see a very strong case for mixing 20% hydrogen into the existing set-up. You do not require new boilers to do it. For the most part, you could help to decarbonise the system straightaway. We do not know the answers to what we do not know, and we will not know those answers until we have trialled them. We have some small-scale neighbourhood and in-village trials and then, potentially, larger trials planned next year and the year after to look at how hydrogen would perform in the real-world domestic arrangement. We know that hydrogen may not work on all the pipes we have. Achieving 100% hydrogen would mean changing the boilers or having boilers which work in both directions.

We do not fully know the answers to those questions, but on heat pumps, which is something else people can and are doing, I am an enthusiast. I am looking at fitting one in my own house to complement the solar panels I have had for 12 years to find another way of heating it. I do not think I can fully answer the point about hydrogen. I have read the House of Lords report; they make a very good case on it. We have to accept that there may not be a single one size fits all solution to, for example, decarbonising household heating. That is my current view. Again, we will say more about this very shortly though. Ashley?

Ashley Ibbett: Absolutely. We are doing a programme of work looking at the potential role for hydrogen in homes and in heating. We have said we will take a decision on that in 2026, following the conclusion of the trials the Secretary of State talked about. We do not know today what the most effective role of hydrogen will be tomorrow. That is why we are looking at all the different options. There are some things where there are not a lot of alternatives to hydrogen as an energy source in some industrial processes and so on. If hydrogen is a resource that you want to use most efficiently, you need to work out what are the places you can deploy it most cost-effectively. That is why the huge programme of work we are doing from industry to homes, to all the other potential applications, is so important.

Q334       Cat Smith: May I ask one final, very short question, Chair? It is around the domestic transition to heat pumps. One of the challenges for transitioning to things like solar panelsSecretary of State, you mentioned that you have solar panels on your home—for those living in the private rented sector, permission from landlords and, indeed, landlords lack of incentive often to insulate is a real barrier to moving towards having a more energy efficient home. I wondered what conversations you were having with colleagues across Government to really address the energy inefficiencies in the private rented sector.

Grant Shapps: Yes, pretty extensive conversations is the answer, particularly with our colleagues in the Department for Levelling Up because, clearly, a big part of how we get our stock of homes much more efficient is through the private rented sector and through building codes as well. As you know, we have consulted on moving to a high level of EPCs for rented. There are a couple of different dates depending on whether it is a new tenancy or an existing tenancy. Off the top of my head, I think it is 2026 and 2028, but you will correct me if I am wrong.

It is probably important to recognise that the narrative has moved on a bit from where it has been for the last few years, where we keep saying, “Look, we have this really old stock of Victorian homes which are basically cold and leaky or CO2 poor and it is just the way it is and nothing is working, to the reality now, where we are getting towards 50% of all homes having an A to C energy performance certificate. That is up from 14% of homes back in 2010 when we really started to get serious about tackling these issues, so we are getting towards half of our stock. The private rented sector is a very important chunk of that.

That has proved trickier to do than in the social sector, where a council or a housing association could, perhaps, take an entire street and sort things out and get the economies of scale. Again, I do not want to sound like a stuck record. I will be saying more about this very shortly, but we do recognise it as being a big, important chunk of sorting out this issue.

Ashley Ibbett: Just to confirm, the position we consulted on is new tenancies from 1 April 2025 and all tenancies from 1 April 2028.

Q335       Chair: Thank you, Cat. This Committee has taken a great deal of interest in the issue of energy efficiency in homes. We are going to come back to some other questions about it in a moment, but one of the things that we have pointed to is that the EPC as a measurement system is fundamentally flawed because it was set up as a measurement of fuel poverty. That means that if, as is the case with the current price of electricity, domestic heating oil provides a cheaper solution to home heating, then you get more points than using a heat pump system. Installing a heat pump then reduces your points. This needs to be looked at if we are going to try to decarbonise homes and also continue with this measurement, which people have got used to, as they have to have trust in the measurement.

Grant Shapps: It is a really interesting point. I think The Sunday Times ran an article on this just as I became Energy Secretary and I asked for advice on the issueI read it last weekend. What you are saying is true, with the exception that it is not what the energy performance certificate was set up to do in the first place. It was not set up to tell you how much it was going to cost you to heat your home or the like. I agree that a more refined version that is more useful in today's context is required. We do not own the energy performance certificate in my Department—again, this is a cross-Whitehall thing—it is actually Levelling Up; it comes from when I was Housing Minister.

I think we are aware of the shortcomings but are also sensitive to the idea. I did fact-check what the article was saying, and it was somewhat misleading, as we do not claim that the energy performance certificate is trying to tell you how much your electricity bill is going to be, for example, which was with thrust in that particular article. I do agree with the broad principle that it could be better, and it needs to be.

Q336       Chair: I know there has been consultation with the sector to try to improve it, but I would urge you to get engaged with that yourself, Secretary of State, because until it is resolved, we are going to be in a bit of a mess.

Grant Shapps: I will.

Chair: We are going to move on to a different technology now; Cherilyn Mackrory.

Q337       Cherilyn Mackrory: Thank you, Secretary of State and Mr Ibbett for your time this afternoon. Before I move on to my questions, I want to go back to the heat-pump point and just make sure that you separate ground- source heat pumps from air-source heat pumps, because they work very differently, and one is more efficient than the other. Perhaps we can have conversations about that another the time.

My questions are predominantly about onshore wind and touching on solar, but more to do with better community cohesion. In the Government's response to our Accelerating the Transition from Fossil Fuels report earlier this year, the Government said there was going to be a consultation on developing local partnerships. Could you give us a bit more of a broad brush on what that looks like, when the consultation is happening and what you hope to achieve from it?

Grant Shapps: Yes. First of all, onshore wind is often talked about as if we do not have much, but I think I am right in saying that we have more onshore wind than offshore wind and/or solarI think 14.6 GW and there is another 4.7 GW in process that we know about already with planning permission or under construction. While this is not quite the picture that I sometimes read about, I agree that it is part of the solution. It is also pretty popular as well; our public attitudes tracker suggests that 79% of people support it and only 4% oppose, as of December 2022.

I have spoken about this before, but I think that it is something that needs to be done with local consent to ensure that people are happy with it. As you rightly say, we have undertaken to explore how to do that better, including how we should frame the rules and planning aspects of this. At the risk of being a stuck record, I will be saying more about this very, very soon.

Q338       Cherilyn Mackrory: Okay, if I was to push you on things like tangible benefits for local communities—potentially money off their energy bills—is that something you can comment on at the moment?

Grant Shapps: Yes, I am big enthusiast for that. You would find the other 4% would melt away. Who does not want cheaper electricity and bills right now, which is the element of this that is missing? To some extent, local control over this will see a lot more of it put in, but no one will need worry because people have consented and are happy about it.

Q339       Cherilyn Mackrory: Can I ask you about the discussions that you have with DEFRA, for example, when there is a conflict between production of food? Agricultural land in Cornwall, for example, might be seen as not particularly agricultural or not particularly productive in other parts of the country, but is actually pretty good by Cornish standards. If there is a conflict there, can I ask for your comments on how that should be managed?

Grant Shapps: Yes, I am told that these figures are very important. The Government have clarified the definition of best and most versatile agricultural land; it constitutes lands of grade 1, 2 and 3A of the Agricultural land classification, and planning decisions continue to be made on that definition. If you are a planner or a farmer, there has been a degree of confusion out there about precisely where this sits. That agricultural land has not changed on that basis. Since I have not had the chance to say this to the Committee before, I am a huge proponent of getting solar panels up on the vast warehouses and rooftops we have in this country. I am busting a gut to do everything I possibly can, including, for example, removing the requirement for planning to go beyond the megawatts that I think it is at the moment, so you could put solar panels all over those big warehouses we have up and down the country and potentially provide gigawatts of power. We know there are other complications, including the grid and grid access. I am sure we are going to come into onto that.

Cherilyn Mackrory: In fact, we might be coming to some of that in a minute, so I will hand back to the Chair now.

Q340       Chair: Thank you. Just to be clear, there is confusion among local authority planning committees about whether effectively there is, or is not, a prohibition on installing solar farms on grade 3A land. Are you in a position to confirm that, or is that something that we need to get the Communities and Local Government Ministers to confirm?

Grant Shapps: Having read out the precise planning position, I do not want to confuse it by caveating it myself as I am not a farming land expert. It might be better if I write back to you, and you publish the letter. The definition has not changed; that is very clear.

Ashley Ibbett: The definition is clear; what is not clear is whether or not they can consent.

Grant Shapps: Yes, I think it was ever thus with planning. I know from my time in housing, anyone who had anything to do with this planning system knows that relatively few things in planning are complete absolutes, it is usually by degrees. I think it is best if I write to you with the exact interpretation.

Chair: The exact interpretation as it relates to planning will be very helpful, thank you. Clive Lewis will take this forward.

Q341       Clive Lewis: I will be quick because I have another question and I want to make sure we reach it. I think you have covered some of the areas in my colleagues’ questions. In terms of the fivefold increase in solar energy that will be needed by 2035which the Government has identified for the British energy security strategywhat role do you see technology playing in achieving those 70 GW, and how important is that going to be in making the jump to that figure?

Grant Shapps: On solar specifically, it will be pretty important because panels are getting better. I was talking to a solar installer about the panels I have and the panels that they would install now. It is clear that over more than a decade they have improved quite substantially, so technology is important in that sense. I still think that getting some of the barriers out of the way is important. We have, for example, removed VAT on solar panels for domestic use, which is important in driving it. We are looking at options for low-cost finance to make it easier. Looking back to my own experience, had I known what I know now, I would not have hesitated for about a year before I actually made the decision. I suspect that the hesitation for a lot of people stops it from ever happening, so we have to make access to the finance easier. The VAT being removed is helpful, but on the technology front, I do not know.

Ashley Ibbett: We have seen dramatic falls in the cost of the solar technology over time as we have in the wind technologies. There is a balance now between the cost of the panels themselves and the cost of the balance of the rest of the plant, which is an important part of the equation. Incremental improvements in all those things can really help push the cost down even further. Solar is part of our annual contracts for difference auctions; we brought forward 2.2 GW of solar in the last CfD auction and we will be saying something about the next auction very soon. It is important to provide those incentives to really drive down across the whole value spectrum of solar.

Q342       Clive Lewis: The costs are coming down, and I want to jump onto rooftop solar in particular. I have friends who come from abroad who are amazed when they see banks of new houses built without a single solar panel. In some cities in France, I think there is a law that new houses have to be roofed with either solar panels or with turf for biodiversity. I know that the Government place a lot of emphasis on easing the supply side to ensure there is lots of housing, but can you ever envisage a time when developers are told they need to put solar on new housing developments?

Grant Shapps: Not quite as you describe; the first thing I would say to your friends from France is we have more solar power in this country, despite not having an obviously sunnier climate. We actually have about the same amount as Spain, which is much bigger and has a much sunnier climate. We do surprisingly well because we got into it early, with our feed-in tariff, as I recall. To answer your question as to why we should not just simply mandate solar as the solution in, for example, the future homes standard, my answer would be that as soon as you do that, you take away innovation. We know that there are many different ways to skin a cat; decarbonisation, heat pumps, whether ground-source or air, could be a solution. If you start to say this is the only technology you can use and the only solution you use, you are in danger of losing out on a potentially better solution in that particular location.

Q343       Clive Lewis: Could you not craft legislation so that there was some form of sustainable, renewable technology involved in the building of new houses going onto the grid?

Grant Shapps: Yes, that is what the future homes standard aims to do. The uplifts in 2021 and something called part L in 2022 are the stepping- stone towards that future homes standard. I think it will be the case that it is virtually impossible to build a home without putting something in. The hesitation is just not telling people this is the only thing that you will put in. To give you an example of where the future homes standard will go—again, DLUHC-owned—it would mean that a new home would produce at least 75% less CO2 than a home built not that long ago in 2013. This is quite dramatic stuff and rightly so.

Q344       Clive Lewis: If we can switch quickly to ground-mounted. What role do you see the Government playing in perhaps forcing through planning of some of these developments when local authorities are reluctant, and is there space in your consultation with communities? You can see where communities with onshore wind, in other countries for example, are given a share in the energy production, so a community dividend is created, they are less reluctant and hesitant for these sometimes quite intrusive energy-generating platforms to then come into their community because they know they will benefit. I wonder if that is something you see for solar and onshore wind etc as a potential in the future.

Grant Shapps: I have already talked about my enthusiasm for that, in particular with onshore wind, which has been controversial in places. I think people getting benefit from it is a very good idea. It will accelerate people's acceptance and therefore uptake. On solar panels on UK rooftops, last year, there were over 130,000 installations: more than the previous three years together. This will probably be a reflection of higher energy prices and low installation costs, which make the maths of installing solar much better than when I did it 12 years ago; it looked quite marginal for a very, very long time. As Ashley was pointing out, in our last contracts for difference, we had another 2.2 GW of solar capacity, and, as I described, we already have more than France, even though we do not have as sunny a climate overall. There is a healthy pipeline of about another 15 GW coming after that.

I will probably regret saying this now, but there is a solar development in my constituency which will deliver about 15% of the energy used in Welwyn Garden City, one of my two major towns. I do not want to comment on the specific planning, and of course some people will be concerned about it, but overall, if it goes through it, you can see how towns and cities are starting to see their own local power provision through a certain lens.

Q345       Clive Lewis: Can I take us briefly on to tidal? You talked about baseload; do you see tidal as offering the opportunity to provide a renewable source of baseload energy? This Committee did a brief inquiry into tidal energy a couple of years ago, following which your predecessor introduced a pillar of CfDs specifically for tidal stream. Can we look forward to how has that gone, and to that increasing in your next round?

Grant Shapps: Yes,