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.
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.
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 machine—it is something my Director General will know more about than I do in a sense—there 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 going—you 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 explain—and this may be a question for Mr Ibbett—why 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 themselves—there is a lot of technology out there—need 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 capital—the CDEL that you have just talked about—will 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 roundtable—well, 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 Department’s 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 hydrogen—especially having been Transport Secretary previously—as 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 strategy—as 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 hydrogen—and I emphasise green hydrogen because I think that is the net zero carbon we are talking about, the low carbon we are talking about—how 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 hydrogen—blue, 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 why—although I know some people are more sceptical about blue hydrogen—it 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 something—use 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 stated—and I am sure you are aware of this—that “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 panels—Secretary 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 issue—I 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 solar—I 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 2035—which the Government has identified for the British energy security strategy—what 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, I think I am right in saying that the UK, in Northern Ireland, was the very first place in the world to install tidal stream energy. There are about 40 MW of new tidal stream secured in Scotland and Wales through CfD round 4, and yes, we will be including tidal stream as part of bidding round 5.
Q346 Chair: There has also been a suggestion that well-developed tidal range proposals might be subject to a forthcoming national policy statement. Can you give us some clues as to what “well-developed” means?
Grant Shapps: Ashley.
Ashley Ibbett: We are hoping to publish the revised national policy statements soon, so I do not really want to get ahead of that. We have obviously had quite a lot of experience in looking at different tidal range projects, and we still think they could continue to play a potentially important role.
Chair: We will look forward to that, thank you. We are going back to Cat Smith.
Q347 Cat Smith: Thank you, Chair. My question relates to the issue of small modular reactors. If I might just begin by responding directly to what was announced in the Budget and the reclassification of nuclear energy as environmentally sustainable, which has been met with some strong criticism: I wondered how the Secretary of State had gone about redefining that when there are still huge questions about what to do with nuclear waste?
Grant Shapps: The first thing I have done is speak to my international partners. I mentioned previously that I had the summit with my French opposite number last Friday. We discussed the way nuclear power can and should be viewed. Obviously, France has taken a much more proactive, even extreme view of nuclear power through its provision of probably 75% of its electricity in that way. I have also spoken with my American counterpart, Jennifer Granholm, as well as the Japanese and South Koreans, who have established nuclear and civil programmes. I spoke yesterday with John Kerry, the US Envoy for Climate, and our view is shared by an increasing number of civil nuclear powers; if we want to get to net zero, and we do want to get rid of the hydrocarbons, we have to accept that baseloads are required somewhere and that nuclear power, particularly a commitment to advanced nuclear power or small modular reactors, can and should be an important part of that.
I think the time has come, and the Committee should know that I am personally very committed to this. Within the new Department for Energy Security and Net Zero, I have appointed a nuclear Minister, possibly the first time the UK has had one. His name is Andrew Bowie—or “Atomic Bowie” as I like to refer to him—and, as the Chancellor mentioned this afternoon, I will very soon be launching Great British Nuclear in order to provide a much more stable platform in the UK.
People will be able to see not only what our plans are to invest in, not just the trajectory, but also a pacing to those plans so that the world knows how to invest in it. I see it as being a very important investment platform, and although all the nuclear reactors in operation today were commissioned, as it so happens, by Conservative Governments, I understand that the Opposition’s policy is now in favour of civil nuclear power as well. I think there will be more consensus than perhaps some of the noises off suggest.
Q348 Cat Smith: With respect, I do not feel that you addressed the question. I think you answered what you thought I might ask rather than what I was actually asking. I am going to try again. Only yesterday, we classed nuclear energy as not being environmentally sustainable. Today, it is classed as being environmentally sustainable, and I am just trying to get to the nub of the issue, which is: what has changed that makes this more environmentally sustainable when, as far as I can see, there has not actually been any change in the technology?
Grant Shapps: We know that when you take nuclear waste, there is a very long period of time in which you need to keep it safe. We also know that once we start trapping CO2 using CCUS, there will be a very long period of time in which we need to invest to do this. In other words, there is often a cost to it. Thinking back to last Friday, when I sat in the summit with academic experts, they talked about the technological improvements, which mean we can now have much more confidence in the way we store nuclear waste over long periods of time. We have to be both sensible and practical in our race to net zero and nuclear is a very sustainable way to do that. It is a judgement call. I know there are others, including people in this room, who will disagree, but I think the political consensus in the world faced with a Putin invasion of Ukraine and the energy insecurity that has brought to all our constituents means that, on balance, the advantages of getting on with this programme far outweigh the disadvantages.
Q349 Barry Gardiner: Sorry, but one of the key targets that Putin has gone for has been a nuclear reactor. How you can make the statement that, with Putin in the world, we should all go nuclear? It just defeats the object.
Grant Shapps: One of our experts is called Cooke, he works for EDF and he talks about modern-day installations that could withstand an A380 flying into it. The fact that it would be safe now is very different from a Soviet era nuclear power station.
Barry Gardiner: I would not like to experiment with that.
Grant Shapps: They do experiment with the modelling on these things, and they are found to be entirely safe to operate. I think it is revealing that even when I speak to my Japanese counterpart, after their nuclear disaster and the public turning against it, they have actually turned back to nuclear. If I may say, even His Majesty's Official Opposition have turned in favour, to remind colleagues around the table of policy positions.
Q350 Chair: I am going to try to take the party politics out of this session for a moment. The Chancellor announced that there would be a competition for the small modular reactors rather than single sourcing to Rolls-Royce, so could you give us a little bit of colour as to how many participants you are anticipating and what the timeframe will be for this? The competition might help to sharpen the pencil of the bidders to produce best value to the Government, which is good, but it might also lead to introducing some element of extra timeframe to allow it to take place.
Caroline Lucas: Chair, may I add one line, which is also relevant, to that question? Given that George Osborne launched a competition about eight years ago for something much the same, what has changed; it did not work then, why is it going to work now?
Grant Shapps: Taking that last point first, it is notable that there are no small modular reactors in operation. The technology is developing all the time and it takes quite a long time to bring these concepts to market. As far as I am aware, there is only one company in a UK regulatory approvals process right now, which is Rolls-Royce. How many companies would there be in total? We will wait to see who comes forward, but I think we know there are a number of companies globally who are interested in small modular reactors. As the Chancellor says, we want to do this very rapidly, by the end of this year. This is not an elongated process at all. Finally, as is now standard, I will be saying more about this very soon.
Chair: You are going to have a very busy few weeks ahead of you in the Chamber by the sounds of it. Cherilyn Mackrory.
Q351 Cherilyn Mackrory: Secretary of State, can I talk to you about floating offshore wind in particular? There has been a great deal of success in bringing down the price for fixed offshore wind, but we still have significant barriers for floating offshore wind; one of which is the strike price in the current round, which is not something that the developers can currently meet. Could you comment on that, and also when FLOWMIS might be coming forward?
Grant Shapps: Taking the second point first—very soon, watch this space. Actually, as with tidal stream, we have the first and possibly the only floating offshore wind installations worldwide. On the contracts for difference, can I ask you to comment, Ashley?
Ashley Ibbett: Yes, floating offshore wind is an eligible technology in the forthcoming allocation round. We were successful in buying floating offshore wind in allocation round four, at £87.30 per MWh in 2012 prices. We will see what the next auction yields in the fourth round; fixed bottom offshore wind will be competing against onshore wind.
Q352 Cherilyn Mackrory: That is the issue, to try to get the new technologies off the ground.
Ashley Ibbett: On the administrative strike prices, those are set through a process looking at the particular technologies. We will see what the auction reveals, but we think we have set those generously enough that floating offshore wind should be able to compete effectively.
Q353 Cherilyn Mackrory: Okay, that is different from what we are hearing from the industry, but I will move on.
Grant Shapps: Sorry, can I just clarify one point for reference? Not to question you, but I just wanted to make sure that the Committee heard it correctly. We are taking standard offshore wind where it is attached to the bed of the sea and putting that in with onshore, but the question here was specifically on floating and I think that was missed.
Ashley Ibbett: Floating offshore will be in the other pot.
Grant Shapps: That is the point I want to clarify for you.
Q354 Cherilyn Mackrory: One of the other great barriers, particularly with offshore wind, is the grid capacity and where we are heading with that. I wonder if you could comment a bit on the strategy that we have to incorporate not only onshore but offshore wind as well. Also, with other technologies that are coming through—I am thinking particularly of geothermal energy and lithium generation—every time we get to a certain point of technology scale-up, we hear that grid capacity is going to be a major barrier. I wondered if you could comment on how we are laying the groundwork for a future where this is not going to be an issue and how much you think it is going to start costing?
Grant Shapps: Grid capacity is one of the things which really concerns me. I think if you want to ask why there is a Department for Energy Security and Net Zero now, focused on this all the time, it is so that we get some real focus on solving this problem. I think we have to produce about six times the amount of grid capacity or grid development in the next few years up to 2030 as we have done over the previous 30 or 40 years. We suddenly have this huge requirement to upgrade the grid. Why? We are electrifying and because frankly there has been an underinvestment over decades.
We are quite a long way ahead of other developed nations in this process to net zero. As you have heard many times before—and the figures move around all the time—we have reduced carbon by 45% and grown the economy by 68%, or whatever the latest number is. In doing so, we have removed coal. I think last year only 1.5% of our electricity generation was through coal. The electricity is coming in through other locations, offshore wind, solar or whatever, and it requires entire new connections.
I actually mentioned that Andrew, or Atomic, Bowie only had one job, which was nuclear, but the other part of his portfolio is specifically grid connections. This is the only other thing that he is constantly focused on, as am I. I have been meeting with Ofgem, and others on this the Committee will know we have Nick Winser working specifically on this issue. He is going to be making recommendations to us on this before the summer. There is already quite a big action plan in place—for example, on nationally significant infrastructure projects—to deal with the question of why it takes so long from go ahead to connection. We want to have that for offshore wind farms, for example, but there is a genuine complexity to this, where people can be given connection dates in a decade's time, which is obviously not good enough. Part of that could be dealt with, for example, by removing projects which are clear non-starters, but they have to be assessed in order and therefore delay the start. We will have a lot of good, sensible speed-up propositions to make. Ashley.
Ashley Ibbett: I agree, and indeed the system operator at the moment is running what it is called an amnesty for people who have connection in the queue that they do not think they will ultimately come to use, to try to reduce the size of the queue.
Q355 Cherilyn Mackrory: Are you getting some take-up from that or are people just hanging onto their potential investments for the future?
Ashley Ibbett: My understanding is that when I last spoke to the Grid, there had been some take up.
Q356 Cherilyn Mackrory: Okay, can you expand a little bit more on how Government are expecting to invest? I do not know if you want to put figures on it, but where is that investment coming from predominantly?
Ashley Ibbett: Obviously, investment in networks is done through price-controlled funding through consumer bills, which Ofgem oversees, to the transmission system operators. We are also taking powers in the Energy Bill to create a future system operator, where we hope we will be able to take a longer term, more holistic view across the whole of the infrastructure and grid requirements. There is a lot of work in hand.
Grant Shapps: It is a vast project; to put scale on this, by 2050, to get to the net zero grid, it is probably between £100 billion and £240 billion of investment—which is quite a range in itself; this is HS2 scale.
Q357 Cherilyn Mackrory: You said that we will hear more on this before the summer, is that right?
Grant Shapps: Yes, because Nick Winser actually reports to us before the summer.
Q358 Cherilyn Mackrory: Then do you have to respond?
Grant Shapps: I do, but you will not have to wait all that time, because in this energy moment that we keep referring back to, I will also be getting into this in a bit more detail.
Q359 Chair: This Committee is very concerned about this subject. It is raised with us constantly by operators seeking to get consent. One of the problems they point to is that the regulations and guidance under which Ofgem operates were set out at a time when we were not expanding capacity at anything like the pace you have just outlined. As the Chancellor announced in his statement today—and, in fact, the Prime Minister heralded in PMQs earlier—a review of regulation and the basis on which, in this case, Ofgem undertakes its role would seem, to me at least, to be a very relevant consideration. Is that something that would be included in your review?
Grant Shapps: Yes, I agree entirely. I have pushed for this review of regulators, both because of Ofgem, but also because of other regulators that I have been responsible for in different roles. This is very important and opportune—there are lots of other moving parts of this, including, to touch on the regulator, the future systems set-up that we are creating; the FSO—which essentially will take some of this planning and do it better.
The only other thing, which I half-said before, is we are experiencing something that all countries are going to go through. We are experiencing it because we are further ahead in our move to our transition to renewables than any other G7 nation, for sure, and it is creating new strains. Minister Graham Stuart was at the Dogger Bank Wind Farm launch yesterday; that will be the first connection using high voltage direct-current wires in our domestic energy system, 160 kilometres off the north-east coast. The infrastructure is really changing as well; it is not just doing more of what has happened for decades.
Q360 Chair: You mentioned the Energy Bill, you have a legislative opportunity coming up, so that is timely as well. You do not always guarantee when you want to get legislation to address an issue. Would you welcome any work by this Committee to try to help you formulate your views?
Grant Shapps: Always. If you wanted more specifics on that, I would be happy to take it away and actually think with officials and Ministers about where that work would be most productive.
Chair: That would be very helpful. Barry Gardiner.
Q361 Barry Gardiner: Secretary of State, you have said that you are going to be coming back to us with a lot of things; you are going to be very busy. Of course, one of the things you are going to be coming back to us with is the biomass strategy, which was due to be published at the end of 2022. Can you give us a time when you expect to publish this strategy?
Ashley Ibbett: We are hoping to bring that forward later this year.
Q362 Barry Gardiner: It was supposed to be at the end of last year—later this year gives you quite a bit of latitude, and I would think it would be more specific.
Grant Shapps: I can actually be more specific, because we are planning to bring it back by the second quarter. There were a number of changes last year that may have created some disruption in that plan.
Q363 Barry Gardiner: One of the things I wanted to press you on, if we can hope to see it by June, relates to the title of your new Department. The old Department of Energy and Climate Change had that slightly broader remit. As you rightly said, climate change is a fundamental issue of our age, but it is precisely because of the impact a change in climate has on biodiversity. Humans in particular are one of the species that are going to be adversely affected by it. I am seeking a reassurance from you that the Department is not going to be so channelled into looking simply at CO2 emissions and GHG emissions that it actually loses sight of the compensation that needs to be made to ensure that biodiversity is not damaged in this rush to net zero.
Grant Shapps: I absolutely agree with you. This country has taken a huge lead in this area. I was talking to the foreign negotiators who were in Montreal for the recent biodiversity summit, who were telling me that our negotiators were, in a sense, the lead on this issue. I fully endorse that it tends to cross both my Department and DEFRA, and I have spoken to Thérèse Coffey extensively about it, actually within in the last day.
Q364 Barry Gardiner: In fact, on the EFRA Committee, I paid tribute to our negotiators for the work they did at COP15, so we are at one on that. Let us now turn to the sustainability rules for bio-energy feed stocks. At the moment, the Government tie those rules to the subsidy that they provide and the rules on sustainability do not apply where use of biomass is not subsidy dependent. The land-use sustainability criteria for woody biomass allows that 30% of it does not have to be legal and sustainable. It only has to fulfil the legality condition, which means that it was legally harvested in the country of origin, wherever that might be.
The rules do not prohibit the use of woody biomass that is sourced from primary virgin forest, and you may well have seen the documentary that was produced that showed that Drax power station in the UK was sourcing some of its biomass from British Columbia. There was clear felling of virgin forests, quite legally, in that country of origin; the Governor had given consent for that clear felling. Please reassure me, Secretary of State, that when you publish your strategy, these loopholes are going to be recognised and closed off.
Grant Shapps: I saw the findings of the “Panorama” programme before I came to this role, so you can imagine one of the first things I did when I got here was to demand chapter and verse on it. I know my officials have spoken to forestry experts, Canadian officials and others, and have come to the conclusion that there were some inaccuracies in the programme.
Q365 Barry Gardiner: I do not want to get into the programme. It is not about the programme. It is about the principle and the fact that these loopholes exist.
Grant Shapps: My understanding of this—and I am very interested in it because it would undermine everything we do if it is not true—is that it comes from residue from trees which are being felled for other purposes, timber, paper, and so on, and nothing other than branches which are in poor condition. It should never come from virgin forest, as you say.
Q366 Barry Gardiner: It is allowed under the sustainability rules at the moment.
Grant Shapps: I might do better to come back to you on this, rather than try to work my way through it. The conclusion from my officials is they have confidence that wood-pellet production in regions that are sustainable does not lead to destruction of forests in those regions, which would sound like it is at odds with that 30% rule that you were talking about. Ashley might have more on this.
Ashley Ibbett: Ofgem have responsibility for auditing the sustainability of all the biomass used for biomass electricity generators here who receive reports either under the renewables obligation or the CfD, and they have processes in place to do precisely that. They have worked very closely, as have we, as the Secretary of State says, with forestry experts and with the Canadian Government to try to understand—
Q367 Barry Gardiner: They do not include onsite inspection, do they? You know that.
Ashley Ibbett: I do not know the answer to that question.
Q368 Barry Gardiner: I am telling you they do not include onsite inspection, but also sourcing of woody biomass from primary forest is not prohibited. What it does say—and this may be what the Secretary of State is alluding to—is that the management of the forest must ensure that harm to ecosystems and biodiversity is minimised in the process. That is a very flexible regulation, I am afraid, and that is why I say there is a loophole, and I really do urge you to look very carefully at closing it.
Grant Shapps: I will certainly look closer. I have already commissioned advice, as it is something which caught my eye, and I am reading you back some sections of the advice that I have had. I started a printing company 33 years ago. It used trees, but I know, and have satisfied myself sufficiently—and we all have pieces of paper in front of us—that it is possible to have a sustainable paper-production industry through forests which are properly managed and replaced. I am not sufficiently expert in this specific field, having only been in this very recently, but I will undertake to look at your points. I know that the International Energy Agency and the Intergovernmental Panel on Climate Change have rules on biomass sustainable managed forests, supported by evidence and experts, so I slightly defer to their definitions, but it may be that there is more to probe here, which I would be happy to do.
Q369 Barry Gardiner: So do I, and that is why I consider very carefully what the Climate Change Committee has said on these matters. It is also why, when your strategy is produced and you look at certification, particularly when you are talking about biomass certification, you do not simply accept the sustainable biomass programme certification scheme that Drax has proposed, because it is one that is basically put together by the industry itself. It seems to me that you should be looking at FSC certification, which would be a much stronger level of certification. Do not let the industry market set the pace.
Grant Shapps: I think your point is well made, if you do not mind me saying, with reference to the pre-payment meter situation recently, where essentially the regulator, Ofgem, was taking the word of the companies rather than doing primary research. Your point is taken, and I am very happy to undertake to spend more time on this subject.
Q370 Barry Gardiner: Thank you. I appreciate the spirit in which you are responding, even though the strategy is not coming out until the second quarter. The Committee recently heard evidence supporting the introduction of a much more rigorous life-carbon assessment for biomass feedstocks. You understand that what we are talking about is not just where you can source this and whether or not that is permissible or sustainable, but also the payback periods. You have your carbon debt from the CO2 emissions, from the harvesting and the transportation, and the drying-out of the pellets and so on, and then you have the carbon payback period. The shortest carbon payback period derives from residues and waste, but the longer carbon payback periods come from increasing harvest volumes of managed forests.
If you look at the source of Drax’s pellets from North Carolina, for example, they are managed forests. You can go there and see the way in which that has been sourced. How will the biomass strategy address that issue of lifecycle greenhouse gas emissions accounting? We can all say, maybe in 100—or maybe even in 60 or 40-years’ time if you are optimistic—some of that woody biomass could be paid back in the lifecycle accounting. That is why originally we thought of it as a renewable energy source. The trouble is we do not have 60 or 50 or 40 years to achieve the targets we have set ourselves for net zero. Therefore, to be proceeding with this does seem really unsustainable.
Grant Shapps: The first thing I would say is we want to develop a programme of bioenergy with carbon capture and storage. That is our BECCS programme, which is in part to recognise your comments. Secondly, in measuring this, we are looking at everything from the collection and manufacture of pellets to the transport of the pellets. People have sometimes wrongly thought that we only take their figures and do not add in the transportation and CO2 costs etc, which is not the case. Then we require the overall stable age and carbon stock profile to mean that there are regeneration rates which are sustainable.
I am not unfamiliar with these arguments from my background in printing, and the paper that we all have in front of us is actually a very interesting case in point on almost everything you just said. On the biomass strategy, we will clearly be able to answer your questions in more detail. It will be a deep dive into all those issues. Other than recognising what you are saying, I will ask Ashley to comment as well.
Ashley Ibbett: These are clearly very important challenges we are working through in thinking about them as part of the biomass strategy. We do look very closely at sustainability at the forest level, and we take into account associated emissions in setting the sustainability criteria, but we will be bringing forward the biomass strategy soon.
Q371 Barry Gardiner: The difficulty is that a biomass plant here in the UK is allowed to count its emissions as zero, even though those emissions are even worse than coal. There are greater emissions from biomass than there are from coal out of the Drax power station. They can count them as zero because the international accounting process says you only count it as the cutting-down of the forest in the country of origin, so they have to account for their increased emissions, but we do not. That is part of the problem— that in a sense, we are a free rider on the environment.
Grant Shapps: I do not think that is accurate to the way we audited ourselves, but I do think I need to come back to you with a fuller, more satisfactory answer.
Q372 Barry Gardiner: Finally, let us turn to land use and land use change, because this is another very important aspect of the use of biomass and just how sustainable it might be. We talked about the Climate Change Committee earlier. Their balanced pathway sees a potential 30% growth in biomass energy supply. The upper end of that could be reached by expanding the growth of energy crops to 1 million hectares of land—that is 7% of current agricultural land—and that would increase the tree planting rate to 50,000 hectares per year by 2050.
This Committee has just visited the Chair’s constituency. We were looking at whether the Government could achieve its target of 30,000 hectares a year. We have not published our report yet, but we were deeply sceptical, from what we had heard, that that would be possible. However, it is not just increasing it to 50,000 hectares a year, it is by tripling the current import levels as well. In terms of what we would be demanding of our land use in this country, the land use change, we are talking about 7% of agricultural land being given over to this, but nobody understands how we could possibly plant that.
Grant Shapps: This ties up very neatly with a previous discussion about nuclear power, which I know you are not a great enthusiast for from your comments, but it is a very good example of why we need a really good balance of energy production in this country. Almost every form of energy production has a downside. We have discussed biomass extensively, and the potential pitfalls, but again, my briefing—and I have asked the questions at this stage rather than reaching my own conclusions—does say that with the carbon stock of the forests from which biomass is derived, the land criteria means that regeneration rates and sustainable harvesting are required, and that we are not diverting material from other uses when it comes to the wood. Let us assume that you are entirely right, and my briefing is entirely wrong for the second. We talked about nuclear. We have the nuclear waste problem. We have talked about hydrocarbons. We know the problems there.
Barry Gardiner: There are trade-offs.
Grant Shapps: We talk about solar. We know the supply-chain issues. Wherever you go there is going to be an issue, which is why true energy security comes from a genuine mixture. I would not want to be in the French position of having all my power nuclear and then having half the reactors down in one go. I want the mix.
Q373 Barry Gardiner: Can I come back to biomass? I finish here, Secretary of State. I understand everything does have a trade-off, everything does have a side-effect, and it is getting that balance. One of the things that the Climate Change Committee has stressed—and so have all the international organisations that have looked at this, whether you are talking about the IPCC or the International Energy Agency—is that we need really strong governance and sustainability criteria to be applied both domestically and internationally. If your strategy can achieve that, then, yes, with CCUS at the end of it, we may find that it is genuinely renewable. With the strong sustainability element put into the governance criteria, we may ensure that it is sustainable at source and is not destroying biodiversity in the way that it is currently, but it has to have that strength.
Grant Shapps: I think that is right. British leadership in this—through the COP process, net zero, and what we have actually done as opposed to what has been pledged and is being pledged and going back to the Montreal biodiversity side of things—shows that this country is capable of real, genuine global leadership in these fields. I entirely endorse your view that what we need to do needs to be based on international rules and agreements, which I will continue to strive for.
Chair: Caroline Lucas.
Q374 Caroline Lucas: Thank you very much, Chair. This Committee has welcomed the creation of the Government's Energy Efficiency Taskforce and the new target to reduce energy demand by 15% by 2030. That is all good, but the key question for us is why is the Government making millions of fuel-poor households across the UK wait two more winters before they deliver extra funding for energy efficiency in 2025?
Grant Shapps: My argument would be that we are not, and it is worth putting on record, Chairman, the extent to which the Government have pitched in on household energy bills. This winter was completely unprecedented. We are literally paying half of the typical energy bill. We have launched, I think, 11 different schemes, from the EBRS to the EBSS, to the alternative payment scheme, to the energy price guarantee and so on. The big point of paying half of the typical energy bill has been missed. We are not waiting to give that assistance.
Q375 Caroline Lucas: That is not a sustainable solution though, is it?
Grant Shapps: On the sustainable solution side of things, we are part-way through spending £6.1 billion, I think it is.
Q376 Caroline Lucas: £6.6 billion, I think it is.
Ashley Ibbett: £6.6 billion.
Grant Shapps: £6.6 billion, and then we have pledged a further £6.1 billion between ‘25 and ‘28, so we have over £14 billion in energy efficiency measures for households, which is why—I am not sure if this was before you arrived—I was saying we have gone from 14% to 47% of homes being EPC—energy performance certificate—A to C, which is the latest figure that I have for homes now reaching that target.
Q377 Caroline Lucas: For 13 years, I do not think that is that fantastic, to be honest. We know that the most sustainable way of addressing the energy crisis we have is by insulating homes. The Climate Change Committee itself has said the Government need to do far more on this. Of that £6.6 billion that I think is meant to be spent over the course of this Parliament, even assuming we go for the best part of another year and so on, we still have £2.1 billion which is not being spent. Why are you not getting this money out the door and properly getting people's homes resilient and warm?
Grant Shapps: In the spirit of healthy but I hope constructive debate, I am not sure I agree with you. First, I think getting nearly half of all our largely Victorian housing stock to EPC A to C in 13 years, given that the target is for 2035, shows determined progress. This is often quite difficult housing to improve. Secondly, and I think again it was before you were with us, I was talking about why some money had been returned to the Treasury. I did say that some local authorities, for one reason another, did not have the programmes ready to spend that money. It is one of the reasons why we have had the ECO1/2/3 programme, and we are launching 4 and ECO+. With ECO+ we are going down a slightly different route to try to get to householders, perhaps in the private sector as well, which has traditionally lagged behind some of these other routes to market.
We are not in full control of every route to market to get house energy efficiency improved, and that is part of the reason, but I think we are making progress. We have become so used to saying we are not making progress that we are ignoring the fact we are nearly at half of all homes.
Q378 Caroline Lucas: Wait—we have had the green deal, which you will remember was not a great success. We have had the green homes grant, which you would also remember was not a great success. I imagine that some of the reasons why local authorities are struggling to get money out of the door is because there are not the supply chains there, because businesses have become very sceptical about whether or not the Government are going to be signalling that this is a serious commitment going forward.
My question to you is: when can we look forward to something that is going to be a real game-changer in terms of the commitments going forward and where businesses can really trust that this is a long-term commitment, and therefore put the money into training people back up again? I had businesses in my own constituency going bust because of the green homes grant, because the money was not forthcoming soon enough to repay them.
Grant Shapps: To be completely candid, I agree with you about schemes sometimes just not working. Hands up here—I think it is right to take responsibility—in opposition, I helped create the concept of the green deal. We legislated for it in primary legislation. It is still on our statute book, and it just did not work.
Q379 Caroline Lucas: We told you that the interest rate was far too high.
Grant Shapps: It was for lots of reasons. Even before that, there was a barrier. I remember trying to use it once. I used our brilliant feed-in tariff to put up solar panels. I tried to use our green deal and discovered that the barrier immediately started when you had to pay money to get somebody to come to your house in the first place. You do not have to put much friction in place to stop people using the deal en masse.
When I came to BEIS, I added up that there had been 22 different schemes. The absolute number of them is not a criticism in itself, because you have to have different routes to this market to improve homes, and some have been great successes. That is how we have gone from 14% to 47%, but I agree with you that not all the schemes have worked. You live and learn through these things. You ask, when? The further £1 billion extension to the ECO scheme, the ECO+ scheme, will start this spring, so immediately for the next section on this. Again, rather like a stuck record, I will be saying more about this in a very important energy moment, not too far from us.
Q380 Caroline Lucas: Could you just clarify the manifesto commitment to spend £9.2 billion on energy efficiency? Can you clarify what that period was? Was that for this Parliament or was it by 2030?
Grant Shapps: I am afraid without going back to the manifesto, I do not specifically recall. It is probably better that I write to you, unless Ashley has an answer.
Ashley Ibbett: I am afraid I do not know.
Grant Shapps: I do not know, but we have over £14 billion pledged in this area. Oddly, I am not sure that the problem here is a lack of money, and I do not think it has been a lack of will. Sometimes the programmes that looked good on paper did not work in reality. You live and learn. Sometimes the local authorities have not had the skills, and a lot of this has happened through housing associations and council housing.
Q381 Caroline Lucas: I appreciate your candour. Speaking as someone who has been following this for years—I have been the chair of the all-party parliamentary group on fuel poverty and so forth—there are many people out there in the third sector, in the NGOs, people like E3G, who have been advising on how you could do this. Listening as well to the Budget, it feels disappointing that there has not been a large-scale intervention on this, which would be the cheapest and most effective long-term way of making people resilient.
Grant Shapps: We aim to try to please you, and this is why the Chancellor made quite a play in the budget about the Energy Efficiency Taskforce, which is meeting for the first time today. It is co-chaired by Lord Callanan, who you will no doubt want to have in to speak, one of my Ministers, and Alison Rose, who will be no nonsense on this. As soon as you are candid, our friends in the media will always pick that up and say, “Minister accepts that the scheme failed.” Let me just mention that the social housing decarbonisation scheme, the home upgrade grant, the local authority delivery schemes and others have been part of getting nearly half of our households to C.
We agree there is further to go. We agree that if we can reduce our need for energy by 15% through this efficiency, of which housing is probably the biggest single chunk, that it would be a really fine thing to do. By the way, our targets are much more ambitious than, for example, the EU targets on this.
Q382 Caroline Lucas: No one is worrying about the ambition. What we are worrying about is the delivery. That is what the Climate Change Committee says time and time again, “Hurrah for the targets, shame about the delivery.”
Grant Shapps: It is good to have a Department fully behind it now.
Caroline Lucas: Absolutely.
Grant Shapps: I hope to bring you hope.
Q383 Caroline Lucas: I hope so too. Could you start by telling us when we can expect the publication of the Energy Efficiency Taskforce workplan?
Grant Shapps: I am not sure I can tell you their delivery date. Do you know the answer?
Ashley Ibbett: I suspect they will be discussing that today, Secretary of State.
Q384 Caroline Lucas: That is very convenient. Could the forthcoming future homes standard be strengthened to help this national effort on energy efficiency, which we have both agreed that we want to see? Why are the Government only insisting on homes being zero-carbon ready from 2025 rather than fully zero-carbon?
Grant Shapps: Our full work on the technical specifications for the future homes standard has been accelerated, and we are consulting on them this year. This is with a different Department. We have done an in-between stepping-stone for this, which I mentioned earlier was part L changes for uplifts for new homes, which will take us part way towards what the future homes standard will do.
My wider comment is, having been Housing Minister, I recall having these discussions and debates 13 years ago. I was amazed to see that quite small additions to costs on homes—in the small thousands—make a big difference in terms of affordability for housing. In other words, there is a housing crisis in this country to resolve at the same time as the climate crisis, and we have to make sure that homes are within reach of our population. There is a genuine tension between how far and how fast you go and making sure that people can afford housing in this country.
Q385 Caroline Lucas: I do not think there is not very much evidence that the capital costs are that much greater for making zero-carbon homes. The running costs are a hell of a lot lower, so it would not take that much imagination from a Government with a bit of wit about it to work out a way of running mortgages differently so that people get help to buy a house that is more environmentally friendly. You know over time they are going to be able to repay that help because their energy bills are going to be lower, so I do not accept that as a reason.
Grant Shapps: It probably gets into a level of technicality that we do not have time to get into.
Caroline Lucas: I would love to—please do.
Grant Shapps: I remember being Housing Minister and thinking exactly the same thing: why do we not just have zero-carbon homes next year? What would we need to do? What would have to happen to the supply chain? This is one of the big issues involved in this. Even if we wanted to do it tomorrow, the supply chain would have to gear up to deliver that tomorrow. As you probably know about our housing sector—where we still insist on turning up on site and building bricks from foundations upwards, rather than doing it in modular build and other things—there are a lot of different reasons why that has not been an overnight achievable thing to do.
Q386 Caroline Lucas: We are not talking about overnight. We were talking about 2025, and that was the bit that we are arguing about. Let me move on and ask whether the Government have calculated how many recently built homes will have to be retrofitted as a result of the decision to scrap the previous zero-carbon homes standard that was due to come in in 2016?
Grant Shapps: I do not have that figure off the top of my head, but on your point, we are not waiting until 2025. That is what part L, which came into force in June ’22, was all about. I mentioned before, but I think this figure is worth noting, that we will be producing homes which have 75% less CO2 emissions than 2013 standards—only 10 years ago—under the future homes standard. I reject the idea that it is not an ambitious place to go. I think it is extremely ambitious.
Q387 Caroline Lucas: Would you accept there is a difference between homes being zero-carbon ready from 2025 and being zero-carbon?
Grant Shapps: Yes. We cannot control the way people use their homes or open their windows or lots of other things. Of course there is a difference, but none the less, we are making significant progress.
Q388 Caroline Lucas: Could you write to the Committee about that figure?
Grant Shapps: Yes, for sure. I do not know whether that is an analysis that has been done, but I will do my best to work, possibly with Levelling Up, to find it.
Q389 Caroline Lucas: I have two quick questions. When will the Government publish the proposed technical specification for the future homes standard? How are developers supposed to prepare for the standard if the technical requirements for it have not yet been published?
Grant Shapps: It is DLUHC department work, but we are consulting this year. We intend to do the legislation in 2024 ahead of 2025. They will have a pretty good idea about what it is going to contain, because that is the point of the consultation.
Q390 Caroline Lucas: Very lastly—and I do apologise I was late; I had to be in the Chamber, and I am not usually late—as I was coming in, I heard you answering my colleague from Norwich South about mandatory solar panels, which is one of my big passions. The reason you said that you would not go down the road of mandatory solar panels on all new homes was because you do not want to specify just one technology, and heat pumps are an alternative. Why do you think heat decarbonisation and renewable electricity are in opposition to one another? We clearly need both. It feels a very odd answer to say, “We are not going to do mandatory solar because we are going to give people the option of heat pumps too.” Again, it is something that you could do very easily.
Grant Shapps: You could, and you could add £10,000 to somebody's new house purchase or what have you. I am racking my brains from over a decade ago on why it is that you only have to add relatively small amounts of money to each home to make them less accessible to people, and it goes through the whole marketplace.
Q391 Caroline Lucas: Putting solar panels nowadays on a home is going to be negligible in terms of the overall cost of the home. We have already said we could maybe think about innovative mortgage ways of solving that problem. Will you go away and look at it again? I just want to beg you that. You said you wanted to make me happy—that would make happy.
Grant Shapps: Of course I do. I am having to stretch my recollection of all this, but I had a programme that would only have added £5,000 of costs to a home. I went to see a brilliant place in Watford where they have all the experimental homes. I forget what the park is called. I went in a home which was zero-carbon—or they thought there would be zero-carbon required—which had almost no heating at all, because it is so sealed. I said, “What would you have to do to get here?” As I say, I can come back to you in more detail, but the issues of, for example, the supply chain to do that, would fundamentally slow the production of houses in this country, so that rather than building 300,000 homes a year, which is what we want to be doing, we would be building significantly less than that.
You only have to look at the supply chain for things like solar panels to know that there is a global issue. This comes back to things like critical minerals, for which we have a separate strategy, to see how we could cause an additional housing crisis if we followed your specific policy prescription. I will come back to that in more detail, because I think you will not be satisfied until you see that detail, but there are reasons why you need to take this in steps.
Q392 Chair: That would be very helpful, Secretary of State. I am conscious that we have hit your deadline. Clive Lewis has yet to ask his substantive question. I am giving him a chance to if you are able to stay. Before you do, as you are writing to us, Caroline touched on the £9.2 million manifesto commitment. I stood on the same manifesto, and within that £9.2 billion, there was a figure of £3.8 billion. The largest component was for the social housing decarbonisation fund, and that was designed to be spent over 10 years, not five. Your letter might want to refer to that. Clive Lewis.
Q393 Clive Lewis: Thank you, Chair. My colleague just admonished me for saying you keep agreeing with us. There is nothing wrong with agreeing with one another, but the reason that disagreement is useful is that it allows the public to see where the differences are on policy. I think you actually want to head in the right direction; I just think, is it quick enough and does it do what it says on the tin?
In that vein of agreeing with one another, I want to ask you a question. Do you think it is acceptable that oil companies’ net zero pledges only cover their production emissions? With all the fuel used for energy generation, aeroplanes and cars, none of that is counted in the net zero 2050 targets. Do you think that is right?
Grant Shapps: First of all, I think it is better to be candid about things that work and do not work. The green deal was mentioned. It clearly did not work. It was pointless trying to pretend otherwise. There is only one person in this room who is personally and legally responsible for delivering net zero by 2050, and it is me. You are right. My heart is in the right place, and I want to take these things in the right direction. I also accept, though, that it is possible to take a view anywhere along this spectrum and come up with very different prescriptions for precisely what we should be doing today, as the discussion that we just had about housing demonstrates in quite an interesting format. It would cause a supply chain cost affordability housing crisis that would be a problem for a different committee, but none the less, is a real problem.
You ask about the overall agreement about what is in and what is out. We have legislated in this country—and are the first country in the world to do it—for what we mean by net zero. I do not agree, you might as well know, and because there will be members of this Committee who disagree with me, with the demonisation of hydrocarbon companies, many of whom are working very hard to switch out of that marketplace and without whom we will not have the critical mass to get to this decarbonised future, and we are taxing them very highly. Most companies are not taxed at 75%, and that money is given to consumers because of the windfalls. Your specific question about which bits are included and where, I think are dealt with through different elements of the plans.
As Transport Secretary, I personally took the decision that we would end the sale of pure petrol and diesel cars by 2030—now less than eight years’ time. It was my personal decision. I drive an electric car. I think they are very good. The country can get there, and mandates will help us reach that goal. Should the oil company be responsible? How they should be measured? Aviation is a good example, and is subject to international agreements, including something called CORSIA, which is the way these emissions are measured globally. I do think we need to work within that international context and environment, as Mr Gardiner was saying earlier, otherwise we can go ahead and do these things and be the greenest country in the world, but it will not save the planet.
Q394 Clive Lewis: On oil companies, the jury is out. Given the fact that we know they sat on the evidence for climate change for many years—that is a proven fact—I can see why people are suspicious of them. I can also see why, when we talk about the taxes they pay, we also have to talk about the billions of pounds of subsidies that we pay to them. We take with one hand and give with the other. When we look at a serious decarbonisation programme, you have said there is a spectrum, which I accept. Trying to find our place on that spectrum as we aim for net zero 2050 is the right thing to do. We can argue about where on that spectrum of possibilities we land.
Do you think that granting a licence for Rosebank, which is imminent—that is 70,000 barrels a day for almost the next 30,000 years, most of which will be exported, blowing a hole in the notion that it is going to be for domestic use and low carbon because it does not have to travel, as some people have made the argument, that is the equivalent of 28 low-income countries’ carbon for the next 30 years—is going to land you in that spectrum or push you outside of it, as most scientists do?
Listening to the Climate Change Committee, I know there are limits to what they can say, but if you read between the lines—I just want read it out—they believe that the Government's climate checkpoints are too narrow and do not fully assess the climate impacts of new developments, and they include Rosebank and Cambo in that. They want tighter limits on production and a presumption against exploration, but Cambo and Rosebank blow a hole in that notion that there is some spectrum we can land on.
Grant Shapps: First of all, I should make clear, I cannot comment on Rosebank because there will be a quasi-judicial thing at some point, I imagine, which comes in front of me, so I will resist doing that. More broadly speaking, I do understand that to get to net zero, we still have to have hydrocarbons. In fact, even in 2050 there will be hydrocarbons for some uses like plastics and other things as well, and we will have to do some of it through carbon capture and other technologies.
In the meantime, we are apparently perfectly happily buying, for example, LNG and cargoes from all over the world, which represent probably twice the carbon by the time they get here, particularly if you have electrification on the rigs and those sorts of things. In every scenario, including the scenarios that the Climate Change Committee assesses, even if we were extracting to the maximum, I think I am right in saying there would be a reduction of about 7% a year because the very mature basin is running out. The country will have to face the decision about whether it thinks it is okay to buy the hydrocarbons from oil and gas from elsewhere rather than here.
Q395 Clive Lewis: I have already indicated that 80% of it is going to be exported. You can understand the limitation of saying, “Well, we are importing it from abroad.” We are exporting 80% of that new oil.
Grant Shapps: Let me try it a different way. I do not think that energy security and net zero are in conflict with each other. This country has a great opportunity to lead the world in this. We have not actually got on to things like the Inflation Reduction Act. There are lots of issues, of course, with it, but also a realisation from the world's largest economy that they actually need a lot of what we have, and we will be able to sell our expertise and goods as well.
A bit like the answer to the housing question, I also realise there is a process to go through to get to that end result. There is little point in our having a requirement for vast sums of hydrocarbons shipped into this country, and therefore creating even higher carbon exposure than when it is right here on the doorstep, notwithstanding that it has to be compatible with getting to net zero. I fear you are tempting into judgments that I will yet have to make, but I want to be clear that I think we can get to these legally binding targets. We will not do it all tomorrow. There will be a process in between.
Clive Lewis: I will leave it there, Chair.
Chair: Thank you, Clive. Secretary of State, thank you very much for giving us an extra 10 minutes of your time and the very constructive way in which you have engaged with the Committee. The fact that you have responsibility for net zero and have told us that you took the decision personally to introduce the ban on the sale of petrol and diesel vehicles gives us a sense of where you are headed in your new Department. We look forward to engaging with you in the future. Thank you very much for coming and for bringing Ashley Ibbett, your Director General, with you. Thank you.