16:38 Dr Alan Whitehead (Southampton, Test) (Lab)

I have to say that I welcome many of the changes that will take place in terms of the scope and focus of the draft regulations—particularly, as the Minister mentioned, the concentration on biomethane and heat pumps, and the injection of biomethane into the grid. Those technologies are seen as increasingly relevant to the attack on the decarbonisation of heat, as it were. The different ambitions the renewable heat incentive will have as a result of these changes reflect a lot better where we actually are in terms of the development of those technologies going forward.

However, this is a change in ambition in that it is an overall reduction in ambition. We need to be clear about that. Not only is the renewable heat incentive, as it stands at the moment, not remotely enough for the ambitions that we have and should have on the decarbonisation of heat in terms of being a vehicle to bring that decarbonisation forward, but it is, as the Minister mentioned, very much a time-limited device, which will expire for new entrants in March 2021. In terms of the measures put forward in the clean growth strategy as some of the building blocks for serious clean growth and meeting climate targets, this is actually one of the most short term.

Indeed, in so far as investors and businesses are concerned, that time limit represents, in many ways, a cliff edge as to what will happen in the longer term future. As hon. Members will be aware, the period between where we are now—allegedly spring 2018—and March 2021 is barely time to get projects from conception, to proof, to development, to financing, to realisation. The cycle that is now in place with the renewable heat incentive is barely sufficient to support a lot of the schemes that will be needed—with all the care and detail that will be needed in their development—over the next few years, in so far as a major attack on the decarbonisation of heat is concerned.

“commissioned research into different heat demand scenarios, the use of hydrogen, what changes might be needed to the electricity grid in response to large scale uptake of heat pumps, the role that bioenergy might play in decarbonising heat and international activity.”

This is a relatively modest scheme on the back of what was a relatively modest scheme in the first place. We should be under no illusion: these changes downgrade our climate change and heat decarbonisation ambitions quite substantially. To that extent, we cannot register anything other than considerable disappointment at that particular reduction. It makes it all the more essential that, in the summer of 2018, we get a grip on understanding what role the RHI or a similar incentive can and should play in heat decarbonisation, and how much further we need to go than the scheme presented to us today.

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17:02 Alan Brown

I support the RHI scheme and welcome anything that will help to enable low-carbon technologies and decarbonise heat. I do have a big “but”, however, which I raised in my intervention on the Minister. I also have other comments to make.

I will return to the big “but” that I highlighted. The Grangemouth renewable energy project has been in the pipeline for a number of years. It is a possible biomass and combined heat and power scheme that will replace the existing gas turbines at the Grangemouth refinery. The current owners of the refinery will have to make a procurement decision in a few weeks’ time on whether to go for the renewable energy project or to commission new gas turbines. The current renewable energy project is innovative and world leading and will reduce carbon dioxide emissions by 342,000 tonnes a year, and will need a £400 million investment.

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17:09 Claire Perry

I praise the hon. Member for Southampton, Test, who is almost my hon. Friend these days. He has brought his typically detailed level of scrutiny, and I will try to cover as many points as possible. On the question of the cliff edge, we are undertaking a lot of work. We published a call for evidence on 19 March. We are keen to develop cost-effective policies for the 2020s through to the 2030s and beyond, but we have a unique situation in this country. We have a centralised gas distribution network to which 85% of houses are attached, and 15% of us, including many in my constituency, live off the gas grid. It is about trying to work out cost-effective ways of delivering those low-carbon, cost-effective solutions on which we all agree. We have published a number of studies. Only last month, we published one showing initial findings on the options available for long-term heat decarbonisation, which are typically hydrogen, bioenergy and electrification. As promised, we will publish a full report of evidence in 2018. I look forward to discussing that with the hon. Gentleman.

I am not going to detain the Committee debating Her Majesty’s Treasury policy, but effectively this is an on-balance-sheet commitment to a liability for either current or future taxpayers that is part of the Government’s spending commitment in perpetuity, and I think £23 billion is a fairly substantial sum. The hon. Gentleman will be pleased to hear that we were keen to understand whether we were rolling this out in the right direction. The Select Committee on Energy and Climate Change made the point that mass roll-out was not the right way forward. That is partly because—this relates to some of the other comments raised—as with all elements of decarbonisation, we need to cut carbon, find cost-effective deployment pathways and create strategic ways to invest where we can grow a manufacturing base and deliver. This is what the reforms are about—trying to reform the scheme for technologies that are more likely to be strategically important in the long run, for example heat pumps. It is less about the fewer, larger installations that use technology that we all know about. I think that is really important for driving through our UK plc investment profile.

My hon. Friend the Member for Stafford raised an important point, showing that he has read all his documents. I am very impressed. Let that be a lesson to the Committee. He and I always like to debate the numbers. I will write to him with the absolute detail, but essentially there was a revaluation of the air quality and decarbonisation benefits. We may not necessarily agree with them, but if it is sufficient, I will write to him to give him more detail on the calculations. I would like to put it on the record again that as much as we all love being bound by our Treasury guidelines, which are important for delivering value for money, sometimes others make the case that they do not always capture the benefits, particularly these early-mover schemes. They do not yet capture the benefits of any investment in UK manufacturing or service expertise that we might be developing as a result of these, effectively, very big Government procurement programmes.

I apologise for detaining my right hon. Friend on this, but does she also agree that the kind of investment that is being made by UK manufacturers and service companies is incredibly important as we seek to boost our exports? I am the Prime Minister’s trade envoy to Ethiopia, which wants to have, effectively, a waste-to-energy RHI and an electrical generation plant for each of its major cities. The UK is in a very good position to assist with this. Based on what we do in the UK, the opportunities are out there, and multiplied many times over, to provide on a commercial basis assistance around the world in renewable energy and heat.

I commend my hon. Friend for his international knowledge. This is exactly the point. As part of the clean growth challenge and the industrial strategy, we have realised that as we are global leaders in decarbonising our economy, while at the same time driving growth—only two countries are considered to be doing enough to meet a 2°C warming of the climate, namely ourselves and China—we can create enormous prosperity in the UK from exporting those services and technologies. If he feels that my Department or the Department for International Trade need to do anything to support his ambassadorial ambitions, I hope he will let me know. It is an important area.

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