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The Minister of State, Department for Energy Security and Net Zero (Michael Shanks)
It is a pleasure to serve under your chairship, Mr Betts—and to still be here as the Energy Minister. It is the only Government job that I wanted to do, which is perhaps just as well given how the reshuffle has landed, so it is genuinely a pleasure.
As I have often said, these debates are a great example not only of how we come together to talk about quite complex topics relating to the energy system, but of how this part of Parliament works. I always come out of these debates having learned something, as the shadow Minister said. Sometimes it is quite a niche fact that I am not quite sure what I will do with. I always learn a huge amount from my hon. Friend the Member for Worcester (Tom Collins), given his detailed knowledge of the industry and its practical application, which is often lost in our debates. I thank him and my hon. Friend the Member for Rushcliffe (James Naish), who also worked in the energy sector, and whose constituency was home to Britain’s last coal power station, the closure of which I attended last year. His understanding of the importance of the transition and the potential of future clean energy technologies is hugely welcome.
It has been an interesting debate not least because, as the shadow Minister said, we have had a degree of consensus. We once had consensus on quite a lot of things in respect of the future of our energy system, but that has somehow changed in the last few months. I will leave it to others to judge why that is, but it is really important that, given the huge opportunities for the future of the country and for thousands of jobs, there is a degree of consensus. As the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) said, we get things done when there is a degree of consensus, and that is hugely welcome. The hon. Gentleman referred to Joule’s law on the loss of power, which I think, if my standard grade physics holds up, is P = I2R,. I am sure people will correct me when that is typed up in Hansard.
Let me say a bit about our commitment to hydrogen before I respond to some specific points. We have been clear that hydrogen will play a fundamental role in the future of our energy system. Not only is it a crucial part of how we decarbonise heavy industry and transport, which are among our most energy-intensive and hardest-to-decarbonise sectors, but it is, as many Members have pointed out, part of our work to provide large-scale storage for our baseload of year-round clean power. As the Government have set out in everything we do, our mission to achieve clean power by 2030 and to maintain that relates to tackling the climate crisis, delivering energy security and reducing our dependence on unstable, volatile fossil fuel markets. How we take back control of our energy supply and storage will clearly be a critical part of that. It can also help us to reduce system costs as both electricity demand and renewable generation increase.
There are other great other examples of the use of hydrogen. The hon. and learned Member for North Antrim (Jim Allister) made the really interesting point that the world’s first hydrogen double-decker bus was made in North Antrim, which I had not realised. As the shadow Minister pointed out, there are challenges around how we maintain such innovation and make sure that it continues to work in the future. Last week I was in Denmark to meet European Energy Ministers. It was really interesting to see examples there, as well as at the port of Amsterdam in the Netherlands, of where infrastructure is being rolled out, while facing some of the same challenges about how we achieve the scale that makes it competitive. That is part of the work we will have to do.
We are acting now to seize the economic and industrial benefits of the hydrogen sector, which is why we have been not only pushing forward on our policy framework but trying to make clear our ambition. There is much more to be said about that, but there has been industrial and investor interest in our hydrogen allocation round programme. The first HAR1 projects are now putting spades in the ground, with the first wave expected to access more than £2 billion over the next 15 years in revenue support from the hydrogen production business model, and over £90 million in capital from the net zero hydrogen fund. Over £400 million of private capital has been committed up front for 2024 to 2026, with more than 700 direct jobs created in construction and operation. Those are among the first commercial-scale hydrogen projects in the world to take a final investment decision, and we expect them to become operational between this year and April 2028. That will kick-start our green hydrogen production at scale.
Following the success of HAR1, we expect to announce successful projects in the second hydrogen allocation round in early 2026. The current shortlist includes innovative projects that could support ammonia production in Shetland, produce new clean energy at Grangemouth and decarbonise lime kilns—one of the first steps in cement production—in the Humber area. Moving forward, in June this year we published our industrial strategy, which set out plans for the further hydrogen allocation rounds, HAR3 and HAR4, for our first regional hydrogen network, and for the launch of the hydrogen-to-power business model in 2026.
My hon. Friend the Member for Worcester talked about the crucial role that storage will play in the renewable energy we are building. The question of how we store that for when we need it is crucial. We laid out our plans in the industrial strategy, backed up by the spending review, with £500 million for hydrogen infrastructure, partly to look at how we unlock hydrogen’s potential for clean power and provide home-grown energy and good jobs. We also have an ambition to deploy the first regional hydrogen transport and storage network, to become operational from 2031, which will aim to connect producers with vital end users such as power for the first time. This will unlock hydrogen’s role in clean power and help to realise the potential of large-scale hydrogen storage in maximising renewable energy use to support the transition to a decarbonised energy system. We are also currently designing a hydrogen storage business model, alongside a hydrogen transport business model, with the intention of providing investors with the long-term revenue certainty that many Members have raised in the debate.
There is no doubt that the clean energy transition is the economic opportunity of the 21st century. This is about not just our energy security but, as many hon. Friends have pointed out, how we deliver the good, well-paid, trade-unionised jobs of the future. It is about how we reindustrialise communities that have for too long been left behind. The UK is well placed to be a global leader not only in hydrogen deployment but, crucially, in making sure that we capitalise on the supply chains, which is where we get the jobs, given the shared skills, experiences and qualifications in the existing oil and gas sector, our strengths in advanced manufacturing and innovation, and the policy environment we have set out.
We have taken significant steps to attract inward investment, and the public finance tools set out in the clean energy industries sector plan will play a crucial role. We have also looked at the question of skills, which a number of Members raised earlier. The Lib Dem spokesperson, the hon. Member for Thornbury and Yate (Claire Young), made the point very well. The hydrogen skills framework, which we published just a few months ago in April, is an open-source framework to try to enable the development of new qualifications and training programmes, in conjunction with industry, to make sure that we are bringing forward the apprenticeships and the skilled workers of the future.
We are also making sure that companies can access international markets and collaborate with global partners. We want to build a domestic success story by exporting hydrogen equipment and services across the world and reinforcing their role in global hydrogen supply chains, with the UK set to benefit from being right at the forefront of that work.
As the sector grows, we want to make sure that it benefits from the comprehensive public finance offers that we have set out. I will cover that briefly, because we have debated many of these things in the past. Part of that includes Great British Energy, with its £1 billion clean energy supply chain fund, which will be aligned with the clean energy industries sector plan to support companies that have the potential to grow in supply chains.
We have empowered the National Wealth Fund with a total of £27.8 billion in capital to enable it to take on higher-risk investments, including equity. It will invest in capital-intensive projects, businesses and assets, with at least £5.8 billion on carbon capture, low-carbon hydrogen, gigafactories, ports and green steel over the lifetime of this Parliament. We have also launched £4 billion in British Business Bank industrial strategy capital to scale up the financing package, and we introduced the clean industry bonus following the success in the round that we have just concluded. We are looking at whether we should expand that to hydrogen, and we will consult on that in due course.
We will continue to do all that we can to put the UK at the forefront of the global hydrogen revolution and thereby unlock billions of investment, create new-generation jobs, build the infrastructure and drive the clean growth that we—there seems to have been consensus today—all want to see. This autumn, we will publish the UK hydrogen strategy, which will be evidence-led, impact-focused and designed on the premise of fast-tracking delivery.
Since the publication of the last hydrogen strategy four years ago, the landscape has evolved significantly. Electrification technologies have moved on rapidly, pointing to a more focused and essential role for hydrogen, complementing the electrification that we will see in so much of our energy system. The new strategy will sharpen our priorities, deepen collaboration with industry, which is key to this, and seek to unlock the full potential of hydrogen over the next decade.
Jamie Stone
Does the Minister agree that we should at least check the proposed grid improvements against the possible strategic sites where hydrogen could be made?
Michael Shanks
My very next point was on the future of the network. It wasn’t, actually, but I will come to it now, because the hon. Gentleman made a very good point, which I meant to come back to. He is right, of course, that we need to invest in the grid—even if we were not embarking on this clean power mission, the grid is very much in need of upgrading—but we want to take the strategic planning of that much more seriously than it has been taken in the past.
We know that we need to build significant amounts of grid—the hon. Gentleman recognised the importance of that—but we also want to plan the future of the energy system strategically so that the grid follows a logical way to build out the energy system. His point about trying to make use of the abundance of clean energy to transfer it into hydrogen as an off-taker was well made. It will feed into the work on the strategic spatial energy plan. It is about how we best use all the energy system to our advantage. It is also about how we can reduce things like constraint payments and make use of it as efficiently as possible. That is an important point that we will take forward.
To conclude, our vision is clear: a thriving low-carbon hydrogen economy—one that decarbonises those hard-to-electrify sectors, strengthens our energy security and fuels good jobs and growth across the country—is at the heart of the Government’s mission.
Jim Shannon
I asked a question about the opportunity for apprentices. I know that the Government are committed to that; I have never had any doubt about that, but I want us to show where the opportunities may be. I know that the Minister is also committed to ensuring that all parts of the United Kingdom of Great Britain and Northern Ireland can take advantage.
Michael Shanks
A key part of my conclusion was the useful challenge that there always is from the hon. Member for Strangford (Jim Shannon) about ensuring that we represent all parts of the United Kingdom. He was right to point out earlier that it is a beautiful part of the country to visit. I confess I have still never been to Strangford, but there is still time.
The hon. Member is right on two other fronts. First, the skills strategy is all about unlocking the next generation of workers. We need to inspire people in school right now to see that we want them to be at the heart of the energy system of the future, and apprenticeships are crucial for doing that. We will create tens of thousands of jobs in the sector, but as part of that there has to be investment in apprenticeships. On his wider point, he knows that I enjoy the engagement with Ministers in devolved Governments across the country. We work closely with the Northern Ireland Executive. As I always say, the energy system is transferred in Northern Ireland, but there is a huge number of areas where we can learn from each other and work together to ensure that the people in Northern Ireland and Great Britain benefit from what we are trying to achieve, and we will continue to do that.
To conclude my conclusion, unless anyone else wants to intervene, we are firm in our commitment to working with industry. There is a huge opportunity here. This is an exciting moment for us to recognise—as we are doing with small modular reactors and with floating offshore wind—that we have the potential to be at the forefront of the next great thing in our energy system. It requires the strategy that we are putting in place and the long-term confidence for investment, and we will continue to work hand in hand with industry, investors, innovators, workers—
Michael Shanks
I will not, because I am just about to conclude. We will work with workers and trade unions to turn this vision into reality and ensure that every part of the UK benefits from the potential of growth and jobs in hydrogen and in securing our energy system for the future. I again thank all Members for this hugely constructive debate. In particular, I thank my hon. Friend the Member for Worcester for the way he introduced it and for the knowledge and experience that he brings to all these matters.